Securities Attorney Briefing 25 October 2016

Securities Attorney Tom Krebs


As Europe and Asia Hoard Cash, Economists See Echoes of Crisis

European and Asian investors have been rushing into the United States bond market, spurred by a global glut of savings that has reached record levels. Running from near-zero interest rates at home, foreign buyers are piling into the booming market for corporate bonds, including high-grade debt securities issued by the likes of IBM and General Electric and riskier fare churned out by energy and telecommunications companies. A growing number of economists are concerned that this flood of money may inflate the value of these securities well beyond what they are worth, potentially leading to a market bubble that eventually bursts. More broadly, however, these economists fear that an excess of ready cash in Europe and Asia is on the rise, which could keep a damper on global growth prospects. That is because the cash, instead of being spent on building bridges in, say, Germany, or individual shopping sprees in China and Japan, is accumulating and being recycled into global capital markets, keeping interest rates artificially low as investors chase after returns. And again, economists say, the burden is placed on the United States, with its still fragile economy, to be the growth engine for the world. “Asia and Europe keep exporting their savings to the rest of the world,” said Brad W. Setser, an expert in global financial flows who worked at the United States Treasury from 2011 to 2015. “All this money sloshing around looking for a home is not healthy — it indicates a real lack of demand in other parts of the global economy.” The surge in flows echoes a wave of investment in the years right before the financial crisis, when mostly European investors snapped up billions of dollars of mortgage-backed securities before the American housing market imploded. The current numbers are also arresting. According to Mr. Setser’s figures, about $750 billion of private money has poured into the United States in the last two years alone. About $500 billion, he calculates, reflects European and Asian investors buying United States Treasury securities, bonds issued by Fannie Mae and debt issued by American companies. The rest comes from American institutional investors unloading their zero-returning European bonds and looking for some extra yield closer to home. The culprit, Mr. Setser argues in a new paper for the Council on Foreign Relations, where he is a senior fellow, is the biggest global glut of savings ever, driven by cash-hoarding in counties like China, Taiwan and South Korea. “There is a glut, and the glut isn’t healthy,” Mr. Setser said.

France Is Clearing Out the ‘Jungle’ in Calais, But What Comes Next?

Last February, the French government began destroying part of the the “Jungle,” a sprawling migrant camp set up in the northern town of Calais. Thousands of asylum-seekers had gathered there in hopes they would find their way into Britain by way of the English Channel tunnel. Many tried to sneak in by hiding on trucks lined up to enter the tunnel, causing traffic jams that backed up for miles and prompting backlash from both countries’ far-right parties who said the masses of displaced were a security threat to both Britain and France. The partial destruction last February caused riots at the camp, and police responded by spraying asylum-seekers with tear gas while they watched their makeshift homes burn to the ground. So the second time France decided to go about shutting down the camp, which has grown to house some 7,000 people from around the world, authorities tried to be more organized. On Monday, some 3,000 of the camp residents lined up to be sorted onto buses that will disperse them to 451 different migration centers across the country. Others will be dispersed over the course of this week. Leonard Doyle, a spokesman for the International Organization for Migration, told Foreign Policy in a phone call on Monday that this effort is “certainly more determined,” but warned against seeing this round of clearing out as the end of the Calais camp.   So the second time France decided to go about shutting down the camp, which has grown to house some 7,000 people from around the world, authorities tried to be more organized. On Monday, some 3,000 of the camp residents lined up to be sorted onto buses that will disperse them to 451 different migration centers across the country. Others will be dispersed over the course of this week. Leonard Doyle, a spokesman for the International Organization for Migration, told Foreign Policy in a phone call on Monday that this effort is “certainly more determined,” but warned against seeing this round of clearing out as the end of the Calais camp.  “Whether it’s final can be a rash thing to say given that these things have a habit of just coming back when they least want them to,” Doyle said. The largest concern for organizations like IOM is the number of unaccompanied minors included in the overall headcount. The camp has housed around 1,300 unaccompanied minors, some of whom were relocated to the United Kingdom last week, where they joined family members living there who they had been trying to reach when they first arrived in Calais. But there are many more vulnerable youngsters left to be sorted. “1,300 unaccompanied minors, that’s a really scary number,” Doyle said. For adults, there is now a long road ahead to try to seek asylum in either the EU or Britain. The French government tried to tell those being forced out of the camp that moving elsewhere will actually make that process easier. “The immense majority of migrants present at Calais are eligible for international protection,” the French Interior Ministry said in a statement about the camp’s closure. It also said that moving out of squalor in Calais will allow former residents to “serenely envisage a request for asylum in France.” More:

Giant panda Bao Bao to leave United States for China

Bao Bao the female giant panda will leave the National Zoo in Washington, D.C. early next year and move to China under a breeding agreement, officials at the zoo said on Thursday. Three-year-old Bao Bao, who was the first surviving cub born at Smithsonian’s National Zoo since 2005, has enchanted zoo visitors and others who watched her via live “panda cam” footage. “She’s captured the hearts of people all over the world who watched her grow up … and she has been an ambassador for conservation,” Brandie Smith, associate director of animal care at the zoo, said in a statement. Upon arrival in Chengdu, China she will travel to a facility run by the China Conservation and Research Center for the Giant Panda, accompanied by one keeper and one veterinarian from the National Zoo, officials in Washington said. The zoo’s panda team will continuously monitor Bao Bao during the trip and will travel with a supply of her favorite treats, “including bamboo, apples, pears, cooked sweet potatoes and water.” Bao Bao must reach sexual maturity, between the ages of 5 and six years old, before entering the breeding program, the zoo said, and by then she will have acclimated to her new home. “We are sad to see her go, but excited for the contributions she is going to continue to make to the global giant panda population,” Smith said. There are an estimated 1,800 giant pandas in the wild, according to the International Union for Conservation of Nature, which classes them as “vulnerable.” The national zoo said it will soon announce special opportunities for the public to say goodbye and celebrate Bao Bao before she departs for China. Her brother, Tai Shan, was sent to China in 2010.

Must see TV: why gutting NAFTA unlikely to create U.S. jobs

Both U.S. presidential candidates routinely criticize free-trade deals they blame for the loss of American jobs. But tweaking the North American Free Trade Agreement (NAFTA), as Hillary Clinton has pledged to do, or ripping it up, as Donald Trump demands, may do nothing to help companies like Element Electronics Corp, which owns America’s last television factory. Winnsboro, South Carolina-based Element, and the television industry more broadly, offer a window into the complexity of industrial supply chains and illustrate why pushing manufacturing jobs back to the United States is so difficult. Element’s plant in South Carolina is nearly identical to a rival factory operated by Taiwanese conglomerate Tatung Company that sits on a dusty back street in this Mexican border town. Both import nearly all their components from Asia. The parts often flow in through the same southern California ports. But there’s a big, and costly, difference. The Mexican plant, by sitting just over the border from El Paso, Texas, doesn’t have to pay duty on those parts, even when the finished televisions are sold in the United States. But Element’s factory has to foot the tariff bill, which makes its televisions more expensive. “It’s pretty crazy that I’m disadvantaged for using U.S. labor,” says Michael O’Shaughnessy, Element’s president. That’s a sentiment that Trump, the Republican nominee, has forcefully tapped as he makes the case that radically revamping the trade deal would level the playing field and bring jobs back. Many trade experts, though, say it would be a costly disaster to try to unravel these production networks, which essentially treat Mexico as a 51st state. The Peterson Institute for International Economics, a Washington think tank that favors free trade, released a study last month that predicted imposing stiff tariffs on Mexico and China would disrupt North American producers that have created global supply chains and push the United States into a recession. “The TV industry is characterized by particularly dense webs of cross-border supply chains with Mexico and China,” says Marcus Noland, the economist who directed the study. “There’d be chaos and a trade war.” Even many who oppose NAFTA acknowledge it would be disruptive to suddenly erect barriers, given the way companies have shifted supply chains to integrate Mexico.


How the AT&T–Time Warner Merger Explains the Universe

Last week, a number of top executives from Silicon Valley, Wall Street, Washington, and the media descended upon the gilded hills of San Francisco for the Vanity Fair New Establishment Summit. There was Richard Plepler, the dashing C.E.O. of HBO; Jeff Bezos, the indomitable founder of Amazon; Travis Kalanick, the iconoclastic chief of Uber; and Priscilla Chan, who leads the Chan Zuckerberg Initiative with her husband, Mark Zuckerberg. You didn’t have to look hard to spot media moguls such asBob Iger and Les Moonves or venture capitalists like Ron Conway and Chamath Palihapitiya. In the old days, conferences existed partly to connect leaders of an industry with their more far-flung peers. these days, though, they serve as a form of intramural business Tinder, serendipitously convening executives from once disparate but increasingly similar universes. A decade ago, for instance, no one would have put the aforementioned names in the same space. HBO was a network; Bezos was in the book trade; ride-sharing sounded like a livery cab nightmare; and Facebook was in its infancy. Now, however, these figures inhabit remarkably similar universes, if not the very same one. They are all competing for eyeballs and mindshare—and the fastest route to that destination. HBO is a studio and premium network, of course, but it is also an over-the-top distributor; ditto Amazon, which also controls just about everything else, too; Facebook, with its 1.13 billion daily active users is where many expect to be consuming TV and video content in the future; and, if self-driving cars become a reality (and they may faster than you think), Kalanick could one day find himself in charge of the world’s largest fleet of mobile movie theaters. In 2016, just about everyone is in the inchoate, amorphous, and jumbled media-distribution-platform-whatever business—a universe where the distinctions between movies and TV and premium digital video have largely evaporated, where the screens keep getting smaller, and showtimes have been replaced by on-demand viewing. It happened fast, and it caught more than a few principals by surprise. A decade and a half ago, Kara Swisher interviewed Jeff Bewkes, then the C.E.O. of HBO, for his opinion on the vaunted, and now ignominious, AOL–Time Warner merger. “The question is, are people really going to watch what we make on a computer screen or not,” Bewkes replied. “I think an awful lot rides on whether that happens or not.” Bewkes was right. The answer then was, obviously, no. Now, it is resoundingly yes, and few know it better than Bewkes himself. A few days after the Vanity Fair summit concluded, Bewkes, now the C.E.O. of Time Warner, agreed to sell his conglomerate for $85 billion to AT&T. The deal is representative of the modern media landscape in many profound ways. For starters, $85 billion is roughly half of what AOL paid for Time Warner some 16 years ago in a deal that valued the conglomerate at a combined $350 billion—or about $30 billion less than Facebook, which was founded four years after the merger, is worth today. It was also engineered by two executives, Bewkes and his counterpart AT&T C.E.O. Randall Stephenson, who defy the stereotype of swashbuckling dealmaker in favor of a more technocratic approach. More:


Why the Justice Dept. Will Have Far Fewer Watchdogs in Polling Places

WASHINGTON — For the first time since the days of poll taxes and literacy tests a half-century ago, the Justice Department will be sharply restricted in how it can deploy some of its most powerful weapons to deter voter intimidation in the presidential election. Because of a Supreme Court ruling three years ago, the department will send special election observers inside polling places in parts of only four states on Election Day, a significant drop from 2012, when it sent observers to jurisdictions in 13 states. And in a departure from a decades-old practice, observers will be sent to only one state in the South, where a history of discriminatory voting practices once made six states subject to special federal scrutiny.

The pullback worries civil rights advocates, who say that Donald J. Trump’s call for his supporters to monitor a “rigged” electoral system could lead to intimidation of minority voters at polling places. Since 1965, federal officials have sent about 32,000 observers to jurisdictions with histories of harassing minority voters or even outright denying them access to the ballot. But officials say their hands are now tied by a 2013 Supreme Court decision that gutted the heart of the Voting Rights Act of 1965.

As a result of that decision, in Shelby County v. Holder, the Justice Department will send observers only to jurisdictions where it already has court approval. That encompasses seven counties or jurisdictions in Alaska, California, Louisiana and New York. “We do not want to be in the position we’re in,” Vanita Gupta, the top civil rights official at the Justice Department, said in an interview. “There’s no doubt that we’re going to be spread thinner,” she added, “but our hope and our intention is that we are going to have a very robust monitoring program” on Election Day. The Justice Department will still send election monitors — expected to number in the hundreds — outside polling places in about 25 states, which will be announced just before Election Day. But unlike the specially trained election observers, monitors are not allowed inside unless local election officials invite them.“The federal observer program has really been a hallmark of the Justice Department’s voting rights work,” Kristen Clarke, the director of the Lawyers’ Committee for Civil Rights Under Law, said. That effort “has really come to a grinding halt,” she said, “and that’s a game changer this election cycle.” In any case, the restrictive new voting procedures enacted after the Shelby ruling threaten to have a chilling effect on minorities, particularly if Mr. Trump’s supporters show up at polling places to challenge voters’ status, said Nina Perales, the litigation director for Maldef, a Hispanic civil rights group. More:


Election May Be a Turning Point for Legal Marijuana

SAN FRANCISCO — To the red-and-blue map of American politics, it may be time to add green. The movement to legalize marijuana, the country’s most popular illicit drug, will take a giant leap on Election Day if California and four other states vote to allow recreational cannabis, as polls suggest they may.

The map of where pot is legal could include the entire West Coast and a block of states reaching from the Pacific to Colorado, raising a stronger challenge to the federal government’s ban on the drug. In addition to California, Massachusetts and Maine both have legalization initiatives on the ballot next month that seem likely to pass. Arizona and Nevada are also voting on recreational marijuana, with polls showing Nevada voters evenly split. The passage of recreational marijuana laws in Alaska, Colorado, Oregon and Washington over the past four years may have unlocked the door to eventual federal legalization. But a yes vote in California, which has an economy the size of a large industrial country’s, could blow the door open, experts say. “If we’re successful, it’s the beginning of the end of the war on marijuana,” said Gavin Newsom, the lieutenant governor of California and a former mayor of San Francisco. “If California moves, it will put more pressure on Mexico and Latin America writ large to reignite a debate on legalization there.” Legalization puts pot-legal states in direct conflict with the federal government, particularly the Drug Enforcement Administration, which in August defied calls for a softening of regulations on marijuana and reaffirmed its classification as a Schedule 1 drug, the same category as heroin. More:

Average premiums for popular ACA plans rising 25 percent

Insurers are raising the 2017 premiums for a popular and significant group of health plans sold through by an average of 25 percent, more than triple the percentage increase of this year’s plans, according to new government figures. The steep increase in rates serves broadly to confirm what has become evident piecemeal in recent months: Prompted by a burden of unexpectedly sick Affordable Care Act customers, some insurers are dropping out while many remaining companies are struggling to cover their costs. The figures, announced by federal officials Monday, injected a new round of uncertainty into the future of the insurance exchanges that are a core feature of the 2010 health-care law. Health policy experts said the rising prices and shrinking insurance options add tumult to the coming ACA enrollment season. The data immediately touched off a fresh round of criticism among the ACA’s persistent Republican congressional opponents. In disclosing the 2017 rates, officials played down the impact of higher prices on consumers. They said that more than 8 in 10 consumers will qualify for ACA subsidies that will cushion them from the effects of more-expensive insurance. And they noted that as premiums go up, more Americans will be eligible for the tax credits. In a conference call with reporters, two Department of Health and Human Services officials did not mention the average percentage increase in price. Instead, they briefly mentioned the smaller, 16 percent median increase — a statistic that has not been in previous years’ analyses. As they have in the past, officials stressed that, if current customers shop around, many will find less-expensive coverage than what they have. With subsidies, more than three-quarters of customers will be able to find a health plan next year for which they pay $100 or less in monthly premiums, according to the new data. People who have ACA coverage tend to qualify for relatively large tax credits because their incomes skew low. The portrait of rates and availability of health plans in the law’s marketplaces has become an annual ritual since the exchanges began selling insurance during fall 2013. Next week, the marketplaces will open for their fourth sign-up season, and the Obama administration is predicting that 11.4 million people will pick health plans by the end of January — about 1 million more than the number of Americans with such coverage now. More:

A New Target for Old Spies: Congress

There was dark talk of treason at an annual gathering of spooks in Washington, D.C., over Congress’ refusal to honor the World War II generation—but also word of a behind-the-scenes plot to save the measure. “I think we’ve found a new target to blow up,” joked Charles Pinck of the Republican House leadership’s refusal to pass a bill that would award all members of the OSS a Congressional Gold Medal. Pinck is president of the Office of Strategic Services Society, and son of a former member of the OSS.

The OSS was established in 1942 to send daring American agents behind enemy lines, to rescue soldiers, sabotage enemy craft, conduct disinformation, or whatever mission would help the allied effort, no matter how creative or quite frankly insane some of their missions sounded. The foundation built by those agents later gave rise to today’s CIA and U.S. Special Operations Command. A bill to honor these daring members of the Greatest Generation unanimously passed the Senate last February but has stalled in the House, where Republican leaders have yet to bring the measure to a floor vote, although they did for a similar bill to honor civil rights activists. It’s the ultimate example of a do-nothing Congress for the crowd Pinck was addressing, including Navy SEAL commanders and CIA officers linked to the mission that killed Osama bin Laden in Pakistan, as well as a handful of the surviving nonagenarian members of the OSS. Ninety-year-old OSS member Bill Becker received France’s Legion of Honor for flying agents behind enemy lines. “The government in France made it happen. The government that I fought for is not,” Becker told The Daily Beast. “It isn’t for us. It’s for my children, my great-grandchildren, and their children,” said OSS member Irv Refkin, 95. He wryly counts among his favorite missions, “finishing up an assignment and still being alive. That was always good.” Leaning on his cane, Refkin described how he’d tried to reach Republican House Majority Leader Kevin McCarthy several times, only to be rebuffed by staffers who’ve said the Republican chief was too busy.  More:

The Big League Prospect That Became a Mob Hit Man

The Buick sedan crawled the Providence streets. The April sky was baby blue, the air pleasant and cool. Perfect baseball weather. The man hunched in the back seat once lived for days like this. When the maroon car stopped outside Pannone’s Market on Pocasset Avenue, its back-seat passenger leapt out with uncommon grace, a mask over his handsome face, a shotgun in his large hands. An armed and disguised accomplice followed close behind. The mom-and-pop employees ducked as the nimble gunman found his target, a bookmaker who had defied Raymond L. S. Patriarca, the coal-eyed head of New England organized crime. The wayward bookie caught it from three feet away, his unused gun clattering to rest a few inches from his outstretched hand. His sidekick was dropped near a shelf of canned tomatoes, his face rearranged by buckshot. Neighborhood children were soon pressing their noses against the storefront window, as investigators examined the two bodies splayed on the blood-slick floor. The Buick was already a memory. The killer and his co-conspirators gathered that evening in a motel a few miles away. One of them later recalled how the athletic shooter, whose apt nickname was Pro, proudly tallied his personal stats. How he was first through the door, the one who hit the bookie, the one who killed the bodyguard trying to slip away. It figured. The habits of old ballplayers die hard. Newspapers from Burlington, N.C., to Walla Walla, Wash., told the same story: Maury (Pro) Lerner could hit. “Maury Lerner crashed a triple off the clock and rode home on Jacoby’s single.” “Maury Lerner doubled in two runs Sunday night to lead Boise to a 7-to-5 victory over Pocatello in the Pioneer League play.” Maury Lerner singled, doubled, tripled, homered, won the game. More:

Fearing Trump, Bar Association Stifles Report Calling Him a ‘Libel Bully’

WASHINGTON — Alarmed by Donald J. Trump’s record of filing lawsuits to punish and silence his critics, a committee of media lawyers at the American Bar Association commissioned a report on Mr. Trump’s litigation history. The report concluded that Mr. Trump was a “libel bully” who had filed many meritless suits attacking his opponents and had never won in court. But the bar association refused to publish the report, citing “the risk of the A.B.A. being sued by Mr. Trump.” David J. Bodney, a former chairman of the media-law committee, said he was baffled by the bar association’s interference in the committee’s journal. “It is more than a little ironic,” he said, “that a publication dedicated to the exploration of First Amendment issues is subjected to censorship when it seeks to publish an article about threats to free speech.” In internal communications, the bar association’s leadership, including its general counsel’s office and public relations staff, did not appear to dispute the report’s conclusions. But James Dimos, the association’s deputy executive director, objected to the term “libel bully” and other sharp language in the report, saying in an Oct. 19 email that the changes were needed to address “the legitimately held views of A.B.A. staff who are charged with managing the reputational and financial risk to the association.” “While we do not believe that such a lawsuit has merit, it is certainly reasonable to attempt to reduce such a likelihood by removing inflammatory language that is unnecessary to further the article’s thesis,” Mr. Dimos wrote. “Honestly, it is the same advice members of the forum would provide to their own clients.”

What Happens to Paul Ryan if Trump Loses?

What happens to the Republican Party after November 8, particularly if Donald Trump loses? One clue comes from a recent Bloomberg Poll: When asked which leader better represents their view what the Republican Party should stand for, 51 percent of likely voters who lean Republican or identify as Republican picked Trump, while 33 percent picked House Speaker Paul Ryan (15 percent said they weren’t sure.) Paul Ryan: The highest ranking Republican elected official, the former vice presidential standard bearer, perhaps the leading elected policy intellectual in the GOP, who is now being attacked regularly by the party’s current presidential standard bearer; who has calling him a secret supporter of Hillary Clinton, and Sean Hannity calling him a “saboteur” who needs to be replaced;  who has both conservative Freedom Caucus members and other discontented Trump-supporting colleagues ripping him and threatening to vote against him when the vote for Speaker occurs on the House floor on January 3 next. The Paul Ryan, who has struggled manfully to walk the fine line between Trump supporters and Trump himself, getting distance from Trump without renouncing him, and who has tried even harder to turn the focus to the policy plans of his House party. The fact that Trump, his advisor Hannity, and a slice of his caucus are hostile to Ryan is less ominous in a sense than the poll result; it is clear that there is now a yawning gap between the Republican establishment leadership and the party rank-and-file. All of that will make governing by finding the necessary coalitions and compromises much more difficult. But it also suggests that the vote for Speaker will be one of the most fascinating and tumultuous post-election events. Of course, it is possible that the Trump meltdown in October will lead not only to a Clinton victory but to a massive Democratic sweep, including taking back a majority in the House. That would almost certainly make Nancy Pelosi Speaker again. Of course, it might be a challenge for her—the new Democratic majority, if there is one, will be thin, and most of the new members will be from Red districts, with several pushed by their local politics to reject Pelosi. But there would not likely be an internal challenger, and her popularity within her caucus, along with her tireless efforts to elect those Democrats, would work very much for her. More:

How White Nationalists Learned To Love Donald Trump

he embrace of Donald Trump by America’s white nationalists has been one of the most surprising and unsettling threads in the 2016 campaign. The celebrity New York developer has been endorsed by the nation’s most prominent neo-Nazis, as well as both current and former Klansmen. He is supported online by a legion of racist and anti-Semitic trolls, who push his campaign’s message and viciously attack journalists and politicians they see as hostile to Trump. Whether deliberately or not, the candidate, his son Donald Jr. and his surrogates have circulated white nationalist messages and imagery online. The Republican National Committee even displayed a white nationalist’s tweet during the GOP convention.

But not long ago, even an accidental alliance between Trump and white nationalists would have seemed utterly unlikely. Far from being a hero, Trump for years was reviled by such groups. Even after years of championing racially tinged questions about President Barack Obama’s birthplace, he was viewed with disdain and suspicion in the white nationalist community as recently as 2015. Many claimed the New Yorker was secretly Jewish, or in thrall to Jewish interests; others saw him as a blowhard and egomaniac, a mercenary who was in it only for himself. On web forums, blogs and online radio shows, they complained about his highly visible associations with “non-whites” in his reality shows and his beauty pageants. What happened? How did the scattered legions of American white supremacists coalesce around a showboating New York mogul? I tracked this two-year evolution through thousands of posts and comments on scores of blogs and forums used by the most ideological racists. What these posts show is the story of a U.S. presidential candidate who slowly but relentlessly overcame widespread distrust and contempt, as white nationalists came to believe he was their candidate—or at least the best candidate they could realistically expect. Perhaps surprisingly, it wasn’t Trump’s initial campaign announcement about Mexican “rapists” that cemented his support: It was his steady, consistent push for an anti-immigration platform, one of the central policy pillars of the nationalist right. And as white-nationalists began to rally around Trump as its closest political ally in a generation, they began to detect what members called “wink-wink-wink” communications from the candidate. There was his retweet of bogus murder statistics that exaggerated black crime; two separate retweets of a racist Twitter feed called @WhiteGenocideTM; and the interview that sealed the deal: the moment on CNN when—just days before the Louisiana primary—Trump dodged the question of whether to repudiate the endorsement of former Ku Klux Klan leader David Duke, which one commenter on the white nationalist site Stormfront called “the best political thing I have seen in my life.” More:

Obama trolls Trump over ‘mean tweet’ on late night TV

President Barack Obama on Monday trolled Republican presidential candidate Donald Trump – known for his prolific use of Twitter to settle scores – making Trump the punch line for jokes on ABC’s late-night show “Jimmy Kimmel Live.” Obama read aloud a series of “mean tweets” culminating in one from Trump: “President Obama will go down as perhaps the worst president in the history of the United States!” “At least I will go down as a president,” Obama said.


Alabama Supreme Court justices recuse themselves in Roy Moore’s fight to return to office

The Alabama Supreme Court said Monday that a panel of retired judges will hear suspended Chief Justice Roy Moore’s bid to return to the bench. The justices issued a 5-3 decision saying that they will recuse themselves from hearing Moore’s appeal and describing how replacement judges will be picked.

“Because the Justices have personal knowledge of the facts and circumstances underlying this appeal, this appeal presents a situation in which all the justices’ impartiality might be questioned,” the majority wrote. The court said Acting Chief Justice Lyn Stuart will work with the governor to randomly draw the names of 50 judges from a pool of retired appellate, circuit and district court judges. The first seven qualified and willing judges will serve as the special Supreme Court to hear Moore’s appeal. Associate Justice Tom Parker, an ally of Moore’s who dissented in the Monday order, said elected judges should hear Moore’s appeal because they are accountable to the public. A judicial panel last month suspended Moore for the remainder of his term after finding he urged state probate judges to defy the federal courts on gay marriage. The charges stemmed from a January order Moore sent, telling probate judges that a state order to refuse marriage licenses to gay couples remained in “full force and effect.” Moore’s writing came six months after the U.S. Supreme Court ruled gays and lesbians have a fundamental right to marry. Moore disputed the charges, saying he was only giving judges a “status” update in the state case.

Moore’s attorney objected to Stuart’s involvement in the selection of replacement judges. Stuart earlier this month directed Moore to clear out his office at the Alabama Judicial Building in the wake of his suspension from the bench. Moore, as of last week, had not removed his personal items. His attorney said the directive was premature since Moore is appealing his suspension. “He wants his case to be heard by an objective and fair panel of judges who will adhere to the rule of law,” said Moore’s attorney, Mat Staver.

Ethics Complaints Filed Against Acting Chief Justice Lyn Stuart

On Monday, Sanctity of Marriage Alabama filed an ethics complaint with the Alabama Judicial Inquiry Commission (JIC) against acting Chief Justice Lyn Stuart for violating multiple Canons of Judicial Ethics in her mishandling of the cases surrounding Chief Justice Roy Moore. “If the Judicial Inquiry Commission really cares about ethics, fairness, and upholding the integrity and impartiality of the Alabama Judiciary, they will no doubt take our complaint seriously, as will organizations which filed ethics complaints on Chief Justice Moore” said Sanctity of Marriage Alabama spokesperson, Tom Ford. The complaint outlines how acting Chief Justice Lyn Stuart has repeatedly failed to avoid impropriety or the appearance of impropriety, failed to perform the duties of her office impartially, failed to avoid conduct prejudicial to the administration of justice that brings the judicial office into disrepute, and failed to conduct herself at all times in a manner that promotes public confidence in the integrity and impartiality of the judiciary.

“Justice Stuart played a part in a sealed case regarding Chief Justice Moore, has repeatedly, prematurely, and boldly inserted her judgment for that of courts over which she should have no sway, and even now, refuses to disqualify herself from the process of Chief Justice Moore’s appeal,” Ford said.  “The sealed case was Moore v. Judicial Inquiry Commission, which means that the JIC is already aware of the ethical violations of Justice Lyn Stuart. We sincerely hope that they have not become so politically motivated as to cover such flagrant violations of the Canons that they are supposed to uphold.” The Complaint reads:  “If Justice Lyn Stuart were to don her innocent mask and recuse from the more publicized aspects of Chief Justice Roy Moore’s appeal (e.g. sitting on the special court), the validity of our complaint would be written in stone: her recusal or non-recusal is based on politics, public clamor, or appearances see Canon 3A(1) as she has already failed to recuse in the sealed case, has already made her judgment on the appeal known, and has failed to disqualify herself from the process thus far.” “When the actions of acting Chief Justice Lyn Stuart are independently analyzed,” Ford continued, “there is no doubt that Chief Justice Moore cannot have the fair appeal any Alabama citizen deserves. With a judge who flouts ethics in such a fashion at the helm of the Alabama court system, we have reason to be concerned about the proper administration of justice throughout the State.”

For mentally ill offenders, this courtroom offers a lifeline instead of jail

Before he entered mental health court, Kevin had worked out what he considered to be an unspoken agreement with the criminal justice system. In exchange for using illegal drugs to escape his demons, Kevin – who did not want to use his real name – would spend part of the year behind bars for petty crimes like theft and possession. “At the time, it was pay to play,” Kevin said. “For me to be able to get away from myself, I had to be willing to give them three months out of the year.” The cycle played out for about 16 years as Kevin, addicted to heroin and suffering from post-traumatic stress disorder, rotated in and out of jail and rehab. Then last year, he picked up his third possession charge, a felony that carried the possibility of a long prison sentence. Case workers and attorneys offered him an alternative – 12 months of supervised treatment through Jefferson County’s mental health court in Birmingham. The program was resurrected last year under the auspices of Judge Stephen Wallace. More:


Your Facts or Mine? 

“Obama to Declare MARTIAL LAW If Trump Wins Election.” That was the teaser text that recently popped up on my Facebook news feed. It directed me to a post from a page called Nation in Distress, one of the many hyperpartisan Facebook pages that have gained in popularity this year. The post linked to a website called, which linked to a video blog called The Daily Sheeple, which cited a National Enquirer story claiming that Hillary Clinton had a lesbian tryst in a Beverly Hills, Calif., hotel in the 1990s. I wasn’t able to find the evidence that President Obama would declare martial law if Donald J. Trump won the presidential election. The next time I opened Facebook, another Nation in Distress post showed up at the top of my news feed — this time with a story about how the size of Mr. Trump’s campaign plane HUMILIATED the Clinton plane. (Dr. Freud was unavailable for comment.)

In 2005, Stephen Colbert coined the term “truthiness”: the instinctive feeling that something is or isn’t true. At the time, he was skewering right-wing talking heads including Rush Limbaugh, Bill O’Reilly and Glenn Beck, all of whom still exert significant influence in Republican politics. But in this election, truthiness has become fully weaponized by social media, with Facebook awarding coveted blue check marks to partisan accounts on the right and left, and lending them an air of credibility despite the fact that they have no responsibility to separate truth from fiction. A recent BuzzFeed analysis found that roughly 38 percent of posts from three “hyperpartisan right-wing Facebook pages” contained false information, compared with 19 percent of hyperpartisan left-wing pages. BuzzFeed’s conclusion: “The best way to attract and grow an audience for political content on the world’s biggest social network is to eschew factual reporting and instead play to partisan biases using false or misleading information that simply tells people what they want to hear.” If share-baiting Facebook posts are the junk food of the political internet, then fact-check journalism is steamed spinach. As a journalistic tool, fact-checking has been on the rise for years. A study conducted by the American Press Institute found that the number of fact-checking stories tripled between 2008 and 2012. This election has given us a barrage of dubious claims that need to be verified or debunked. The study also found broad support for political fact-checking — or at least the concept of it. Eight in 10 Americans view political fact-checking favorably. But reconcile that statistic with the fact that, according to a CNN poll from 2015, 29 percent of Americans, and 43 percent of  Republicans, think President Obama is Muslim. The implication seems to be that Americans like the concept of fact-checking, as long as those facts confirm their point of view. More: 

One way or another, Gov. Bentley’s goose is cooked

It’s time to turn up the heat on Gov. Robert Bentley. ‘Cause he’s nutty and undone as a half-baked pecan pie. He just ain’t fit to serve. A special grand jury last week found that evidence cooked up against former Alabama Law Enforcement Agency Secretary Spencer Collier didn’t have enough starch to hold together. The claims of misspending, found in an investigation ordered by Collier’s replacement Stan Stabler and dished out as truth by the governor himself, was thin as gruel. Or as the attorney general’s office put it after Collier was cleared, “no witness established a credible basis for the initiation of a criminal inquiry in the first place.” In the first place. As Emeril himself might say… Bam! And what did Bentley – who repeatedly used that “evidence” to explain why he fired Collier – say to that news? What did he say after a grand jury shredded his whole story like so much old cheese, after multiple people cited in ALEA’s internal “investigation” of Collier said they were misquoted or taken out of context? He said this. This:

“Based on concerns presented to me by a member of the Alabama Senate and information that was given to the then Acting Secretary of Alabama Law Enforcement Agency Stan Stabler, when he assumed his position, I felt a new direction in our state law enforcement agency was needed. The information obtained by the ALEA integrity unit was gathered and presented to the Attorney General’s office and a determination has been made.  I am very satisfied with the new direction of ALEA and its leader Secretary Stan Stabler.” Assume the position, Alabama. Assume the position. If the governor of this state is “very satisfied with the new direction of ALEA and its leader” after this debacle, it’s time to turn that sucker up to broil. We’re talking about an ALEA “investigation” that looks more like a facts-be-darned hatchet job than real detective work, ordered by Stabler – who just got the interim job of top cop – targeting the man who became the governor’s biggest political landmine. And the governor used it over and over again to describe how dirty Collier was. Which, as it turned out, he wasn’t. We’re talking about indication that the top law enforcement agency in the state – run by a man appointed by the governor and serving at the pleasure of the governor — used people and resources to carry out a vendetta against an enemy of that very governor. That’s what needs to come before a grand jury. It needs to come back before the Legislature, too, to clear up the dirty dish that consolidated power in ALEA and put it under the control of the governor in the first place. Alabama’s law enforcement agency has no business being an arm of the governor any more than your police department should be an arm of your mayor. And Bentley is the perfect example of why. And now all the crock pot governor can say is he “felt a new direction in our state law enforcement agency was needed?” No. He wanted to punish Collier, who told the world about Bentley’s dirty phone talk, and Stabler wanted to keep his new job – which came with a hefty 23 percent raise. A new direction? Tell it to Spencer Collier, who is pleased to be cleared but convinced the governor and Rebekah Mason, with the aid of Stabler, sought to destroy his name. “If the governor had told me he lost confidence in me I would have resigned,” Collier said. “But I would not resign being called a thief.”

Yeah, prosecutors are gonna kick this thing up a notch. And somebody’s goose is cooked.

Morning Money

GENSLER NOT GETTING A GIG? — MM hears that a senior Democrat on Capitol Hill has been assuring bank lobbyists that former CFTC Chair (and ex-Goldman Sachs exec and current Hillary Clinton campaign aide) Gary Gensler will probably not be getting a top spot in a potential Clinton administration. Progressives who love Gensler are not exactly thrilled with this. They are looking for Gensler to get a top spot in the West Wing or Treasury. But word going around the Hill is that Gensler will only get a “second tier” position.

THE JOCKEYING — One Hill denizen noted that while Obama came to Washington with very little in the way of baggage and sprawling networks, Clinton has so many that “her coming to power is like the Roman Legions coming home.”

NO REPATRIATION? — In a other sign of the Dem on Dem violence to come should Clinton win, former Senate aide Tyler Gellasch emails: “As banks and corporations keep handicapping a repatriation tax holiday, the unassailable evidence from the 2004 holiday is that it was a complete disaster.

“I don’t think rewarding corporations who have avoided billions of taxes at the expense of the rest of us is likely high on Progressives’ wish list. For the more moderate folks, it would be a bit cynical for a new Democratic Senate majority and President to agree on something that polls more than 70 percent against them.”

HRC/WARREN LOVE … FOR NOW — Haroon Khan of the Federal Resources Group emails: “Interesting remarks by Sec Clinton today while campaigning with Senator Warren in NH. I wonder if she will have the same feeling as President particularly once the nomination process gears up.”

He was referring to this from Clinton: “Some of the best TV you can see is on C-Span when Elizabeth going after a bank executive or a regulator. She is refusing to let them off the hook and she is not just speaking for herself, she is speaking for every single American who is frustrated and fed up. I am so looking forward to working with her to rewrite the rules of our economy … ”

MORE ON TRUMP/CLINTON PLANS — Via the Committee for a Responsible Federal Budget: “According to our findings, neither candidate would significantly increase economic growth to the 3 percent, 4 percent, or 5 percent growth levels hinted. Clinton would likely quicken growth because of her immigration reform while Trump would likely slow growth for the same reason. …

“[W]when immigration reform is accounted for, we expect Clinton’s plan to increase average real Gross Domestic Product growth from about 2.0 percent per year to 2.3 percent, while Trump’s plan could reduce it to as low as 1.7 percent. Importantly, these estimates do not account for the candidates’ trade, regulatory, or energy plans, all of which could further impact economic growth” Read more.

BAYH MET WITH BANK LOBBYISTS DURING BAILOUT VOTE — POLITICO’s John Bresnahan: “Former Indiana senator and longtime Banking Committee member Evan Bayh held a series of private meetings with financial service industry executives and lobbyists throughout 2008 — just as Wall Street was collapsing and big banks were seeking a bailout from Washington, according to a newly obtained schedule for the ex-lawmaker now running to reclaim his seat. One of the engagements — which included lunches, dinners and golf outings — happened the day of the Wall Street bailout vote.

“On Oct. 1, 2008, when the Senate voted to approve the $700 billion rescue package, Bayh held a ‘Lunch with Supporters’ that included lobbyists for the financial services industry, his schedule shows. Other meetings with industry lobbyists and officials took place in the weeks and months up to and following the bailout vote” Read more.

LOVE YOU TOO, JOHN! — Hillary Clinton campaign chair John Podesta in an email to communications director Jennifer Palmieri in July of last year with the subject line “Being a crazy person”: “Just read Ben White’s piece in Politico on the speech. It was a joke. I think we might need to go postal on the press.” See the email.

Here’s the story that got Podesta so steamed up.

MORE FROM WIKILEAKS: THE COURTING OF BOB WOLF — This appears to be from an exchange between Podesta and Clinton about Robert Wolf, a Wall Street exec and close confidante to President Obama. Podesta: “I think you may be seeing him today and wanted to let you know where his head is at. I spent an hour with him on Tuesday. I saw him a few days earlier at David Brock’s book party and had heard he was cranky so asked if I could come see him. He wasn’t so much cranky as trying to figure out where, if anywhere, he fits in the campaign. He has a super close relationship with Obama … .

“He’s not expecting that, but hoping that he could have some direct relationship with you and that the campaign would seek his views on economic issues. He raises money, but hopes that he isn’t just connected to the campaign only as a fundraiser and only through Dennis. … Most importantly, Biden is courting him hard … All these guys are kind of pains in the ass in their own ways, but I find Robert pretty nice, pretty easy, and pretty smart.”

YOUR GUIDE TO THE MEDIA CIRCUS: Stay ahead of the hype with POLITICO’s Morning Media — your early morning rundown of the biggest media stories, controversies and scoops, reported by industry veteran Joe Pompeo. Sign up today.

DRIVING THE DAY — Trump campaigns in Sanford and Tallahassee, Florida … Clinton campaigns in Coconut Creek, Florida … Case-Shiller Home Prices at 9:00 a.m. expected to rise 0.2 percent … Consumer Confidence at 10:00 a.m. expected to dip to 101.5 from 104.1.

GET TO KNOW TRUMP TOWER — Bloomberg has a new graphic going up Tuesday letting people explore Trump Tower: “On one half of the screen readers can dive into the incredible story of the building and on the other half users can click through the center of Trump’s universe — Trump Tower — and view the tower, and its (in)famous tenants, floor by floor” Check it out.

FRIENDS NOW/FRENEMIES LATER — POLITICO’sAnnie Karni: “This could be the ending of a beautiful friendship. Hillary Clinton and Elizabeth Warren, dressed in matching jewel-toned pantsuits, touted each other’s virtues Monday … The happy rally represented an evolution for the two all-stars of the Democratic party. Clinton and Warren entered the campaign season as wary competitors who had never forged a personal bond during their overlapping years in power in Washington, D.C.

“But there’s tension on the horizon: If Clinton wins, Warren has promised to rattle the gates of a Clinton White House — as she did to President Barack Obama — pushing for progressive, anti-Wall Street crusaders to fill posts as top economic advisers and, most importantly to her of all, treasury secretary. Warren and her staffers have already been feeding to the Clinton campaign lists of individuals they would consider appropriate for those posts — and signaling in unsubtle terms those whose appointment they would fight to block” Read more.

SCRUTINIZER IN CHIEF — NYT’s Amy Chozick and Matt Flegenheimer: “[L]iberal Democrats are already looking past Election Day — and relying on Ms. Warren to become the thorn in chief in Mrs. Clinton’s side, scrutinizing her appointments and agenda. Mrs. Clinton has vowed that if elected she will work across the aisle with congressional Republicans, but relations with liberals, including Ms. Warren of Massachusetts and Senators Bernie Sanders of Vermont and Sherrod Brown of Ohio, could prove quite contentious” Read more.

WEISS ON TREASURY TRANSPARENCY — POLITICO’s Patrick Temple-West: “The public needs more information about the U.S. government debt being bought and sold, but precautions need to be taken to keep businesses from getting burned by too much sunlight, a U.S. Treasury Department official said … ‘Trading in our nation’s debt should be transparent to the public,’ Antonio Weiss, counselor to Treasury Secretary Jack Lew, said at a New York Federal Reserve conference … ‘All significant participants in the Treasury market should be subject to comprehensive oversight and trade-reporting requirements.’

“But Weiss said regulators’ desire for more Treasury transparency should accommodate businesses’ concerns about possible disruptions to the market. ‘Transparency is not all or nothing, and one size may not fit all segments of the Treasury market,’ Weiss said. ‘We have heard the concerns regarding potential risks of increased transparency and believe that design is key.’” Full speech.

MET LIFE VS FSOC — Compass Point’s Isaac Boltansky: “[T]he U.S. Court of Appeals for the District of Columbia Circuit heard oral arguments in MetLife v. FSOC. Lawyers from both sides faced pointed, and relatively detailed, questions from Judges Millett (Clinton appointee), Randolph (H.W. Bush appointee), and Srinivasan (Clinton appointee).

“While it is dangerous to read too deeply into questions from the bench, our sense is the oral arguments in MetLife v. FSOC broke very slightly in favor of the government. Judge Randolph’s questioning regarding cost-benefit analyses suggested sympathy for MetLife’s arguments. Questions from Judges Millett and Srinivasan suggested conceptual support for the FSOC’s unique position in the regulatory ecosystem, but stopped short of signaling a wholehearted acceptance of the government’s position”

TRUMP DOESN’T GET TRADE — Consumer Technology President Gary Shapiro in U.S. News: “In reality, any decline in manufacturing jobs in the U.S. has virtually nothing to do with competition from abroad and everything to do with a massive increase in productivity through the use of technology. …

“Trump has also made a habit of attacking technology companies, such as Apple, openly suggesting that as president, he would strong-arm the company to build all its products in the U.S. What Trump doesn’t say — or, more than likely, doesn’t know — is that such a draconian move would do little to create jobs in America and would only result in vastly increased prices for Apple products to U.S. consumers.” Read more.

CITI LOSES GROUND — TheStreet’s Brad Keoun: “As the largest U.S. banks race to reinvent themselves amid an onslaught of new regulations, Citigroup is falling behind.

‘On a key measure of profitability, Citigroup lags behind the other five big U.S. banks — and is barely halfway toward its own goal. During the first nine months of this year, the New York-based lender’s return on tangible equity was just 7.7 percent, well behind the 14 percent at Wells Fargo and 13 percent at JPMorgan Chase. Citigroup has set a long-term goal in the “mid-teens,” while refusing to set a timeline.” Read more.

TWITTER PLANS JOB CUTS — Bloomberg’s Sarah Frier: “Twitter Inc. is planning widespread job cuts, to be announced as soon as this week, according to people familiar with the matter.

“The company may cut about 8 percent of the workforce, or about 300 people, the same percentage it did last year when co-founder Jack Dorsey took over as chief executive officer, the people said. Planning for the cuts is still fluid and the number could change, they added. The people asked not to be identified talking about private company plans.” Read more.

WELLS ADS BLITZ — FT’s Alistair Grey: “Wells Fargo is launching a television advertising campaign as part of a push by the bank’s new chief executive Tim Sloan to rebuild a brand damaged by the scandal over faked accounts. “The commercials, scheduled to begin on Monday evening, stop short of apologising for the debacle but tell viewers that the bank is ‘making changes to make things right’.” Read more.

OBAMACARE COSTS TO RISE — FT’s Barney Jopson: “Health insurance costs under Barack Obama’s healthcare reforms will jump by an average of 25 per cent next year as the president’s signature initiative — which was designed to bring down costs for consumers — is undermined by growing problems.

“The US Department of Health and Human Services said premiums for the most popular plans would rise by an average of 25 per cent, although the change in cost for many consumers would be less dramatic because the figure does not take account of government subsidies.” Read more.

PROGRESSIVES PLAY LONG GAME — InsideSources’ Carter Dougherty: “Far from hankering for a fight similar to the one that torpedoed the nomination of a senior Treasury Department official in 2014, Democratic lefties and their outside allies are eyeing a complex process that doesn’t over-emphasize the importance of any single nomination.

“With Sen. Elizabeth Warren, the Massachusetts Democrat, at the center of the fight, progressives are also guarding against Clinton keeping power in the hands of White House staff or other appointees not confirmed by the U.S. Senate. The emphasis, say people close to the effort, is on the overall profile of her administration.” Read more.

FRANCE CLEARS CALAIS — NYT’s Maurico Lima and Adam Nossiter: “Hundreds of migrants, mostly young men from Africa or Afghanistan, lined up in the cold on Monday for buses to take them to temporary housing all over France, as the government set in motion a plan in the port of Calais to clear the sprawling migrant camp known as the Jungle once and for all.

“The squalid camp, growing and festering for over a year, has become a symbol of Europe’s faltering efforts to handle its migration crisis. Before Monday’s operation, the camp’s population was 6,000 to 8,000.” Read more.

CHINA CHECKS INTO HILTON — Reuters’ Ankit Ajmera: “Chinese aviation and shipping conglomerate HNA Group said on Monday it would buy about 25 percent of hotel operator and manager Hilton Worldwide Holdings Inc from biggest shareholder Blackstone Group LP for $6.5 billion

“The deal will allow the HNA Group to appoint two directors to Hilton’s board, raising its size to 10.” Read more.


FIRST LOOK: FISCAL CONFIDENCE AT 52 — Via release out Tuesday: “As Election Day approaches, the nation’s fiscal health remains a top concern for voters … The Fiscal Confidence Index, modeled after the Consumer Confidence Index, is 52 (100 is neutral), indicating the nation’s fiscal future remains a top issue on voters’ minds as they head to the voting booth.” Read more.

BI LAUNCHES MARKET DATA SITE — WSJ’s Lukas Alpert: “Business Insider’s partnership with German media conglomerate Axel Springer SE is growing closer. The nearly decade-old business news site is leveraging its relationship with its new corporate parent to launch, a globally-focused markets data and news operation. The new site, which launches Monday, will be powered by data coming from, Axel Springer’s German finance portal that crunches numbers coming from 100 exchanges around the world” Read more.

HOW WALL STREET FUNDS GOV RACES — Via International Business Times: “Wall Street is getting around the SEC pay to play rule and funneling huge money into gubernatorial races in states where Wall St firms make big money off pension funds” Read more.

TD TO BUY SCOTTRADE — WSJ’s Michael Wursthorn: “One of the nation’s biggest discount brokerages is buying a smaller rival as a decline in stock trading and a relentless price war in commissions push stock sellers to seek new ways to make money. The $4 billion acquisition of Scottrade Financial ServicesInc. by TD Ameritrade Holding Corp. joins two of the biggest names in online brokerage, a business that boomed in the late 1990s as technology stocks soared and individuals flocked online to buy stocks on their own for a fraction of what traditional brokers had charged them” Read more.

POTUS Events

11:20 am || Holds a fundraiser for Senate Democrats; private residence, Los Angeles
12:50 pm || Departs Los Angeles
8:25 pm ET || Arrives White House

All times Pacific except as noted