Securities Attorney Briefing 31 October 2016

Securities Attorney Tom Krebs


Iraqi forces attempt first push into Mosul as offensive enters third week

An elite Iraqi army unit advanced towards the built-up area of the Islamic State stronghold of Mosul on Monday after two weeks of fighting to clear surrounding areas of the insurgents. Military commanders said that the U.S.-backed offensive to recapture Mosul — the largest military operation in Iraq since the U.S.-led invasion that toppled Saddam Hussein in 2003 — could still take weeks and possibly months. “The battle of Mosul will not be a picnic,” Hadi al-Amiri, leader of the Badr Organisation, the largest Shi’ite militia fighting with Iraqi government forces, said from the southern frontline. “We are prepared for the battle of Mosul even if it lasts for months”. Troops from the Counter Terrorism Service (CTS) were moving in on Gogjali, an industrial zone on Mosul’s eastern outskirts, and could enter it later on Monday, an officer from the U.S.-trained unit told a Reuters correspondent just east of Mosul. The zone lies about a kilometer from the administrative border of Mosul. “The operation to liberate the left bank of Mosul has started,” a military statement said, referring to the eastern bank of the river that flows from north to south. The capture of Mosul would mark the militants’ effective defeat in the Iraqi half of the caliphate that Islamic State leader Abu Bakr al-Baghdadi declared two years ago from the city’s Grand Mosque.  It is still home to 1.5 million residents, making it four of five times bigger than any other city they seized in both Iraq and Syria. Other military statements said five villages were taken north of Mosul, where Kurdish Peshmerga fighters are also being deployed, while army units advanced in the south. Pro-Iranian Iraqi Shi’ite militias joined the fighting on Saturday, aiming to cut the route between Mosul and Raqqa, Islamic State’s main stronghold in Syria. Islamic State militants has been fighting off the offensive with suicide car bombs, snipers and mortar fire. More:

Iraqi Christians, scarred by Islamic State’s cruelty, doubt they will return to Mosul

IRBIL, Iraq — At the evening service, the priest counseled forgiveness to a congregation with little reason to forgive. They were Christians from Mosul, brutalized by the Islamic State and betrayed, in some cases, by neighbors, and nothing — not the priest’s pleas, not his invocation of Cain and Abel — seemed likely to heal those scars. Khalid Ramzi, a congregant, seemed to choke on the sermon. “We can’t fall into the same hole twice. We don’t want our children to be raised in violence and fear,” he said, standing outside the church in Irbil. “Only in our dreams can we go back to Mosul.” When the militants swept into the city two years ago, Christians were ordered to convert, pay a tax or die. As the Islamic State pushed beyond the city, onto the plains of Nineveh, its advance scattered the rich patchwork of religious and ethnic minorities — Yazidis and Assyrians, Kurds and Shabaks — that made the area a microcosm of diverse Iraq and a place unlike perhaps any in the world. Churches were torched. Yazidis were massacred or enslaved. Villages emptied as hundreds of thousands of people fled. Iraqi forces advancing toward Mosul have recaptured some of the villages, raising the possibility of return for the minorities. But it is difficult to imagine the villages whole again, with their emptied streets and houses lying in ruin or despoiled by the militants. More:

Doubts About the Promised Bounty of Genetically Modified Crops

LONDON — The controversy over genetically modified crops has long focused on largely unsubstantiated fears that they are unsafe to eat. But an extensive examination by The New York Times indicates that the debate has missed a more basic problem — genetic modification in the United States and Canada has not accelerated increases in crop yields or led to an overall reduction in the use of chemical pesticides. The promise of genetic modification was twofold: By making crops immune to the effects of weedkillers and inherently resistant to many pests, they would grow so robustly that they would become indispensable to feeding the world’s growing population, while also requiring fewer applications of sprayed pesticides. Twenty years ago, Europe largely rejected genetic modification at the same time the United States and Canada were embracing it. Comparing results on the two continents, using independent data as well as academic and industry research, shows how the technology has fallen short of the promise. An analysis by The Times using United Nations data showed that the United States and Canada have gained no discernible advantage in yields — food per acre — when measured against Western Europe, a region with comparably modernized agricultural producers like France and Germany. Also, a recent National Academy of Sciences reportfound that “there was little evidence” that the introduction of genetically modified crops in the United States had led to yield gains beyond those seen in conventional crops. At the same time, herbicide use has increased in the United States, even as major crops like corn, soybeans and cotton have been converted to modified varieties. And the United States has fallen behind Europe’s biggest producer, France, in reducing the overall use of pesticides, which includes both herbicides and insecticides. More:


Banks Are Hoarding $2.4 Trillion of Bonds

If the world’s biggest economy is really on the upswing, then why are America’s banks stockpiling a record amount of ultrasafe bonds? After all, jobs are back, the Federal Reserve is close to raising interest rates again and growth has perked up after a sluggish first half. But instead of ramping up lending to keep up with deposits, banks are plowing into U.S. government and related debt at the fastest clip since 2014.

The easy answer, of course, has to do with post-crisis financial regulations, which were designed to curb risk-taking and have compelled banks to hold more high-quality assets. Yet in many ways, the buildup reflects a more worrying sign. In the past year, more loan officers at large and midsize banks have tightened credit to businesses than at any time since 2009, when the U.S. was still reeling from the housing bust. Americans are also saving more rather than taking on extra debt, damping demand for new loans. Though it’s hard to say whether that means the seven-year-long U.S. expansion may be closer to an end than the upbeat data suggest, the demand for bonds is welcome news for investors buffeted by the biggest monthly selloff since 2010. “Banks continue to buy Treasuries as we move further through the economic cycle,” said Jeff Caughron, chief operating officer at Oklahoma City-based Baker Group, which advises community banks with over $45 billion in investments. And there are just “fewer good loans out there to be made.” That may help contain the backup in Treasury yields as rates rise and foreign demand slows. More:

California Wins $15 Million From Madoff-Tied Settlement

SACRAMENTO, Calif. — California will recover $15 million related to the vast Ponzi scheme engineered by Bernard Madoff as part of an agreement liquefying the $277 million estate of a Beverly Hills investment adviser, officials said on Friday. The settlement ends a seven-year-old lawsuit filed by the state attorney general against Stanley Chais, a Beverly Hills investment adviser. Officials said he charged astronomical fees to invest hundreds of millions of dollars from more than 460 victims. Mr. Chais, who died in 2010, collected nearly $270 million in fees from 1995 to 2008 while presenting himself as an “investment wizard,” according to the lawsuit filed in Los Angeles Superior Court. In fact, he funneled investors’ life savings to Mr. Madoff, the onetime Nasdaq chairman whose $20 billion financial pyramid collapsed in 2008, the lawsuit said. The agreement filed in federal bankruptcy court in New York settles separate lawsuits against Mr. Chais. Trustees say the settlement will essentially turn over his estate to his victims.

That includes nearly $263 million in cash and other assets to the Bernard L. Madoff Investment Securities customer fund, and another $15 million that will be administered by the California attorney general’s office to pay claims by investors in companies operated by Mr. Chais. Investors in the Chais-operated companies are not permitted to lay claim to the larger amount of money because that share will go to those who invested directly with Mr. Madoff, not through so-called feeder funds, said Kristin Ford, a spokeswoman for California’s attorney general, Kamala D. Harris. The lawsuit estimates there are more than 460 defrauded investors in three Chais-related companies, which would work out to reimbursements of about $32,600 each. Ms. Ford said the actual awards would be decided by an administrator and depended in part on how many former clients filed claims. The state can also use up to $750,000 of the settlement money for its administrative costs. More:

Technology can help advisers ensure they are giving ‘best’ advice to meet DOL fiduciary rule

It has been said that necessity is the mother of invention. The financial services industry is fast approaching a key April 2017 deadline that will require advisers to act as fiduciaries when advising clients on retirement accounts, products and services. Since the release of the Department of Labor Conflict of Interest final rule, a variety of companies have invented or re-invented a wide range of products and services to help firms and advisers comply with the new standard. The financial services profession will need to evolve, and evolve quickly. The adviser acting as an ERISA fiduciary must act prudently and in the best interest of the client. One way to meet the higher standard is for firms and advisers to leverage existing and new technologies. Aggregating client data and coupling it with better compliance systems integration will be a critical first step in the process. Client account aggregation has been around for decades in one form or another, but the recent fintech revolution has added more players to the mix. Tech firms have been pushing the aggregation envelope to create adviser dashboards that connect multiple platforms, such as CRM, financial planning software and client aggregation services.

In the post-DOL-fiduciary world, it will be a challenge for advisers to determine what is in the best interest of a prospect or a client by relying on the old data gathering techniques that were sufficient to meet a suitability standard. The ability to efficiently obtain comprehensive financial data will be a key element for the adviser to document how they are acting in a client’s best interest. Data aggregation of a client’s financial life should include information about assets held inside and outside the firm. These outside financial assets could include corporate retirement accounts; money market, checking and savings accounts; along with insurance policies.It should also include liabilities such as credit cards and home mortgage balances. This may be an unfamiliar area for advisers who have focused their entire business model on analyzing and managing client assets, and not their liabilities. What may be “best” for a client may not be an updated investment allocation or adding money to a portfolio, but rather a plan to pay down a high-interest credit card balance or to refinance an existing mortgage. Offering comprehensive financial advice rather than specific investment guidance may be useful in adhering to the DOL fiduciary rule; and the effective use of technology, such as an adviser dashboard, is a prudent start in the process. More:

Got bank? Election could create flood of marijuana cash with no place to go

Although the sale of marijuana is a federal crime, the number of U.S. banks working with pot businesses, now sanctioned in many states, is growing, up 45 percent in the last year alone. Still, marijuana merchants say there are not nearly enough banks willing to take their cash. So many dispensaries resort to stashing cash in storage units, back offices and armored vans. Proponents believe the Nov. 8 election could tip the balance in favor of liberalizing federal marijuana laws, a move seen as key to getting risk-averse banks off the sidelines. Measures on ballots in California, Florida and seven other states would bring to 34 the number of states sanctioning pot for medical or recreational use, or both. That could push annual sales, by one estimate, to $23 billion. The prospect for a market of such scale is adding urgency to calls for a national approach to marijuana that expands banking options. Law enforcement and Federal Reserve officials have expressed concern about the fraud and crime associated with un-bankable cash.

Nearly 600 dispensary robberies have been reported in Denver since recreational pot was legalized in Colorado three years ago. “There’s not a single human being who thinks there is any benefit at all in forcing marijuana business to be conducted on an all-cash basis,” said Rep. Earl Blumenauer, a Democrat from Oregon who has called for the decriminalization of marijuana since coming to Congress in 1996. The U.S. Justice Department said in 2014 it would not prosecute banks for serving state-sanctioned marijuana businesses. At the same time, the Treasury Department requires banks to report suspected drug crimes. At last count, 301 banks were serving marijuana businesses, according to the Treasury Department. Many more have avoided the sector out of fear that making the wrong call could put them at risk, said Robert Rowe, a vice president at the American Bankers Association. More:

Feds in talks to get emails from Weiner computer

Federal authorities are in discussions with representatives of longtime Hillary Clinton aide Huma Abedin to get permission to search a computer Abedin used so agents can review newly discovered emails that may be related to the previously closed investigation of Clinton’s handling of classified information, an official familiar with the matter said Sunday. The official, who is not authorized to comment publicly, said discussions have been underway to secure approval for the review of the laptop used by both Abedin and her estranged husband, former Rep. Anthony Weiner, D-N.Y.  The questionable emails first surfaced in a separate investigation of Weiner’s sexually charged contacts with a 15-year-old girl. The laptop was seized during that inquiry. The Clinton campaign said Sunday that neither Abedin nor her lawyer had been contacted by the FBI. NBC News and ABC News both reported Sunday evening that the FBI had obtained a warrant to search the emails on the laptop that may relate to the Clinton email investigation.

The Wall Street Journal reported Sunday that there may be as many as 650,000 emails on the laptop, but it is unclear how many may be relevant to the Clinton email server investigation. FBI Director James Comey announced Friday that the bureau had uncovered emails that may be related to the FBI probe of Clinton’s use of a private email server while she was secretary of state. Comey had announced in July that while Clinton had mishandled classified information on her private email, he would not recommend criminal charges against her. More:

U.S. airlines lose bid to dismiss price-fixing lawsuit

A federal judge rejected a bid by the four largest U.S. airlines to dismiss nationwide antitrust litigation by passengers who accused them of conspiring to raise fares by keeping seating capacity artificially low.

In a decision late Friday afternoon, U.S. District Judge Colleen Kollar-Kotelly said she could “reasonably infer the existence of a conspiracy” among American Airlines Group Inc (AAL.O), Delta Air Lines Inc (DAL.N), Southwest Airlines Co (LUV.N) and United Continental Holdings Inc (UAL.N) to fix prices.

Kollar-Kotelly, who sits in Washington, D.C., did not rule on the merits of the proposed class-action case, which combines 105 lawsuits filed around the country and seeks triple damages. The U.S. Department of Justice last year began its own probe into a possible conspiracy among the airlines, which, according to government data, command a roughly 69-percent domestic market share. Passengers claimed that the conspiracy began in early 2009, and has resulted in higher fares and reduced flight choices. They said the conspiracy, together with low fuel prices and higher fees for checking bags and other services, helped the airlines post a record $21.7 billion combined profit in 2015. The airlines said the litigation should be dismissed because there was no proof of an agreement to collude, or that they reduced capacity in tandem. But in her 41-page decision, Kollar-Kotelly pointed to statements by several airline executives about the need for “discipline” in seating capacity. “Starting in 2009, the industry experienced limited capacity growth,” the judge wrote. “Notably, as defendants’ executives acknowledged, this restriction on growing capacity was a marked change within the industry. The court is satisfied that at this stage, plaintiffs sufficiently pled parallel conduct.” Kollar-Kotelly said this was true even for Southwest, though its use of a single aircraft type and other factors gave it a “limited ability” to reduce capacity. American spokesman Matt Miller called the plaintiffs’ claims “plainly deficient,” and said the carrier is confident they will be found meritless. More:

G.E. to Combine Oil and Gas Business With Baker Hughes

General Electric said on Monday that it would combine its oil and gas business with Baker Hughes, looking to increase its scale to battle the effects of a prolonged slump in oil prices that has eaten into results and prompted job cuts across the petroleum sector. The new company, which G.E. referred to as the “new” Baker Hughes, would be one of the world’s largest providers of equipment, technology and services to the oil and gas industry. In 2015, the businesses had $32 billion in revenue, and operations in more than 120 countries. It also would be better able to compete with Schlumberger and other oil services companies. Oversupply in the oil industry has sapped prices in the past two years, and there is little expectation that prices will rise much more before the end of the year. But expectations that the Organization of the Petroleum Exporting Countries cartel could freeze or cut production has helped send prices higher recently. The deal came after Baker Hughes and Halliburton called off a $35 billion merger in May, following a lengthy regulatory review and a lawsuit by the Justice Department to block the transaction on antitrust grounds. After the deal, G.E. would own 62.5 percent of Baker Hughes. Shareholders of Baker Hughes would own the rest. More:

For 25 years, it has been Clarence Thomas v. Controversy

Justice Clarence Thomas marked 25 years on the Supreme Court last week, and if he remains for another dozen or so, he could become the longest-serving member in the court’s history. But the unofficial title of the court’s most polarizing justice seems his to keep regardless of tenure. Dedicated supporters are determined that the 68-year-old Thomas gets his due as one of the court’s most productive, if un­or­tho­dox, thinkers, and they seized on the 25th anniversary to make their point.

They have created websites and a Twitter account to remind the world of his accomplishments, held a symposium on his jurisprudence and flooded op-ed pages to defend him. They are pressuring the new National Museum of African American History and Culture to revise its fleeting, and they say insulting, reference to him. His detractors continue to characterize his mostly silent demeanor on the bench during oral arguments as disinterest. In all his years on the court, he is still so much an outlier that his conservative colleagues do not rely on him to write the court’s most important decisions, they say.

The subject himself tends to leave the debate to others. “I don’t spend a lot of time looking back,” he told an appreciative audience that gathered at the Heritage Foundation on Wednesday to congratulate him. His simple goal is to be a fair and “consistent” interpreter of the Constitution, he said. “I’m not a navel-gazer,” he added. More:

State elections focus on fees, amendments and promises

As money managers weigh how the election of Hillary Clinton or Donald J. Trump could affect their industry, a handful of key state races are bringing a particular focus on fees and investment classes. One of the most closely watched state races is North Carolina’s next treasurer, who also serves as sole trustee of the $87.6 billion North Carolina Retirement Systems, Raleigh. After incumbent Janet Cowell decided to not seek a third term, bond attorney Dan Blue III won the Democratic primary and is facing Republican state Rep. Dale Folwell. Mr. Folwell, who hopes to be the first Republican state treasurer since 1876, aims to reduce money manager payments by $100 million immediately through a combination of fee cuts, internal management and indexing. “We’re going to open the books,” said Mr. Folwell, a former forensic accountant with Alex. Brown, a division of Raymond James, who as an assistant secretary of commerce produced dramatic cost savings for the state’s unemployment program. “Within a very short time, we’re going to tell … how good (money managers) are at what they are doing, and how well they get paid,” Mr. Folwell said in an interview, promising to do the research “first thing, between the election and the swearing-in.” Mr. Blue, a former Bear Stearns Cos. Inc. investment banker who specialized in health care, also promised to scrutinize outside fees while stressing the fiduciary obligation of finding the best managers. More:

Bad Form, Wells Fargo – NPR Podcast – Securities Attorney Tom Krebs Interview

 Listen at link below:

As Clinton struggles, Trump tries to raise doubts

Republican presidential nominee Donald Trump is fighting to raise doubts about Democratic rival Hillary Clinton as she struggles to get past a new firestorm over her emails that have posed a sudden danger with eight days to go until Election Day. The announcement by FBI Director James Comey that his agency is investigating more emails as part of a probe into Clinton’s use of a private email server has upended the presidential race and given new hope to Trump that he can make an improbable comeback and win on Nov. 8. “When we win on Nov. 8 we are going to Washington D.C. and we are going drain the swamp,” Trump said on Sunday night at a rally in Albuquerque, New Mexico, charging that Clinton represents a corrupt political system. “Hillary Clinton is not the victim. You, the American people are the victims of this corrupt system,” he said. Clinton’s controversy became more problematic on Sunday when a source familiar with the matter said the FBI has secured a warrant to examine newly discovered emails related to Clinton’s private server. The Clinton campaign and its many influential supporters in the Democratic Party have all but declared war on Comey, who was appointed FBI director by Democratic President Barack Obama in 2013. U.S. Senator Harry Reid of Nevada, the Democratic leader in the Senate, accused Comey of “a disturbing double standard for the treatment of sensitive information, with what appears to be a clear intent to aid one political party over another.” Clinton’s problems have taken the focus away from Trump’s own troubles. He has battled to rebound from release of a 2005 videotape in which he boasted about groping women. Trump had already narrowed Clinton’s lead in national opinion polls and is leading in some battleground states where the election is likely to be decided.

The Sad Fate of Trump’s Biggest Losers: Newt, Giulani, Christie, and Ailes

fe will go on for Donald Trump after November 8, win or lose. Defeat might even be kinder to his reputation than victory, making him a folk hero, the Quixote who tried to found a new party but lost to forces larger than himself. (Never mind whether the narrative is in sync with reality—symbolism has its own rules.) Many of his associates and supporters will be fine, too. People like Jeff SessionsAnn Coulter, and Stephen Bannonalready believed in Trumpism before Trump came along. But times will be hard on those who threw in their lot with Trump just to come along for the ride. We speak here of people like Mike PenceNewt Gingrich,Chris ChristieRudy Giuliani, and Roger Ailes. Some politicians are dislikable in public but charming as hell in private. Then there’s Newt Gingrich. There’s a reason he’s been out of office for 17 years. Or, to quote Donald Trump, “Newt is Newt.” But Gingrich wants back in, and he has long recognized the power of populism, making him an early adopter of Trump. To his credit, Gingrich actually gets Trumpism. But he doesn’t quite get Trump, who demands fanatical loyalty, while Gingrich delivers frequent repudiations through newspapers and cable news. Nor does he get how to make himself more appealing to the public, which hasn’t been clamoring to restore him to office. So he’s got a tough job either way, but he needs Trump to win to have a shot at anything. If Trump becomes president, Gingrich can grab a coattail, possibly with his teeth, and refuse to unlock his jaw, and it might get him some sort of post. But if Trump loses, it’s back to novel writing, probably for good. Rudy Giuliani loves excitement and power—as mayor, when restless, he’d even use his power to create excitement—but the years since he left office have offered little of either. He looked like a top G.O.P. presidential prospect back in 2007, but that faded away, and he never got close to high office. Now his only plausible return to the big leagues appeared to run through Trump, for whom Giuliani has gone full guns. Never mind that Giuliani is in line with the G.O.P. establishment on trade and immigration, and he’s a flat-out hawk on foreign policy. Few surrogates and defenders of Trump have been more loyal. Giuliani’s finest moment was telling the Republican convention that Trump had a record of munificence—toward injured firefighters or police officers or anyone in trouble—for which he spurned all recognition. “He’s not going to like my telling you this, but he did it anonymously,” said Giuliani. “He came forward and he helped, and he asked not to be mentioned.” Yes, Trump is a self-effacing spender. Disbelieve if you wish. Then there’s Mike Pence, a Republican’s Republican, which is another way of saying that members of Congress love him and the rest of the world doesn’t. Pence is so paint-by-the-numbers on G.O.P. talking points that he’ll veer 180 degrees from his running mate on policy. Embarrassingly, Trump wound up slapping Pence down publicly on the call to intervene against Russia in Syria, telling Martha Raddatz, “He and I haven’t spoken, and he and I disagree.” But Pence’s alternative path was to run to be governor of Indiana once more—and probably lose. So he went for it. Pence’s policy deviations are probably his attempts to look like his own man, to make the case that he is “balancing” the ticket. But they look more like the efforts of someone who wants it both ways: the glory of a vice-presidential candidacy without the drawbacks of Trump. If he runs for office once more—a Senate seat, say—Pence will be ripe for accusations of soulless opportunism, for being neither supportive of Trump nor resistant to him. But, to be fair, soulless opportunism is rarely a shock to voters, so there’s hope.

Forget Private Villas, the Super Rich Are Now Renting the Whole Resort

Other than at your wedding, when else will you have the chance to bring everyone you love under one roof, with an open bar, to celebrate and toast and laugh into the early hours of the night? Most people would say never. But some travel insiders beg to differ. “Americans nowadays want to get together and celebrate, whether it’s a graduation, or a birthday, or a wedding,” said Frederik Vidal, general manager of Rosewood’s Las Ventanas, a five-star resort in Los Cabos, Mexico. “They’ll take any reason to throw a party.” And by throw a party, he means really throw a party—and buy out a whole resort. He’s not the only one to notice an uptick in birthday party buyouts among the super wealthy. Jumby Bay,  Another Rosewood Resort, this one in Antigua, hosted twice the number of birthday buyouts in 2015 than it did in 2014 and is on track to surpass that number in 2016. The Mayflower Grace, in Connecticut, has seen birthday buyouts quadruple in the past two years—and is launching spa packages for fêted guests to encourage that growth to continue. At the Lodge at Glendorn, in Pennsylvania, birthday buyouts have cost as much as $200,000. Most of these properties are reporting such strong birthday business, it’s edging out weddings entirely. For Jack Ezon, an industry expert and travel specialist at Ovation Vacations, birthday bashes are “the biggest growth market.” Among the parties he’s planned were a $3.5 million spectacle in London that took over Claridge’s and included private events at Buckingham Palace and Spencer House. He’s flown in disk jockeys to private islands in the Caribbean, set up Olympic-style family competitions, chartered yachts, and sent groups on birthday safaris. Ezon estimates that he books 50 such parties a year—with one-fifth of them costing upward of a million. And though he didn’t plan it, he said the largest one he’d ever heard of was the 60th birthday party of Arcadia Group Chairman Philip Green; it was reportedly a $5 million to $6 million affair at Rosewood Mayakoba (on the Riviera Maya) that included live performances by Stevie Wonder. More:

The obscene amount of candy sold for Halloween, in three charts

Look around: Chances are, there is Halloween candy near you right now. If the candy is not in your home, your office, or your school, it’s in a bowl at the dry cleaners, the doctor’s office, or the tire shop.

We’ve officially entered the long season of candy-centric holidays. Make no mistake: After we drench ourselves in sugar this Halloween, we’ll do it again on Christmas and Hanukkah, Valentine’s, Passover and Easter, and in the weeks between these special days. The candy industry counts on us to celebrate with sugar for a huge portion of their annual sales. We can all agree that Halloween and other seasonal candy is a fun ritual. I like chocolate as much as my Vox colleagues who recently ranked their favorite Halloween candies. And a bit of candy here and there is no problem for our health. But we have reached a point where the amount of candy in circulation is excessive — and symbolic of our sugar-coated environment. In 2016, the candy industry expects Halloween will bring in a record $2.7 billion in retail sales: More:


Shelby Sends Letter to Comey

In July, FBI Director James Comey denounced former Secretary of State Hillary Clinton’s mis-handling of classified material, but said that while careless and reckless, there was no criminal intent. Thus, he was closing the investigation against Mrs. Clinton without bringing the matter before a grand jury. This move angered many inside the FBI and Republicans accused Comey of acting improperly. While the FBI stopped investigating, independent journalists and news gathering organizations, particularly the controversial Wiki-Leaks, continued their investigations, uncovering thousands of Clinton emails that the FBI thought were unrecoverable. Now, Director Comey has announced that the FBI is reopening its investigation, just 11 days before the Presidential election. US Senator Richard Shelby (R-Alabama) sent a letter to Director Comey following the terse announcement to Congress that the investigation had been reopened. Sen. Shelby wrote, “I am writing in response to the letter you sent me regarding the Federal Bureau of Investigation’s intention to re-open the investigation of former Secretary of State Hillary Clinton. Due to the serious nature of this matter, I request that the FBI expeditiously and thoroughly conduct its review.” Sen. Shelby continued, “In July, you held a press conference where you explained to the American people that Secretary Clinton was ‘extremely careless’ with classified information while using a private e-mail server. Unfortunately, it has now become apparent that the FBI, with all its extensive resources and highly-trained personnel, closed an incomplete investigation that resulted in only partial findings. I firmly believe that the American people deserve to know the facts – all of them.”

Depositions Suggest Blue Cross/Blue Shield Rate Variations Were Kept from Lawmakers, Public

MONTGOMERY—Newly released depositions in a class-action antitrust lawsuit against Blue Cross Blue Shield (BCBS) give rise to charges of inflated rates and a nationally coordinated plan to control insurance markets, according to federal court filings. A written statement received by the Alabama Political Reporter claims, “Blue Cross and Blue Shield are defendants in a series of federal class actions alleging that the Blues are engaging in a nationwide conspiracy to suppress competition in violation of federal antitrust law, including unlawfully conspiring to divide up their respective markets and agreeing to suppress competition among themselves within those markets artificially.” The depositions also show that the Alabama Department of Insurance Leadership (ALDOI) did not inform lawmakers or the public about rate variations charged by BCBS of Alabama. Not only did ALDOI not disclose the differences in rates, the department also didn’t mount an official investigation into BCBS’s activities in the State. Attorneys claim these latest revelations are part of a larger pattern of an “ongoing conspiracy between and among the Individual Blue Plans and BCBSA to allocate markets in violation of the prohibitions of the Sherman Act.”

Depositions given by BCBS Chief Actuary Noel Carden, as well as Steven Ostlund of the Alabama Department of Insurance, were unsealed on Oct. 18 by order of Birmingham-based Federal District Judge R. David Procter, who is hearing the nationwide class-action suit. In his order, Judge Proctor wrote in favor of the public’s right to know, as well as those who might be affected by the claim, which BCBS’s motion sought to keep secret. “The public and the parties whose damage claims may be affected by Defendants’ Motion, should be allowed access to the evidence,” Judge Proctor ruled. “The question before the court is whether there is sufficient cause for these depositions to remain under seal. After careful review, the court concludes there is not.”

Morning Money

THE SPOOKY STATE OF THE RACE — Happy Halloween everyone! I’m dressing up as a tired reporter sick to death of this dismal, issue-free campaign. … The news that the FBI would review emails found on a laptop shared by top Hillary Clinton aide Huma Abedin and her creepy, estranged husband Anthony Weiner walloped the political world. The news hit as Donald Trump was already drawing close to Hillary Clinton in national polls. We’ve always said wild card investigatory disclosures posed the biggest threat to a solid Clinton win. Well, we got one.

Will it be enough to swing the election to Trump? Probably not. But taking the focus away from Trump certainly helps the GOP nominee and threatens to undermine Democrats’ chances for a wave that sweeps them to Senate control.

We don’t have enough post-Comey polling to determine the national impact. And Democrats are attempting to make Comey’s unusual decision this close to Election Day the issue. This could fire up some Democratic turnout but it’s a major net negative.

Still, Trump’s path to 270 is still really, super hard. He has to win Ohio and Florida, which seems possible. But then he also has to win a bunch of other states where he trails including some combination of Pennsylvania, North Carolina, Colorado, New Hampshire and Nevada. Still a giant lift. And Clinton is competitive in Alaska, Arizona, Georgia and Utah, not what you’d call Democratic strongholds.

BRIEF MARKET MOVE — Compass Point’s Isaac Boltansky: “The letter injected uncertainty into the 2016 election and briefly roiled markets with the VIX spiking as much as ~13 percent intra-day. … We continue to believe that the electoral math heavily favors Clinton taking the White House and maintain our ~90 percent odds of her victory. In our view, the most tangible impact of this development will be felt in down-ballot races.

“The ‘Democratic Sweep’ narrative already faced long odds and we expect the most recent email development to effectively end Democratic hopes of winning back both chambers of Congress. Odds still slightly favor Democrats taking the Senate, but we believe this email scandal will ensure that the House stays under Republican control.”

ASIA STUTTERS EARLY — Reuters: “Asian stocks got off to a shaky start on Monday after a renewed FBI probe of … Clinton … The Japanese yen, seen as a safe-haven in times of uncertainty, rose slightly against the U.S. dollar. … Markets have tended to see Clinton as the candidate of the status quo, while there is greater uncertainty over what a victory for … Trump might mean for U.S. foreign policy, international trade deals or the domestic economy.

“The dollar surged 0.7 percent against the Mexican peso on Friday and extended those gains by another 0.2 percent to 18.9982 peso early on Monday. A Trump victory has been viewed as a key risk for the Mexican currency given his promises to clamp down on immigration and redraw trade relations with the country.” Read more.

THE DAILY TRUMP — Trump campaigning Sunday night said of Clinton as president : “You could have 650 million people pour in and we do nothing. Think about. That’s what could happen. You triple the size of the country in one week.” Wait. What?

TOOMEY WARNS BANKERS OF WARREN WARPATH — POLITICO’s Zachary Warmbrodt: “Sen. Pat Toomey is trying to leverage bankers’ fears of Sen. Elizabeth Warren to rally support for his tough reelection fight. In a conference call with a pro-industry group Friday morning, the Pennsylvania Republican said Warren has frightened Democrats from pursuing regulatory changes that would help banks, according to a paraphrased summary of the call obtained by POLITICO.

“‘While there are individual Democrats that support traditional banks and reform, there is little to no chance of reform passing if the Democrats take control of the Senate due to Elizabeth Warren’s influence on leadership,’ Friends of Traditional Banking Chairman John Boyer wrote in the email describing Toomey’s comments.” Read more.

ICYMI: GDP WAS PRETTY GOOD — POLITICO’s Ben White (right before the Comey thing blew up the news cycle): “The U.S. economy grew at a nearly 3 percent pace in the third quarter of the year, a better-than-expected reading that dents … Trump’s case that growth has stalled out. The faster pace of 2.9 percent may not hold up in the final quarter of 2016 but it offers a positive headline to … Clinton less than two weeks until Election Day … Republicans, even those still supporting the GOP nominee, view 2016 as a largely lost opportunity to frame the race as a referendum on the economy …

“‘At every turn I urged him to talk about the economy and tax cuts, particularly business tax cuts, where there is virtual unanimous agreement to do something,’ said Larry Kudlow, an informal Trump economic adviser. ‘It was a tactical mistake not to and it was a strategic mistake because the economy is poor and the country believes we are on the wrong track and a lot of that is about the economy.’” Read more.

GE NEARS $30B DEAL — WSJ’s Dana Cimilluca, Dana Mattioli and David Benoit: “General Electric Co. is nearing a roughly $30 billion deal to combine its oil and gas business with Baker Hughes Inc., creating an energy powerhouse that would give GE a cost-effective way to play any recovery in the industry. GE plans to contribute its oil and gas business and some cash to the new entity, which would have publicly traded shares and be controlled by GE” Read more.

GOOD MONDAY MORNING — Eight more days until the 2016 campaign is over. Unless … No we won’t even go there. It’s gonna be over. Anyone who mentions the 269-269 electoral vote scenario gets banned. Email me on and follow me on Twitter @morningmoneyben. Email Andrew Hanna on and follow him on Twitter @andrewbhanna.

THANK THE LORD … The World Series will continue (sorry Indians fans but we need more baseball) after the Cubs took Game 5, 3-2. Read more.

DRIVING THE WEEK — Trump campaigns Monday in Michigan, a state where he trails by about seven points and will not win without some kind of miracle. He’s scheduled to be in Wisconsin on Tuesday … Clinton campaigns in Ohio on Monday, Florida on Tuesday and Arizona on Wednesday (all campaign schedules are subject to change this late in the game) … Treasury Secretary Jack Lew is in London and Oxford, England on Monday … FOMC meets Tuesday and Wednesday with no change in policy expected … Personal income and spending Monday at 8:30 a.m. expected to both rise 0.4 percent … ISM Manufacturing at 10:00 a.m. Tuesday expected to rise to 51.7 from 51.5 … ISM non-manufacturing at 10:00 a.m. Thursday expected to dip to 56.0 from 57.1 … October jobs report at 8:30 a.m. Friday expected to show a gain of 165K and 0.1 percent drop in unemployment to 4.9 percent.

NO BIG CENTRAL BANK MOVES THIS WEEK — Mohamed A. El-Erian: “The central banks of Japan, the U.K., and the U.S. will hold policy meetings this week. These three systemically important institutions are inclined to implement new policy measures, albeit different ones. Yet all three may end up keeping their policy stance as is. Their individual and collective dilemmas will illustrate the current policy funk facing the global economy, as well as the urgent need for a macroeconomic policy pivot on three continents.”

CETA SIGNED — POLITICO EU’s Christian Oliver, David M. Herszenhorn and Anca Gurzu: “The European Union and Canada signed a landmark trade deal Sunday, drawing a line under four months of political conflict across Europe that at times looked likely to scupper the pact.

“The deal is now expected to enter force on a provisional basis early next year, as long as it wins support from the European Parliament, which is seen as likely.” Read more.

HOPE FOR TTIP? — Reuters’ Robert-Jan Bartunek: “A much-debated trade deal between the European Union and the United States is not dead and negotiations will continue with the new U.S. administration after November’s elections, EU Trade Commissioner Cecilia Malmstrom said on Saturday.

“‘TTIP is not dead, but TTIP is not yet an agreement,’ she told reporters after a ceremony in Brussels, in which Belgium signed its addendum to the Comprehensive Economic and Trade Agreement (CETA) with Canada. ‘The U.S. election will naturally bring the negotiations to a pause and we will resume after with the new administration,’ she added.” Read more.

OPEC TALKS FAIL — Bloomberg’s Grant Smith and Elena Mazneva: “OPEC’s internal disagreements over how to implement oil-supply cuts agreed to last month prevented a deal to secure the cooperation of other major suppliers.

“More than 18 hours of talks over two days in Vienna yielded little more than a promise that the world’s largest oil producers would keep on talking. Discussions will continue in late November, just days before the Organization of Petroleum Exporting Countries is supposed to finalize the accord that lifted oil prices to one-year highs.” Read more.

RUSSIA SLASHES SPENDING — FT’s Kathrin Hille: “Russia is preparing to slash government spending across the board over the next three years as it struggles to bring down a budget deficit swollen by lower oil prices and recession.

“The scale of the proposed austerity measures, at a time when Russia’s recession is bottoming out but incomes continue to fall, illustrate how badly the country’s public finances have been hurt by the oil price slide, which has also forced Gulf states to slash spending.” Read more.

LONDON RULES FOR UBER DRIVERS — Washington Post’s Karla Adam: “In a landmark ruling Friday that could impact Britain’s wider “gig” economy, a London employment tribunal ruled that taxi drivers using the Uber ride-hailing app are “workers” and entitled to minimum wage and holiday pay.

“Uber said Friday it would seek to appeal the judgment, which applies to the two drivers who brought the case to court. But analysts said it could also open the floodgates to claims from other Uber drivers in Britain, as well as the thousands of independent workers in Britain’s gig economy, in which temporary positions are the norm and independent workers perform short-term jobs.” Read more.

VENZEULAN SHOWDOWN — FT reports: “Venezuela’s political crisis comes to a head this week in a mass march on the Presidential Palace that raises the risk of a crackdown.

“The march, which follows opposition-led mass protests and a general strike last week, is slated to take place even as Vatican-mediated talks between the government and the opposition Democratic Unity coalition (MUD) began on Sunday.” Read more.

AMAZON PRIME COMPETES IN CHINA — Bloomberg’s Lulu Yilun Chen: “ Inc. has started offering its Prime free-shipping service in China, ratcheting up attempts to compete with Alibaba Group Holding Ltd. for the rising number of shoppers hankering after overseas goods.

“From Friday, Chinese Prime subscribers get free shipping on orders exceeding 200 yuan ($29.50) on millions of eligible overseas goods, the company said in an e-mailed statement. Domestic goods will also be delivered free and a membership costs 388 yuan a year, lower than the U.S. fee of $99. Amazon China representative Wu Shanhan said membership won’t include access to any digital content.” Read more.

INFLATION’S BACK (A BIT) — WSJ’s Greg Ip: “After being given up for dead, inflation is gradually coming back to life. It’s not roaring back. Indeed, it’s still below the 2 percent level the Federal Reserve targets, one reason the Fed is almost certain to leave interest rates unchanged when it meets this week. But economic circumstances and attitudes of policy makers have shifted in the past year in ways that suggest the likeliest path of inflation is up, not down.

“Data released Friday showed that core inflation … reached a two-year high of 1.7 percent in the third quarter … Other data found stirrings of wage acceleration. The intellectual case for low inflation is also showing cracks. Central banks now openly entertain, and even welcome, inflation bubbling over 2 percent. This isn’t bad news. To the contrary, markets and central bankers alike will be relieved that the world is no longer skirting a deflationary abyss” Read more.

TRADE SLOWING — NYT’s Binyamin Appelbaum: “The volume of global trade was flat in the first quarter of 2016, then fell by 0.8 percent in the second quarter … The United States is no exception to the broader trend. The total value of American imports and exports fell by more than $200 billion last year. Through the first nine months of 2016, trade fell by an additional $470 billion. It is the first time since World War II that trade with other nations has declined during a period of economic growth.” Read more.

CARNEY WANTS TO STAY — FT’s Chris Giles: “Mark Carney, governor of the Bank of England, is ready to serve a full eight-year term, facing down Brexiter critics campaigning for him to resign ahead of time. Mr Carney has told friends that he is likely to make a statement on his future this week to put an end to damaging speculation.

“The governor is expected to confer with prime minister Theresa May and chancellor Philip Hammond before making a final ‘personal’ decision, potentially ahead of the publication of the BoE’s inflation report on Thursday.” Read more.

POTUS Events

10:30 am || Receives the Presidential Daily Briefing
12:30 pm || Lunch with Biden
4:35 pm || With the first lady, welcomes local children and children of military families to trick-or-treat at the White House

All times Eastern
Live stream of White House briefing at 12:45 pm

Floor Action

The Senate gavels in for a spooky pro forma session at 4:30 p.m. The House is out.