Why BREXIT Is A Perfect Sequel To The Iraq War
On the surface, things in London appear reassuringly normal on a fine summer’s day. The parks are full; new exhibitions of David Hockney’s and Georgia O’Keeffe’s work have opened; and the lawn tennis championship is reaching its climax at Wimbledon. But beneath the surface, the Brexit vote continues to unleash unprecedented turmoil, which has only been exacerbated in recent days by the publication of Sir John Chilcot’s long-delayed report on Britain’s involvement in the Iraq war. Seven years in the making and comprising 2.6 million words, spread among 12 volumes, the Chilcot report heaps further opprobrium on a clapped-out, directionless political establishment. It makes little difference that Tony Blair and the members of his government who decided to join George W. Bush’s invasion in spring 2003 withoutexhausting the options for peace are all long gone. For, in a way, their folly has now been repeated in another form by the current Conservative administration. The similarities between the invasion of Iraq and the Brexit vote are rather striking. First, the arrogance of Britain’s decision to storm Baghdad over the protestations of leaders in France and Germany, among other nations, is in line with some 40 years of uncooperative and aloof dealings with the country’s European partners. Second, just as Blair and Foreign SecretaryJack Straw failed to plan for the peace in Iraq, the Cameron government, which included ministers who campaigned to leave as well as remain, failed to devise a strategy for Britain’s departure from Europe. As I keep repeating with increasing astonishment, no one on either side of the debate thought to even sketch a post-conflict road map. Third, the key arguments for leaving the E.U.—namely, the control of immigration and the return of E.U. money to fund Britain’s National Health Service—turned out to be as false as the fiction about Saddam Hussein’s weapons of mass destruction. And fourth, those who wanted to leave the E.U. claimed that Britain’s departure would strike a blow for democracy. That, of course, was among the key arguments for the invasion advanced by a misty–eyed Blair. During the first part of this century, the British have been busily exporting democracy to a people who never knew they wanted it, and then repatriating democracy to the Westminster Parliament. In the process, they have helped bring chaos to one continent and upheaval to another.There may be no clearer case of post-colonial delinquency, yet one emerging lesson from both Iraq and Brexit revolves around the perils of how power is concentrated in the hands of the British prime minister. The Iraq war and E.U. referendum were the personal projects of two plausible but basically shallow men who didn’t think too much about the consequences of their bold plans. More:
Growing Unease as British Mutual Funds Block the Exit Doors
As one British mutual fund after another bars its doors to fleeing investors, traders and regulators alike are asking the same question: What does it mean for nervous global markets? This week, six asset management firms in Britain decided to refuse, for the moment, cash demands from those seeking to escape funds that invest in commercial real estate in the country. The rush for the exits followed the unexpected decision by British voters to leave the European Union. So far, the numbers are small enough. Of the 35 billion pounds, or $45 billion, invested in these funds, just under £20 billion has been affected. Yet to see, in real time, fund companies turning away investors because they cannot quickly unload assets that are hard to sell brings to life a nightmare situation that has long kept central bankers and large investment managers awake at night. “The market has gotten crowded,” said Ken Monaghan, an investor in high-yield bonds for Amundi Smith Breeden, a global investment company that manages $1 trillion. “At some point you have to wonder what happens if all these investors decide to go home.” The move by the British funds served as an eerie echo of last December, when Third Avenue Management said that it needed to block investors who wanted to bail on its risky credit fund, shocking regulators and rattling investors. And more recently, the Bank of England, in its financial stability report released this week, expressed concern about the surge in open-ended funds, which have more than tripled since 2008 to almost £16 trillion, or $20 trillion. Perhaps the purest principle of investing in such funds is the understanding that an investor who wants to get out of the fund, or redeem shares, will immediately receive his or her money back. For that to happen, the portfolio manager must either have sufficient cash on hand or be able to sell enough stocks or bonds quickly enough to satisfy investors on the run. What the recent developments in Britain clearly show, however, is that British fund companies are less beholden to this principle than their American counterparts.
Greece was once the fast lane to Europe for refugees. Now it’s a grim waiting room.
MYTILENE, Greece — The human traffickers who brought a million desperate asylum seekers through Turkey to the Greek islands have been stopped. Where once thousands a day were smuggled by the mafias on cheap rubber rafts, very few are making the trip this summer. To shut down the Eastern Mediterranean route, countries such as Macedonia, Hungary and Bulgaria acted independently and threw up razor-wire fences along their southern borders, defying Europe’s central authority in Brussels. The European Union itself struck a deal that threatens to send the migrants back to Turkey from Greece en masse. It wasn’t pretty. Human rights activists called it cruel. But it worked. The unimpeded flow of humanity, dominated by Syrians, Iraqis and Afghans, to Europe is over, at least for now. Arrivals in the Greek islands are down 97 percent. The repercussions of the unprecedented maritime migration in the Eastern Mediterranean is still playing out across Europe, especially in Britain, whose citizens voted last week to leave the European Union, in part, because of fears that more immigrants would reach the British isles. More:
5 Dallas Police Officers Killed by Snipers at Protest; 1 Suspect Is Dead
DALLAS — Snipers killed five Dallas police officers and wounded seven others, along with two civilians, during a demonstration on Thursday night against police shootings in Minnesota and Louisiana this week, the authorities said. By morning, one suspect had been killed by the police, who used a robot bomb after extensive negotiations during a standoff in a garage in downtown Dallas at the El Centro community college. Three others were in custody. The Dallas police chief, David O. Brown, said the gunman who was killed had “said he was upset at Black Lives Matter, said he was upset about the recent police shootings.” Chief Brown said, “The suspect said he was upset at white people; the suspect said he wanted to kill white people.” He was especially upset at white police officers, said Chief Brown.
“This must stop, this divisiveness between police and citizens,” said Chief Brown, who is black. It appeared to be the deadliest attack for law enforcement officers in the United States since the Sept. 11, 2001, attacks. The shootings, only a few blocks from Dealey Plaza, where President John F. Kennedy was assassinated in 1963, transformed an emotional but peaceful rally into a scene of carnage and chaos, and they injected a volatile new dimension into the anguished debate over racial disparities in American criminal justice. More:
Federal Reserve Board formalizes previously announced one-year conformance period extension for certain Volcker rule legacy fund investments
Formalizing its prior commitment to facilitate the orderly implementation of section 619 of the Dodd-Frank Act, commonly known as the Volcker Rule, the Federal Reserve Board on Thursday announced that it will extend until July 21, 2017 the conformance period for banking entities to divest ownership in certain legacy investment funds and terminate relationships with funds that are prohibited under the rule. The Board announced in December 2014 that it would make this extension to provide for orderly divestitures and to prevent market disruptions. This is the final of the three one-year extensions that the Board is authorized to grant. Section 619 generally prohibits insured depository institutions and any company affiliated with an insured depository institution from engaging in proprietary trading and from acquiring or retaining ownership interests in, sponsoring, or having certain relationships with a hedge fund or private equity fund. These prohibitions are subject to a number of statutory exemptions, restrictions, and definitions. The rules to implement section 619 were jointly finalized by the Board, the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), the Securities and Exchange Commission (SEC), and the Commodity Futures Trading Commission (CFTC) in December 2013. This extension would permit banking entities additional time to divest or conform only “legacy covered fund” investments, such as prohibited investments in hedge funds and private equity funds that were made prior to December 31, 2013. This extension does not apply to investments in and relationships with a covered fund made after December 31, 2013 or to proprietary trading activities; banking entities were required to conform those activities to the final rule by July 21, 2015. The Board consulted with staffs of the other agencies charged with enforcing the requirements of section 619, including the OCC, the FDIC, the SEC, and the CFTC. The agencies plan to administer their oversight of banking entities under their respective jurisdictions in accordance with the Board’s conformance rule and this extension of the conformance period. Additionally, upon the application of a banking entity, the Board is permitted under section 619 to provide up to an additional five years to conform investments in certain illiquid funds, where the banking entity had a contractual commitment to invest in the fund as of May 1, 2010. The Board expects to provide more information in the near term as to how it will address such applications. For media inquiries, call 202-452-2955.
Deutsche Bank Pulls Back from Deals in Coal Mining Sector
Pressured by environmentalists and worried about big losses from a troubled industry, many large banks and other lenders have made a hasty retreat from coal mining in recent years. But even in these dark times, there was one bank that many coal miners could still count on for financing and advice: Deutsche Bank. Not any longer. The German banking giant is pulling back from the embattled coal sector, another sign of the increasing risks for banks that finance industries that contribute to climate change. Last week, six senior members of Deutsche Bank’s metals and mining investment banking team, which was responsible for overseeing deals in the coal industry, said they were decamping for Jefferies, a smaller, scrappy New York investment bank that has a knack for scooping up investment bankers who increasingly feel out of place at larger, more heavily scrutinized global banks. A Deutsche Bank spokeswoman declined to comment on the bankers’ exodus. But industry analysts said the move was partly related to Deutsche Bank’s decision to back away from working on certain coal projects.
Deutsche Bank has no immediate plans to replace the six bankers, who helped the German bank secure the largest market share of metals and mining revenue in the Americas among banks last year. That ranking was up from sixth place in 2011, when many of them joined Deutsche from the Swiss banking rival UBS. Dan Chu, a prominent coal banker at Deutsche Bank, will be global head of metals and mining investment banking at Jefferies. “The large banks are under significant pressure from environmental groups to limit their activity in fossil fuels and mining across the board,” said Ted O’Brien, chief executive of Doyle Trading Consultants, which focuses on the coal sector. “This move might reflect an investment banking team that was no longer that important to a large bank and that will now be able to practice their niche under somewhat less scrutiny.”
Payroll surge: Employers added 287,000 jobs in June
Employers added 287,000 jobs in June as the labor market bounced back resoundingly from a spring slump and eased concerns about a longer-term slowdown in payroll growth. The unemployment rate rose to 4.9% from 4.7%, the Labor Department said Friday. Economists’ median estimate was for 180,000 employment gains, according to a Bloomberg survey. June payrolls were expected to be boosted by 35,000 Verizon workers who returned from a strike that had suppressed May employment by a similar amount. It appeared unlikely that even a blockbuster June jobs report could coax the Federal Reserve into raising interest rates late this month after the United Kingdom’s recent vote to leave the European Union rattled financial markets. A weak tally, meanwhile, likely would raise doubts about even a September hike. Other recent employment indicators have been mixed. Payroll processor ADP this week reported a moderate advance of 172,000 jobs in the private sector last month. Jobless claims, a gauge of layoffs, have remained low. And surveys of both the manufacturing and service sectors revealed a pickup in hiring. But the Conference Board has tallied much fewer online job ads in recent months. The labor market has been buffeted by various headwinds, making it difficult to determine if the subdued job growth marked a temporary blip, a more enduring slowdown or something in between. Employers added an average of less than 100,000 jobs in April and May, significantly below the 200,000-plus pace that prevailed the past two years. On the one hand, monthly payroll growth has been expected to slow to about 175,000 in light of a near-normal 4.7% unemployment rate that’s supplying employers with fewer job candidates. But the recent dip was far more pronounced. Economists pointed to transitory forces. Warm winter weather led to a surge in hiring early in the year, lessening the need to expand staffs in the spring. Market turbulence and a weak economy in the first quarter had a lagged, negative effect on hiring. Blame even has been cast on a boisterous presidential election season that may have employers dialing back investment and hiring amid uncertainty about future tax and regulatory policy. Goldman Sachs said the weather effects likely were played out by June, but Capital Economics said they may have continued to hamper last month’s jobs count.
Stocks jump after strong June jobs report
U.S. stocks are pointing toward a sharply higher open after the June jobs report came in far stronger than expected, a key data point that will go a long way towards reducing U.S. recession fears on Wall Street.
The government reported that 287,000 jobs were created in June, far above the 180,000 estimate.
In pre-market trading just moments after the jobs report was released, the Dow Jones industrial average was up about 100 points, or 0.6%, building on its gains earlier in the pre-market session. The broader Standard & Poor’s 500 stock index was 0.6% higher and the Nasdaq composite was also trending higher. “This is a very good number,” says Liz Ann Sonders, chief investment strategist atCharles Schwab. It sends an important messsage, she says, to investors: “The pickup on job growth means we are not falling into an economic abyss.” Sonders says the good news will be greeted as good news on Wall Street, but probably could put an interest rate hike by the Federal Reserve back on the table for later this year, most likely in December after the presidential election. Investors that had been ruling out any rate hikes until next year might have to rethink their views, she adds. The May report came in way below expectations with just 38,000 new jobs created. As a result, Wall Street was looking for a sharp rebound that would suggest the economy is stil creating jobs at a fast clip. Investors were also looking for good economic news following the scare caused by Britain’s vote last week to leave the European Union. The June jobs report delivered on both fronts. “It’s a critical report in the sense that markets (were) looking for something soothing after all the global uncertainty surrounding Brexit and politics both here and abroad,” says Dan North, chief economist at Euler Hermes North America. “It’s also important because it tells us (that) last month’s miserable 38,000 gain was a statistical anomaly (and not) part of a trend.” Economists had forecast 180,000 new jobs in June and a tick up in the unemployment rate to 4.8%, from 4.7%, according to Bloomberg. The unemployment rate ticked up to 4.9%. North says a strong number will likely give U.S. stocks a boost as it will “alleviate recession fears.”
Dare to Dream: The Bank Mergers That Could Help Fix the Industry
Eight years after the financial crisis, bank bailouts are being discussed once again in Europe. Low and even negative interest rates, the weight of soured assets, high legal bills and new digital competitors are all depressing shares and executives. Britain’s decision to leave the European Union has further undermined confidence in the banking sector. This week, an index of European bank shares fell to the lowest since 2011. With another potential crisis looming and political uncertainty throughout Europe, large cross-border bank deals have perhaps never been as unlikely. But that doesn’t mean they wouldn’t help.
In nearly every other industry, the combination of stagnant growth, distressed valuations and need for consolidation would lead to a raft of mergers and acquisitions. In finance, disastrous bank combinations and bailouts of too-big-to-fail firms are fresh in regulators’ minds. The volume of deals involving North American and Western European banks in the past six years has been less than half that of the previous six. Yet glimmers of financial industry consolidation are starting to emerge in places like Abu Dhabi, China and North America. Based on discussions with more than a dozen merger advisers, as well as analysts and investors, here are some major deals that could make sense — if they were allowed to happen. More:
Your 401(k) Fees Are Attracting More Attention—From Lawyers
Here’s a term you really don’t want used to describe your 401(k): “One of the most expensive plans in America.” That’s what law firm Nichols Kaster calls the $1.3 billion retirement plan at the center of a proposed class action against Fujitsu Technology and Business of America Inc. In a lawsuit filed last week in San Jose federal court, the attorneys alleged a cornucopia of fiduciary breaches tied to excessive fees, record keeping, and the components of the company’s target-date funds. The case, and several like it in the past year, may be harbingers of a new cycle of 401(k)-gone-bad litigation, this time targeting ever-smaller retirement plans. Nichols Kaster compared the Fujitsu plan’s fees with those of about 650 other plans with more than $1 billion in assets. Among 401(k)s with that much money, the average plan has annual costs that amount to 0.33 percent of assets, according to the complaint; it estimates that Fujitsu’s costs were 0.88 and 0.90 percent for 2013 and 2014. That would have led to at least $7 million in excess fees that could have been socked away in employee nest eggs, the complaint stated. Fujitsu America, which provides technology and business support to affiliated companies, has yet to answer the complaint or make an appearance in the case, and a company spokesman declined to comment.
Lawsuits such as this one are just the beginning, said Marcia Wagner, a principal at the Wagner Law Group who represents plan sponsors and vendors under the Employment Retirement Income Security Act. The case follows a parade of high-profile suits filed by Jerome Schlichter, of the St. Louis law firm Schlichter Bogard & Denton, alleging breaches of fiduciary duty at some of the largest plans in the U.S. The mega-settlements Schlichter has won, along with a U.S. Supreme Court ruling last year that put plan fiduciaries on high(er) alert about the need to continuously monitor plan investments, has encouraged more law firms to develop and expand their fiduciary litigation practices. “It started with Schlichter doing cases against very large corporations in America,” Wagner said. “And now it’s going to start to be a free-for-all.” More:
U.S. tax agency investigates Facebook’s Ireland asset transfer
The U.S. Internal Revenue Service (IRS) said Facebook Inc (FB.O) may have understated the value of intellectual property it transferred to Ireland by “billions of dollars”, unfairly cutting its tax bill in the process, according to court papers. The U.S. Justice Department filed a lawsuit on Wednesday in federal court in San Francisco seeking to enforce IRS summonses served on Facebook and to force the world’s largest social network to produce various documents as part of the probe. The tax authority is examining whether Facebook understated its U.S. income by selling rights to an Irish subsidiary too cheaply. Doing so could boost taxable profits in Ireland, which has a corporate tax rate of 12.5 percent, and reduce taxable income in the United States which has a rate of at least 35 percent. Facebook denied any wrongdoing. “Facebook complies with all applicable rules and regulations in the countries where we operate,” Anteneh Daniel, a spokesperson for the company, said in a statement. The complex tax structuring used by big technology companies such as Google (GOOGL.O) and Amazon (AMZN.O) has prompted governments in recent years to launch a program to rewrite tax rules so that inter-group deals that shift profits into tax havens are no longer possible. The lawsuit said that in 2010 Facebook Inc sold the rights to exploit the Facebook platform outside the United States and Canada to Facebook Ireland Holdings. The price used for the intangible property was determined by Facebook’s tax adviser Ernst & Young (E&Y). “The IRS examination team’s preliminary positions suggested that the E&Y valuations of the transferred intangibles were understated by billions of dollars,” the lawsuit said. E&Y was not immediately available for comment.
Trump, seeking GOP unity, has tense meeting with Senate Republicans
Donald Trump’s private meeting Thursday with Senate Republicans — designed to foster greater party unity ahead of the national convention in Cleveland — grew combative as the presumptive presidential nominee admonished three senators who have been critical of his candidacy and predicted they would lose their reelection bids, according to two Republican officials with direct knowledge of the exchanges. Trump’s most tense exchange was with Sen. Jeff Flake (R-Ariz.), who has been vocal in his concerns about the business mogul’s candidacy, especially his rhetoric and policies on immigration that the senator argues alienate many Latino voters and others in Arizona. When Flake stood up and introduced himself, Trump told him, “You’ve been very critical of me.” “Yes, I’m the other senator from Arizona — the one who didn’t get captured — and I want to talk to you about statements like that,” Flake responded, according to two Republican officials. Flake was referencing Trump’s comments last summer about the military service of Sen. John McCain (R-Ariz.), who was a prisoner of war during the Vietnam conflict. Trump questioned whether McCain was a war hero because he was captured. Flake told Trump that he wants to be able to support him — “I’m not part of the Never Trump movement,” the senator said — but that he remains uncomfortable backing his candidacy, the officials said. Trump said at the meeting that he has yet to attack Flake hard but threatened to begin doing so. Flake stood up to Trump by urging him to stop attacking Mexicans. Trump predicted that Flake would lose his reelection, at which point Flake informed Trump that he was not on the ballot this year, the sources said. Asked in a Senate hallway later about his exchange with Trump, Flake declined to elaborate. “No, I’ll just leave it,” he told reporters, adding “my position remains, I want to support the nominee. I really do. I just can’t support him given the things that he’s said.” More:
Would Donald Trump Quit if He Wins the Election? He Doesn’t Rule It Out
The traditional goal of a presidential nominee is to win the presidency and then serve as president. Donald J. Trump is not a traditional candidate for president. Presented in a recent interview with a scenario, floating around the political ether, in which the presumptive Republican nominee proves all the naysayers wrong, beats Hillary Clinton and wins the presidency, only to forgo the office as the ultimate walk-off winner, Mr. Trump flashed a mischievous smile. “I’ll let you know how I feel about it after it happens,” he said, minutes before leaving his Trump Tower office to fly to a campaign rally in New Hampshire. It is, of course, entirely possible that Mr. Trump is playing coy to earn more news coverage. But the notion of the intensely competitive Mr. Trump’s being more interested in winning the presidency than serving as president is not exactly a foreign concept to close observers of this presidential race. Early in the contest, his rivals, Republican operatives and many reporters questioned the seriousness of his candidacy. His knack for creating controversy out of thin air (this week’s edition: the Star of David Twitter post) and his inclination toward self-destructive comments did not instill confidence in a political culture that values on-message discipline in its candidates. Those doubts dissipated after Mr. Trump vanquished his Republican opponents and locked up the nomination. More:
State Department to conduct internal probe of Clinton email case
The U.S. State Department said on Thursday it will conduct an internal review of whether Democratic presidential candidate Hillary Clinton and her aides mishandled classified information, after the Justice Department declined to bring criminal charges. The State Department said in April it had suspended plans for an internal review at the request of the Federal Bureau of Investigation, which conducted a yearlong probe of Clinton’s use of private email servers while she was secretary of state. “Given the Department of Justice has now made its announcement, the State Department intends to conduct its internal review,” State Department spokesman John Kirby said in a statement. “I cannot provide specific information about the Department’s review, including what information we are evaluating. We will aim to be as expeditious as possible, but we will not put artificial deadlines on the process,” he said. On Wednesday, U.S. Attorney General Loretta Lynch said she would accept the recommendations of the FBI not to bring criminal charges against Clinton, the presumptive Democratic presidential nominee for the Nov. 8 election. FBI Director James Comey said on Tuesday Clinton had been “extremely careless” in the handling of classified information, and Republicans have criticized the decision not to prosecute. Comey told a congressional hearing on Thursday that FBI employees who mishandled classified material in the way Clinton did as secretary of state could be subject to dismissal or loss of security clearance.
The Most Trusted White Man in Black America
The best clue to where the participants at the historic gathering stood was where they sat. All 11 African-Americans lined up on one side of the Kennedy family drawing room overlooking Central Park, the five whites on the other. It was Harlem vs. Hickory Hill. The partition was a fitting one for the spring of 1963, when demarcation of the races was written into law across the American South and into practice in the rest of the land. But it was not an auspicious beginning to an urgent conclave that the black novelist James Baldwin had pulled together, at the request of Attorney General Robert F. Kennedy, to talk about why a volcano of rage was building up in Northern ghettos and why mainstream civil rights leaders couldn’t or wouldn’t quell it as summer approached. A second sign that the meeting was ill-fated was not who had been invited but who had not. Baldwin assembled a motley collection of fellow artists, academics, and second-tier civil rights leaders, along with his lawyer, secretary, literary agent, brother, and brother’s girlfriend. Martin Luther King Jr. wasn’t welcome, nor were the top people from the NAACP and the Urban League, because Bobby Kennedy wanted a no-holds-barred critique of their leadership. He also hoped for a sober discussion of what the Kennedy administration should do, with African-Americans who knew what it already was doing. Having a serious conversation without the serious players would have been difficult enough, but Bobby made it even harder: What he really wanted was gratitude, not candor. Baldwin did his best given those constraints and only on one day’s notice. Bobby may not have been inclined to take them seriously, yet everyone participating—whether a matinee idol or crooner, dramatist or therapist—had earned their stripes as activists.
Sentencing day arrives for former Alabama Speaker Mike Hubbard
Mike Hubbard’s fall from the pinnacle of Alabama politics could hit bottom on Friday, when a judge is expected to sentence the former House speaker on 12 counts of violating the state ethics law.
Prosecutors have asked Lee County Circuit Judge Jacob Walker to sentence Hubbard, 54, to five years in prison, 13 years on probation and to order maximum fines and more than $1 million in restitution for his crimes of using his public office to make personal income. They say that’s an appropriate sentence because Hubbard betrayed the public trust and has not taken responsibility for his actions and because it would be a deterrent to other public officials. Hubbard has maintained his innocence and his lawyer, Bill Baxley, called the state’s sentencing request “absurd.” Baxley has said the convictions will be appealed.
Walker will hold a sentencing hearing in his Opelika court room starting at 10 a.m. A Lee County jury convicted Hubbard on 12 of 23 felony ethics charges on June 10. The convictions automatically removed him from his House seat, which he had held since 1998. The crimes are Class B felonies, punishable by two to 20 years and fines of up to $30,000. Hubbard had been speaker since 2010, the year he led an historic campaign that put Republicans in control of the Legislature for the first time since Reconstruction.
Prosecutors used Hubbard’s emails and testimony from about 40 witnesses to convince jurors that Hubbard used his powerful position to illegally obtain $1,125,000. That includes a total of $600,000 in investments in debt-saddled Craftmaster Printers, which Hubbard partly owned, from four business executives defined as principals under the state ethics law. Principals are companies or officers with companies that employ lobbyists. Hubbard also illegally made $525,000 for his company, Auburn Network, from 2012 to 2014 under consulting contracts with American Pharmacy Cooperative Inc. (APCI); Edgenuity Inc.; and companies owned by Bobby Abrams. APCI and Edgenuity were principals; the companies employed the same State House lobbyist. Hubbard was also convicted of voting on legislation that would uniquely benefit APCI. Hubbard was convicted of lobbying the governor’s office and the Department of Commerce on Abrams’ behalf and of directing his chief of staff to help Abrams get a patent approved. Hubbard helped lead the Republican takeover of the Legislature on a “Handshake with Alabama” platform that stressed ethics reforms. Shortly after the historic 2010 election, the new Republican majority passed ethics reforms. Soon after, though, prosecutors say financial problems led Hubbard to break some of those same laws. More:
Former Regions Bank VP’s indicted in bribery, wire fraud scheme
Two former Regions Bank vice presidents have been indicted by a federal grand jury for conspiracy in a $5 million bribery and wire fraud scheme. The indictments were announced today by United States Attorney Joyce White Vance and FBI Special Agent in Charge Roger C. Stanton. A 39-count indictment filed in U.S. District Court charges Richard Alan Henderson, 57, of Hoover, and Philip Henry Cooper, 66, of Birmingham, with conspiracy, bank bribery, wire fraud affecting a financial institution and money laundering. Henderson and Cooper were Regions’ employees, serving as officers of Regions Equipment Financing Corp., a part of the bank that offered business customers various financing tools, including equipment financing and lease options. Henderson began as senior vice president and finance manager of REFCO and was promoted in April 2012 to its chief administrative officer. Cooper worked as senior vice president and asset manager of REFCO. According to the indictment, Henderson and Cooper recruited a third man, Jesse Stewart Ellis, who has agreed to plead guilty to charges arising from this scheme, to establish a company that would enter an agreement with REFCO to provide residual value insurance, a type of insurance designed to manage asset value risk. Ellis had no experience providing residual value insurance. The defendants directed REFCO’s residual value insurance business to Ellis’ new company, and he, in return, split the proceeds of the business with Henderson and Cooper, according to the charges. The defendants concealed from Regions that they were receiving money as a result of directing REFCO’s residual value insurance business to the company Ellis established. Between Sept. 2010 and Nov. 2015, REFCO paid Ellis’ company, Residual Assurance Inc., about $5.1 million, most often through interstate wire transfer into the new company’s account at Wells Fargo Bank, the indictment charges. Henderson received about $1.8 million as a result of the scheme and Cooper received about $1.5 million, according to the indictment. The indictment also seeks forfeiture from the defendants in those amounts. More:
Bentley, Stabler legal contracts approved by committee
A legislative committee Thursday approved contracts that will pay a law firm up to $200,000 to represent Gov. Robert Bentley and Alabama Law Enforcement Agency Stan Stabler in a civil lawsuit, but not without some mild criticism from members. “It’s not lost on this committee this is taxpayer money being used as we wade through these legal challenges,” said Sen. Bill Holtzclaw, R-Madison, the chairman of the Contract Review Committee. The two contracts, each worth up to $100,000, will pay Birmingham-based Maynard Cooper & Gale over the next two years to defend Bentley and Stabler in a lawsuit brought by former ALEA Secretary Spencer Collier. The contract calls for a rate of $195 an hour for the attorneys and $60 an hour for paralegals involved in the case. Bentley’s office cites coverage provided to state employees by the Office of Risk Management when they face lawsuits against them as individuals. David Byrne, Bentley’s legal advisor, told the committee that the attorney general’s office could not represent the governor. “There is a pending matter before them,” he said. “There is an internal investigation against the plaintiff in that lawsuit.” The investigation, involving what Bentley said in March was “possible misuse of state funds,” has been before the AG since then. Bentley fired Collier over the report. Collier strongly denies any wrongdoing. Collier sued Bentley, Stabler and former Bentley political advisor Rebekah Caldwell Mason in April, alleging that Bentley and Mason conspired to fire him after he submitted an affidavit in the criminal investigation of former House Speaker Mike Hubbard. Collier also accuses the three of defaming him, and says Stabler said harsh things about him to get the Secretary’s position. All three defendants have moved to dismiss the case. Bentley says sovereign immunity protects him from the lawsuit, and Stabler accused Collier of making “irresponsible and misleading factual allegations” in his lawsuit. Both say Collier cannot state grounds for relief. Byrne said the office has spent $9,886.56 on the Maynard Cooper contract to date. He cited the experience of John Neiman, a former solicitor general for the state and the attorney assigned to the case, as a reason for the contract. “He went to Yale and Harvard (and) clerked for a Supreme Court justice,” Byrne said. “He is the best writer that we can basically engage.” Neiman is representing the office in four other cases, Byrne said. The committee approved both contracts. Contract Review cannot stop the implementation of contracts but can put a 45-day hold on contracts. Holtzclaw said there was “some discussion” about that, but said it would “further politicize the process,” and hoped the review would allow discussion of contracts in the “light of day.”
The chairman said that the contracts were legal, but added that “in my personal opinion, just because you can doesn’t mean you should.” Rep. John Knight, D-Montgomery, speaking generally about all contracts before the committee, said agencies were relying too much on a handful of businesses to do their work, at the expense of small and minority-owned businesses. “There are other firms in this state that are capable of doing work for the state,” he said. “You see the same firms doing the same work over and over again.” More:
How Alabama’s sales tax stacks up against the rest of the country
Alabama is known for its low taxes. Property taxes, that is. Sales taxes? Well that’s another matter. The Tax Foundation compiled 2016 sales tax data for every state. It found the five states with the highest average combined state and local sales taxes are:
- Louisiana – 9.99 percent
- Tennessee – 9.45 percent
- Arkansas – 9.30 percent
- Alabama – 8.97 percent
- Washington state – 8.92 percent
That average is comprised of two parts: local sales tax and state sales tax. Alabama is one of 38 states where consumers pay local sales tax as well as a state assessment. Alabama’s local average sales tax rate (4.98 percent) is the second highest in the country, behind only Louisiana. It’s state sales tax rate – 4 percent – is actually one of the lowest in the country, tying with Georgia, Hawaii, New York and Wyoming for the second-lowest in the country. The lowest non-zero state level sales tax can be found in Colorado, which has a rate of 2.9 percent. Five states – Alaska, Delaware, Montana, New Hampshire and Oregon – have no statewide sales tax at all. More:
Alabama Charter School Commission releases letters of intent
Chairman Ed Richardson of the Alabama Public Charter School Commission has released letters from five organizations announcing their intentions to start charter schools in Alabama. Alabama has never had charter schools, which were authorized by the Legislature in 2015. No charter schools are expected to open until the 2017-2018 school year. The five organizations that sent letters:
Federal survey shows Alabama with some of lowest paying jobs in nation
Most Alabama cities have some of the lowest-paying jobs in America, according to a recently released federal survey, though Huntsville, with its rich aerospace sector, is among the nation’s best. The latest U.S. Bureau of Labor Statistics Occupational Employment data, covering wages and salaries in 414 metropolitan areas in the country, finds five Alabama cities rank among the 25 with the lowest pay in the country, according to an analysis by Alabama Today. The bottom tier of metro areas shows pay is generally worst in Mexican-U.S. border towns, with Brownsville, McAllen and Laredo, Texas, having the nation’s lowest, second-lowest and third-lowest wages. Gadsden, with a median pay of $26,800, ranks 10th from the bottom in salaries; Daphne, with median pay of $27,090, ranks 12th; and Auburn, with median pay of $27,550, has the nation’s 15th lowest wages. Dothan and Florence-Muscle Shoals also are in the bottom 25 nationally, while most of Alabama’s seven other metro areas, as defined by the BLS, also are in the nation’s bottom half. The exceptions are Huntsville, ranking among the South’s best-paid cities, 62nd-highest overall nationally, with a median pay of $38,420; and Birmingham, which has a $34,670 median pay, and ranks 159th-best nationally. As a state, Alabama ranks sixth from the bottom nationally in pay rates. Mississippi was lowest at $29,000, followed by Arkansas, West Virginia, South Dakota, South Carolina, and then Alabama, at $31,550. The data are based on the BLS’s annual survey of rates of pay for hundreds of specific professional occupations, ranging from accountants to zoologists, inside 414 employment markets nationwide.The salary review is different from an assessment of workers’ median incomes because the survey does not account for the prospects that many people hold two or more jobs or have other sources of revenue. This is a study of how wages and salaries compare, per occupation, per city. The metropolitan areas with the highest pay are all in the nation’s northeast [the Boston-Washington D.C. corridor]and the Northwest. The San Jose-Sunnyvale-Santa Clara, California, Metropolitan Division, home of Silicon Valley, has the highest annual median pay at $58,900.
Nationwide, higher wages are almost exclusively found in bigger metropolitan areas while smaller towns are dominated by relatively lower-paying occupations, and by lower pay across the board. Huntsville has more than 18,000 engineering jobs of various kinds, the city’s third-most-common broad job category, with a combined median pay of nearly $99,000. Another 12,000 computer-related jobs have a combined median salary of over $88,000. Between them, those two professions make up almost 15 percent of Huntsville’s 213,310 jobs, according to the BLS. By contrast, Gadsden, with a much smaller employment market, 35,570 jobs overall, is dominated by more than 11,000 factory and office jobs with a combined median pay of a little more than $25,000 a year. There are 3,220 health care jobs with a median pay of $46,840, but not many that pay much more, and none that competes with the salary ranges in Huntsville.
MASSACRE IN DALLAS — According to Dallas Police Chief David O. Brown, two snipers opened fire at protest in Dallas Thursday night, hitting at least ten police officers and killing at least three. At midnight, Chief Brown held a press conference pleading for help from the public to find one sniper still at large. He said the second remained cornered. Brown also said Dallas received a bomb threat from the assailants. The Dallas police later Tweeted that a fourth officer had died … Tune in to morning TV for latest details and follow @DallasPD. As ever in these situations, initial reports often turn out to be inaccurate, even from official sources.
DALLAS MORNING NEWS ONE WORD HEADLINE: “AMBUSH” https://goo.gl/jhefCZ
MM THOUGHT — Hard to imagine President Barack Obama won’t return from Europe early to address the nation following the multiple shootings of black men by police and the attack on police in Dallas overnight. It’s a time of maximum peril for the nation. History will also call on both major presidential candidates to elevate their rhetoric and appeal for calm in the wake of these devastating events.
PROTESTS GROW AFTER SHOOTINGS — USAToday/St. Paul: “Thousands of people gathered Thursday at the school where Philando Castile worked, mourning the man’s death at the hands of police officers Wednesday. Marches and demonstrations also were underway in cities across the nation, including New York, Washington and Chicago, to protest shootings of black men by police” http://goo.gl/EMTErG
Read about Castile, a gentle man who memorized the names of hundreds of kids and remembered what food allergies they had. http://goo.gl/9D4ZEb
WELCOME TO JOBS DAY — Individual jobs reports are usually over-hyped (including by us!) but Friday’s reading on June payrolls is actually quite important. It’s one of the last that will have a real impact on the election (late summer figures get lost and by October it’s really too late to matter).
And we will learn whether the sharp slowdown in May (to just 38K) was the real thing or a statistical blip that gets revised higher. In addition to the impact on the political narrative, the number will be critical to the timing of the next interest rate hike. A strong number close to 200,000 will put the Fed back on track to hike later this year. Another very weak number will likely keep the central bank on pause until next year.
HFE’s Jim O’Sullivan: “We continue to forecast a fairly strong 210K rise in payrolls for June, a bit higher than the 180K consensus and sharply higher than the 38K rise in May. We expect the unemployment rate to hold at 4.7 percent; even a slightly higher number would not be concerning after the big 0.3-point drop in May. We forecast a slightly below-trend and below consensus 0.1 percent month-over-month rise in average hourly earnings”
Moody’s Analytics’ Mark Zandi emails: “Employment growth should get back on track, with a gain of close to 200k, and unemployment should tick higher to 4.8 percent. Adding to the employment gain is the return of Verizon workers from a strike. This will add 35K to employment. …
“The economy is close to full-employment. This is evident in accelerating wage growth, which has picked-up across all age groups, company sizes, and regions of the country … Monthly job growth of near 200K and stronger wage gains should be political tailwinds behind Hillary Clinton.”
Pantheon’s Ian Shepherdson: “We have had a modest rethink of our June payroll forecast and have nudged up our number to 150K, still below the 180K consensus. … To be clear, we have not changed our medium-term view that the underlying economy is in better shape, and the labor market is tighter, than markets believe”
GOLDMAN NIXING TRUMP GIVING? — Fox Business’ Charles Gasparino and Brian Schwartz: “Executives at Goldman Sachs who want to support Republican efforts in this fall’s elections are telling GOP fundraisers that management at the big investment bank is cautioning them about making direct contributions [Donald Trump] …
“Rather, these same Goldman executives say they are being prodded by their supervisors that if they want to support the GOP this year, they should give more broadly to Republican party coffers, such as PACs and directly to the Republican National Committee” http://goo.gl/dNbvUb
GOLDMAN SAYS NOT SO — Per a Goldman exec: “We don’t really have any major donors to the RNC or Trump this cycle. No enthusiasm … [But] there are no top down edicts. Safe to say that GOP folks at the firm are more enthused about supporting down ballot races.”
THIS MORNING ON POLITICO PRO FINANCIAL SERVICES – Zachary Warmbrodt’s interview with Basel Committee Secretary General William Coen — and to get Morning Money every day before 6 a.m. — please contact Pro Services at (703) 341-4600 or email@example.com.
DRIVING THE DAY — Reaction to Dallas will dominate … President Obama is scheduled to “meet with the Presidents of the European Council and the European Commission to discuss U.S.-EU cooperation” … Jobs report at 8:30 a.m. expected to show a gain of 180K with the unemployment rate staying at 4.7 percent and wages up 0.2 percent … Consumer Credit at 3:00 p.m. expected to expand by $17B …
TREASURY DEPARTURE LOUNGE — Friday is Treasurer Rosie Rios’s last day. Via Treasury Secretary Jack Lew: “Rosie Rios joined the Treasury team nearly eight years ago, during the presidential transition. Since then, she has been a thoughtful steward of two important Treasury bureaus — the Bureau of Engraving and Printing and the Mint — and has been an advocate for women and girls including, for example, her leadership of the Treasury Women in Finance symposium.
“I am particularly grateful for her creativity and leadership in the effort to redesign our paper currency and to ensure that future notes reflect, for the first time in 120 years, the important role of women in shaping our democracy. I thank her for her service and wish her all the best in her future endeavors.”
TREASURY ON BOND MARKET LIQUIDITY — Via Treasury’s Jake Liebschutz and Brian Smith: “While some measures, such as lower trade sizes and dealer inventories, are frequently cited as evidence of declining liquidity, the available evidence, when viewed holistically and in light of recent market trends, does not suggest a broad-based deterioration in liquidity.
“Instead, most measures are within historical ranges. Nevertheless, the corporate bond market is undergoing significant changes that are reshaping the nature of trading and liquidity provision, including: the shift from principal- to agency-based intermediation, growth in electronic trading, and the emergence of new trading platforms.” https://goo.gl/yjGMwX
VOTERS ARE UNHAPPY BUT FAVOR CLINTON — POLITICO’s Nolan D. McCaskill: “Voters are highly interested in the presidential contest between Hillary Clinton and Donald Trump, but they’re also largely dissatisfied with their options, according to a national Pew Research Center poll … Clinton leads Trump in a head-to-head matchup, 51 percent to 42 percent, with 7 percent undecided, according to the poll.
“Trump holds a nine-point advantage over Clinton among white voters, 51 percent to 42 percent, but Clinton dominates among African-American (91 percent to 7 percent) and Hispanic (66 percent to 24 percent) voters. Both candidates have high negatives, and only 43 percent of Democrats and leaners and 40 percent of Republicans and leaners are satisfied with their choices for president”
COMEY CALLS OUT CLINTON FALSE STATEMENTS — Via POLITICO’s “2016 Blast” email: “FBI Director James Comey said … that some of Hillary Clinton’s public statements about her use of a private email server as secretary of state were not truthful – though he said Clinton never lied to his agency. Comey also said that the FBI’s investigation found information marked as classified on Clinton’s server, despite repeated public statements from Clinton that she hadn’t sent or received classified materials” http://goo.gl/58udRt
NEVER TRUMPERS UNMOVED ON THE HILL — POLITICO’s Burgess Everett, Heather Caygle and Rachael Bade: “Dozens of House and Senate Republicans touted party unity after Donald Trump’s pair of appearances with them on Capitol Hill Thursday. But as details about the meetings leaked out, it became clear that the gatherings did little but paper over deep internal GOP divisions that show no signs of abating.
“House members already wary of Trump were even more skeptical after seeing him in person, their concerns about his standing among Latinos and praise for Saddam Hussein undiminished. It was even worse with senators, as Trump seemed more intent at times on settling scores than mending fences, calling out his critics in front of the bulk of the Senate GOP Conference.”http://goo.gl/O7Qz1h
CLINTON EMAIL HEADACHES WON’T FADE — POLITICO’s Annie Karni: “Despite Democratic attempt to paint Thursday’s testimony as a huge victory, there were undeniable downsides. Comey said that Clinton and her top aides’ handling of State Department email carried serious consequences. When Rep. Ron DeSantis asked if it could lead to ‘ineligibility for future employment in national security positions,’ Comey replied, ‘it could.’ And the email saga once again gobbled up hours of cable news coverage … .
“[P]utting the email scandal … in the rearview mirror may be wishful thinking. House Republicans said Thursday, based on the FBI’s findings, they planned to open up a new investigation into whether Clinton lied during her marathon Benghazi hearing testimony. At the same time … Trump’s campaign moved aggressively to take advantage of the furor surrounding Clinton’s emails, sending out multiple rapid response statements and even fundraising off the Comey hearing” http://goo.gl/74xLhN
THE BIG IDEA: WHAT WENT WRONG — WSJ’s Jon Hilsenrath and Bob Davis: “The past decade and a half has proved so turbulent and disappointing it has upended basic assumptions about modern economics and our political system. This string of disappointments has resulted in one of the most unpredictable and unconventional political seasons in modern history, with the rise of … Trump and Bernie Sanders. Median household income, accounting for inflation, has dropped 7 percent since 2000, and the income gap widened between the wealthy and everyone else.
“Even though official measures of unemployment have receded from postrecession peaks, seven in 10 Americans believe the nation is on the wrong track … The 2016 election is shaping up in large part as a referendum on an economic model that is widely seen as failing. Messrs. Trump and Sanders argue that policies celebrated 16 years ago no longer work for most Americans, a message that is resonating widely among those who have most suffered the consequences” http://goo.gl/MVLR7h
UK MUTUAL FUNDS WOBBLE — NYT’s Landon Thomas Jr.: “As one British mutual fund after another bars its doors to fleeing investors, traders and regulators alike are asking the same question: What does it mean for nervous global markets? This week, six asset management firms in Britain decided to refuse, for the moment, cash demands from those seeking to escape funds that invest in commercial real estate in the country.
“The rush for the exits followed [Brexit] … So far, the numbers are small enough. Of the 35 billion pounds, or $45 billion, invested in these funds, just under £20 billion has been affected. Yet to see, in real time, fund companies turning away investors because they cannot quickly unload assets that are hard to sell brings to life a nightmare situation that has long kept central bankers and large investment managers awake at night.” http://goo.gl/j8epxE
LAGARDE RIPS TRUMPISM — FT’s Shawn Donnan, Gillian Tett and Sam Fleming: “The antitrade policies championed by Republican presidential candidate Donald Trump risk sparking a dangerous protectionist movement that could severely damage the global economy, Christine Lagarde has warned. Britain’s vote to leave the EU is already casting a shadow over international growth, the International Monetary Fund chief said in an interview, adding that the imposition of new trade barriers in another large economy could have ruinous effects.
“‘I think it would be quite disastrous, actually. Well I don’t think I should say disastrous because that is an excessive word and I should refrain from excessive words. But it would certainly have a negative impact on global growth,” she told the [FT] … Any uncertainty surrounding a Trump presidency would probably yield more instability in financial markets, similar to the upheaval in the wake of last month’s UK referendum, she said in response to a question. But the IMF chief took care to avoid singling out any politician or referring to Mr Trump by name.” http://goo.gl/10HNMg
9:55 am ET || Meets with the Presidents of the European Council and the European Commission; Warsaw Marriott, Warsaw, Poland
10:55 am || Delivers a statement with the Presidents of the European Council and the European Commission; Warsaw Marriott
11:20 am || Holds a bilateral meeting with NATO Secretary General Stoltenberg; Warsaw Marriott
12:05 pm || Participates in an Embassy meet and greet; Warsaw Marriott
1:30 pm || Holds a bilateral meeting with President Duda of Poland; Pge Narodowy, Warsaw, Poland
2:20 pm || Delivers a statement with President Duda of Poland; Pge Narodowy
3:15 pm || Participates in a NATO family photo; Pge Narodowy
3:30 pm || Attends a session of the North Atlantic Council; Pge Narodowy
8:30 pm || Attends a working dinner with NATO leaders; Presidential Palace, Warsaw
All times Central Eastern European Summer Time, which is six hours ahead of U.S. Eastern time.
The House meets at 9 a.m. with first and last votes for the week starting around 11 a.m. The Senate is out, resting up over the weekend after a late-night vote series Thursday.
AROUND THE HILL— Members of the Congressional Black Caucus will hold a press conference on legislation to prevent gun violence at 10 a.m. in HVC Studio A. The House Select Committee on Benghazi will have a closed meeting to approve its report at 9 a.m. in HVC-301. Rep. Jason Chaffetz will speak at a forum on federal sentencing reforms at 10 a.m. in Rayburn 2237.