Saturday, January 21, 2017

As Always, Trump Talks Great PR, Then Shafts The People Who Believe It

The most important lesson to learn with Donald Trump is to focus on what he actually does or (usually) doesn't do as opposed to the outrageous things he says. His words are meaningless; they are just a reflexive PR statement that positions his brand, whether business or political, and have no basis in reality. Yesterday, Trump promised "From this moment on, it's going to be America First. Every decision on trade, on taxes, on immigration, on foreign affairs, will be made to benefit American workers and American families." Sounds wonderful if you can ignore the anti-Semitic Nazi slogan of "America First".

But look at what the first few actions of the Trump administration actually were. First, he rolled back the reduction in mortgage insurance rates for FHA mortgagees that was scheduled to go into effect on January 27th. That reduction in mortgage insurance fees would have saved over three-quarters of a million primarily middle class homeowners around $500 per year in the cost of mortgage insurance. That doesn't sound like its putting America's working and middle class first.

Next, the Department of Justice asked for a delay in the Supreme Court hearing concerning the reduction in voting rights in Texas in order to "brief the new leadership of the Department on this case and the issues to be addressed at that hearing before making any representations to the Court." The voter ID plan in Texas was struck down by a lower court as being discriminatory against minorities. The case will probably still go ahead but it remains to be seen whether the DOJ will still remain party to the suit. If not, it would be putting white Americans first, but that's what was Trump probably really meant.

Immediately after Trump's inauguration, the sections devoted to civil rights, LGBT rights, sexual assault survivors, and climate change on the WhiteHouse.gov website were all deleted. The sections on climate change was replaced with a section on an energy plan that focuses on more drilling in the US. The civil rights sections was replaced by a section called "Standing Up For Law Enforcement". At the Department of Labor's website, the sections on advancing LGBT workplace rights is gone. At the Department of Justice, the lawyer who represented North Carolina in the HB2 "bathroom bill" court case has been picked to run the Civil Rights division. The DOJ also announced the phasing out of 25 grant programs designed to address the problem of violence against women. All of these moves once again indicate that "America First" only applies to certain Americans, particularly white heterosexual males.

Lastly, Trump signed what a few days ago the GOP referred to as one of those abuses of Presidential power, an executive order, that gave the Health and Human Services Department broad discretion in how they enforce the ACA, or Obamacare. One of those powers will allow the agency to provide waivers for the "individual mandate", one of the three pillars that makes Obamacare work. As I have mentioned many times before on this blog, a move like this would effectively kill Obamacare in 2018 without the Congress having to even pass a bill to specifically repeal it. Democrats and the press are finally waking up to this strategy. Since most insurance companies have to make a decision before April or May of this year as to whether they will remain in the exchanges next year, this executive order essentially signals to the health insurance companies that they should leave the exchanges. Early this summer, Republicans will point to all the insurance companies dropping out of the ACA and claim that the program is collapsing of its own accord, just as they had always predicted. At that point, they can pass whatever pathetic replacement plan they want to because their hands will not be bloodied by openly murdering the program, just killing it by stealth. Democrats and the press need to be prepared for this strategy and constantly focus on the issue that any waivers to the individual mandate is the equivalent of a vote to repeal. If ripping health insurance away from 30 million Americans doesn't sound like its putting America first, you would be correct. Because those people are not the Americans that Trump is putting first. It is the 400 households who will get a tax break that is equivalent to all the Obamacare subsidies in 21 states. That's who Trump really cares about.

Trump is a congenital liar. He has promised to cede control of his companies to his sons. He has not done that. He promised that he would "explain" Melania's immigration status. It never happened. He promised he would "drain the swamp". His cabinet is filled with Wall Street potentates and billionaires. For all those who believe what he says, please take a close look at what he actually does. He is a PR master and he will inundate you with his sales pitch. Ignore it and look at what he actually does. And for those of you on Obamacare who truly thought he was going to fix the few problems the program had, you will shortly find out that you have been taken, just like those attending Trump University. When that happens, I hope you never forget that you essentially voted to have your insurance taken away. You also voted to have my insurance taken away. And that's something I will never forget.



Photos From March In Stamford, CT, DC, and Austin, TX

Stamford, CT is the heart of Fairfield County, one of the richest counties in the country and a traditional bastion of Republicans that has turned blue, at least in national elections, because the move to the extreme right taken by the GOP. The march there was overwhelmed by attendees which resulted in the route of the march being way to short. The first marches had already completed their circuit before even half of the crowd had even started. For a small town like Stamford, population of 125,000, this was a pretty impressive turnout. I should also add that the clouds (miraculously?) parted and the sun came out just as the march was starting. I wonder how Franklin Graham would spin that...

Here you can see the crowds still waiting to start to march as the early starters were already finishing:

video

And here are some more classic signs:


Lastly, another update on the crowds at the march in DC:





And here's a photo of the march in Austin, Texas:


Photos From DC March

Here are some photos as people prepare for the march in DC today. You've got to say the creativity of the American people is something to behold...




Donald Trump - First President Of The Banana Republic Of America

For my regular readers, there will be no Natural Weekends segment today because there is nothing natural about what is happening in our country right now. Donald J. Trump is not really the 45th President of the United States. He is also the First President of the (Banana) Republic of the America. Trump is already in violation of the Constitution of the United States through the payments he is receiving from foreigners both here in America and overseas as well when the spend money in a Trump Hotel or apartment building. He is also in violation of a lease agreement with the United States Government. He is using the White House website to hawk products that his family owns and operates. He and his family still control businesses that will undoubtedly profit from his presidency. None of this should ever be considered normal. In fact, it is no different than any other banana republic where the family and friends of the ruling power get richer and richer by taking advantage of the power of their positions to loot the country. Wikipedia describes the characteristics of a banana republic as having a "large, impoverished working class and a ruling plutocracy of business, political, and military elites. This politico-economic oligarchy controls the primary-sector productions to exploit the country's economy." That certainly seems like a perfect description of Trump, his cabinet, and the oligarchic business elites of this country today.

The Emoluments Clause of the Constitution is located in Article 1, Section 9 and says (emphasis mine), "No title of nobility shall be granted by the United States: and no person holding any office of profit or trust under them, shall, without the consent of the Congress, accept of any present, emolument, office, or title, of any kind whatever, from any king, prince, or foreign state."  Trump can surely pay a lawyer to say that a hotel booking is not a present but that will never pass Constitutional muster, especially when foreigners are openly expressing the fact that the reason they booked at a Trump hotel was to influence the President. Additionally, sending the profits from those foreign expenditures to the US Treasury simply reduces the amount of the gift Trump is receiving, nothing more, And this violation of the Emoluments Clause does not just involve his hotel in DC. It applies to any property he owns, anywhere in the world, where a foreign national spends money that goes to the Trump Organization. His transfer of control to his sons does nothing to remove Trump's ownership in the Trump Organization and therefore it does absolutely nothing to relieve Trump of the Emoluments Clause and this massive conflict of interest.

Heck, in typical Trump fashion, (which means lying), as of his inauguration yesterday, Trump had still not ceded control of the Trump organization to his sons. ProPublica reports that the required documents to do that need to be filed in the states of Florida, Delaware, and New York. None of the necessary documents have been filed in Delaware and New York and it is unclear whether any have been filed in Florida due to lag time in posting those kinds of documents. In his press conference, both Trump and the attorney he paid to produce the useless agreement to cede control of the companies to his sons promised that it would be done before his inauguration. It has not happened. We should not be surprised.

The Trump Hotel is housed in the Old Post Office which is still owned by the government. The Trump Organization signed a lease with the government's representative, in this case, the General Services Administration (GSA). Specifically, that lease says "No ... elected official of the Government of the United States ... shall be admitted to any share or part of this Lease, or to any benefit that may arise therefrom." Again, by maintaining his ownership stake in the Trump Organization, Trump is in violation of this lease. The question will be whether the GSA, which is now essentially headed by Trump as President, will pursue this violation of contract and law. Ig the GSA won't pursue it, other groups will certainly try to force them to. Already, the government watchdog group CREW has filed a lawsuit in the matter.

Although the offending section has been subsequently pulled after the initial backlash, the new White House website that came online with Donald Trump's inauguration had a plug for Melania Trump's jewelry line. As part of her bio, the website wrote, "Melania is also a successful entrepreneur. In April 2010, Melania Trump launched her own jewelry collection, ‘Melania™ Timepieces & Jewelry,’ on QVC". As with everything Trump, this too turned out to be a lie as a QVC spokesman said, "At this time, QVC does not have an active relationship with the [Melania] brand".

I'll give them a pass on this one as it was probably just a part of a typical bio that was copied onto the website. But it highlights two important issues with Trump. First is that there is apparently no attention to detail when it comes to everything Trump. Just like most rich and powerful people, they are above dotting the "i"s and crossing the "t"s because they know they can get away with it. It is the same thing with Trump's promise to cede control of the Trump Organization to his sons. More importantly, it shows just how much the business interests of the family are entangled with the President and, by extension, the presidency. The family will be profiting handsomely by leveraging their closeness to the President for the next four or, God forbid, eight years.

Yesterday, Trump swore an oath on Lincoln's bible to "preserve, protect and defend the Constitution of the United States". He is already in violation of that oath. He, his family, and the Trump Organization will benefit greatly from his ownership stake in that company while he is President. Unlike advance banana republics, Trump and his family will not be able to personally loot our country. There are members of his cabinet who may be able to do a far better job of that than Trump. But, by accepting Trump's violation of the Constitution and the law and allowing it to stand, we are letting him to set a precedent going forward. As the First President of the Banana Republic of America, Trump may turn out to just be a two-bit thief. But he will pave the way for others who may be far more adept then he is.

Friday, January 20, 2017

The Economic Future Under Trump

The myth of Donald Trump's surprisingly election victory is that he alone understood the travails of the white working class and that was what catapulted him to victory. The reality is that there was a large swath of Democrats, Bernie supporters and even Clinton supporters, who have been complaining for years about the wage stagnation, at best, and wage loss, at worst, for middle class Americans and workers. It is not that Trump alone understood working class issues but that he was more effective at tapping into their angst. Of course, he had an enormous assist from a media that was obsessed with Hillary's emails and virtually ignored her policy prescriptions for the very troubles Trump was bemoaning as well as James Comey's illegal intervention in the election, which was clearly decisive.

Trump's inaugural address was basically another campaign speech that harped on what desperate shape the country is in and how he would put America first in all that he did. The real question, just as it should have been in a tragedy of a campaign, is whether Trump's policies to restore the American middle and working class will actually work.

Jim Tankersley over at Vox details the rationale behind what he describes as a potential "Trump boom". He points to the (finally) rising median wage in the last year which is an indicator that we may be getting near full employment. That will help increase productivity and even higher wage growth in a kind of virtuous circle. In Tankersley's mind, Trump really doesn't have to do too much in order to get around 3% growth and higher wages, both of which will accrue to his benefit. Slashing corporate and personal taxes, renegotiating trade deals, and pressuring firms to bring and keep jobs in the US will further enhance growth and investment. Tankersley does admit there are certain dangers. An economy growing too fast could create that dreaded inflation, forcing the Fed to raise rates and slow the economy down. In addition, a ballooning federal deficit and a trade war brought on by Trump's beloved tariffs could derail the economy. And Tankersley offers this caveat, that this all "depends on whether his team is correct that high and complicated taxes, burdensome federal regulations, and misguided trade policies are holding America are holding companies back from spending and hiring more in the United States". Dear God. Haven't we tried this gambit before, slashing taxes and regulations, and it did nothing for the middle or working class. It just increased inequality and led to the greatest financial disaster since the Great Depression. Apparently, despite three decades worth of evidence to the contrary, Tankersley thinks it will work this time. It should also be noted that if Tankersley thinks we are close to full employment now, we were also probably close to full employment six months ago. The unemployment numbers (even though Trump and Mnuchin apparently don't believe them) have shown steady growth over those six months, certainly not any kind of hiring explosion. If the working and middle class were dissatisfied six months ago, what makes Tankersley think they will be that much happier now.

Larry Summers takes a more sober view of the potential of Trump's presidency and tells us to prepare for the worst. He notes that "animal spirits" are high as business, like Tankersley, believes that lower taxes and less regulation will set off that virtuous circle of increased investment, hiring, and confidence. He's not buying it. Besides Trump's low approval ratings and potential for crippling ethics problems, Trump will simply be unable to make much headway on his promises. According to Summers, "it is not possible to repeal Obamacare without taking health insurance away from millions of Americans and placing new burdens on those with preexisting conditions. If Trump follows through on proposed increases in tariffs, the result will be lower real wages and incomes as prices rise faster than wages. All in Congress agree that tax reform will not happen in a few months, and it is impossible to reconcile the president-elect’s stated goals of major reductions in corporate and top rates, a fair distribution of the benefits of tax cuts and preventing a huge increase in federal debt." The Republican Congress is really fixated on two issues, repealing Obamacare and a massive tax cut for the rich. Neither of these will help Trump's popularity or address the problems he has promised to fix. And renegotiating tax deals will take far longer than his supporters have patience for. Perhaps Summers most prescient line is that "History is replete with examples of populist authoritarian policies that produced short-run benefits but poor long-run outcomes."

An open question is whether Trump will offer any pushback against the GOP Congress. He has already demanded a simultaneous replacement for Obamacare but Republicans have no plan that doesn't strip away real, affordable health insurance from millions. He dissed the GOP's plan for a "border adjustment tax" that essentially taxed imports while exempting businesses exporting from corporate tax, describing that plan as "too complicated". That could be because there would be some clear winners and losers with a plan that was so favorable to exporters and punitive to importers. He seems to prefer a straight tariff which would simply create a trade war that would make everyone poorer and would still create those same winners and losers. Perhaps Trump really does believe he is the great negotiator and that the simple threat of tariffs will get our trading partners to fall in line. On the other hand, perhaps he doesn't really know what he is doing. But it is hard to see how any of these actions address the real problems of wage stagnation and rampant inequality. Yes, they will provide plenty of great PR tweets but really not accomplish very much that won't be swamped by broader economic trends.

The reality is that there is very little in Trump's stated plans, or in his cabinet, that would give any confidence that the rampant inequality will be reduced. Under the current tax plans, that inequality will only be exacerbated. Globalization and technological change may be responsible for stagnating and declining wages in the working and middle class throughout the industrialized world, but the idea that restricting immigration or imposing tariffs is really going to change that is a fiction. Globalization and technology have actually made us as a whole much richer. The problem is that, for the last thirty years, all those extra riches have been taken by the elites. In the US, the powers that be, primarily Republicans, have made sure that those riches are not shared with those who have been displaced by the changes that made the top 1% so rich. Just look at the idea of repealing Obamacare. What kind of miserliness and greed will rip away health care from millions of Americans in order to give 400 households a tax cut that would pay for the health care subsidies for 21 states. What kind of person thinks that a system where eight people own more than half of the rest of the world is not only sane but a system that can survive. Mark Thoma hit the nail on the head when he said the elites "must get over their greed and their lack of compassion for those who’ve paid the price for their fortunes." Does anyone really think that Trump and the current GOP is capable of that.





GOP Resorts To Lies And Obfuscation Regarding Repeal And Replace

Republicans are really starting to feel the heat over repealing Obamacare. Numerous GOP Congressmen have returned for meetings in their districts and been confronted with angry crowds wanting to know what exactly is going to happen with their health care. Those representatives really have no answer at this point.

The Republican leadership hasn't been able to come up with a real replacement plan in the last six years and they have seem to be just as lost today. There is no way they can come up with a plan that will rival the coverage and costs of Obamacare without spending more money, which is totally out of the question. Any other plan that would be able to cover the same number of uninsured as Obamacare for less money would rely on cheap, crappy insurance that would provide far less coverage and/or more out of pocket costs for the consumer.

So, in response, the GOP has resorted to its usual tactics of obfuscation and outright lies. Yesterday, John Cornyn pledged, "Nobody's going to lose coverage. Obviously, people covered today will continue to be covered." Of course, even before Obamacare, insurance coverage was theoretically available to everyone. The question was always whether it was affordable and what kind of coverage your money could buy. Cheap, crappy coverage will always be available. It just won't do you much good when you really get sick. As Drum also notes, "This could mean anything. It could mean giving the poor a $1,000 refundable tax credit they can use toward buying coverage on the open market, which would be useless. It could mean giving the poor access to tax-favored HSAs and catastrophic coverage, which would also be useless. It could mean keeping them on Medicaid but instituting a 50 percent copay to make sure they have 'skin in the game'."

Meanwhile, that great policy wonk, Paul Ryan has moved beyond meaningless obfuscation that allows people to hear what they want to hear and into outright lies. In a softball interview with Charlie Rose, Ryan said this, "We also think that a refundable tax credit is a smarter way to get people the ability to go buy insurance that they like that they can afford. That's better than [Obamacare's] subsidies. A refundable tax credit means you get assistance to regardless of your income tax liability to buy care". As Jordan Weissmann over at Moneybox points out, the IRS has determined that Obama's subsidies are, you guessed it, a refundable tax credit. Michael Hiltzik ran down the list of outright lies that Ryan spouted in his town hall a week ago. The claims that the law is collapsing, premiums are skyrocketing, and Obamacare in a death spiral are all fabrications. His proposal for high risk pools is a proven joke and his answer to a question about what a replacement would look like was that he didn't want to get into "all of the legislative mumbo-jumbo".

As I have written before, if Obamacare does go into a death spiral it will be because the uncertainty about the (lack of) Republican's repeal and replace plan will drive insurers out of the market for 2018. Those insurers have to make plans by late spring this year if they are going to remain or drop out of the exchanges. The obfuscation and outright lies from the GOP leadership will not give those insurers much confidence to remain.

Trump Is Sworn In And Is Immediately In Violation of the Constitution

Donald Trump is now officially our 45th President. And with his ownership of hotels both here and abroad that have bookings from foreign nationals, Donald Trump, our current President, is now in violation of the Constitution, specifically the Emoluments Clause. He still has an ownership stake in his new Washington, DC hotel and is now in direct violation of the lease with the GSA for the Post Office building that houses that hotel.

Has there every been a President who was in such direct violation of the laws of our land from the very moment he has taken office? This is not normal and we should no allow it to be. Never.

Thursday, January 19, 2017

Navient, JPM, And Western Union Are Today's Corporate Criminals

It's time for today's roundup of corporate criminals. Like Trump's nominees ethical problems, this is also becoming a daily feature. Let's start the day with Navient, the largest servicer of student loans in the country. The company handles about $300 billion in student loans that effect one-quarter of all students with loans. A lawsuit filed by federal regulators and states attorneys general accuses Navient of basically misleading and defrauding students in almost every part of the loan servicing process in order to maximize its profits.

Navient steered borrowers away from income-based repayment plans that would have significantly lowered the borrowers' costs and incentivized their employees to do so, reminiscent of the massive Wells Fargo fraud. It mislabeled injured military veterans' credit reports with defaults even though their federal loans were legally discharged because of their disabilities, potentially preventing those veterans from subsequently getting mortgages and other loans. They mishandled regular loan payments and hid critical information from borrowers by burying it in the fine print. And, not surprisingly, Navient is also a serial offender. According to the Times, in 2014, the DOJ and the FDIC "fined Navient for illegally overcharging military members. The company, officials found, flouted the Servicemembers Civil Relief Act, a federal law that protects active duty military members, requiring lenders to reduce interest rates on any loans to 6 percent." The federal party to this suit against Navient is, of course, Elizabeth Warren's brainchild, the CFPB. According to the head of the CFPB, Richard Cordray, Navient "used shortcuts and deception to illegally cheat struggling borrowers out of their rights to lower payments. These unlawful practices have cost student loan borrowers across the country both heartache and money." It is this type of agreesive action against the serial offenders in the financial industry that has the GOP and its Wall Street allies up in arms and has apparently made Cordray and the CFPB a target for elimination by the Trump administration.

Our next stop is another serial offender, JPMorgan Chase (JPM). The financial behemoth settled a $55 million suit that alleged it essentially red-lined Hispanic and African Americans in its mortgage business. This is a result of an investigation that focused on racial bias in the setting of rates on mortgage and auto loans by the financial industry. A similar suit against another serial offender, Wells Fargo, was settled in 2012 for $175 million. On average a black or Hispanic borrower paid over $1,000 more that their white counterparts for a typical mortgage in the first five years of the loan. Since JPM was not the originator of the loan, they had just enough separation from the process to settle the suit without admitting any guilt.

We have come to expect criminal behavior from all sorts of financial firms and the small fines like the one just imposed on JPM are merely the cost of doing business. But today we have new entrant, Western Union. The world's largest money transfer company agreed to pay a $565 million fine for turning a blind eye to money laundering and fraud for over a decade. The company actually admitted to "aiding and abetting wire fraud" by essentially letting known fraudsters and scammers illegally wire money and avoid federal anti-money laundering rules. According to the complaint, the company received over 500,000 complaints about fraud over the eleven year period that these violations were taking place. Western Union employees knew that many fraudulent transactions were taking place but did nothing to stop them. According to the US Attorney who brought the case, "Western Union is now paying the price for putting profits ahead of its own customers". Since Western Union's revenue for the year based on its quarterly earning is going to be somewhere around $6 billion, I'm wondering whether the company is really paying much of a price at all.

I know I sound like a broken record but until individual executives within these firms actually fear spending some real time in a real jail, this kind of blatant corporate criminality will just continue, interrupted only by paying a fine that will be considered the cost of doing business.

Two SCOTUS Cases Raise Questions And Pose Dangers

The Supreme Court has made some interesting moves over the last couple of weeks and it is hard to know whether they signal danger or not. But the default position with the Roberts' Court should always be to expect the worst.

Last week, the Court decided to hear three cases that involve the rights of workers to engage in a class action against workplace violations. Right now, employers use a class action waiver in their contracts with employees that does not allow the employees to form a group to sue for the company for workplace violations but instead forced them into individual arbitration. This effectively neuters most workplace complaints as the arbitration process is effectively rigged for the employer and the individual worker has to devote an inordinate amount of time and sometimes money to actually go to arbitration. This class action waiver and forced arbitration is what has allowed rampant wage theft, such as that in the fast-food business, to go on for years. The CFPB has tried to eliminate forced arbitration in the financial services industry, a technique that allowed the massive fraud at Wells Fargo to go on for than a decade. These cases involve a new rule by the NLRB that would allow workers to band together for "mutual aid and protection" in a legal action against an employer. Is it possible that one conservative member of the court is troubled by the abuse of workers? I would find that hard to believe. If anything, the Roberts Court believes in a free hand for business to essentially do what it wants. I sense danger with this case and this case alone would call for Democrats to delay Trump's SCOTUS nominee as long as possible, at least until this session ends.

Earlier this month, the Court put a temporary stay a lower court's ruling that North Carolina redraw its illegally racially gerrymandered state's legislative districts and have a special election in 2017. According to various court rulings, every election since 2012 in North Carolina has been conducted under an illegal gerrymander of one kind or another. The special election was a way of rectifying this situation before the 2018 election. Naturally, North Carolina appealed the lower court's ruling claiming the special election was "an extraordinary incursion on state sovereignty". Yes, nothing should be able to get in the way of keeping minority voters from exercising the franchise. The interesting thing about this ruling is that the traditional 4-4 split in the Court would have let the lower court's ruling stand and the special elections would have gone forward. That means that at least one member of the traditional liberal bloc had to vote to put a stay on the lower court's ruling. The full Court will still hear the case but it is apparent that the special election may not be held because of the time constraints caused by this delay. The question is why a liberal member of the court would put a stay on this order and allow North Carolinian's to be effectively disenfranchised for another year. Is it possible that a conservative member of the Court is having second thoughts about gutting the Voting Rights Act? Again, I would find that hard to believe. But, if that is true, then a liberal vote to hear the full case would be what the Court would need to reverse course. On the other hand, if the liberal bloc on the Court has given up on fighting radical and illegal gerrymandering, then we are truly doomed.


Trump Nominees Ethical Issues And Ignorance Are Actually A Danger For Trump

Most new administrations run into one or two problems with their cabinet nominees. But the number of ethical lapses by such a range of nominees in trump's cabinet is probably "unpresidented", to use Trump's word. In addition, to their ethical lapses, their ignorance about the very function and details of the agency they will be tasked with overseeing is staggering. I know that the Republican Congress will rubber-stamp most, if not all, of these nominees but the pathetic level of vetting by the Trump transition team does not bode well for any detailed analysis of the challenges that will confront the administration and the country.

Tom Price's troubles of mingling his stock portfolio with legislation in front of his committee continues to grow. Initially, it was revealed that Price had transacted in the stocks of up to 40 companies with business that would be effected by legislation in front of the House Budget Committee that he chaired. Then a specific instance of seeming quid-pro-quo was uncovered showing that Price had introduced legislation that would benefit a medical device company just days after purchasing that company's stock. In addition, Price lobbied for a delay in a regulatory ruling that would have benefited that very same medical device company and two days later received a donation from that company's PAC. Both Price and the Trump transition have claimed that these stock purchases were "broker-directed", meaning that Price potentially did not know they were occurring. Yesterday, however, Price contradicted that position by admitting that at least one purchase of stock in an Australian biotech firm was based on a tip from fellow Representative Chris Collins. The firm offered a private placement at a discounted price to American investors. Price was one of those investors. Collins had been touting the firm, is currently on the firm's board, and was recently overheard saying that he had made lots of Congressmen millionaires with his investment advice. When confronted by Senator Patty Murray over this issue, Price tried to argue semantics that he did not receive a "stock tip" but was eventually forced to admit that he did, in fact, direct the purchase of these shares, a direct contradiction of his claim that all his transactions were broker-directed.

Mick Mulvaney, Trump's choice to become budget director, has a more traditional problem for potential nominees, not paying Social Security and state taxes for a nanny or housekeeper. Mulvaney admitted, "I have come to learn during the confirmation review process that I failed to pay FICA and federal and state unemployment taxes on a household employee for the years 2000-2004." At least Mulvaney went through the efforts to discover this, admit to it, and pay the back taxes before his confirmation hearing. But an ethical lapse like this has sunk numerous nominees in the past. For today's GOP, it is probably considered a badge of honor.

Wilbur Ross had a similar issue to Mulvaney. He "discovered" that one of the "dozen or so" household workers he had employed over the years was actually an undocumented immigrant. Apparently that worker was still employed by Ross because Ross claims that he fired the worker. As opposed to Mulvaney, Ross had paid Social Security and state taxes on this employee. It is unclear whose Social Security account actually received the benefit of Ross's payment. Again, an ethical lapse like this has derailed other nominees in the past and is even more egregious when you consider Trump's position on illegal immigrants. To be snarky, I'm surprised Ross wasn't murdered by this employee but perhaps he/she was running a drug operation out of Ross's home. Also troubling is the fact that Ross seems to think that this issue goes away simply because he fired the employee. That is certainly the attitude of most business executives but it is not how the world works for most of us. I would also add that the best way to cut down on illegal immigration is to crack down on employers who use them. The threat of real punishment for hiring an undocumented worker will require employers to be more vigilant about who works for them. I'm not saying I support that idea but it is clearly a much more effective tool than building a wall.

The already embattled Steve Mnuchin who ran OneWest, the foreclosure machine, is now reported to have failed to report nearly $100 million in properties and investments as well as his involvement in a Cayman Islands investment fund of which Mnuchin is a director. At OneWest, Mnuchin oversaw a massive fraud that forced foreclosures with forged and back-dated documents and engaged in illegal bidding on their own foreclosed properties in order to pick them up on the cheap. In California, virtually every single OneWest foreclosure was based on illegally back-dated documents. Mnuchin also used his private foundation to "astroturf" support for OneWest's sale to CIT, a transaction that put an $11 million payout in Mnuchin's pocket. The latest revelation is Mnuchin's failure to disclose over $95 million in real estate assets as well as the fact that he had moved his investment vehicles to the offshore firm in the Cayman Islands, a move that makes it easier to avoid paying US taxes. In today's hearing, Mnuchin defended himself, saying, "I have been maligned as taking advantage of others’ hardships in order to earn a buck. Nothing could be further from the truth." Sadly, the evidence make lie of that statement. With regard to his "omission" to disclose $100 million of assets, Mnuchin said, "I assure you that these forms were very complicated." I'm pretty sure that's what mortgage holders think when they have to read the fine print on the documents they sign. For those who were foreclosed, the excuse that the forms were complicated didn't really fly. And this guy is going to be Treasury Secretary.

Scott Pruitt has filed dozens of lawsuits against the EPA as Attorney General of Oklahoma. When asked whether he would recuse himself from decisions on the suits that are still outstanding when he becomes head of the EPA, Pruitt responded that he would only do so if the agency's ethics lawyers instructed him to do so. Said Pruitt, "If directed to do so, I will do so." As Senator Markey pointed out, by not recusing himself, Pruitt would become the plaintiff, the defendant, and the judge in these cases. But that seems to be an OK outcome for the GOP these days.

The above lists only the ethical lapses of Trump's nominees. But many of the nominees have shown incredible ignorance about the departments that they will be running, none more so than voucher advocate Betsy DeVos, in line for the Education Secretary. Senator Franken seemed to absolutely flummox DeVos when he asked whether the focus of education should be growth or proficiency. This is a critical question in how we evaluate schools and teachers. Should we focus on whether test scores are improving (growth) even if students are still failing standardized desks (proficiency)? She did not answer because she did not even understand the question. When asked by Senator Hassan about protecting the educational opportunities of the disabled through the IDEA, DeVos responded that the individual decisions should be left to the states. Hassan had to inform DeVos, who had clearly no idea what IDEA was, that it was a federal civil rights statute that required public schools to provide free and appropriate education to those with disabilities. The states have no say in the enforcement of a federal civil rights law. DeVos continued to amaze when she responded to a question from Senator Murphy that guns might be needed in schools, citing a school in Wyoming That had guns in order to protect the school from attacks by grizzly bears. Yes, you read that correctly. Senator Warren asked about how DeVos might crack down on fraud and abuse in the for-profit education business as evidenced by Trump University. DeVos said she would work with individuals within the Education Department on the matter. Warren pointed out that there are already regulations on the books and that DeVos would simply have to enforce them. Devos's answer was that she would review those regulations. As Warren noted, "Swindlers and crooks are out there doing back flips when they hear an answer like this." Lastly, Senator Kaine asked a fairly straightforward question as to whether all institutions, whether public, charter, or voucher-assisted private schools, should be held to the same standards of accountability. Apparently Devos must have though this was a trick question because she again and again repeated that the schools should merely be accountable but would not agree to equally accountable. That would seem like a no-brainer if someone believed that voucher-assisted private schools were actually going to be better for students than public schools. But, based on the success of DeVos's involvement with Detroit's school system, it appears the voucher system is basically a way for private companies to steal public money and provide very little education at all. In that vein, her answer seemed totally appropriate. Did anyone brief this train-wreck before the hearings?

Rick Perry, who, when he could remember, actually advocated for the elimination of the Energy Department apparently never really understood what the department really did. Although he did have some inkling it was responsible for our nuclear arsenal, he seemed to believe it was simply a PR job for US oil and gas interests. He was apparently unaware that two-thirds of the department's budget goes toward the safety and upkeep of our nuclear stockpile, both military and civilian. According to a Trump transition official, "If you asked him on that first day he said yes, he would have said, ‘I want to be an advocate for energy. If you asked him now, he’d say, ‘I’m serious about the challenges facing the nuclear complex.’ It’s been a learning curve." I know this is a low bar to cross for Trump nominees but at least give Perry credit for actually getting briefed and learning about what the agency does. It was apparently more than DeVos could do. In today's hearing Perry said, "In fact, after being briefed on so many of the vital functions of the Department of Energy, I regret recommending its elimination".

I have only focused on the ethical and ignorance issues of Trump's nominees here and have not touched on some of their truly awful policy positions and constant waffling and hedging as indicated by their positions on climate change, etc. Nor have we even mentioned the biggest ethical disaster of them all, Donald Trump. In just a little under 24 hours, Trump will be in violation of the Emoluments Clause of the Constitution. Hopefully, the first lawsuits can be filed by Friday evening.

Most, if not all, of these nominees cannot be stopped by Democrats alone. Of all of them, I think the three most vulnerable are Tillerson, DeVos, and Price. There are enough Republican Russia hawks to derail Tillerson. DeVos's incompetence and ignorance is so great even some in the GOP may not be able to vote for her. Price's plan for Obamacare repeal is not popular with Trump or Senate Republicans and his stock trading problems are quickly ballooning into a real scandal.

For Democrats, there is a sliver of hope in some of these nominees. For a small minority, there may be a "come to Jesus" moment, a la Perry, when they actually understand that all the agencies of the federal government have important functions for our country and are not just make-work jobs for unions. There won't be many of those. On the flip side, the ethical issues hanging over all these candidates will make it slightly more difficult for them to do their job, which many of them interpret as rendering their agency as ineffective as possible. In addition, the total ignorance and lack of understanding that these nominees are bringing to their agencies will make it far easier for the technocrats and career officers in these agencies to constantly thwart some of their most egregious plans. The same goes for all of Trump's nominees from business who have always been able to run things by fiat and can fire or sideline people with competing views. That just doesn't work in a government agency. And when these nominees fail, by extension so will Trump.

Wednesday, January 18, 2017

Rolls Royce Takes Us On A World Tour Of Corporate Criminality

Today's edition of corporate crime literally takes us around the world. The corporate criminal paying the fine today and escaping any real prosecution is Rolls Royce. The company has agreed to an over $800 million fine for violating the anti-bribery laws of the US, the UK, and Brazil. $600 million of that will go to the UK, $170 million to the US, and the remaining $25 million to Brazil. The fines were imposed after it was determined that Rolls Royce bribed officials in at least six countries including Angola, Azerbaijan, Iraq, and Kazakhstan. In Azerbaijan, Rolls Royce paid nearly $8 million in bribes in order to obtain contracts with the state-run oil company. Those contracts resulted in at least $50 million in profit for the company, making the bribes well worth the money. And these were no one-offs. Rolls Royce engaged in this activity for more than a decade and "regularly bribed foreign officials and others in order to secure work".

The real culprit of this whole bribery scandal is a company called Unaoil. The firm basically was a cutout for major companies like Rolls Royce to bribe local governments without getting their hands dirty. According to the UK's Serious Fraud Office, it is doubtful "that Unaoil conducts any lawful business" other than bribing governments on behalf of other corporations.  Unaoil conducted "business" in more than a dozen countries, most of which are incredibly corrupt or even under sanctions. The map below from the Huffington Post article shows the countries where Unaoil operates.


There are plenty of other firms besides Rolls Royce that have done business with Unaoil and some of them are huge multinational giants. Samsung, whose president has just been arrested for bribing the now-impeached South Korean President Park Geun-ye, did business with Unaoil, as did the US companies KBR and Honeywell. Unaoil's banking needs were supplied by Citigroup and HSBC who must have been aware of the payments to the regimes where the bribes took place. All of these firms and other smaller outfits that did business with Unaoil are assumed to be currently under investigation. FMC Technologies, Core Laboratories, and KBR have already confirmed that they are cooperating with the investigation.

The use of Unaoil as a cutout to offer bribes to obtain business is similar in so many ways to other strategies that companies use to avoid any real responsibility for breaking the law and abusing workers. It is really no different from companies in the fast-food business that use franchisees that engage in massive wage theft to drive profits for the company without being held responsible for breaking employment law. It is no different than companies like Uber and so many others who claim their "employees" are merely contractors in order to avoid being constrained by existing labor laws. It is not unlike the mob bosses who run their profits through front companies so they can maintain separation from the actual crimes they order.

At least in this instance, Rolls Royce was required to admit to its illegal actions and has forced at least seventeen people within the firm who were associated with the bribery scandal to leave the firm. At least that is something. Here in the US, in a totally belated action, the Justice Department announced guilty pleas from three traders involved in the massive manipulation of foreign exchange prices. That was followed by guilty pleas from six executives involved in the Volkswagen emissions scandal. In addition, both Volkswagen and Takata, the maker of knowingly defective air-bags, were forced to plead guilty for their actions. All of this came in the last month of the Obama administration and there is no chance that this kind of aggressive prosecution of individual executives for corporate illegality will continue with the new Trump administration. With Wall Street executives off at least the legal hook for the massive fraud they committed that led to the financial crisis, this really is much too little, much too late. The only positive thing to say is that at least it shows it is possible to hold individuals to account for corporate criminality. It is only the fear of real criminal punishment for individuals within a firm that will restrain corporate corruption.

Analysis Of Theresa May's 12 Point Plan For Brexit

Theresa May finally outlined her plans for Brexit in a speech the other day and it is clear that she is starting negotiations with a stance of a clear break from the European Union. May outlined 12 points in her negotiating strategy:

1) We will provide certainty wherever we can.

That may be true but this statement is altogether meaningless. Brexit is a negotiation and there will be no certainty until the deal is actually signed, sealed, and delivered. May clearly indicated that she will not be providing updates on the state of the negotiations but I imagine there will still be plenty of leaks that will give an indication of how they are proceeding.

2) Leaving the European Union will mean that our laws will be made in Westminster, Edinburgh, Cardiff and Belfast.

Indeed, that is true. But the reality is that EU law has only effected a relatively small percentage of UK law. The real impact on Britain comes from EU regulation which does not require a UK law for enforcement. As noted below, workers may find that some of those EU laws and regulations provided quite a benefit that may no longer exist when UK lawmakers have free reign.

3) A stronger Britain demands that we strengthen the precious union between the four nations of the United Kingdom.

Well said. But Brexit does exactly the opposite. Already, Sinn Fein has forced early elections in Northern Ireland and Brexit is likely to become a major issue during that campaign. In addition, an upcoming ruling by the Supreme Court could require May to get the consent of the Northern Irish Assembly before invoking Article 50 to begin negotiations. According to the Times article, "There is little sign that Northern Ireland has been a significant concern in London as the British government works out its strategy for Brexit." In Scotland, Nicola Sturgeon reacted to May's speech by saying that a new referendum on Scottish independence was now ""all but inevitable". That puts her in direct opposition to May, who said in her speech, "We will put the preservation of our precious union at the heart of everything we do", basically indicating she will do everything in her power to prevent that referendum. So, it is hard to see how this hard Brexit will do anything but weaken the "precious union".

4) We will deliver a practical solution that allows the maintenance of the Common Travel Area with the Republic of Ireland.

Here May is promising to have no hard border between Ireland and Northern Ireland. This would allow for the free flow of goods and people between the two countries. There are two problems with this promise. First, the free flow of people would certainly mean that illegal immigrants would have a pretty clear path of entry into the UK. Secondly, the very act of leaving the EU customs union of which Ireland is a part would automatically mean a return of a hard border between the two Irelands. Any free flow of goods into Ireland from the North would be a violation of that union. Similarly, any exports from Ireland to Northern Ireland would also violate EU rules if hey wer not subject to the same tariffs that the UK imposes on other EU members when Brexit is finalized. As Sinn Fein leaders have already pointed out, "Exiting the single European market, exiting the customs union, creates a hard border on the island of Ireland...Warm words, soft words from Theresa May mean nothing."

5) Brexit must mean control of the number of people who come to Britain from Europe.

This is clearly the heart of the matter. May has interpreted the Brexit vote as primarily a vote against immigration. The choice for the UK will be to be able to control immigration or be part of a single market. The EU will force May to choose between one or the other. There will be no having the cake and eating it too.

6) We want to guarantee rights of EU citizens living in Britain & rights of British nationals in other member states, as early as we can.

This has already become a touchstone issue as many EU nationals living in the UK would like May to guarantee their rights before negotiations begin, rather than essentially being used as a bargaining chip. In addition, according to May, there are some EU leaders who are not prepared to offer that reciprocal guarantee, saying, "I have told other EU leaders that we could give people the certainty they want straight away, and reach such a deal now.  Many of them favour such an agreement - one or two others do not - but I want everyone to know that it remains an important priority for Britain - and for many other member states - to resolve this challenge as soon as possible. Because it is the right and fair thing to do." It may be right and fair but that won't stop May from not doing it and using EU nationals living in Britain as a bargaining chip.

7) Not only will the government protect the rights of workers set out in European legislation, we will build on them.

This statement, in a way, contradicts the first statement. Apparently, EU laws are what protects worker's rights in Britain, not English law. The 48 hour work week, paid vacations, and maternity leave are all EU protections. So, perhaps for many workers, those pesky EU laws are actually better than UK laws. Similarly, this statement directly stands against the prior statement which said that the rights of EU nationals living in the UK were subject to negotiation, rather than government protection. The UK could simply pass new legislation today that protected the rights of all workers, UK and non-UK, with the full knowledge that those laws would be in place when Brexit is finalized.

8) We will pursue a bold and ambitious Free Trade Agreement with the European Union.

May can pursue this all she wants, but she will not have access to the single market and at the same time be able to restrict immigration. See statement 5. Even getting beyond the immigration issue, there will still be enormous hurdles for May to accomplish this goal. First, individual members of the EU can not negotiate separate trade deals with a non-EU member. In addition, the tariffs negotiated for that non-member must be applied equally by all members of the union. Also, this would still not allow for free access of goods across EU borders. British goods would be stopped at each border for a "point of origin" check to ensure that the merchandise did not include goods that had been imported into Britain from another non-EU member and then exported to Europe, thereby avoiding the higher external tariff. Lastly, the head of the European council's legal service said that this kind of agreement that May is proposing would be a violation of the Global Agreement on Tarrifs And Trade and would never pass muster with the EU or the World Trade Organization.

9) It is time for Britain to get out into the world and rediscover its role as a great, global, trading nation.

This is May's big shot across the bow of the EU. She is hoping to persuade the EU to offer better terms to prevent the UK from signing separate trade deals with the US, China, Brazil, etc. Certainly, Donald Trump has made no secret about his willingness to quickly sign a trade deal with the UK. But it is far from clear whether these deals will offset the losses from losing access to the single market as well as helping British exports. The loss of access to Europe for financial firms could be enormous blow to the UK economy. A PriceWaterhouseCooper analysis of Brexit's effect on the financial services estimated that the sector would shrink between 5%-10%. Already, firms are moving or preparing to move staff to the continent.  The financial sector accounts for over 3% of jobs and nearly 8% of gross value added to the British economy. European ministers have much to gain by forcing UK banks to lose access to the single market and move their base of operations into the EU and will probably force that issue when Article 50 is invoked.

10) We will welcome agreement to continue to collaborate with our European partners on major science, research and technology initiatives.

Again, May will welcome that agreement but it's not clear it is likely to happen. Already, EU workers on joint projects are pulling up stakes and moving back to the continent, precisely because May can not guarantee their rights to work in the UK and fear that funding for these projects will dry up. It is also doubtful that EU leaders will want to share certain technology research with a non-EU member.

11) We will continue to work closely with our European allies in foreign and defence policy even as we leave the EU itself.

Hopefully, that cooperation will continue and there is no reason to think that it won't. But there will probably be a little less sharing of information between EU defence agencies and the UK.

12) We believe a phased process of implementation will be in the interests of Britain, the EU institutions and member states.

This is probably May's most realistic statement as a "cold turkey" break from the EU would probably be catastrophic. The real question is how quickly this phased in approach can be implemented, what the agreement is, and whether the uncertainty that would reign in the interim would create huge damage to the UK economy.

May also made the point of saying that Parliament would be able to have an up-or-down vote on the final agreement. She clearly ruled out a second referendum on the final deal but was also unclear on what  Britain's status would be if Parliament actually voted down the final agreement.

Finally, Europeans reacted angrily to Chancellor of the Exchequer Philip Hammond's veiled threat that Britain could become a tax haven if it did not get a good Brexit deal. Hammond said, "most of us who had voted remain would like the UK to remain a recognisably European-style economy with European-style taxation systems, European-style regulation systems etc. I personally hope we will be able to remain in the mainstream of European economic and social thinking. But if we are forced to be something different, then we will have to become something different". German CDU deputy Norbert Röttgen responded, "The two major economic weaknesses in Great Britain are the considerable trade deficit and the large budget deficit. Hammond's tax cuts 'threats' are therefore threats of self-harm and as such an expression of British helplessness". Ouch. On the other hand, that pretty much sums up how Germany feels about everyone, as Southern Europe well knows. Others in Europe saw Hammond's statement as essentially "blackmail" and felt it did nothing but harm the negotiations to come.

But Rottgen's comments have resonance. Despite May's 12 point plan and her bluster, the UK enters these negotiations as by far the weaker party. Threatening to become a tax have is hardly a reflection of a powerful, dynamic economy. While May could believe that she can mitigate the damage to the UK economy with separate trade deals, those deals are going to take time to negotiate and sign. As her own ambassador the EU, who resigned in protest, has clearly stated, the deal to unwind from the EU could take a decade. New trade deals with other countries could take years to negotiate. But the UK is working in a tight two year window to exit the EU. it is unclear just how capable the government is at being able to negotiate so many trade simultaneously. It is clearly a much more difficult task than May's blithe statements imply. Similarly, the upcoming European elections in the Netherlands, France, and Germany, all of which will be a referendum on the EU, will provide further difficulties for the negotiations. For the current governments in all three countries that support the continued Union, a punitive Brexit deal will inhibit other countries from potentially exiting. And, even if the Anti-EU parties win power in these countries, it is still unclear how they would treat Britain going forward. The incentives for those countries to punish Britain would still be there even as they worked to dissolve the EU from within.

Finally, May has to await the outcome of the Supreme Court ruling on whether Parliament is required to vote in order to invoke Article 50. If the Supreme Court upholds the ruling from the lower court that Parliament does indeed need to do that, the whole approach to how the government negotiates Brexit will be back up for discussion.

Meanwhile, the damage to the UK economy is already beginning. Much of the immediate impact of Brexit has been offset by the dramatic fall in the pound. But that can only last for so long. The latest inflation numbers for December jumped 1.6% and the Bank of England expects inflation to rise to nearly 3% this year, eating into workers incomes even as the price of imported goods continues to rise. Already, UK consumers are starting to maintain their current lifestyles by drawing down savings and increasing their rate of borrowing. That, too, can only last so long. It certainly won't last until the UK and the EU finalize the Brexit agreement.




Tuesday, January 17, 2017

Three Trump Nominees May Be In Trouble

It looks like three Trump nominees for cabinet positions may be in trouble - Andy Puzder, Betsy DeVos, and Tom Price. Puzder is already reported to be looking to back out and information about Price and DeVos seem to comes out daily that compromises those candidates more and more.

Already, Monica Crowley has withdrawn from consideration for a communications position at the National Security Council after it was revealed that large parts of her Ph.D. thesis was plagiarized as was portions of her 2012 book.

Puzder is reportedly not happy with the financial disclosures he will have to make and the amount of heat he is getting now that some of his positions toward employees are being exposed. He was already carrying baggage from accusations of domestic abuse documented in at least three instances. In addition, his companies have settled lawsuits for millions of dollars in cases where employees were cheated out of earnings. According to a Republican source, "He may be bailing. He is not into the pounding he is taking, and the paperwork." Other sources say Trump is pushing Puzder to stay the course, saying, "Trump loves it and wants the fight." One serial domestic abuser to another...

Meanwhile, Betsy DeVos is already in hot water for blatantly violating campaign finance laws while leading a PAC supporting school vouchers. After getting a ruling from the elections commission in Ohio that the PAC could only contribute $10,000, DeVos ignored that ruling and spent over $850,000. When she was caught for violating the campaign finance law, she initially refused to pay the over $5 million fine imposed and then eventually dissolved the PAC without paying the fine. Now it has come to light that DeVos gave monetary support to a group, the Acton Institute, that encourages child labor. Devos also served on the organization's board for a decade. The Institute is "dedicated to the study of free-market economics informed by religious faith and moral absolutes." Yes, absolutism will fit in nicely in a Trump administration. A recent post by the Institute originally entitled "Bring Back Child Labor: Work is a Gift Our Kids Can Handle", declared, "In our policy and governing institutions, what if we put power back in the hands of parents and kids, dismantling the range of excessive legal restrictions, minimum wage fixings, and regulations that lead our children to work less and work later?…Let us not just teach our children to play hard and study well, shuffling them through a long line of hobbies and electives and educational activities. A long day’s work and a load of sweat have plenty to teach as well." Nice. That will certainly take care of the problems in public education - send them to work instead.

Lastly, Tom Price seems to have had difficulty in not mixing his legislative efforts with the stock holdings in his portfolio. It had already been disclosed that he had traded in up to forty stocks of companies who had legislation potentially effecting them under consideration by the House Budge Committee which Price chaired. Now it has come out that Price purchased shares in a medical device manufacturer just days before introducing legislation that directly benefited the company. Later, Price sent a letter to the agency responsible for a ruling that would effect that same device manufacturer. In the letter, Price asked for a delay which would have benefitted the company. Two days later, he received a campaign donation from the device manufacturer's PAC. It seems pretty clear that the purchase of shares directly before introducing legislation is a violation of the STOCK Act that prohibits Congress and the executive branch from essentially insider trading. And the timing of the campaign donation certainly looks like "pay to play". Price has vowed to divest his stock holds if he is confirmed as HHS Secretary, but that is simply normal procedure for all cabinet officers and the executive branch (until Trump came along). And that divestiture does not offset the fact that Price quite probably broke the law by violating the STOCK Act.

I'm sure Trump and the GOP will still try to ram these nominees through. But it does show that constant vigilance and continual pressure on the GOP will reap some rewards.

GOP-Created "Uncertainty" Will Kill Obamacare Even Without Repeal

Remember those days back during Obama's first term when Republicans blamed Obama for creating "uncertainty" that was destroying jobs and preventing businesses from hiring new workers. Eric Cantor blamed "job-destroying regulations” for creating “a cloud of uncertainty hanging over small and large employers." Mitt Romney claimed Obama's policies "have done the one thing employers can’t deal with ... created more uncertainty." Those were the days. Now, of course, Republicans are proposing to take away health insurance from over 30 million Americans, creating a tsunami of uncertainty for millions of Americans. In addition, Republicans seem intent on repealing some parts of Obamacare without any real plan to replace them, causing enormous uncertainty for the health insurance market. But there's no talk of the negative effects of real "uncertainty" now.

J.B. Silvers, a former health insurance executive, is out today with another piece, this time on the NY Times op-ed page, describing how many millions of Americans will lose health insurance under any repeal and delay plan while also describing the already debilitating effects of the uncertainty about the future of Obamacare on the health insurance markets. According to Silvers, unless Republicans can come up with a real replacement plan, "[b]y April, when filings from insurance company plans and premiums for 2018 are due, there will be a sizable exit — of insurers running away from the greatly increased and unpredictable risk and of individuals not able to afford insurance without the subsidies." In other words, Obamacare will effectively be destroyed for 2018 and beyond by April, even if Republicans back off their insanely unpopular plan to repeal and replace or repeal and delay. Since Republicans can only ram through changes to the funding of Obamacare under budget reconciliation, it seems inconceivable that they will be able to craft a replacement plan that can pass both the House and the Senate by April, nearly two short months away.

All this leads me to my biggest fear - that Republicans will not repeal Obamacare but won't do it in time to prevent a mass exodus from the exchanges by health insurers. That really would create a death spiral in 2018 and that the GOP would then capitalize on the collapse of Obamacare just in time for the 2018 elections. It seems preposterous that they could get away with that, but, after this year, we should never underestimate the Republican propaganda machine.

Meanwhile, the Congressional Budget Office (CBO) has come out with its independent analysis of the costs of repealing Obamacare and the numbers are staggering. According to the CBO, "The number of people who are uninsured would increase by 18 million in the first new plan year following enactment of the bill. Later, after the elimination of the ACA’s expansion of Medicaid eligibility and of subsidies for insurance purchased through the ACA marketplaces, that number would increase to 27 million, and then to 32 million in 2026. Premiums in the nongroup market (for individual policies purchased through the marketplaces or directly from insurers) would increase by 20 percent to 25 percent—relative to projections under current law—in the first new plan year following enactment. The increase would reach about 50 percent in the year following the elimination of the Medicaid expansion and the marketplace subsidies, and premiums would about double by 2026."

Just take a moment to let those numbers sink in. Up to 32 million Americans will lose their health insurance and premiums in the individual market will double. Have the Republicans ever given a real rationale for why they would like to do this and think this is a good outcome? Of course not. Because the real answer is they just want to give massive tax cuts to the rich and couldn't give a damn about the rest of America.

Monday, January 16, 2017

Astronomy Adventure - Venus


Photo of Venus. You can clearly see that that it is in a phase where we see only about 60% of the planet covered in sunlight.

Telescope: Starblast 4.5
Magnification: ~150X with variable polarizing filter
Camera: iPhone 6 with Night Cap Pro
Post-Processing: Gimp using Curves

Moody's Is Latest Wall Street Criminal To Pay Fine And Avoid Prosecution

The first rule of the kleptocracy we currently live in is clearly "heads I win, tails you lose".  In another classic Friday announcement before a long holiday weekend, Moody's announced that it has settled suits brought by federal and state governments over mortgage ratings leading up to the financial crisis. Moody's agreed to pay $864 million dollars in penalties with the fine pretty much split 50/50 between the federal government and the 21 states plus Washington, D.C. who were parties to the suit. This follows Standard & Poors' settlement of a similar suit in 2015 for a little over $1.35 million.

My Connecticut Attorney General, George Jepsen, led the negotiations to end the lawsuit originally filed in 2010 and said Moody's bogus ratings on mortgage backed securities (MBS) were "directly influenced by the demands of the powerful investment banking clients who issued the securities and paid Moody's to rate them". The US Attorney General's office added, "Moody's failed to adhere to its own credit-rating standards and fell short on its pledge of transparency in the run-up to the Great Recession." Moody's was happy to collect outrageous fees in order to rate MBS that were clearly inferior as highly as the issuer wanted. Some of those MBS were privately labeled as "craptacular" and "had the distinct aroma of default" by the issuers themselves but still received the coveted AAA rating from Moody's and S&P. The issuers were only to happy to bribe the rating agencies with enormous fees and the agencies were only too happy to accept the bribe. As usual, no individual from Moody's or S&P has been charged with a crime.

Moody's actively purged those employees and/or executives who questioned the ratings being given and felt that the company was putting profits before trustworthy ratings the agency was supposedly committed to providing. According to an executive who worked at the firm for a decade before being let go, "The story at Moody's doesn't start in 2007; it starts in 2000. This was a systematic and aggressive strategy to replace a culture that was very conservative, an accuracy-and-quality oriented (culture), a getting-the-rating-right kind of culture, with a culture that was supposed to be 'business-friendly,' but was consistently less likely to assign a rating that was tougher than our competitors." It's important to note, according to this executive, the year things started going south at Moody's - 2000. Coincidentally, that was the year Moody's was spun off from Dun & Bradstreet and went public. Executives received stock options that could be worth millions based on the stock's performance. One former executive stated, "It didn't force you into a corrupt decision, but none of us thought we were going to make money working there, and suddenly you look at a statement online and it's (worth) hundreds and hundreds of thousands (of dollars). And it's beyond your wildest dreams working there that you could make that kind of money." It may not have forced a corrupt decision, but it certainly provided an incentive. And the company provided added "incentive" by telling managers that they would be fired if Moody's lost a single deal.

And don't think that the fraudulent activity by the ratings agencies was only restricted to MBS securities. Even in the 1990s, an analyst of exotic assets at Moody's felt pressure to provide positive ratings despite his concerns. He says, "In my days, I was pressured to do nothing, to not do my job. I saw in two instances -- two deals and a rental car deal -- manipulation of the rating process to the detriment of investors". My tangential experience with a ratings agency involved a company that was trying to improve its own rating in order to bring down borrowing costs. I certainly got the impression from talking to people near, but not directly involved, in those negotiations, that the fee for the ratings agency's investigation into the company's financials would have some influence on the rating received. I have no direct knowledge that any of that occurred nor do I know whether the company or the rating agency was driving that impression. But there were people in the firm who definitely felt that way and this was probably a decade before the financial crisis. Like everything on Wall Street, it was pay to play. And when you get caught, you pay some more and continue with business as usual. It is all merely the cost of doing business.

Trump Determined To Break Up NATO And EU, Create A Nationalist Right Alliance

Donald Trump's latest diatribe against the EU and NATO must have put a shudder through European leaders, especially those in the exposed Baltic states. In an interview with the German paper Bild, Trump said that NATO was "obsolete, first because it was designed many, many years ago. Secondly, countries aren’t paying what they should." He declared that only five NATO members are actually paying their fair share. He added that the EU is "is basically a vehicle for Germany" and the Britain was right to leave the Union, saying it would "end up being a great thing" and adding "If you ask me, more countries will leave." He went on to attack Angela Merkel for her immigration policies and threatened to impose tariffs on BMW cars unless they move a planned plant from Mexico to the US, probably a violation of WTO rules. Finally, he floated the idea of lifting sanctions on Russia in return for some kind of nuclear arms agreement or that "something can happen that a lot of people are going to benefit.”

Of course, Trump's comments about NATO are in direct opposition to what his nominee for Secretary of Defense, James Mattis, affirmed in his confirmation hearings where he declared 100% support for NATO and its benefit to the US, saying it "facilitates European stability and as a military alliance it helps sustain our values." Needless to say, this kind of dissonance within the incoming administration makes our allies uncomfortable.  But it is also typical of the serially abusive nature of Trump. He is purposeful on making sure whoever he is dealing with feels the discomfort he willfully creates. It is also incredibly dangerous as it raises the odds of some party making an horrendous miscalculation because of the administration's contradictory positions, a miscalculation that could end up in a European war. If Russia invades the Baltics and Trump issues orders not to abide by the common defense mechanism by invoking Article 5 of the treaty, it will be interesting to see how the military, the cabinet, and Republicans in general react. It will truly be a choice between patriotism and the chain of command. Based on what we have seen from Republicans so far with regard to Trump, we should not be heartened.

Trump promised to complete a trade deal with the UK as soon as he possibly, could, claiming it would be "[g]ood for both sides." As Josh Marshall points out, this is part of the Trump/Bannon strategy to destroy both NATO and the EU. The theory on a trade deal with Britain is that it will strengthen the UK's hand in negotiations with Europe and encourage other EU countries to also leave the Union. Based on the reaction of European leaders today, it appears that Trump's comments may actually strengthen the EU.

There are three upcoming elections in Europe that will be important in determining the EU's future - the Netherlands, France, and Germany. Under Bannon's guidance. it is clear that Trump will be supporting the nationalist right in all three elections. Bannon has already expressed admiration for the NVV in Netherlands, the National Front in France, and AfD in Germany. Nigel Farage, the former leader of the UKIP, the nationalist right party in Britain, is now an important Trump advisor on European issues. And Trump's attacks on Merkel yesterday will be just the beginning of his administration's support for these parties. Marine Le Pen was visiting Trump in New York just last week.

It appears that Trump is truly looking to create a New World Order with an alliance of nationalist right powers consisting of Russia, Germany, France, Britain, and the US. This would, of course, be the end of the EU and NATO and the smaller countries in Europe would have to decide whether to go it alone or play ball with this new alliance. The real question is will Americans go along with Trump's new world. We may find out sooner than any of us care to think.