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reality is only those delusions that we have in common...

Saturday, February 18, 2017

week ending Feb 18

Fischer Admits Fed Is Clueless About What Happens Next - In a moment of rare honesty, during a conference in England, Fed Vice Chair Stanley Fischer admitted that the Fed is clueless about what happens next, blaming the Fed's lack of clarity on Trump and saying there is significant uncertainty about U.S. fiscal policy under the Trump administration."There is quite significant uncertainty about what's actually going to happen, I don’t think anyone quite knows what’s going to come out of the process which involves both the administration and Congress in the deciding of fiscal policy and a variety of other things." Fischer said in response to audience questions about the Fed's next steps. “At the moment we are going strictly according to what we see as our responsibility according to law.” Traders have echoed Fischer's confusion, with the Trump rally sputtering in on-again, off-again mode in recent weeks, demanding details about Trump's various economic policies. Following the December rate hike, Fed officials have given no indication on the timing of their next hike in response to improvements in the U.S. economy, which however have manifested mostly in the area of "soft" indicators, such as sentiment and confidence surves. In recent days, even these have started to roll over, as the Trump honeymoon slowly ends and the euphoria over the Trump victory - mostly among Republicans as the latest UMichigan consumer sentiment survey showed - begins to fade.

It's Way Too Early for the Fed to Consider a March Rate Increase - Tim Duy -- The countdown to the Federal Reserve’s next policy meeting in mid-March has begun, and so have the pleadings of some central bank officials desperately trying to suggest the meeting is “live.” Market participants remain wary -- and rightfully so -- that the Fed might pull the trigger on another interest-rate increase before June. Unless policy makers are truly ready for a preemptive hike -- and Fed Chair Janet Yellen has a chance to send that signal when she testifies before Congress this week -- they would be wise to dial back their March talk. The data are on the market’s side. The median rate forecast in the December 2016 “Summary of Economic Projections” anticipates three 25-basis-point increases this year. Fed speakers generally appear comfortable with this number. Even Yellen, often considered to be on the dovish side of the table, acknowledged that she shared this forecast. With the year less than two months old, we don’t have enough data to confirm or deny this forecast. We do have enough data to question the timing of the next hike. And that data suggest that March isn’t likely. The January employment report, while showing a solid 227,000 gain in nonfarm payrolls, also revealed an uptick in unemployment to 4.8 percent. That is actually good news. It means the Fed is underestimating the rate of labor-force growth. The economy can run hotter for longer than the Fed anticipated and justifies a continued gradual approach. In addition, the Fed was counting on further unemployment declines (to 4.5 percent by the end of the year) to place some much needed upward pressure on inflation. Core inflation, as measured by the Fed’s preferred price index, was running at just 1 percent on an annualized basis in the final three months of 2016, compared with the central bank's target of 2 percent, raising some questions about the Fed’s inflation forecast. This combination of data seems to justify the Fed’s current “go slow” approach. It doesn’t scream for a rate hike in March. And with current odds of a boost hovering below 30 percent, that’s the signal markets are receiving, too. Some Fed policy makers don’t appear to like these odds. I suspect they don’t like the markets to preordain the outcome of meetings when they themselves don’t believe they know the outcome. Officials such as San Francisco Fed President John Williams and Philadelphia Fed President Patrick Harper both have said recently that March remains open for a possible rate move.

  Pimco to Investors: Don't Underestimate the Chance of a Fed Mistake - Pacific Investment Management Co. has a warning for investors: don’t underestimate the chance of a misstep by the Federal Reserve. The U.S. central bank may tighten monetary policy faster than markets expect over the next two years in part as changes to key staff affect the sway of decisions, according to Joachim Fels, Pimco’s global economic adviser. Markets have ignored many risks as they focus on a potential boost from President Donald Trump’s policies, he said. Janet Yellen, chair of the U.S. Federal Reserve, speaks during a news conference following a Federal Open Market Committee (FOMC) meeting in Washington, D.C., U.S., on Wednesday, Dec. 14, 2016. Federal Reserve officials raised interest rates for the first time this year and forecast a steeper path for borrowing costs in 2017, saying inflation expectations have increased “considerably” and suggesting the labor market Fels joins a swathe of investors questioning the outlook for the U.S. economy as the Fed grapples with a lack of clarity from the new administration, which may get to fill a number of spots at the central bank. BlackRock Inc. Chief Executive Officer Larry Fink and economists at Goldman Sachs Group Inc. have critiqued how pro-growth policies might struggle to emerge. Traders are awaiting appearances by Fed Chair Janet Yellen before Congress this week, with data expected to show an uptick in U.S. inflation. “The Fed could actually turn hawkish and tighten policy too much,” Fels told a conference in Sydney Tuesday via a videolink from the firm’s headquarters in Newport Beach, California. “Keep in mind that the Fed is not overly expansionary at this stage. So if you think that if we get a more hawkish Fed and that we will see more rate hikes than the market is pricing in right now, it may well be that the Fed becomes contractionary at a relatively early stage.” Fed officials, who raised interest rates by 25 basis points in December, have given no indication on the timing of their next hike amid evidence of slow but continuing improvement in the U.S. economy. The Federal Open Market Committee next meets March 14-15, with fed funds futures contracts pointing to 30 percent odds policy makers will lift borrowing costs.

The Monetary Superpower: As Strong As Ever- David Beckworth -In a forthcoming paper, Chris Crowe and I argue the Fed is a monetary superpower:[A] defining feature of the US financial system is that its central bank, the Federal Reserve, has inordinate influence over global monetary conditions. Because of this influence, it shapes the growth path of global aggregate demand more than any other central bank does. This global reach of the Federal Reserve arises for three reasons. First, many emerging and some advanced economies either explicitly or implicitly peg their currency to the US dollar given its reserve currency status. Doing so, as first noted by Mundell (1963), implies these countries have delegated their monetary policy to the Federal Reserve as they have moved towards open capital markets over the past few decades. These “dollar bloc” countries, in other words, have effectively set their monetary policies on autopilot, exposed to the machinations of US monetary policy. Consequently, when the Federal Reserve adjusts its target interest rate or engages in quantitative easing, the periphery economies pegging to the dollar mostly follow suit with similar adjustments to their own monetary conditions.  [...] The second reason for the global reach of US monetary policy is that a large and growing share of global credit is denominated in dollars. That means the Federal Reserve’s influence over the dollar’s value gives it influence over the external debt burdens of many countries.  [...] The third reason for the extended reach of US monetary policy is that other  advanced- economy central banks are likely to be mindful of, and respond to, Federal Reserve policy given the large size of the dollar bloc...  These  findings imply that even  inflation- targeting central banks in advanced economies with developed financial markets are not immune from the influence of Federal Reserve policy. This has led Rey (2013, 2015) to argue that the standard macroeconomic trilemma view is incomplete.  There is more in our article, but I wanted to share this excerpt because a new working paper from Ethan Ilzetzki, Carmen Reinhart, and Kenneth Rogoff sheds light on our claim that Fed is a monetary superpower.

Fed 'Insider' Exposes The Evils Of US Monetary Policy Recklessness -- Danielle DiMartino Booth, former analyst at the Federal Reserve Bank of Dallas, has just released the book Fed Up: An Insider's Take On Why The Federal Reserve Is Bad For America. In it, Danielle describes how the Federal Reserve is controlled by 1,000 PhD economists and run by an unelected West Coast radical with no direct business experience. The Fed continues to enable Congress to grow our nation’s ballooning debt and avoid making hard choices, despite the high psychological and monetary costs. And our addiction to the "heroin" of low interest rates is pushing our economy towards yet another collapse.This reckless monetary policy pursued by the Fed has resulted in the rich elite becoming markedly richer, while savers and retirees are being absolutely gutted. All while risking a coming conflagration in the bond markets that will destroy a painful percentage of the world's financial wealth:That’s the trillion-dollar question. We didn’t used to call it that did we? We used to call it the million-dollar question. But it's now the trillion-dollar question. The punditry up there will tell you that The Fed has been in tightening mode since the taper began several years ago, but I say hooey to that. What we have today is absolute fungibility with central bank purchases on a global basis. You're talking about something upwards of $200 billion every single month. What the global bond market now revolves around, and relies upon, is the assumption that somebody somewhere will be conducting quantitative easing. As long as they do that, we're operating in a bond market that is assuming that every single bond purchased by a central bank globally has been expired permanently.

Did The Fed Just Experience A "Margin Call" Moment? - For those not familiar, the reference is attributed to a scene from the movie “Margin Call” where John Tuld (Jeremy Irons) makes the sanguinary argument for dumping its portfolio of toxic holdings immediately against contradictory arguments that it’ll be seen as panicking by others with the line, “It’s not panicking if you’re first.” That one line in fiction contains volumes as to the reality about how Wall Street, bankers, and more view the world. Which is precisely why when I read the news that Federal Reserve member, and “Regulatory Point Man” Daniel Tarullo resigned unexpectedly I just sat back in my chair thinking, “Of course he did” as that afore-mentioned scene came to mind.The reason why this sudden departure (remembering his term expires in 2022 some 5 years away) inspired thoughts as the above  that will surely be met with retorts such as “tinfoil wearing, conspiracy type” nonsense was not just the timing. But his resignation letter. To wit:“After more than eight years as a member of the Board of Governors of the Federal Reserve System, I intend to resign my position on or around April 5, 2017. It has been a great privilege to work with former Chairman Bernanke and Chair Yellen during such a challenging period for the nation’s economy and financial system.” Yep, that’s it. No alluding “health reasons.” No “need more time with family” qualifiers. Nor, anything else. Just a corporate styled, “Thanks, see Ya!” as to vacate 5 years early one of the most prestigious jobs in banking (Board of Governors) with quite possibly one, if not “the” most powerful agencies in the world, bar none. e.g., The Federal Reserve. Right, “Nothing to see here people, just move along, thanks for stopping by.”

Your potential Trump-Fed candidates - From Citi’s Will Lee following Tarullo’s resignation from the Fed on Friday. As Matt already wrote, Tarullo’s departure “adds to the two open spots on the Federal Reserve Board, which in principle is supposed to have seven members.” And as Lee suggests: With the prospective retirement of Chair Yellen and Vice-Chair Fischer in 2018, the imminent retirement of Governor Tarullo on April 5, and the existing two Board vacancies, President Trump [can] deliver to Congress a “rules-friendly” Federal Reserve Board. He can staff the Board with a majority of members (five out of seven) who would be favorably inclined toward operating monetary policy in a manner consistent with the House legislation. You can make your own mind up about the risks of Trump “stacking the board”, but here’s Lee again on the potential makeup of that stack:  Notwithstanding two other unfilled Board positions, filling the position of Vice-Chair of Supervision likely will be given higher priority because it allows the Trump Administration to further its mandate to deregulate the financial sector… A few names have surfaced as potential candidates for Fed Vice-Chair for Supervision, but there is no clear winner yet:

  • David Nason, a former member of the former Treasury Secretary Paulson’s 2008 TARP team was engaged in bank rescue efforts, and has been cited in the press as a leading candidate for vice-chair. He won high praise from Paulson for his helpful role in designing and advocating for TARP during the 2008 banking crisis.
  • John Allison, the former head of the regional bank, BB&T Corp, former head of the libertarian think tank, the Cato Institute, and gold standard advocate.
  • Tom Hoenig, current FDIC Vice-chair and former Kansas City Fed President has been mentioned as a contender, but his position on strengthening terms of bank “living wills” and for not easing capital requirements may put him at odds with Cohn.
  • Paul Atkins, former SEC commissioner has been mentioned, but he has said he would prefer to remain at his consulting firm.

The short list of potential Chairs and Board members likely include those mentioned above for Vice-Chair of supervision and the following mainstream Republican economists:

    • John Taylor of Stanford and author of the Taylor Rule has recently said “the Federal Reserve is a little behind the curve” in raising rates. Yet he has never advocated an actual policy change that would raise rates rapidly to levels prescribed by the simple Taylor Rule.
    • Kevin Warsh of Stanford, and a former M&A banker at Morgan Stanley, has focused on both cyclical economic and financial developments as determinants of monetary policy, which he has criticized as being too short-term focused and driven too much by “ride the wind” policies.
    • Glen Hubbard, Dean of Columbia Business School, advocates a “wait and see” approach to raising rates to assess the impact of whatever fiscal measures may come from the Trump Administration. He has noted that different policy reactions are needed for fiscal policies that raise aggregate demand versus policy changes that affect the supply side and productivity. He is agnostic about which will prevail.

Key Measures Show Inflation close to 2% in January --The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.3% (3.3% annualized rate) in January. The 16% trimmed-mean Consumer Price Index also rose 0.3% (3.7% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics' (BLS) monthly CPI report. Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.6% (6.8% annualized rate) in January. The CPI less food and energy rose 0.3% (3.8% annualized rate) on a seasonally adjusted basis.  Note: The Cleveland Fed released the median CPI details for January here. Motor fuel was up 149% annualized in January!

Yellen: Semiannual Monetary Policy Report to the Congress - Federal Reserve Chair Janet Yellen testimony "Semiannual Monetary Policy Report to the Congress" Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, Washington, D.C.. A few excepts:Since my appearance before this Committee last June, the economy has continued to make progress toward our dual-mandate objectives of maximum employment and price stability. In the labor market, job gains averaged 190,000 per month over the second half of 2016, and the number of jobs rose an additional 227,000 in January. Those gains bring the total increase in employment since its trough in early 2010 to nearly 16 million. In addition, the unemployment rate, which stood at 4.8 percent in January, is more than 5 percentage points lower than where it stood at its peak in 2010 and is now in line with the median of the Federal Open Market Committee (FOMC) participants' estimates of its longer-run normal level. A broader measure of labor underutilization, which includes those marginally attached to the labor force and people who are working part time but would like a full-time job, has also continued to improve over the past year. In addition, the pace of wage growth has picked up relative to its pace of a few years ago, a further indication that the job market is tightening. Importantly, improvements in the labor market in recent years have been widespread, with large declines in the unemployment rates for all major demographic groups, including African Americans and Hispanics. Even so, it is discouraging that jobless rates for those minorities remain significantly higher than the rate for the nation overall. Ongoing gains in the labor market have been accompanied by a further moderate expansion in economic activity. U.S. real gross domestic product is estimated to have risen 1.9 percent last year, the same as in 2015. Consumer spending has continued to rise at a healthy pace, supported by steady income gains, increases in the value of households' financial assets and homes, favorable levels of consumer sentiment, and low interest rates. Last year's sales of automobiles and light trucks were the highest annual total on record. In contrast, business investment was relatively soft for much of last year, though it posted some larger gains toward the end of the year in part reflecting an apparent end to the sharp declines in spending on drilling and mining structures; moreover, business sentiment has noticeably improved in the past few months. In addition, weak foreign growth and the appreciation of the dollar over the past two years have restrained manufacturing output. Meanwhile, housing construction has continued to trend up at only a modest pace in recent quarters. And, while the lean stock of homes for sale and ongoing labor market gains should provide some support to housing construction going forward, the recent increases in mortgage rates may impart some restraint.

Yellen Sets High Hurdle for Reducing Fed's Massive Bond Holdings -  Federal Reserve Chair Janet Yellen set a relatively high hurdle for shrinking the central bank’s balance sheet, leading some analysts to conclude that such a move won’t occur this year. She told the Senate Banking Committee on Tuesday that the Fed’s focus was on raising interest rates to keep the economy in balance, and not on reducing its holdings of bonds. QuickTake The Fed’s Rate Tools Rates first need to reach sufficiently high levels that the Fed feels it has some room to cut them to offset a weakening economy. Only then would the central bank begin to shrink its $4.5 trillion balance sheet, she said. “What we would like to do is to find a time when we judge that our need to provide substantial accommodation to the economy in the coming years is minimal,” she said. The central bank also wants to be sure “that the economy is on a solid course and the federal funds rate has reached levels where we have some ability to address weakness by cutting it,” she added. Ward McCarthy, chief financial economist for Jefferies LLC in New York, said that this meant no move to start shrinking the balance sheet in 2017. Policy makers expect to increase the fed funds rate to 1.4 percent by the end of 2017, according to the median of their projections released on Dec. 14. That would still leave it below the 20-year average of 2.3 percent. The timing and scope of any moves to reduce the Fed’s debt holdings could have big implications for the bond market and for the economy as a whole. That’s because, as Yellen herself noted, they would represent an effective tightening of monetary policy. “Allowing that process to take place,” Yellen said, “will show that the economy is doing well.” The policy-setting Federal Open Market Committee has said it will continue to reinvest principal payments on the maturing bonds in its portfolio until “normalization of the level of the federal funds rate is well underway.”

Yellen Sees More Rate Hikes Ahead If Economy Stays on Course -- Federal Reserve Chair Janet Yellen said more interest-rate increases will be appropriate if the U.S. economy meets the central bank’s outlook of gradually rising inflation and tightening labor markets. “At our upcoming meetings, the committee will evaluate whether employment and inflation are continuing to evolve in line with these expectations, in which case a further adjustment of the federal funds rate would likely be appropriate,” she told the Senate Banking Committee in prepared remarks Tuesday. Yellen’s semiannual report on monetary policy is her first since Donald Trump became president vowing to boost U.S. growth, which could push the Federal Open Market Committee to pick up the pace of rate hikes if such steps fan higher inflation. She reiterated that falling behind on inflation could harm to the economy and possible cut short the expansion. “Waiting too long to remove accommodation would be unwise, potentially requiring the FOMC to eventually raise rates rapidly, which could risk disrupting financial markets and pushing the economy into recession,” she added. Yellen gave no indication of the timing of the next hike in her prepared remarks. Investors see about a 34 percent chance of an increase at the next meeting of the FOMC on March 14-15, up from about 30 percent before she spoke. Treasuries fell, U.S. stocks pared losses and the dollar rose.The Fed, which has only raised rates twice since the recovery began in 2009, has penciled in three quarter-point rate increases in 2017, as the economy closes in on the central bank’s goals for maximum employment and 2 percent inflation.

Five takeaways from Janet Yellen's testimony before Congress -- Janet Yellen’s first day testifying before Congress solidified investor views that the Fed chair is more hawkish, building on sentiment from the most recent Federal Reserve meeting and pushing Treasury yields higher. Here are five takeaways from her appearance before the Senate and ahead of a second day of testimony and questions on Wednesday before the House of Representatives.

  • 1. Hawkish sentiment continues. Ms Yellen echoed some of the language from the Fed’s last policy meeting, providing further evidence that the US central bank has adopted a more hawkish outlook in recent months. But she left some wiggle room for how the policies of President Donald Trump’s administration will develop from ideas to reality. The dollar climbed off the back of her testimony, trading up 0.27 per cent at 101.230 in the New York afternoon, having sunk slightly in early morning trading.  The 5-year Treasury, sensitive to the future path of interest rates, rose 4.5bp to 1.96 per cent.
  • 2. Markets price in June rate rise and elevate expectations for March. Markets quickly began repricing expectations of future rate increases. Odds that the US central bank will tighten policy by 75bp this year — through three 25bp shifts — increased to 34 per cent, according to calculations on federal funds futures. That was up from 30 per cent immediately before her speech and as low as 24 per cent earlier this month when lacklustre wage gains were interpreted by some investors as releasing the pressure on the Fed to tighten policy imminently. The market is now fully pricing in the next rate rise in June, followed by a second in December. That compares with policymakers’ own projections last year for three 25bp increases.
  • 3. Agreement with Mr Trump’s core principles on financial regulation. Ms Yellen said she supported the core principles of Mr Trump’s recent executive order on financial regulation. The order, which outlined plans for a review of existing rules, also put forward a set of core principles that the US regulatory system should look to espouse, such as preventing taxpayer funded bailouts and making regulation “efficient, effective, and appropriately tailored”.
  • 4. Little detail on the Fed balance sheet There was little detail offered on the closely watched issue of when the Fed will start to trim its balance sheet, which is particularly important for the mortgage market due to the large holdings at the central bank. “We want to wait to start this process until the process of normalisation is well under way,” said Ms Yellen.
  • 5. Policy changes provide ‘considerable uncertainty’ - Ms Yellen avoided commenting on the specifics of the new administration’s economic plans but continued to point out that higher growth and increased productivity should be a main objective, with greater fiscal expenditure — on Mr Trump’s list of plans — being one way to achieve this. She added that policy changes are among the sources of “considerable uncertainty” for the economic outlook.

The Coming Of Depression Economics - Like it or not, this is where we have been all along and a great many people are just now catching up. No matter what Janet Yellen says about the economy, she is talking out the side of her mouth. Internally, the recovery is gone, and it is never coming back. Externally, we have sub-5% unemployment so we all should be so happy, especially with, in her view, stable prices. To their credit, many prominent economists aren’t so enthusiastic about those prospects. Among them are Larry Summers, Paul Krugman, and Brad DeLong, all who recognize that “something” just isn’t right and therefore “something” else should be done about it. Thus, the real economic debate over the coming years (unfortunately) will take shape around those two facets. Having wasted nearly a decade on purely central bank solutions that were never going to work, the real discoveries can now possibly take place. The problem is as I wrote yesterday, where in a rush to do anything and everything “different” the Trump administration might actually spoil the process. De-regulation and income tax cuts, as well as the repeal of Obamacare, are all very good things that sorely need to be addressed; but they didn’t cause this depression and thus won’t get us out of it. And you can bet that none of Summers, Krugman, or DeLong will be in favor of those options, so if they all fail to restore economic growth, as I believe they will if left in isolation, then that will severely diminish those ideas for perhaps a generation or more. That would be a fatal mistake, especially since for the first time in many generations people outside of Economics are receptive to “new” ideas (that are only new because they have been out of practice and actively discouraged for so long).

Conference Board Leading Economic Index Increased Sharply in January - The Latest Conference Board Leading Economic Index (LEI) for January increased to 125.5 from a revised 124.7 in December. The last two months were revised. The latest indicator value beat the month-over-month 0.5 percent increase forecast by Investing.com. The Conference Board LEI for the U.S. increased in January, driven mainly by positive contributions from the yield spread, building permits and average weekly initial claims for unemployment insurance (inverted). In the six-month period ending January 2017, the leading economic index increased 1.6 percent (about a 3.3 percent annual rate), much faster than the growth of 0.9 percent (about a 1.8 percent annual rate) during the previous six months. In addition, the strengths among the leading indicators have become more widespread. [Full notes in PDF] Here is a log-scale chart of the LEI series with documented recessions as identified by the NBER. The use of a log scale gives us a better sense of the relative sizes of peaks and troughs than a more conventional linear scale.

"It Was A Deer In Headlights Moment": Japan Dumps Most US Treasuries Since May 2013 -- With the December monthly TIC data due out this week, bond traders will be closely watching if the selling of US Treasuries by foreign accounts, and especially central banks, which as we have repeatedly shown for the past several months has hit record levels...... will persist, with a focus on whether China's near record selling of US paper will persist.However, this time the surprise may not be China, but its nemesis across the East China Sea, Japan.As UBS notes, Japanese investor appetite for developed market overseas bonds, and especially US, was a big story during the first seven months of 2016. However, since then interest has waned. Weekly flow data underscores how Japanese investors sold ~¥4 trillion of overseas bonds from the time of the US presidential election to the end of Jan-17. Last week the Japanese government released more granular data for the month of December which highlights a number of notable developments.Most importantly, while December saw the largest overall net selling flow of overseas bonds since Jun-15, this was entirely due to offloading of US Treasuries – other developed bond markets on aggregate actually saw modest net purchases. Indeed, while Japanese investors bought German and Australian paper, US Treasuries were sold to the tune of ~¥2.4 trillion (~$21bn) in December, the largest net selling flow since May-13.

 China's Holdings of Treasuries Dropped in 2016 by Most on Record - China’s holdings of U.S. Treasuries declined by the most on record last year, as the world’s second-largest economy dipped into its foreign-exchange reserves to buttress the yuan. Japan, America’s largest foreign creditor, trimmed its holdings for a second straight year. A monthly Treasury Department report released in Washington on Wednesday showed China held $1.06 trillion in U.S. government bonds, notes and bills in December, up $9.1 billion from November but down $188 billion from a year earlier. It was the first monthly increase since May. The People’s Bank of China, owner of the world’s biggest foreign-exchange reserves, has burned through a quarter of its war chest since 2014 in an effort to underpin the yuan and deter capital from fleeing the country. Chinese sales have made borrowing more costly for the U.S. government: 10-year yields rose to 2.6 percent last year, from as low as 1.3 percent. “China is a massive player in our market, and can move the markets whether they are a buyer or seller,” said Tom di Galoma, managing director of government trading and strategy at Seaport Global Holdings. “If 10-year yields are going to trade to 3 percent this year, China will be the catalyst.” China’s foreign currency reserves fell for a seventh straight month in January to $3 trillion, to the lowest in almost six years, driven by the central bank’s intervention in foreign-exchange markets. More broadly, America’s biggest creditors are re-thinking their financing of the U.S. government amid the prospect of bigger deficits and more inflation under President Donald Trump or higher interest rates from the Federal Reserve. Japan’s portfolio decreased for a fifth consecutive month in December, falling by $17.8 billion to $1.09 trillion, according to the data. The holdings declined by $31.6 billion last year. The report, which also contains data on international capital flows, showed net foreign selling of long-term securities totaling $12.9 billion in December. It showed a total cross-border outflow, including short-term securities such as Treasury bills and stock swaps, of $42.8 billion.

 GDP Estimate For 1Q17 Keeps Dropping -- -- Latest GDP Now forecast: 2.2 percent — February 15, 2017 : The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2017 is 2.2 percent on February 15, down from 2.7 percent on February 9.  The forecast for first-quarter real consumer spending growth declined from 3.1 percent to 2.8 percent after the retail sales report from the U.S. Census Bureau and the Consumer Price Index report from the U.S. Bureau of Labor Statistics were released this morning.  The forecast for the contribution of inventory investment to growth fell from -0.20 percentage points to -0.39 percentage points after the industrial production report from the Federal Reserve Board of Governors and the Business Inventories report from the U.S. Census Bureau were released this morning.  The inventory contribution forecast for February 9 was corrected to account for data from the wholesale trade report not incorporated in last Thursday's GDPNow update. The correction did not change the model's GDP growth forecast after rounding.

Trump’s Budget Bluff - Trump made promises that he has no way of keeping. Inveighing against the rising national debt, he promised to balance the budget by getting rid of “tremendous waste, fraud, and abuse.” But he also pledged to boost infrastructure spending, protect Social Security and Medicare, and—the centerpiece of his economic program—provide a budget-busting multi-trillion-dollar tax cut. Something’s got to give, but what? Trump won’t be sending a formal budget to Congress for a few weeks. But he’s already announced a hiring freeze for federal employees, with the notable exception of the military. Right-wing media have claimed that he wants to cut the budgets of executive departments by ten per cent and payrolls by as much as twenty per cent. Kellyanne Conway said that the President would call for converting Medicaid to a block-grant system. And Trump staffers have been working Capitol Hill, arguing for steep cuts in discretionary spending, including privatizing the Corporation for Public Broadcasting and getting rid of the National Endowment for the Arts and the Legal Services Corporation. These moves would have a drastic effect on many people’s lives. But they’re not going to do much to balance the budget. Most federal spending is nondiscretionary, meaning that it goes to entitlements (such as Social Security, Medicare, and unemployment insurance) and to pay the interest on the national debt. Discretionary spending totals just $1.2 trillion a year (out of a budget of almost four trillion), and roughly half of that goes to national defense, which Trump insists that he won’t touch. The federal budget deficit is around six hundred billion dollars a year, and analysis by the Tax Foundation suggests that Trump’s proposed tax cut would reduce federal revenue by another half trillion or so. So it’s simply impossible for Trump to balance the budget while protecting defense and entitlement spending.  Fortunately for Trump, most voters have no real idea how the government spends its money, and plenty of his supporters believe that you can balance the budget by just hiring fewer people, making government more efficient, and getting rid of the odd department. In a 2013 survey of Fox News viewers, forty-nine per cent said that “cutting waste and fraud” would eliminate most of the national debt. Polls of the general population have found that people believe that more than twenty-five per cent of the federal budget goes to foreign aid (it’s less than one per cent); that ten per cent goes to pensions and benefits (today, it’s 3.2 per cent); and that five per cent goes to PBS and NPR (it’s 0.01 per cent). The median guess about how much food and housing assistance cost was three to four times as much as the true figure.

Report: Trump team ordered government economists to cook up forecasts - As the White House staff tries to put together a budget for President Donald Trump, they face a fundamental problem. Trump has promised to cut taxes, increase spending on the military and infrastructure, and avoid cuts to Social Security and Medicare. The only way to do that without producing an exploding budget deficit is to assume a big increase in economic growth. And Nick Timiraos at the Wall Street Journal reports that Trump is planning to do just that — by making things up. Deep into his story about Trump budget hijinks, Timiraos reveals that “what’s unusual about the administration’s forecasts isn’t just their relative optimism but also the process by which they were derived.” Specifically, what’s unusual about them is that they weren’t derived by any process at all. Instead of letting economists build a forecast, Trump’s budget was put together with “transition officials telling the CEA staff the growth targets that their budget would produce and asking them to backfill other estimates off those figures.” Staff has been ordered to project that inflation-adjusted growth will average between 3 and 3.5 percent over the next decade, eventually settling at around 3.2 percent.  That’s drastically higher than the estimates provided by the Congressional Budget Office and the Federal Reserve, both of which see the economy growing at a bit less than 2 percent. The make-believe reasoning the administration is giving for this is that “a regulatory rollback and a tax-code revamp will unleash growth that drives a recovery in productivity, sends business investment higher and draws idled workers back to the labor force.”  At the same time, however, it’s projecting that an uptick in economic growth won’t lead to higher interest rates, “because the U.S. would become a more attractive place to park money.”

Not So Fast: Goldman Warns Three Things Are About To Derail Trump's Fiscal Plan - For some still unknown reason, Goldman Sachs, the bank that single-handedly accounts for the bulk of Trump's closest economic and financial advisors, and whose former COO has been reportedly tasked with hatching Trump's "phenomenal" tax plan, has been on a tear in the past month to discredit his proposed political agenda. Just last week Goldman slammed Trump's proposed economic plan, warning that unlike its earlier optimism, "one month into the year, the balance of risks is somewhat less positive in our view."  Goldman's Jan Hatzius then gave three reasons why his outlook had soured substantially in just a few months:

  • First, the recent difficulty congressional Republicans have had in moving forward on Obamacare repeal does not bode well for reaching a quick agreement on tax reform or infrastructure funding, and reinforces our view that a fiscal boost, if it happens, is mostly a 2018 story.
  • Second, while bipartisan cooperation looked possible on some issues following the election, the political environment appears to be as polarized as ever, suggesting that issues that require bipartisan support may be difficult to address.
  • Third, some of the recent administrative actions by the Trump Administration serve as a reminder that the president is likely to follow through on campaign promises

Now, in yet another note from Goldman over the weekend, the bank's Washington analyst Alec Phillips breaks down the "Fiscal Constraints on the Political Agenda" and lays out why, despite Trump's intention to announce "something phenomenal on taxes in the next 2-3 weeks", a statement which promptly boosted stocks to new all time highs, the reality is far different, and that between Trump's tax plans and various other aspects of the president's fiscal agenda, the most likely outcome will be imminent disappointment as the plan begins to move through Congress where it is about to hit major roadblocks. And while in the past such discussions between Democrats and Republicans have been the source of much consternation, infamously leading to the US government shutdown of 2011 and subsequent US downgrade, this year's budget plans will be even more difficult to put together. He gives the following three reasons why:

  • First, the projected deficit at the end of the ten-year period that Congress uses for fiscal plans is slightly larger.
  • Second, Republican leaders will need to make room in the budget for tax reform and increased infrastructure spending, unlike previous budget proposals.
  • Third, more of the budget appears to be politically off-limits to proposed cuts than in the past.

Stockman: "What's Going On Today Is Complete Insanity" --In his recent TV appearance, last week David Stockman suggested that President Trump would be better suited to some time actually addressing economic issues instead of the administration's travel ban for immigrants from Middle Eastern countries, which Stockman called "a giant misfire." Employing the 1992 Clinton Campaign motto of "it's the economy, stupid," Stockman noted "Trump was elected because flyover America is hurting economically. The voters of Racine, Wisconsin and Johnstown, Pennsylvania are imperiled not because of some refugees, they're imperiled because their jobs have all been disappearing for decades." He added, correctly, that "the problem is far more the Federal Reserve, Janet Yellen, the bubbles they're creating on Wall Street."Stockman went on to suggest that the Trump Administration is showing decreased interest in "draining the swamp", having surrounded himself with, as he himself has now realized, the "Goldman Guys."Then, in a follow up interview with CNBC, Stockman once again discussed the impact of Trump, this time on markets, and warned that while stocks are booming under Trump, with the S&P now up 12%  since the election (with banks up 25% and Goldman 35% higher), traders are living in a "fantasy land" that can't last —and Trump's policies will derail the market for years to come.Stockman reiterated his concern that Trump has lost his focus on the economy, and has become distracted by other issues which should be a particular point of worry for investors. "What's going on today is complete insanity," said Stockman. "The market is apparently pricing in a huge Trump stimulus. But if you just look at the real world out there, the only thing that's going to happen is a fiscal bloodbath and a White House train wreck like never before in U.S. history."

Crop Insurance Targeted By Budget Cutters As Deficit Debate Looms – Ed Dolan - Congress will soon start debating the federal budget for the 2018 fiscal year. As the following figure shows, the Congressional Budget Office projects that after shrinking for several years, the budget gap will soon begin to widen if there are no changes in current policy. Crop insurance is one of several farm programs in the crosshairs of Congressional budget hawks who hope to keep that from happening.  Crop insurance may seem like small change compared to massive programs like health insurance subsidies under the Affordable Care Act, but critics have long targeted it as wasteful. The Heritage Foundation, a consistent ally of budget cutters, characterizes crop insurance, along with other farm subsidy programs, as “a massive transfer of wealth from taxpayers to mostly large agribusinesses that are (or should be) fully capable of managing their business operations without this special treatment.” The problem begins with the very name of the program. For several reasons, the risks that crop insurance protects against, which include both low crop yields and low prices, are not truly insurable, as I explained in  this previous post. First, they are not truly fortuitous. Rather than being random events outside the control of the insured party, losses depend on choices of crops and growing methods. Second, the covered hazards are not pure losses. Instead, farming is an ordinary business activity that entails the possibility of profit as well as loss, in contrast to insurable risks like fire or theft, which have no upside. Third, premiums for crop loss insurance would not be affordable without federal subsidies. The government currently pays 60 percent of the premiums for crop insurance, and in addition, subsidizes the administrative expenses of the companies that provide the coverage. In short, critics say, the program is just one more federal subsidy, masquerading as insurance. A recent report from the CBO includes crop insurance as Number four on a list of one-hundred and fifteen options for cutting the federal deficit. In its current form, the program costs the federal government a little over $8 billion per year. The CBO report estimates that relatively modest reforms to the program, including a reduction of premium support from 60 percent to 40 percent and a reduction in reimbursements for the administrative expenses of insurers, would save more than a third of that amount, as shown in the next chart.

 The Scale Of Trump’s Yemen Botch -- It is  becoming clear that the scale of the botch by Donald Trump in Yemen in his first effort at a foreign military action is much greater than .first reported, as reported by Juan Cole.   Right from the start we heard that people in the military were complaining about poor vetting of intel and how there was more military resistance than expected, with one American dying and three getting injured.  There was the embarrassment of a bunch of civilians getting killed, with the latest estimate of those now as high possibly as 30. On top of this we had the absurdity of the whole thing being decided mostly over a dinner with Steve Bannon and Jared Kushner the main parties to it, although supposedly SecDef Mattis signed off on it, followed by the bizarre business of Trump not even going to the Situation Room for this his first military outing.  Maybe he thought that since there were so many pictures of Obama there, and even with Hillary, that this is not something he wanted to do. Of course there was pushback from the Trumpisti over this, claiming that the whole thing had been planned by Obama, who had just not  quite had enough time (or maybe even guts) to finally sign off on it, and furthermore that some bad leaders of the target group, Al Qaeda in the Arabian Peninsula (AQAP), were killed.  The latter may be true, although as Juan Cole reports, the main target of the raid, AQAP leader Qassim al-Rimini, was not killed and has since put out an audio publicly mocking Trump.But now Cole further reports (as have others) that Obama had apparently not decided to do the raid. It was long planned, but it was not just a matter of waiting for more intel.  They thought it was not a wise effort, and indeed it has not turned out well. On top of that, now the Yemeni government led by Mansour Hadi that the US and Saudi Arabia support has just forbidden the US from engaging in any further ground military assaults.  Oh.  Cole suggests that aside from the matter of civilian casualties, there is the matter of Trump’s insulting Muslim immigration ban, which Cole reports has the leaders of this US-backed Yemeni government “disgusted.”  Oh.

Trump To Unveil "Passive-Aggressive" Currency War With China - While one of Trump's most sincere desires, both during his campaign, and ideologically from his life prior to politics, has been to publicly declare China a currency manipulator - something he promised he would do on day one of his administration - and crack down on the "undervalued" Yuan (even though over the past 18 months, China has been scrambling to prevent further devaluation of the Yuan in light of over $1 trillion in capital outflows in recent years), lately Trump appears to have gotten second thoughts, and after backing off on his intent to negotiate the "One China" policy, now Trump is looking for a way out of engaging China directly in currency war. That is the impression we get from reading a WSJ piece, according to which the White House is exploring a "new tactic" to discourage China from devaluing the Yuan to boost exports, without explicitly accusing it of currency manipulation, something the US last did in 1994 under the Clinton administration. Under the plan, US commerce secretary Wilbur Ross would designate the general practice of currency manipulation "as an unfair subsidy when employed by any country, instead of singling out China." Following such a designation, U.S. companies would be in a position to bring antisubsidy actions themselves to the U.S. Commerce Department against China or other countries. By engaging in such "passive-aggressive" currency warfare, which avoids direct confrontation with Beijing and which may have been conceived during last week's Trump-Xi phone call, the administration would avoid making confrontational claims about whether China is manipulating its currency for trade benefit, the WSJ reports, in the process allowing Xi to save face and avoid having to defend himself domestically in a key year politically for the Chinese president. Trump also avoids looking weak, as eventually exporter complaints can be addressed via conventional channels, resulting in tariffs and other anti-subsidy actions, as has been the case for many years under the Obama administration.

Meeting Israel's Netanyahu, Trump backs away from commitment to Palestinian state | Reuters: President Donald Trump on Wednesday dropped a U.S. commitment to a two-state solution to the Israeli-Palestinian conflict, a longstanding bedrock of Middle East policy, even as he urged Israeli Prime Minister Benjamin Netanyahu to curb settlement construction. In the first face-to-face meeting between the two leaders since Trump’s victory in the 2016 election, the Republican president backed away from a U.S. embrace of the eventual creation of a Palestinian state, upending a position taken by successive administrations and the international community. "I'm looking at two states and one state, and I like the one both parties like," Trump told a joint news conference with Netanyahu. "I can live with either one." Trump vowed to work toward a peace deal between Israel and Palestinians but said it would require compromise on both sides, leaving it up to the parties themselves ultimately to reach the terms of any agreement. But he offered no new prescription for achieving an accord that has eluded so many of his predecessors, and Palestinian anger over his abandonment of their goal of statehood could scrap any chance of coaxing them back to the negotiating table. Dropping a bombshell on Netanyahu as they faced reporters just before sitting down for talks, Trump told him: “I'd like to see you pull back on settlements for a little bit.” The right-wing Israeli leader, who may have expected more decidedly pro-Israel rhetoric as the two sought to get past years of feuding with Trump's Democratic predecessor Barack Obama, appeared startled.Netanyahu insisted that Jewish settlements were “not the core of the conflict” and made no commitment to reduce settlement building in the occupied West Bank.

A New Approach to Tackling Chinese Currency Manipulation Which I Do Not Understand -- Menzie Chinn - From Bloomberg: President Donald Trump’s administration is considering a new tactic to discourage China from undervaluing its currency that falls short of a direct confrontation… Under the plan, the commerce secretary would designate the practice of currency manipulation as an unfair subsidy when employed by any country, instead of singling out China, the newspaper reported. American companies would then be in a position to bring anti-subsidy actions to the U.S. Commerce Department against China or other countries, it said. I don’t understand how this will apply to China at the moment. If Chinese reserves were rising because of PBoC intervention in the forex market, then one might be able to make the argument that — by buying dollar assets — the yuan is weaker than the value determined by supply and demand. But they’re not. Reserves have just dipped below $3 trillion.[1] So whatever forex intervention China is implementing now — to some that’s manipulation — it’s pushing up the value of its currency. So I don’t know how this new plan is going to do anything to solve “the” problem (and in this case I’m not sure there is a real “problem” to be addressed).  I look forward to the plan to label the Bundesbank a currency manipulator (!).

 This Makes No Sense -- Menzie Chinn --In response to my post on a possible new approach to tackling currency manipulation, reader “Judy” comments by sending me a link: This is a WSJ op-ed, which is behind a paywall. Here is an ungated version: When governments manipulate exchange rates to affect currency markets, they undermine the honest efforts of countries that wish to compete fairly in the global marketplace. Supply and demand are distorted by artificial prices conveyed through contrived exchange rates. Businesses fail as legitimately earned profits become currency losses. …central banks provide useful cover for currency manipulation. Japan’s answer to the charge that it manipulates its currency for trade purposes is that movements in the exchange rate are driven by monetary policy aimed at domestic inflation and employment objectives. But there’s no denying that one of the primary “arrows” of Japan’s economic strategy under Prime Minister Shinzo Abe , starting in late 2012, was to use radical quantitative easing to boost the “competitiveness” of Japan’s exports. Over the next three years, the yen fell against the U.S. dollar by some 40%. …  Whether China is propping up exchange rates or holding them down, manipulation is manipulation and should not be overlooked.  So…let me get this straight. If you lower interest rates and that depreciates a currency, that’s manipulation. If you embark on quantitative easing by purchasing domestic assets and the currency depreciates, well that’s currency manipulation. And if you intervene in the foreign exchange market to keep a currency weak by purchasing foreign currency, that is manipulation, as well as if you intervene to keep it strong by selling off foreign currency. This expansive definition of “manipulation” means that pretty much every central bank in the world is manipulating their exchange rates — except for those that have their exchange rates at the “correct” levels, as determined by somebody. That article made me wonder what criterion would result in exchange rates being at correct levels. According to this article, Dr. Shelton believes a fix to gold would do the trick.  I have read that Dr. Shelton is an economic adviser to President Trump; if so, I think I will miss the days when Donald Trump called Lt. General Flynn for advice on the dollar.

China upset at disputed islands mention in Japan-U.S. meeting | Reuters: China's Foreign Ministry expressed concern on Monday after Japan got continued U.S. backing for its dispute with Beijing over islands in the East China Sea during a meeting between U.S. President Donald Trump and Japanese Prime Minister Shinzo Abe. A joint Japanese-U.S. statement after the weekend meeting in the United States said the two leaders affirmed that Article 5 of the U.S.-Japan security treaty covered the islands, known as the Senkaku in Japan and the Diaoyu in China. Chinese Foreign Ministry spokesman Geng Shuang said China was "seriously concerned and resolutely opposed", adding that the islands had been China's inherent territory since ancient times. "No matter what anyone says or does, it cannot change the fact that the Diaoyu Islands belong to China, and cannot shake China's resolve and determination to protect national sovereignty and territory," Geng told a daily news briefing in Beijing. The United States and Japan should watch what they say and do and stop making the wrong comments to avoid complicating the issue and affecting regional peace and stability, he added.

Pentagon Chief's Ultimatum To NATO: "Boost Military Spending Or The U.S. Will Cut Its Support" - Ahead of Jim Mattis' first official trip to Brussels as the new head of the Pentagon, NATO members were on edge to see if America's new Defense Secretary would push the same agenda which Trump had vocalized during his presidential campaign, namely that he would withdraw US support of NATO unless its member states boosted their spending in support of the international military organization.To their disappointment, he did and in an ultimatum to America's allies, Mattis told fellow NATO members Wednesday to increase military spending by year's end or risk seeing the U.S. curtail its defense support, a move which AP dubbed was "a stark threat given Europe's deep unease already over U.S.-Russian relations."“Americans cannot care more for your children’s future security than you do,” Mr. Mattis said in his first speech to NATO allies since becoming defense secretary. “I owe it to you to give you clarity on the political reality in the United States and to state the fair demand from my country’s people in concrete terms.” Mattis went further than his predecessors in apparently linking American contributions to the alliance to what other countries spend.“If your nations do not want to see America moderate its commitment to this alliance, each of your capitals needs to show support for our common defense,” he said. Echoing Trump's demands for NATO countries to assume greater self-defense responsibility, Mattis said Washington will "moderate its commitment" to the alliance if countries fail to fall in line. He didn't offer details, but the pressure is sure to be felt, particularly by governments in Europe's eastern reaches that feel threatened by Russian expansionism.

President Trump Has Done Almost Nothing – POLITICO  -- Just weeks into Donald Trump’s presidency, you would think that everything had changed. The uproar over the president’s tweets grows louder by the day, as does concern over the erratic, haphazard and aggressive stance of the White House toward critics and those with different policy views. On Sunday, White House aide Stephen Miller bragged, “We have a president who has done more in three weeks than most presidents have done in an entire administration.” But Miller was dead wrong about this. There is a wide gap, a chasm even, between what the administration has said and what it has done. There have been 45 executive orders or presidential memoranda signed, which may seem like a lot but lags President Barack Obama’s pace. More crucially, with the notable exception of the travel ban, almost none of these orders have mandated much action or clear change of current regulations. So far, Trump has behaved exactly like he has throughout his previous career: He has generated intense attention and sold himself as a man of action while doing little other than promote an image of himself as someone who gets things done. ..It is the illusion of a presidency, not the real thing. The key problem here is understanding Trump’s executive orders and presidential memoranda. Trump very quickly seized on the signing of these as media opportunities, and each new order and memo has been staged and announced as dramatic steps to alter the course of the country. Not accustomed to presidents whose words mean little when it comes to actual policy, opponents have seized on these as proof that Trump represents a malign force, while supporters have pointed to these as proof that Trump is actually fulfilling his campaign promises. Neither is correct. The official documents have all the patina of “big deals” but when parsed and examined turn out to be far, far less than they appear.

White House posts wrong versions of Trump’s orders on its website - The White House has posted inaccurate texts of President Trump's own executive orders on the White House website, raising further questions about how thorough the Trump administration has been in drafting some of his most controversial actions. A USA TODAY review of presidential documents found at least five cases where the version posted on the White House website doesn't match the official version sent to the Federal Register. The differences include minor grammatical changes, missing words and paragraph renumbering — but also two cases where the original text referred to inaccurate or non-existent provisions of law. By law, the Federal Register version is the legally controlling language. But it can often take several days for the order to be published, meaning that the public must often rely on what the White House puts out — and that's sometimes inaccurate. For example:

Transparency advocates said the discrepancies raise unnecessary concerns about Trump's executive actions. "These last-minute edits suggest the Trump White House needs to revisit their vetting, sign-off, and publication processes for executive orders," said John Wonderlich, executive director of the nonpartisan Sunlight Foundation. The White House has faced questions about the vetting of executive orders, especially the order suspending travel for nationals of seven majority-Muslim countries. That order caused confusion inside and outside the administration and led to the firing of acting Attorney General Sally Yates when she refused to defend it in court.

How Trump skipped the military brass in negotiations with defense companies - In an unorthodox move, President Trump, days before he formally assumed office, allowed Boeing chief executive Dennis A. Muilenburg to listen in on a call with the manager of a key Pentagon fighter jet program as the then-president-elect weighed the government’s options for lowering the costs of Lockheed Martin’s F-35. Air Force Lt. Gen. Chris Bogdan, program manager for the F-35, provided details about the call at a briefing before the House Armed Services Committee Thursday morning, taking questions from congressional staff members just hours after Bloomberg reported the episode. Boeing and F-35 maker Lockheed Martin declined to comment. But others characterized the call to Bogdan as an inappropriate subversion of the military’s ability to determine its own equipment requirements. “The president directly trying to influence the requirements process in the presence of a [defense company executive] is wildly inappropriate and has the worst optics one can imagine … we’ve never seen anything like this before,” Trump first met Bogdan during a Dec. 21 meeting at the president’s Mar-a-Largo resort in Florida with close to a dozen senior military officials. The president-elect then called Bogdan twice in January to ask questions about the program. In congressional testimony Bogdan said the second of two calls, on Jan. 17, included both Muilenburg and the soon-to-be-president. Bogdan said Trump asked for a comparison of the capabilities of the F-18 Super Hornet, which is made by Boeing, and the F-35C, which is made by Lockheed.

The Spy Revolt Against Trump Begins - In a recent column, I explained how the still-forming Trump administration is already doing serious harm to America’s longstanding global intelligence partnerships. In particular, fears that the White House is too friendly to Moscow are causing close allies to curtail some of their espionage relationships with Washington—a development with grave implications for international security, particularly in the all-important realm of counterterrorism. Now those concerns are causing problems much closer to home—in fact, inside the Beltway itself. Our Intelligence Community is so worried by the unprecedented problems of the Trump administration—not only do senior officials possess troubling ties to the Kremlin, there are nagging questions about basic competence regarding Team Trump—that it is beginning to withhold intelligence from a White House which our spies do not trust.. The president has repeatedly gone out of his way to antagonize our spies, mocking them and demeaning their work, and Trump’s personal national security guru can’t seem to keep his story straight on vital issues. That’s Mike Flynn, the retired Army three-star general who now heads the National Security Council. Widely disliked in Washington for his brash personality and preference for conspiracy-theorizing over intelligence facts, Flynn was fired as head of the Defense Intelligence Agency for managerial incompetence and poor judgment—flaws he has brought to the far more powerful and political NSC. Flynn’s problems with the truth have been laid bare by the growing scandal about his dealings with Moscow. Strange ties to the Kremlin, including Vladimir Putin himself, have dogged Flynn since he left DIA, and concerns about his judgment have risen considerably since it was revealed that after the November 8 election, Flynn repeatedly called the Russian embassy in Washington to discuss the transition. The White House has denied that anything substantive came up in conversations between Flynn and Sergei Kislyak, the Russian ambassador. That was a lie, as confirmed by an extensively sourced bombshell report in The Washington Post, which makes clear that Flynn grossly misrepresented his numerous conversations with Kislyak—which turn out to have happened before the election too, part of a regular dialogue with the Russian embassy. To call such an arrangement highly unusual in American politics would be very charitable.

 Trump's national security adviser Flynn trying to survive crisis: President Donald Trump's national security adviser, Michael Flynn, is struggling to get past a controversy over his contacts with Russian officials before Trump took office, conversations that officials said have raised concerns within the White House. Top White House officials have been reviewing over the weekend Flynn's contacts with the Russians and whether he discussed the possibility of lifting U.S. sanctions on Russia once Trump took office, which could potentially be in violation of a law banning private citizens from engaging in foreign policy. Flynn is a retired U.S. army general and former director of the Defense Intelligence Agency. An early supporter of Trump, he has been a leading advocate to improve U.S. relations with Russia. Flynn had initially denied discussing sanctions with the Russians in the weeks before Trump took office Jan. 20 and Vice President Mike Pence went before the television cameras to repeat the denial and defend Flynn. When a Washington Post report emerged last week quoting officials saying the subject of sanctions had in fact come up, Flynn left open the possibility that he had discussed sanctions but could not remember with 100 percent certainty, an administration official said. A second administration official, also speaking on condition of anonymity, stressed that Pence made his comments based on a conversation with Flynn. Pence is said to be troubled by the possibility of being misled.Flynn has apologized to Pence and others over the incident, the first official said. A third official said the uproar prompted White House chief of staff Reince Priebus to review the matter with other top officials as Trump played host to Japanese Prime Minister Shinzo Abe over the weekend in Florida. The White House did not respond to a request for comment.

Turmoil at the National Security Council, From the Top Down - These are chaotic and anxious days inside the National Security Council, the traditional center of management for a president’s dealings with an uncertain world. Three weeks into the Trump administration, council staff members get up in the morning, read President Trump’s Twitter posts and struggle to make policy to fit them. Most are kept in the dark about what Mr. Trump tells foreign leaders in his phone calls. Some staff members have turned to encrypted communications to talk with their colleagues, after hearing that Mr. Trump’s top advisers are considering an “insider threat” program that could result in monitoring cellphones and emails for leaks. The national security adviser, Michael T. Flynn, has hunkered down since investigators began looking into what, exactly, he told the Russian ambassador to the United States about the lifting of sanctions imposed in the last days of the Obama administration, and whether he misled Vice President Mike Pence about those conversations. His survival in the job may hang in the balance. Although Mr. Trump suggested to reporters aboard Air Force One on Friday that he was unaware of the latest questions swirling around Mr. Flynn’s dealings with Russia, aides said over the weekend in Florida — where Mr. Flynn accompanied the president and Japan’s prime minister, Shinzo Abe — that Mr. Trump was closely monitoring the reaction to Mr. Flynn’s conversations. There are transcripts of a conversation in at least one phone call, recorded by American intelligence agencies that wiretap foreign diplomats, which may determine Mr. Flynn’s future.  Stephen Miller, the White House senior policy adviser, was circumspect on Sunday about Mr. Flynn’s future. Mr. Miller said on NBC’s “Meet the Press” that possibly misleading the vice president on communications with Russia was “a sensitive matter.” Asked if Mr. Trump still had confidence in Mr. Flynn, Mr. Miller responded, “That’s a question for the president.”

Trump, Bannon Said To Weigh Firing Mike Flynn Over Russian Phone Calls Scandal --Top White House aide and policy adviser, Stephen Miller, sidestepped repeated chances during Sunday news shows to publicly defend embattled National Security Adviser Michael Flynn following reports that he engaged in conversations with a Russian diplomat about U.S. sanctions before Trump’s inauguration. The uncertainty came as Trump was dealing with North Korea’s apparent first missile launch of the year and his presidency, along with visits this week from the leaders of Israel and Canada.Pressed repeatedly, Stephen Miller said it wasn’t up to him to say whether the president retains confidence in Flynn. “It’s not for me to tell you what’s in the president’s mind,” he said on NBC. “That’s a question for the president.”While Trump has yet to comment on the allegations against Flynn, the White House said in an anonymous statement Friday the president had full confidence in Flynn. But officials have been mum since then amid fallout from reports that Flynn addressed U.S. sanctions against Russia in a phone call late last year. The report, which first appeared in The Washington Post, contradicted both Flynn’s previous denials, as well as those made by Vice President Mike Pence in a televised interview.Now we know why the administration has been so quiet about the fate of Flynn. As the WSJ reports, the White House is reviewing "whether to retain Flynn amid a furor over his contacts with Russian officials before President Donald Trump took office, an administration official said Sunday." Flynn has apologized to White House colleagues over the episode, which has created a rift with Vice President Mike Pence and diverted attention from the administration’s message to his own dealings, the official said.  “He’s apologized to everyone,” the official said of Mr. Flynn.

The ultimate entrepreneurial achievement can be seen in Steve Bannon’s rise to the White House - Those bankers who knew Steve Bannon when he was a banker, long before he ascended the path to Chief White House Strategist to President Trump, will see the unique tale of a true American entrepreneur – someone who turns subversive observations into profound actions. In the 1990s, he left Goldman Sachs and formed his own boutique media investment bank called Bannon & Co, which evolved in 1998 into a joint venture with Societe Generale called SG Bannon. Then, suddenly he departed with little explanation. Leaving banking to become a political entrepreneur or social movement leader could make you the subject of ridicule. But years later he was running Breitbart, propelling what is now labelled as the ‘alt-right’ platform and hosting a radio show among the fringe voices lurking in the far right wilderness. In 2011, he gave a sensational presentation of his political manifesto (business plan) to a sparsely attended meeting in a Sheraton ballroom in Orlando, Florida, which you can find on Youtube. He starkly laid out the opportunity lying beneath the socio-political crisis that continues to shake America and change its future as told in his 2009 documentary Generation Zero. At the heart of the crisis was “a compromised political class, crony capitalism in a permanent political class. If the elites are so good, how did we get in this jam?” In a globalised era where aspiring to be an entrepreneur is mainstream culture, it is all too easy to confuse what real entrepreneurship means. And what Bannon achieved, after a journey in the intellectual and political desert, is the ultimate entrepreneurial achievement – to overturn the establishment, attack government, evict two major political parties, extinguish three dynasties (Bush, Clinton, Obama) and seize power with a candidate coming from nowhere. What we witnessed last year was not an election, but a peaceful revolution. The losers are still crying.

Which Trump Appointee Will Be Fired First: Here Are The Odds -- With Reince Priebus and Mike Flynn seemingly on the chopping block, bookmakers' odds suggest Sean Spicer is still the 'favorite' to hear the infamous words "You're Fired"from President Trump. However, it is President Trump himself that faces the toughest odds as his favorability tumbles...  So the likelihood of his impeachment is now evens... (but there looks like a decent arbitrage between impeachment and when he will be replaced)  As Politico reports, Ladbrokes, the British oddsmaking giant, has Trump’s chances of leaving office via resignation or impeachment and removal at just 11-to-10, or just a little worse than even money. The odds of Trump being impeached this year in the House of Representatives are only 4-to-1, according to the Irish bookmaker Paddy Power, despite GOP control of the chamber. You can win $180 on a $100 bet with Bovada, the online gaming site, that Trump won’t make it through a full term — though the bet is off if Trump passes away during the next four years.  All in all, Trump has meant big business for the international gambling industry. There’s always been betting on politics — mostly as a novelty around election season — but professional bookies say Trump’s unlikely victory and tumultuous transition mean that gamblers are jonesing to wager on his presidency.

National Security Adviser Michael Flynn resigns | TheHill: National Security Adviser Michael Flynn has resigned, after reports he misled senior Trump White House officials about his conversations with Russia. President Trump has named retired Army Lt. Gen. Keith Kellogg as acting national security adviser. Kellogg previously served as Flynn’s chief of staff on the National Security Council. The embattled Flynn blamed his resignation late Monday on the “fast pace of events” that led him to “inadvertently” give Vice President Mike Pence and others “incomplete information” about his phone conversations with Russia’s ambassador to the U.S., Sergey Kislyak. “I have sincerely apologized to the president and the vice president, and they have accepted my apology,” Flynn wrote in his resignation letter.Pence had defended Flynn's contacts with Russia, and when it became clear the national security adviser had not been forthcoming, serious questions were raised about his ability to keep his job. Flynn’s sudden exit comes just 24 days into Trump’s presidency and represents a dramatic overhaul of his team of senior aides that has been consumed by controversy. Flynn, the former head of the Defense Intelligence Agency was a trusted adviser to Trump throughout the 2016 campaign, but was seen as a controversial figure by many inside and outside the White House.

Embattled national security adviser Michael Flynn resigns - Michael Flynn, the national security adviser to President Trump, resigned late Monday over revelations about his potentially illegal contacts with the Russian ambassador to the United States, and his misleading statements about the matter to senior Trump administration officials. Flynn stepped down amid mounting pressure on the Trump administration to account for its false statements about Flynn’s conduct after The Washington Post reported Monday that the Justice Department had warned the White House last month that Flynn had so mischaracterized his communications with the Russian diplomat that he might be vulnerable to blackmail by Moscow. [Justice Department warned White House that Flynn could be vulnerable to Russian blackmail, officials say] In his resignation letter, Flynn said he had “inadvertently briefed the Vice President Elect and others with incomplete information regarding my phone calls with the Russian ambassador. I have sincerely apologized to the president and the vice president.”   Flynn was referring to his disproven claims to Vice President Pence and others a month ago that he had never discussed U.S. sanctions against Moscow with Russian Ambassador Sergey Kislyak. Pence, White House spokesman Sean Spicer and others, relying on Flynn’s accounts, publicly defended him and repeatedly declared in categorical terms that sanctions were never discussed. President Trump accepted Flynn’s resignation letter and appointed Keith Kellogg, a decorated retired Army lieutenant general, as acting national security adviser. Kellogg is one of three candidates Trump is considering as a permanent replacement for Flynn, according to a senior White House official. The other two are David H. Petraeus, a former CIA director and retired general, and Vice Adm. Robert Harward, a former deputy commander of the U.S. Central Command.

 Trump Security Team "In Turmoil" After Flynn Resignation, Russia Calls It An "Internal Matter" -- Less than a month into the new administration, President Trump security team has beenplunged into "turmoil" following last night's unexpected resignation announcement by his now former National Security Advisor Mike Flynn. In some additional back story color, Flynn reportedly infuriated VP Pence by misleading him about the call, then not fully apologizing, the NYT reported and also added that Steve Bannon pushed for his resignation since Friday. Flynn stepped down on Monday night over his phone conversations with Russia’s ambassador to Washington, Sergey Kislyak. In a statement announcing his resignation, the general said he had “inadvertently briefed the Vice President Elect and others with the incomplete information” about the calls. Flynn’s resignation comes at a delicate time for the president as Trump struggles to cement his national security apparatus, just as the president and his cabinet officials are preparing for a series of meetings and summits with foreign leaders in the coming months, starting this week in Europe, and followed by various trips abroad, mostly to Europe. Flynn leaves as the U.S. confronts serious challenges on two strategic fronts: the Middle East and Asia, as Bloomberg notes. Trump has yet to define his plan for combating the Islamic State and other radical Islamists that he’s said are the No. 1 threat to the U.S. In Asia, North Korea has tested the new administration by launching a ballistic missile while Trump was meeting Prime Minister Shinzo Abe of Japan. China also is asserting itself, forcing Trump to back down from the notion of using Taiwan as a bargaining chip in dealing with the world’s second biggest economy.

Michael Flynn out side door, establishment in back door? -- What seems to be the likelihood that US National Security Advisor Michael Flynn is on the verge of losing his job could be the second bloodied nose for hard-charging insiders of the Donald Trump administration. Flynn and his possible demise was the hot topic on the US Sunday talk-show circuit after reports surfaced that conversations he had with Russian Ambassador Sergei Kisilyak included US sanctions on Russia. Beside the sensitivity of such issues, it seems Flynn lied about it to US Vice President Mike Pence. According to officials at the US National Security Council the Flynn affair ranks as the second bloodying after what was handed out to White House Chief Strategist Steve Bannon and Trade Chief Peter Navarro.  They questioned US security policy toward Europe and economic policy toward the EU and Germany, in particular. That was until their boss, President Donald Trump, said on February 6 at US Central Command HQ in Florida: “We strongly support NATO. We only ask that all of the NATO members make their full and proper financial contributions.”  A far cry from the “NATO is obsolete” campaign rhetoric. Meanwhile, Navarro, after his statements on alleged undervaluation of the euro to German advantage — widely derided as “hogwash” in the financial community — has not been heard from at all. Donald Trump is know to be sensitive to being embarrassed by his underlings and Navarro’s larger agenda of declaring China a currency manipulator has not even been aired. What’s played out on the European front with those two Trump insiders could well about to be replayed on a global scale with Flynn.

White House struggles to contain Flynn fallout | TheHill: The White House on Tuesday sought to contain the damage caused by Michael ­Flynn’s resignation as national security adviser, insisting he did not break the law in his conversations with Russia. Rather than putting the matter to rest, however, White House press secretary Sean Spicer raised more questions by confirming that Trump knew for “weeks” that ­Flynn had misled Vice President Pence and others about his dealings with Russia before his ouster on Monday. Spicer attempted to quiet calls for investigations into ­Flynn as Democrats howled for an independent probe into links between Trump’s team and Russia — including when the president first learned his national security adviser discussed sanctions with Moscow’s U.S. envoy before the inauguration. ADVERTISEMENTHe said Trump had fired ­Flynn not because of his conversations with Russian ambassador Sergey Kislyak, but because Trump felt that his trust in ­Flynn had “eroded.” “There is not a legal issue but rather a trust issue,” Spicer said, who added that the circumstances created a “critical mass and an unsustainable situation.” “The president must have complete and unwavering trust for the person in that position,” he said. The spokesman strongly suggested a congressional probe isn’t necessary because the matter was handled after a “very thorough review” by the president and his legal team, which he said determined no laws were broken.

Trump Aides Spoke to Russian Intelligence - Phone records and intercepted calls show that members of Donald J. Trump’s 2016 presidential campaign and other Trump associates had repeated contacts with senior Russian intelligence officials in the year before the election, according to four current and former American officials. American law enforcement and intelligence agencies intercepted the communications around the same time they were discovering evidence that Russia was trying to disrupt the presidential election by hacking into the Democratic National Committee, three of the officials said. The intelligence agencies then sought to learn whether the Trump campaign was colluding with the Russians on the hacking or other efforts to influence the election. The officials interviewed in recent weeks said that, so far, they had seen no evidence of such cooperation. But the intercepts alarmed American intelligence and law enforcement agencies, in part because of the amount of contact that was occurring while Mr. Trump was speaking glowingly about the Russian president, Vladimir V. Putin. The officials said the intercepted communications were not limited to Trump campaign officials, and included other associates of Mr. Trump. On the Russian side, the contacts also included members of the government outside of the intelligence services, they said. All of the current and former officials spoke on the condition of anonymity because the continuing investigation is classified.

Former Trump campaign manager denies Kremlin contacts - Donald Trump’s former campaign manager has denied knowingly contacting Russian intelligence agents during the 2016 presidential race, telling the Financial Times he has “never had any involvement” with the regime of Vladimir Putin.Paul Manafort, who ran Mr Trump’s campaign until being dismissed in August following questions about his work for pro-Russian political leaders in Ukraine, also said the Federal Bureau of Investigation had never questioned him about the alleged contacts despite reports he is subject to an inquiry.“I have never had any involvement with Putin or the Russian government on any matter,” Mr Manafort told the FT. “Furthermore, I have never knowingly spoken to Russian intelligence officers and I have never been involved in any projects that include the Russian government or the Putin administration or parties acting in concert with or on behalf of the Russian government.”Mr Manafort’s denials came after CNN and the New York Times reported US intelligence and law enforcement officials had found evidence some Trump campaign aides, including Mr Manafort, had been in frequent contact with Russian intelligence officials during the race.  The reports said the conversations were intercepted by US authorities investigating alleged Russian hacking of the Democratic National Committee’s computer servers, which US intelligence agencies determined was part of a concerted Kremlin effort to undermine the campaign of Mr Trump’s rival, Hillary Clinton.

 "It Is A Conspiracy To Have Trump Impeached": Russia Denies Trump Officials Contacted Russian Spies -- The latest Trump foreign policy keeps getting stranger by the minute. Overnight, as the three liberal-leaning US newspaper launched another attack on Trump, alleging that officials linked to the president, most notably Tim Manafort, engaged Russian intel officials in the not too distant past, the Russian government dismissed allegations that the country’s intelligence officials were in repeated contact with Donald Trump’s team ahead of the US election.“Let's not believe anonymous information,” Vladimir Putin's spokesman Dmitry Peskov told reporters. “It's a newspaper report which is not based on any facts.”A Russian senator, Vladimir Jabbarov, cited by the Independent went so far as to tell state media the latest claims "were part of an intelligence community conspiracy to have the President impeached." “This is a common tactic to try to discredit a particular person,” he added.

Trump Slams Russia Connection "Non-Sense"; Accuses "Fake News Media" Of Creating "Conspiracy Theories" - With the news cycle once again squarely focused on Mike Flynn in particular, and the Trump Administration's ties to Russia in general following a volley of news last night from NYT, WaPo and CNN that Trump advisors allegedly communicated with members of Russian intellgience in the year preceding the election, it was expected that Trump's first comment of the day would be focused on the story du jour, and sure enough in his first tweet on Wednesday, President Trump blasted the “fake news media,” saying it is “going crazy with conspiracy theories and blind hatred.” "The fake news media is going crazy with their conspiracy theories and blind hatred. @MSNBC & @CNN are unwatchable. @foxandfriends is great!" he tweeted. In a follow up tweet, Trump also said "this Russian connection non-sense is merely an attempt to cover-up the many mistakes made in Hillary Clinton's losing campaign."

Two explosive reports on Trump and Russia. Zero on-the-record sources. - There's very little good news for President Trump these days. His White House is dealing with not one but two (!) explosive reports that his aides and associates were in contact with Russian intelligence officials during the campaign. But there is one bright spot for Trump: Both of the stories use zero on-the-record sources to back up their claims.CNN, which produced one of the reports, cited "multiple current and former intelligence, law enforcement and administration officials." The New York Times, which published the other, was a bit more specific: "four current and former American officials." Predictably, the use of anonymous sources opened the door for Trump to call the reports "nonsense" and "fake news," though he might have inadvertently lent credence to the stories by tweeting that "information is being illegally given ... by the intelligence community."Which is it? Is the media making up fake nonsense? Or is the intelligence community leaking real information? Both things can't be true.Unnamed sources are often critical contributors to important news reports and, as I have noted before, Trump has no problem with them, when he finds their disclosures helpful. But anonymity invariably promotes skepticism about sources' motives. The Times wrote that "all of the current and former officials spoke on the condition of anonymity because the continuing investigation is classified." That makes sense; it also makes sense to wonder whether these officials have political agendas and to consider what they might not be revealing.

"Wake Up America" Dennis Kucinich Defends Trump, Issues Dire Warning About "Deep State" --Dennis Kucinich, Former U.S. Rep. and Democratic presidential candidate, defended Donald Trump on “Mornings with Maria” on Tuesday.In regards to Michael Flynn’s resignation, Kucinich defended Trump and told America to “Wake Up” In the interview, Kucinich blamed factions of the US intelligence community for wanting to end any positive relationship between Russia and the US, hoping for a return of the cold war."...the American people have to know that there's a game going on inside the intelligence community... at the bottom of all this is the fact that there are those that seek to separate US from Russia to reignite the cold war... wake up America!!" Kucinich did not see this as an anti-Trump game, but rather an anti-Russia game:  “It’s not just this administration. I want to remind the views and all those who are on the panel that in the closing months of the Obama administration, they put together a deal with Russia to create peace in Syria. A few days later, a military strike in Syria killed a hundred Syrian soldiers and that ended the agreement. What happened is inside the intelligence and the Pentagon there was a deliberate effort to sabotage an agreement the White House made.” This is like “Deep State” said Kucinich.

Dennis Kucinich: Push for ‘New Cold War’ Behind Effort Against Michael Flynn -- Former US House of Representatives Member Dennis Kucinich (D-OH) presented an urgent warning to the American people in a Wednesday Fox Business interview regarding the resignation of Michael Flynn from the position of national security advisor after information was leaked about a phone conversation Flynn had with the Russian ambassador to the United States. “At the core” of the intercepting of the then-incoming national security advisor’s phone conversation and the sharing with media of related information by US intelligence officials, Kucinich says, “is an effort by some in the intelligence community to upend any positive relationship between the US and Russia.” But why take such an action? Kucinich answers that the effort against Flynn is part of an effort to ensure that the “military-industrial-intel axis can cash in” from the deterioration of relations between the US and Russia and, potentially, a new cold war. As Kucinich notes, “the American people forked over billions of dollars” for the previous US-Soviet Union cold war. Kucinich elaborates:  This isn’t about whether you are for or against Donald Trump. Hello — this is about whether or not the American people are bystanders in a power play inside the intelligence committee, the outcome of which could determine our relationship with Russia and whether or not billions of dollars are going to be spent in a new cold war. If Trump does not gain control over “his own intelligence apparatus,” Kucinich says that the resulting danger extends beyond a new cold war. Trump, Kucinich warns, “will never know the truth, the American people won’t know the truth, and we could be set at war with almost any country.” Watch Kucinich’s complete interview here:

Trump levels dirty tricks charge against US intelligence community - Donald Trump responded to the crisis engulfing the White House by rekindling a feud with the intelligence community, accusing it of mounting a “criminal” campaign to undermine him by leaking information about his administration’s ties to Russia. In a Twitter barrage and public comments, the president blamed the crisis surrounding Michael Flynn, his national security adviser who was fired this week, on a conspiracy fuelled by a media driven by “blind hatred” and intelligence agencies seeking revenge. “The real scandal here is that classified information is illegally given out by ‘intelligence’ like candy. Very un-American!” Mr Trump tweeted. During a news conference, he called the leaks — contained in New York Times and CNN reports that Mr Flynn and other Trump aides had been in regular contact with Russian intelligence officers during the presidential race — a “criminal act”. “People are trying to cover up for a terrible loss that the Democrats had under Hillary Clinton,” he said, speaking alongside Israeli prime minister, Benjamin Netanyahu.

On The Verge Of Treason: US Spies Withhold Intelligence From Trump -Following President Trump's exclamations today with regard "un-American" leaks of classified intel, it appears he has a bigger, much more serious problem on his hands. WSJ reports that US intel officials have withheld information from President Trump due to concerns it could be leaked or compromised. The Wall Street Journal, citing unidentified current and former officials familiar with the matter, reports that officials’ decision to keep information from Mr. Trump underscores the deep mistrust that has developed between the intelligence community and the president over his team’s contacts with the Russian government, as well as the enmity he has shown toward U.S. spy agencies. On Wednesday, Mr. Trump accused the agencies of leaking information to undermine him. In some of these cases of withheld information, officials have decided not to show Mr. Trump the sources and methods that the intelligence agencies use to collect information, the current and former officials said. Those sources and methods could include, for instance, the means that an agency uses to spy on a foreign government. The officials emphasized they know of no instance in which crucial information about security threats or potential plotting has been omitted. Rep. Adam Schiff (D., Calif.), the ranking member of the House Intelligence Committee, said he has heard concerns from officials about sharing especially sensitive information with Mr. Trump.“I’ve talked with people in the intelligence community that do have concerns about the White House, about the president, and I think those concerns take a number of forms,” Mr. Schiff said, without confirming any specific incidents.“What the intelligence community considers their most sacred obligation is to protect the very best intelligence and to protect the people that are producing it.”

Democrats, Liberals Catch McCarthyistic Fever - America is a strange place and the blow-up over Mike Flynn’s conversation with Russian Ambassador Sergey Kislyak is making it even stranger. Liberals are sounding like conservatives, and conservatives like liberals. Rep. Steve King, an Iowa Republican who serves on the House Judiciary Committee, made perfect sense when he remarked on CNN concerning the intelligence leaks that are now turning into a flood: “We’ve got to have some facts to work with here. And what troubles me is that … there are people within the intelligence community that disagree with President Trump [and] that don’t want to see his administration succeed. … General Flynn has been subject to a political assassination here regardless of what he did or didn’t say to President Trump or Vice President Pence.” Quite right. On the liberal side, however, the hysteria has been non-stop. In full prosecutorial mode, The New Yorker’s Ryan Lizza demanded to know: “Did Trump instruct Flynn to discuss a potential easing of sanctions with Russia? Did Flynn update Trump on his calls with the Russian Ambassador? Did Trump know that Flynn lied to Pence about those contacts? What did the White House counsel do with the information that he received from [Acting Attorney General Sally] Yates about Flynn being vulnerable to blackmail?” At The Nation, Joan Walsh was thrilled to hear the media asking “the old Watergate question about what the president knew and when.” “We’ve said it before and we’ll say it again,” declared Bill Moyers and Michael Winship at Alternet: “there MUST be an investigation by an independent, bipartisan commission of Russia’s ties to Donald Trump and his associates and that nation’s interference in our elections.” At The Intercept, the perennially self-righteous Glenn Greenwald said intelligence agents are “wholly justified” in leaking inside information because “[a]ny leak that results in the exposure of high-level wrongdoing – as this one did – should be praised, not scorned and punished.” Finally, there was The New York Times, which, in Thursday’s lead editorial, compared the Flynn contretemps to Watergate and Iran-Contra, expressed “shock and incredulity that members of Mr. Trump’s campaign and inner circle were in repeated contact with Russian intelligence officials,” and called for a congressional investigation into whether the White House has been taken over by Moscow:

Leading Progressives Kucinich and Greenwald: Even Americans Who Hate Trump Should Defend Him Against Attempted Coup by the “Deep State” … A Coup Which Is Being Attempted “So That This Military Industrial Intel Axis Can Cash In” --Former liberal congressman and presidential candidate Dennis Kucinich said Tuesday: What’s at the core of this is an effort by some in the intelligence community to upend any positive relationship between the U.S. and Russia. And I tell you there’s a marching band and Chowder Society out there. There’s gold in them there hills. There are people trying to separate the U.S. and Russia so that this military industrial intel axis can cash in. … What’s going on in the intelligence community with this new president is unprecedented. They’re making every effort trying to upend him.  It’s not just this administration. I want to remind the viewers and all those who are on the panel that in the closing months of the Obama administration, they put together a deal with Russia to create peace in Syria. A few days later, a military strike in Syria killed a hundred Syrian soldiers and that ended the agreement. What happened is inside the intelligence and the Pentagon there was a deliberate effort to sabotage an agreement the White House made. Similarly, Pulitzer prize winning journalist Glenn Greenwald said today: The deep state stays and exercises power even as presidents who are elected come and go. They typically exercise their power in secret, in the dark, and so they’re barely subject to democratic accountability, if they’re subject to it at all. It’s agencies like the CIA, the NSA and the other intelligence agencies, that are essentially designed to disseminate disinformation and deceit and propaganda, and have a long history of doing not only that, but also have a long history of the world’s worst war crimes, atrocities and death squads. And it is important to resist them. […] That isn’t what this resistance is now doing. What they’re doing instead is trying to take maybe the only faction worse than Donald Trump, which is the deep state, the CIA, with its histories of atrocities, and say they ought to almost engage in like a soft coup, where they take the elected president and prevent him from enacting his policies. And I think it is extremely dangerous to do that. Even if you’re somebody who believes that both the CIA and the deep state, on the one hand, and the Trump presidency, on the other, are extremely dangerous, as I do, there’s a huge difference between the two, which is that Trump was democratically elected and is subject to democratic controls, as these courts just demonstrated and as the media is showing, as citizens are proving. But on the other hand, the CIA was elected by nobody. They’re barely subject to democratic controls at all. And so, to urge that the CIA and the intelligence community empower itself to undermine the elected branches of government is insanity. That is a prescription for destroying democracy overnight in the name of saving it.

Pentagon Chief Rejects Military Cooperation With Russia -- One day after Defense Secretary Jim Mattis told US NATO allies they will have to pay up and meet their mandatory quota of 2% of GDP (which only 5 nations currently satisfy, among them the US and Greece), on Thursday the Pentagon's new chief also had some bad news for Russia when he rejected any kind of military collaboration with Russia, despite previous calls by Putin for the West to work with his country on Syria and other issues. Quoted by the WSJ, Mattis said at NATO's Brussels headquarters that “We are not in a position right now to collaborate on a military level” adding that  “our political leaders will engage and try to find common ground or a way forward where Russia, living up to its commitments, will return to a partnership of sorts, here with NATO.” Prior to the meeting, Russian Defense Minister Sergei Shoigu expressed hope for cooperation but warned that “attempts to build a dialogue from a position of strength with regard to Russia are hopeless.”

Germany Issues Stark Warning To Trump: Stop Threatening The EU, Favoring Russia - Two days after the Pentagon's new chief Jim Mattis appeared before a full conference room in Brussels, and issued an ultimatum to NATO to boost spending or risk a cut in US support, Germany's Defense Minister Ursula von der Leyen "fired a salvo of warnings" back at Washington, cautioning it against hurting European cohesion, abandoning core Western values and seeking a rapprochement with Russia behind the backs of its allies. In a hard-hitting speech at the Munich Security Conference against President Donald Trump's administration, German Defence Minister Ursula von der Leyen urged the United States not to take transatlantic ties for granted. "Our American friends know well that your tone on Europe and NATO has a direct impact on the cohesion of our continent," the German minister told the Munich Security Conference. "A stable European Union is also in America’s interest, as is a strong and unified NATO," she said, quoted by AFP.

Deutsche Bank examined Donald Trump's account for Russia links - The scandal-hit bank that loaned hundreds of millions of dollars to Donald Trump has conducted a close internal examination of the US president’s personal account to gauge whether there are any suspicious connections to Russia, the Guardian has learned. Deutsche Bank, which is under investigation by the US Department of Justice and is facing intense regulatory scrutiny, was looking for evidence of whether recent loans to Trump, which were struck in highly unusual circumstances, may have been underpinned by financial guarantees from Moscow. The Guardian has also learned that the president’s immediate family are Deutsche clients. The bank examined accounts held by Ivanka Trump, the president’s daughter, her husband, Jared Kushner, who serves as a White House adviser, and Kushner’s mother. The internal review found no evidence of any Russia link, but Deutsche Bank is coming under pressure to appoint an external and independent auditor to review its business relationship with President Trump. Democratic congressman Bill Pascrell Jr, a member of the House Ways and Means committee, said: “We know that Deutsche Bank is a major lender to President Trump, and the firm is also currently undergoing scrutiny by the Department of Justice for alleged misconduct. “I think it’s important for the American people to know the extent of the bank’s involvement with the president, and whether there is any Russian involvement in loans made to Mr Trump.”

Pence heads to Europe on reassurance tour | Reuters: U.S. Vice President Mike Pence will seek on Saturday to soothe allies unnerved by his boss' unorthodox statements on Russia and NATO as he stresses America's commitment to Europe during the first major foreign address for the Trump administration. Pence will tell the annual Munich Security Conference that Europe is an "indispensable partner" for the United States, a message he will repeat privately in meetings with a dozen leaders over the weekend and on Monday, a senior White House foreign policy adviser told reporters. "We are the most secure and most prosperous when both the U.S. and Europe are strong and united," the adviser said, previewing Pence's trip. President Donald Trump alarmed allies during his campaign for office by breaking with traditional Republican views on the transatlantic relationship. Trump has expressed admiration for Russian President Vladimir Putin, with whom he said he would like to work to fight Islamic State militants, and has questioned the value of the North Atlantic Treaty Organization. In Munich, Pence will hold a series of meetings with leaders, including German Chancellor Angela Merkel, Ukrainian President Petro Poroshenko, and leaders from Estonia, Latvia and Lithuania. Pence will emphasize that Russia and Ukraine need to fully implement the Minsk ceasefire agreement, and will stand firm on economic sanctions on Russia related to its aggression in Ukraine, the adviser told reporters.

Where Is Rex Tillerson? Top Envoy Keeps Head Down and Travels Light — When President Trump met with Prime Minister Benjamin Netanyahu of Israel at the White House on Wednesday, Secretary of State Rex W. Tillerson was conspicuously absent. He was on his first flight overseas as America’s top diplomat, pretty much alone. Mr. Tillerson, who has no government experience, also missed two other important occasions in Washington this week: a lunch with Russia’s ambassador and Mr. Trump’s meetings with the prime minister of Canada. He has yet to hold a news conference. Among the eight senior State Department staff members who accompanied Mr. Tillerson on Wednesday to Bonn, five are serving in temporary positions. Mr. Tillerson was not expected to do much talking, at least publicly, at a Group of 20 foreign ministers’ meeting here on Thursday, which will lay the groundwork for the Group of 20 meeting in July. The State Department did not invite the customary scrum of reporters, apparently hoping that Mr. Tillerson could continue to keep what has so far been a low profile. Mr. Tillerson relied on his acting deputy, Thomas A. Shannon Jr., a holdover from the Obama administration, to be his stand-in for the meetings this week with Prime Minister Justin Trudeau of Canada and the lunch with ambassador Sergey I. Kislyak of Russia, who is entangled in the growing scandal that cost Michael T. Flynn his job as Mr. Trump’s national security adviser. Mr. Tillerson sent Mr. Shannon to Mr. Trump’s meetings with the Israeli prime minister instead. The State Department has not held its usual daily briefing since Mr. Trump was inaugurated last month, and Mr. Tillerson has said almost nothing publicly since the Senate confirmed him for the job two weeks ago. Part of the problem may be an extraordinary leadership vacuum at the department. Some appointees to top jobs during the Obama administration resigned or retired, and most of the rest were dismissed by the Trump administration long before there were candidates to replace them.

Brad DeLong is far too lenient on trade policy’s role in generating economic distress for American workers --Josh Bivens, EPI - Brad DeLong posted a widely-read piece on Vox a couple of weeks ago effectively exonerating globalization and trade policy from accusations that it has contributed to economic distress for low- and moderate-wage American workers. He doubled-down on specific claims this week in a piece at Project Syndicate. Below I’ll assess some of his claims in a bit of detail, but here’s a “too-long; didn’t read” checklist of how I grade the accuracy of some of his main claims:

  • Putting pen-to-paper on trade agreements contributed nothing to aggregate job loss in American manufacturing. This is almost certainly true.
  • The aggregate job loss we have seen in manufacturing is due to automation plus declining domestic demand for manufactured goods, period. This is mostly false. Trade deficits, especially with China in the last 15-20 years, have contributed significantly to overall manufacturing job-loss..
  • The source of these rising trade deficits is mostly an overvalued U.S. dollar, which has nothing to do with trade policy. It’s true that an overvalued dollar is what’s behind rising trade deficits, but saying that has nothing to do with trade policy is semantics. Call it macroeconomic policy if you want, but the way an overvalued dollar hurts Americans is through its impact on trade flows.
  • The trade agreements we have signed are mostly good policy and have had only very modest regressive downsides for American workers. This is false.
  • Globalization writ large has been tough on some American workers and policymakers have failed to compensate losers. This is true, but I think DeLong underestimates the number of losers and the size of their losses.

So, let me dive deeper into each one of these arguments:

Conservatives Take A Hard Line On Obamacare Repeal, Putting GOP In A Bind ― Conservatives in the House Freedom Caucus voted among themselves Monday night to band together and support only an Obamacare repeal that is at least as aggressive as a bill the House and Senate passed in 2015, putting GOP leaders in a bind with their conference and perhaps even threatening the possibility of passing a repeal.The group of roughly 35 to 40 House conservatives voted to take this official position ― meaning it received the support of at least 80 percent of the members and is therefore supposed to be the position of all lawmakers in the group ― amid some GOP consternation that Republicans ought to focus more on repairing the law rather than repealing it, as well as amid heavy voter pressure in many districts to leave the law intact.“If it’s less than the 2015 [bill], we will oppose it,” Freedom Caucus Chairman Mark Meadows (R-N.C.) told a small group of reporters Monday night.Meadows added that the Freedom Caucus would encourage replacing Obamacare at the same time Congress repeals it but that if GOP leaders put the same 2015 reconciliation bill gutting major parts of Obamacare on the floor, conservatives in the group would support it.The 2015 repeal bill removed the Medicaid expansion that is popular in many red states ― including among many Republican governors ― and repealed the individual and employer mandates. The bill also removed the law’s subsidies and the taxes that helped to pay for them. In short, it would disassemble Obamacare.By insisting that the repeal bill be as forceful as that 2015 measure ― which technically got to President Barack Obama’s desk at the beginning of 2016 ― conservatives have staked out a hard line that some GOP moderates may now have a problem following.Many Republicans had seemed ready to support parts of the law. If conservatives really can stick to this position, they could be endangering the ability to get 218 Republicans in the House and 50 in the Senate ― to say nothing of the ongoing disagreements among Republicans about what a replacement should look like.

Republican Version Of 'Cadillac Tax' In Obamacare Replacement Drawing Fire From Employers And Unions -- Back in 2009, the Obama administration drew a lot of fire from employers and labor unions over Obamacare's so-called "Cadillac Tax", a tax on healthcare premiums over a certain threshold.  Apparently, the United Auto Workers in the Midwest had grown accustomed to their unlimited supply of Viagra, completely free of charge, and were unwilling to 'go down' without a fight. Fast forward eight years and now several Republican plans for replacing the ACA include their own curb on generous health plans: a cap on how much of employer-provided health benefits could be shielded from taxes. Such a cap could force certain workers to start paying income tax on a portion of the cost of their coverage. Currently, when an employee receives health insurance, the value of that benefit isn’t subject to either income or payroll taxes. On average, employer coverage for a single worker last year ran $6,435, while for a family, the tab was $18,142, according to a survey by the Kaiser Family Foundation. Employers bore about 82% of the cost for single plans, and about 70% for family coverage. While the Republican plan would limit the deductibility of premium payments as opposed to implementing a special tax, as the Wall Street Journal points out, “in the end, they both would have similar effects,” including pushing companies toward skinnier health plans, according to Steve Wojcik, an official with the National Business Group on Health, which represents employers. “It’s six of one, a half-dozen of the other.”

Nervous About the ACA, GOP Divisions Emerge Over Repeal Effort - After much campaign talk about repealing the law in the first days of the Trump administration, some moderate Republicans are now wary of rapidly gutting the program without an alternative in place. Conservatives, meanwhile, are demanding an immediate roll-back before political momentum collapses. Representative Charlie Dent of Pennsylvania, said he wants a “fully developed and articulated” replacement plan before repeal goes forward. While he’s voted in the past to repeal Obamacare without one, he said it’s different now that it could actually happen. “We’re playing with live rounds this time,” Dent said. On the other hand are lawmakers like Representative Trent Franks, an Arizona Republican and a member of the conservative Freedom Caucus. “I’m concerned that certain senators are going to go wobbly on even the repeal part of this effort,” Franks said. “We have to move the strongest bill that we have there so we can at least gain that repeal.” The divisions come just as supporters of the law may be gaining some momentum. In the last several weeks, GOP lawmakers have been flooded with anti-repeal phone calls to their offices, and back in their districts have faced fiery exchanges at town halls with constituents worried about health care. Next week, they’ll head home for a week-long break when many lawmakers plan to hold more town halls and other public events.

 IRS won’t withhold tax refunds if Americans ignore ACA insurance requirement - The Trump administration is taking its first steps to put its imprint on the Affordable Care Act, reversing plans to withhold tax refunds this year from Americans who flout an insurance requirement in the law while proposing a series of rule changes to encourage insurers to remain in ACA marketplaces. The Internal Revenue Service has revoked an Obama-era instruction to taxpayers that was taking effect during the current filing season as a way to further compliance with the ACA’s requirement that most Americans carry health insurance or pay a tax penalty. Under the instruction, the IRS had announced that it would no longer process tax returns for people who fail to send a notice with their returns that they have insurance, are exempt from the requirement or are paying the fine. Instead, the agency said in a statement on Wednesday, tax returns will be processed as always, even for individuals who do not provide the required information. The IRS said the decision, made earlier this month but not previously publicized, was in line with an executive order that President Trump signed hours after his inauguration, giving agencies broad authority to lighten the burden of federal rules under the ACA. The IRS confirmed the change on the same morning that Health and Human Services officials proposed a set of rules to help protect insurers and shore up ACA marketplaces in the short term while Republicans work on demolishing the law. The proposal drew swift praise from the insurance industry and condemnation from consumer advocates and congressional Democrats. Taken together, the moves by the IRS and HHS demonstrate the balancing act the fledgling administration is attempting with the 2010 law, which remains one of Trump’s top targets. The administration is eager to undermine as much of the ACA as it can through executive actions, but it also is eager to stave off any abrupt collapse of the insurance marketplaces covering about 10 million people — and to minimize any political fallout for the GOP. While allowing tax refunds to keep flowing, the IRS change does not affect the actual penalty most people face for not having health coverage, which can be eliminated only through a new law. The penalty is $695 per adult or 2.5 percent of a household’s income, whichever is greater.

IRS Deals Major Blow To Obamacare Mandate -- The tax agency has stopped requiring individual filers to indicate whether they maintained health coverage or paid the mandate penalty as required under the law How much difference does a single line on a tax form make? For Obamacare's individual mandate, the answer might be quite a lot. Following President Donald Trump's executive order instructing agencies to provide relief from the health law, the Internal Revenue Service appears to be taking a more lax approach to the coverage requirement.The health law's individual mandate requires everyone to either maintain qualifying health coverage or pay a tax penalty, known as a "shared responsibility payment." The IRS was set to require filers to indicate whether they had maintained coverage in 2016 or paid the penalty by filling out line 61 on their form 1040s. Alternatively, they could claim exemption from the mandate by filing a form 8965. For most filers, filling out line 61 would be mandatory. The IRS would not accept 1040s unless the coverage box was checked, or the shared responsibility payment noted, or the exemption form included. Otherwise they would be labeled "silent returns" and rejected. Instead, however, filling out that line will be optional. Earlier this month, the IRS quietly altered its rules to allow the submission of 1040s with nothing on line 61. The IRS says it still maintains the option to follow up with those who elect not to indicate their coverage status, although it's not clear what circumstances might trigger a follow up. But what would have been a mandatory disclosure will instead be voluntary. Silent returns will no longer be automatically rejected. The change is a direct result of the executive order President Donald Trump issued in January directing the government to provide relief from Obamacare to individuals and insurers, within the boundaries of the law. "The recent executive order directed federal agencies to exercise authority and discretion available to them to reduce potential burden," the IRS said in a statement to Reason. "Consistent with that, the IRS has decided to make changes that would continue to allow electronic and paper returns to be accepted for processing in instances where a taxpayer doesn't indicate their coverage status."

Aetna CEO Says Obamacare In "Death Spiral" And "It's Getting Worse" -- Back in the summer of 2016, as Obamacare rates were being set for the 2017 plan year, we repeatedly argued that the entire system was on the "verge of collapse" as premiums were soaring, risk pools were deteriorating and insurers were pulling out of exchanges all around the country leaving many Americans with just a single 'option' for health insurance (see "Obamacare On "Verge Of Collapse" As Premiums Set To Soar Again In 2017"). And while Democrats may be all too willing to quickly dismiss our analysis, they may want to listen to the warnings of the CEO of one of the country's largest health insurers who says that Obamacare is in a "death spiral."  In speaking with the Wall Street Journal, Aetna CEO Mark Bertolini said, among other things, that the "risk pools are deteriorating in the ACA" to a point that it would inevitably result in more withdrawals this year.   Per The Hill:"It's not going to get any better; it's getting worse.""That logic shows just how much the risk pools are deteriorating in the ACA," Bertolini said.He added: "I think you will see a lot more withdrawals this year. ... There isn't enough money in the ACA as structured, even with the fees and taxes, to support the population that needs to be served.""It is in a death spiral," he said, but did not say whether Aetna would participate in the exchanges in 2018.

Why the feds must take the lead on health reform. - In yesterday’s post on my new draft essay, Federalism and the End of Obamacare, I emphasized the benefits of returning more regulatory authority to the states. Today, I’d like to draw out a different point: the need for the federal government to take the lead when it comes to financing health reform.The states face two enormous obstacles to achieving near-universal coverage on their own. First, the states don’t have the same fiscal capacity as the federal government. Keep in mind that the ACA is a large, countercyclical spending program:When a recession hits, many people will lose both their jobs and their employer-sponsored coverage. The ranks of those eligible for Medicaid and for ACA subsidies will predictably grow, leading to larger federal outlays. At the same time, the economic downturn will depress tax revenues. The federal government can deficit-spend to manage these countercyclical fluctuations. The states, however, cannot. With the exception of Vermont, the states are legally obliged to balance their budgets every year. And states are understandably reluctant to adopt large obligations that will require savage spending cuts or hefty tax increases when times get tough. Cuts and taxes are not only unpopular, but they would also depress the economy further, exacerbating the recession. Broad coverage expansions thus commit states to an economic policy that could inflict serious damage on their residents.Second, ERISA poses an enormous problem for states that want to tackle health reform. No government, state or federal, likes to impose new taxes. But governments face a special challenge when their residents can complain that the new tax is discriminatory. That problem arises with particular force when states try to impose new taxes to finance a coverage expansion. A resident who gets health coverage through her job—let’s call her Anna—already faces a reduction in take-home pay commensurate with the value of that coverage. Another resident who works at a similar job but does not get health coverage—let’s call him Bob—likely receives higher cash wages. Should Anna and Bob both face the same new tax, even if it finances a coverage expansion that will only benefit Bob?

WaPo: Federal agents conduct immigration enforcement raids in at least six states -- From the article: Officials said the raids targeted known criminals, but they also netted some immigrants without criminal records, an apparent departure from similar enforcement waves during the Obama administration. Last month, Trump substantially broadened the scope of who the Department of Homeland Security can target to include those with minor offenses or no convictions at all. Trump has pledged to deport as many as 3 million undocumented immigrants with criminal records. … If the Administration does undertake removal of 3 million undocumented immigrants (whether there are 3 million undocumented with criminal records is up for debate), there will be substantial fiscal costs. The American Action Forum, headed by CBO’s former head Doug Holtz-Eakin, estimated the 20 year cost of deporting all 11 million at between $419.6 to $619.4 billion. One time cost (so excluding the subsequent 20 year’s of expenditures) would range from $103.9 billion to $303.7 billion.   Assuming linearity, this means the 20 year recurrent costs will be only $114-$169, and one removal time cost of $28-$83 billion. That can be added to the $21.6 billion for the completion of the wall [1]. In the short-run, implementation of mass deportations will inject spending into the economy, stimulating the economy. It’s not quite “military Keynesianism”, but is in economic terms equivalent. The net impact on GDP will depend on the extent of monetary accommodation, the demand for US Treasurys from the private sector and the foreign official sector, and (over the medium term) the economy’s proximity to full employment. In the long run, assuming linearity, potential GDP will be 1.6% lower than otherwise in twenty years.  Digression: The President has asserted he will negotiate down the price of the wall [2]; my question — why does he care about the price tag if the Mexicans are ultimately going to pay? Is it altruism?

Trump Weighs Mobilizing National Guard for Immigration Roundups - -- The White House distanced itself Friday from a Department of Homeland Security draft proposal to use the National Guard to round up unauthorized immigrants, but lawmakers said the document offers insight into the Trump administration’s internal efforts to enact its promised crackdown on illegal immigration. Administration officials said the proposal, which called for mobilizing up to 100,000 troops in 11 states, was rejected, and would not be part of plans to carry out President Donald Trump’s aggressive immigration policy. If implemented, the National Guard idea, contained in an 11-page memo (http://apne.ws/2l1Dj0k) obtained by The Associated Press, could have led to enforcement action against millions of immigrants living nowhere near the Mexican border. Four states that border on Mexico were included in the proposal — California, Arizona, New Mexico and Texas — but it also encompassed seven states contiguous to those four — Oregon, Nevada, Utah, Colorado, Oklahoma, Arkansas and Louisiana. Despite the AP’s public release of the document, White House spokesman Sean Spicer said there was "no effort at all to utilize the National Guard to round up unauthorized immigrants." A DHS official described the document as a very early draft that was not seriously considered and never brought to Homeland Security Secretary John Kelly for approval. However, DHS staffers said Thursday that they had been told by colleagues in two DHS departments that the proposal was still being considered as recently as Feb. 10. DHS spokeswoman Gillian Christensen declined to say who wrote the memo, how long it had been under consideration or when it had been rejected. The pushback from administration officials did little to quell outrage over the draft plan. Three Republican governors spoke out against the proposal and numerous Democratic lawmakers denounced it as an overly aggressive approach to immigration enforcement.

Utilizing the National Guard to Deport Undocumented Immigrants - Menzie Chinn - What are the fiscal and economic implications? From Associated Press:The Trump administration considered a proposal to mobilize as many as 100,000 National Guard troops to round up unauthorized immigrants, including millions living nowhere near the Mexico border, according to a draft memo obtained by The Associated Press.Staffers in the Department of Homeland Security said the proposal had been discussed as recently as last Friday.The 11-page document calls for the unprecedented militarization of immigration enforcement as far north as Portland, Oregon, and as far east as New Orleans, Louisiana.… The non-classified memo is here. Should that document disappear, here is another copy. The relevant text is here:  From NYT today:Sean Spicer, the White House press secretary, said Friday morning that the report by The A.P. was “100 percent not true.”“It is false,” he said. “It is irresponsible to be saying this.”He told reporters traveling with the president to an event in South Carolina that “there is no effort at all to round up, to utilize the National Guard to round up illegal immigrants.” He added that “I wish you guys had asked before you tweeted.” An A.P. reporter noted that the news service asked for comment multiple times before the article was published. I have not been able to obtain cost estimates, which surely depend on the duration of mobilization, and the nature of operations that will be conducted by the National Guard units. I will add cost estimates as they become available.  For discussion of costs of deporting 11 million undocumented immigrants, see this post.

"Fearful, Panicked" Illegal Immigrants Flood Mexican Consulates Across The U.S. -- After a wave of raids last weekend by U.S. Immigration and Customs Enforcement officials landed over 600 people, in cities across the country, in federal detention centers, illegal immigrants around the nation are suddenly growing far more concerned about what the Trump administration might mean for their future residency plans.  Add to that this morning's latest leaks/rumors, courtesy of the Associated Press, that Trump is making plans to call up100,000 National Guard troops to "round up" illegal immigrants and you have a recipe for nationwide panic among those who have intentionally violated U.S. immigration laws.  As the New York Times points out, this uncertainty over Trump's approach to deportations has Mexican nationals flooding consulates all over the country for legal advice on how to fight deportation.Perhaps nobody is as busy as Carlos García de Alba, the consul general in Los Angeles, one of the largest offices in the country. He has begun to train nearly every employee in basic legal services and expects to bring in many more immigration lawyers. Still, in recent months, Mr. García has felt torn between his efforts to increase services to worried constituents and trying to calm their nerves.“We don’t want to provoke and feed a kind of paranoia among our nationals here,” Mr. García said in an interview. “There is a kind of psychosis, people are really scared. Up to now we haven’t seen anything that is really different than the last several years, but the environment is making people panic and they are completely fearful. They want to know what is going to happen and how to protect themselves.”

“Who Will Pay for the Wall?”--  Menzie Chinn - That’s the title of a new post written by me, on Econofact. Short answer to the question posed: not likely just the Mexicans…The Issue:  Building a wall on the Mexican border –and having Mexico pay for it– has been a centerpiece of President Trump’s policies to control immigration. The costs of building the wall are uncertain, ranging from $12 billion to $25 billion. The Trump Administration has stated that one possible way to fund the wall is through a Destination Based Cash Flow Tax applied to U.S.-Mexico trade. There are questions about the amount of revenue that this tax could raise and, even more importantly, the wider consequences of this tax, not only for trade with Mexico but for trade with all countries.  In the memo, I focused on the likelihood the DBCFT will do the trick. After taking into account elasticities and partial exchange rate adjustment, the Mexicans are unlikely to be paying fully.  Capital controls via a transactions tax on remittances are unlikely to fully fund the wall (and what revenues are obtained are likely to at least partly come from Americans and legal immigrants). A tariff on Mexican imports would likely to be at least partly funded by American consumers and producers.

How Serious Is the Threat to Global Financial Stability From a Border-Adjustment Tax? -  Brad Setser - Neil Irwin’s column on the border-adjustment tax spurred an interesting debate. Irwin notes that a 25 percent rise in the dollar (or even a somewhat smaller rise) would have an impact outside the United States, as the dollar is a global currency. Dean Baker and Jared Bernstein noted that the dollar moves around a lot—it has moved about 20 percent since mid 2014—and the global economy survived. The projected moves in the dollar are no larger than the dollar’s move over the last three years. Baker: “Movements of this size happen all the time. They certainly can cause problems, but the financial system generally deals with it.” Fair enough.*I still worry though. There is a difference between a 20 percent move (off a long-term low) and a 30 or 40 percent move. And there is a difference between normal exchange rate volatility and large, sustained currency shifts. I would note that the 20 percent rise in the dollar in late 2014 and early 2015 contributed to the change in China’s currency regime—and China’s shift to managing against a basket roiled global markets from August 2015 to February 2016. The world survived, but it wasn’t totally smooth. Let me focus on two specific reasons for concern: One. Balance sheet mismatches in emerging economies.** Two. Dollar pegs, or basket pegs heavily weighted to the dollar.

The Vulnerabilities in the Ninth Circuit’s Executive-Order Decision -- The Ninth Circuit Court of Appeals delivered an extraordinary rebuke to President Trump. The politically diverse panel (two Democratic appointees, one Republican) rejected just about every argument put forth by the Justice Department and left intact a temporary restraining order that prevented Trump’s ballyhooed executive order on immigration from going into effect while a federal court in Seattle considers a challenge brought by the states of Washington and Minnesota. . But is the Ninth Circuit ruling correct on the law? And what are the prospects for the underlying case as it continues through the legal system toward an expected dénouement in the Supreme Court? Short answer: one can’t say for sure. But I think there are several vulnerabilities in the Ninth Circuit opinion that may help the Trump Administration pull this case out in the end. Here are four areas of concern.
Standing. Article III of the Constitution says that the federal courts may only decide cases and controversies. The Supreme Court has interpreted this command to mean that only plaintiffs who can claim an “injury in fact” caused by the defendants are allowed to bring cases. If you’re simply interested in a case or, say, alarmed by something the President does but can’t claim a real injury, you’re said to lack standing, and the courts will toss your case without addressing the merits.
Presidential power. Trump issued the executive order pursuant to his power under this federal law: Suspension of entry or imposition of restrictions by President Whenever the President finds that the entry of any aliens or of any class of aliens into the United States would be detrimental to the interests of the United States, he may by proclamation, and for such period as he shall deem necessary, suspend the entry of all aliens or any class of aliens as immigrants or nonimmigrants, or impose on the entry of aliens any restrictions he may deem to be appropriate. What does the Ninth Circuit say about this provision? Nothing
Due process of law. The primary ground for the Ninth Circuit’s opinion is that “the Government has not shown that the Executive Order provides what due process requires, such as notice and a hearing prior to an individual’s ability to travel.” But in making this finding, the judges refer primarily to the order’s effect on lawful permanent residents, i.e., green-card holders. The main effect of the order, though, is on other immigrants: refugees and visa applicants and visa holders. By definition, they have fewer rights to due process than green-card holders..
Religious discrimination. Most of the criticism of the executive order has focused on the possibility of religious discrimination. Many believe that the order represents a “Muslim ban,” as promised by Trump during the campaign, and such a rule would run afoul of the First and Fourteenth Amendments. . By its own terms, the order does not mention Muslims, or any other religion.

 Federal judge says court proceedings will continue on Trump’s travel ban - A federal judge in Seattle says district court proceedings on President Trump’s travel ban will continue, even as an appeals court weighs whether to rehear the case, according to Reuters. U.S. District Judge James Robart ordered both sides in the legal battle to continue on Monday and reportedly expressed surprise that the White House had even requested a delay since Trump declared  “SEE YOU IN COURT” on Twitter last week. Trump came under fire earlier this month for labeling Robart — who had put Trump’s travel ban on a temporary hold while the legal case against it proceeds — a “so-called judge" and accusing the courts of being politically motivated. The Trump administration asked Robart earlier on Monday to postpone the district court case until the San Francisco-based 9th U.S. Circuit Court of Appeals decides whether to rehear a three-judge panel’s decision last Thursday to keep the immigration policy on ice. An unknown 9th Circuit judge requested Friday that the entire appeals court vote on whether to rehear the case through “en banc” review. That process would task an 11-judge panel to review the case and could result in another hearing. A majority of the active judges would need to agree to review the case.

Challenge to Trump travel ban moves forward in two courts | Reuters: The most consequential legal challenge to U.S. President Donald Trump's travel ban will proceed on two tracks in the next few days: in a U.S. appeals court vote in San Francisco and the Seattle courtroom of a federal judge. The 9th U.S. Circuit Court of Appeals will vote on whether to reconsider an appeal in the case that was decided in the Seattle court last week. That vote could reveal which judges disagree with their colleagues on the bench and support the arguments behind the new president's most controversial executive order. In Seattle, the state of Washington will attempt to probe Trump's motive in drafting the Jan. 27 order. In another case, in Virginia, a federal judge on late Monday halted enforcement of portions of the order against Virginia visa holders or permanent residents, concluding that the travel ban likely violates the U.S. Constitution’s protections for freedom of religion. The rulings put the order on hold until the courts can rule on the underlying merits. Ultimately, they will have to address questions about the extent of the president's power on matters of immigration and national security. Traditionally, judges have been extremely cautious about stepping on the executive branch’s authority in such matters, legal experts say. Trump's directive, which he said was necessary to protect the United States from attacks by Islamist militants, barred people from Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen from entering the country for 90 days. Refugees were banned for 120 days, except those from Syria, who were banned indefinitely. The ban was backed by around half of Americans, according to a Reuters/Ipsos poll, but triggered protests across the country and caused chaos at some U.S. and overseas airports.

Persuade -- Steve Randy Waldman - A lot of arguments which ought to be about politics become arguments about principles or morality. We can have interesting arguments over competing values, like weighing the concrete harms that might be done by publicly outing undocumented students against support for free expression and nonviolence. Even when we share similar values, people will weigh tradeoffs between them differently to arrive at very different conclusions. And that’s great.But it isn’t politics. Among the communities that I am a part of, within the well-appointed ghetto I live in, there is an unusual degree of consensus that we are living through a dangerous time, that the current governing coalition of our country represents a mix of malignity and incompetence so hazardous that our absolute priority must be to check and constrain it. That is much less a moral or ethical problem than it is a practical one. Within the political system we have inherited, with its quirks and virtues and flaws, how can we ensure that we have and can sustain the capacity to block the most terrible things? There are, thank goodness, the courts. They sabotaged the ACA Medicaid expansion, stranding millions of low-income people in Red states without healthcare. They prevented implementation of President Obama’s humane expansion of DACA and implementation of DAPA. But now they have also prevented implementation of President Trump’s ugly executive order on immigration, which is terrible in its content but absolutely terrifying in light of the manner in which it was initially (and intentionally, I think) implemented. So, yay courts.

If U.S. asks foreigners for their passwords, American travelers may face the same  -- Privacy advocates voiced indignation Thursday at a White House plan to demand that some visa-bearing foreign travelers to the United States provide officials the passwords to their social media accounts and turn over their cellphones to be searched. The advocates said the plan was unlikely to deter terrorists and might be turned on Americans traveling abroad. “If we adopt it, other countries are going to adopt it,” said David Kaye, a law professor at the University of California at Irvine. “Americans who travel better be prepared to provide this to other governments.” Homeland Security Secretary John Kelly laid out the proposal this week on Capitol Hill and again in an interview with National Public Radio that aired on Thursday. Under the plan, Kelly said, border agents would ask visitors “to give us a list of websites that they visit and the passwords to get on those websites to see what they’re looking at.” Agents would also examine “what they tweet, cellphones, cellphone conversations or cellphone contact books to where we can run them against databases: telephone numbers, people, names.” To start with, Kelly said, the proposal would be aimed at visitors from the seven nations named in a 90-day travel ban that President Donald Trump set in a Jan. 27 executive order. Those majority-Muslim countries are Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen. He added that the program “could be” expanded.

Paying Them Not To Kill Us? - I bet you didn’t know the Department of Homeland Security takes millions of your tax dollars and hands it over to Muslim organizations in America so they can try and convince their minions not to conduct a jihad against us. Isn’t that precious? I guess if they are turning down the money because of Trump, that means they will encourage their junior jihadists to violently oppose our society. Fourth Muslim group rejects federal grant to fight extremism. A California Islamic school wanted to keep an open mind before Donald Trump took office. Butless than a month into Trump’s presidency, the school rejected $800,000 in federal funds aimed at combatting violent extremism.The decision made late Friday night by the Bayan Claremont graduate school’s board to turn down the money — an amount that would cover more than half its yearly budget — capped weeks of sleepless nights and debate. Many there felt Trump’s rhetoric singling out Islamic extremism and his travel ban affecting predominantly Muslim countries had gone too far.It also made the school the fourth organization nationwide under the Trump administration to reject the money for a program created under President Barack Obama known as countering violent extremism, or CVE, which officials say aims to thwart extremist groups’ abilities to recruit would-be terrorists.Bayan Claremont had received the second-largest grant, among the first 31 federal grants for CVE awarded to organizations, schools and municipalities in the dwindling days of the Obama administration. The school had hoped to use the money to help create a new generation of Muslim community leaders, with $250,000 earmarked for more than a dozen local nonprofits doing social justice work.But the fledgling school’s founding president, Jihad Turk, said officials ultimately felt accepting t he money would do more harm than good.

Trump Withdraws Appeal Of Travel Ban Suspension, To Unveil New Immigration Order Next Week --During Trump's press conference, the president announced, among numerous other things, that he will issue a new executive action on immigration "next week sometime" which will be "tailored to the decision" issued by the 9th Circuit Court of Appeals, and will rescind the initial travel ban which has been challenged in legal battles across the nation."We are issuing a new executive action next week that will comprehensively protect our country," Trump said.At the same time, the DOJ asked the San Francisco-based Appeals Court not to review a decision by a three-judge panel to keep the immigration policy on hold while it moves through the legal system, citing plans to soon replace the order with a “superseding” one."Rather than continuing this litigation, the President intends in the near future to rescind the Order and replace it with a new, substantially revised Executive Order to eliminate what the panel erroneously thought were constitutional concerns," the DOJ said in a brief to the U.S. Court of Appeals for the 9th Circuit.As The Hill adds, a  judge on the appeals court had requested that the entire court vote on whether to review the case after a three-judge panel refused to lift a temporary restraining against the travel ban, which was issued while a lower court debates the merits of the policy. But with a new immigration order on the horizon, the administration appears to be backing down on appealing the decision, which would have taken weeks or months to resolve.

Trump Vows Lower Personal, Business Tax Rates As Part Of "Massive" Tax Plan, Stocks Surge - Trump did it again: one week after he promised to unveil "phenomenal" tax cuts, moments ago in his meeting with retail CEOs, who are meeting with the president to get him to kill the border adjustment tax idea, he pulled another OPEC, using the precise word the algos were looking for, and this time said that "we're doing a massive tax plan" so there will be a “much, much simpler tax code” that will lower rates for everybody in every bracket. He added that “other than H & R Block, people are going to love it” Of course, people would love to know when it is coming, to which Trump had no explicit answer, instead saying the "tax plan will be submitted in not so distant future”Trump then said that “there’s a lot of confidence in our economy right now,” Trump says, citing both the jobs report and the level of the stock market.Speaking to the retail CEOs, Trump said the retail industry is important to country in supporting millions of jobs, which however did not explain if the BAT will be cut - if so, then the level of corporate tax cuts would be far less, as there would be no partial revenue offset needed to balance the roughly $2 trillion in revenue losses over the next decade from cutting the tax rate from 35% to 20%. CEOs that were present at the Trump meeting include Brian Cornell, Target; Marvin Ellison, J.C. Penney; Hubert Joly, Best Buy; Art Peck, Gap; Bill Rhodes, AutoZone; Stefano Pessina, Walgreen Boots Alliance; Greg Sandfort, Tractor Supply; Jill Soltau, Jo-Ann Fabric and Craft Stores.

Libertarians split with Trump over controversial police tactic -- The White House has riled the country's civil libertarian wing after President Trump enthusiastically voiced support for a controversial law enforcement tool that allows an individual’s property or assets to be seized without a guilty verdict.   The president weighed in on what's known as "civil asset forfeiture" during an Oval Office meeting last week with sheriffs. The president, who ran on a law-and-order message, said he shared their desire to strengthen the practice and even said he would “destroy” the career of a Texas politician trying to end it.  The comments revived tensions with libertarians who have been fighting the practice under both Democratic and Republican administrations. Already piqued by the selection of former Alabama Sen. Jeff Sessions, a vocal supporter of asset forfeiture, to lead the Justice Department, the Libertarian Party itself condemned the comments.  “It was really disappointing to hear those words. He campaigned on the idea of helping people who are on the low end of the economic spectrum and this [law] disproportionately affects minorities and those who do not have the means to hire an attorney,” Libertarian National Committee Chair Nicholas Sarwark told Fox News.  Sarwark called the practice "immoral," adding that it is simply “government theft of individual property that flips the nation’s legal system on its head.”

The Future of Police Reform Under the Trump Administration –   Over the last few years, a spate of high-profile deaths at the hands of police officers, and concomitant claims of racial profiling, have prompted calls for widespread reform of local law enforcement agencies. The issue of police brutality or racially biased policing is not new, but the increased awareness of the issue has prompted unprecedented bipartisan calls for criminal justice reform. By 2016, the country seemed poised to experience a “criminal justice revolution,” as many municipal police departments and local officials promised the communities they served that they would implement reforms aimed at combatting racial profiling, increasing police accountability, and addressing factors that contributed to mass incarceration.  Yet, during his campaign, President Donald Trump effectively took a swipe at these efforts. He consistently referred to himself as the “law and order” candidate, a troubling moniker when one considers the impact that President Richard Nixon’s “law and order” policies—which relied on racially charged messaging targeted toward white voters—had on communities of color. Now, criminal justice reform advocates are pondering the fate of the federal government’s police reform efforts under a Justice Department (DOJ) led by U.S. Senator Jeff Sessions (R-Ala.), who was recently confirmed as U.S. Attorney General. And although the fate of these efforts may appear murky, a review of past DOJ-initiated reform efforts can offer some clarity by providing a window into how a “criminal justice revolution” can indeed continue to move forward in the years ahead

‘A Sense of Dread’ for Civil Servants Shaken by Trump Transition — Across the vast federal bureaucracy, Donald J. Trump’s arrival in the White House has spread anxiety, frustration, fear and resistance among many of the two million nonpolitical civil servants who say they work for the public, not a particular president. At the Environmental Protection Agency, a group of scientists strategized this past week about how to slow-walk President Trump’s environmental orders without being fired. At the Treasury Department, civil servants are quietly gathering information about whistle-blower protections as they polish their résumés. At the United States Digital Service — the youthful cadre of employees who left jobs at Google, Facebook or Microsoft to join the Obama administration — workers are debating how to stop Mr. Trump should he want to use the databases they made more efficient to target specific immigrant groups.“It’s like the movie music when the shark is coming,” Ms. Martin said, referring to “Jaws,” the 1975 thriller. “People are just wary — is the shark going to come up out of the water?” This article is based on interviews around the country with more than three dozen current and recently departed federal employees from the Internal Revenue Service; the Pentagon; the Environmental Protection Agency; the Justice and Treasury Departments; the Departments of Homeland Security, Veterans Affairs, and Housing and Urban Development; and other parts of the government. They reveal a federal work force that is more fundamentally shaken than usual by the uncertainties that follow a presidential transition from one party to the other.

Donald Trump Is Selling Access to the ‘Winter White House’ for $200,000 - As President Donald Trump headed to his private resort in Florida this weekend—his second trip in two weeks, and probably not his last this month—ethics experts and multiple senators voiced serious concerns about the president’s conducting business in a bustling, elite, members-only club.  Over the past 48 hours, Trump validated those concerns with gold-plated gusto. He hashed out a response to a North Korean missile launch on a busy patio, as people snapped photos and waiters cleared his salad. He hobnobbed with members and visitors at the club, making it clear that paying the $200,000 member fee at Mar-a-Lago was an easy way to parlay with the most powerful man on earth. And passersby were apparently able to get close to classified documents and the presidential limo whenever they pleased.   CNN reported Sunday night that, one hour before Trump was set to dine with Japanese Prime Minister Shinzo Abe, North Korea launched a ballistic missile 300 miles into the Sea of Japan. Trump and Abe nevertheless sat down in the center of the Mar-a-Lago patio to review the situation and plot their response over dinner as scores of club members watched:  As Mar-a-Lago’s wealthy members looked on from their tables, and with a keyboard player crooning in the background, Trump and Abe’s evening meal quickly morphed into a strategy session, the decision-making on full view to fellow diners, who described it in detail to CNN….  Trump’s National Security Adviser Michael Flynn and chief strategist Steve Bannon left their seats to huddle closer to Trump as documents were produced and phone calls were placed to officials in Washington and Tokyo. The patio was lit only with candles and moonlight, so aides used the camera lights on their phones to help the stone-faced Trump and Abe read through the documents.  Pictures of the bizarre scene quickly began popping up on social media. Instagram user ebain529 posted this on Saturday night, evidently showing National Security Adviser Michael Flynn and senior counselor to the president Stephen Bannon hovering over Trump at a dinner table.

Random Mar-A-Lago Guest Posts Selfie With "Nuclear Football" Briefcase -  Richard DeAgazio, a 72-year-old Palm Beach businessman, Trump supporter and actor, raised some eyebrows over the weekend after he essentially live blogged Trump's Mar-A-Lago golf outing with Japanese Prime Minister Shinzo Abe.  Among other misguided posts, DeAgazio thought it would be a really good idea to pose with, and publicly identify, "Rick", the service man responsible for carrying the "nuclear football." DeAgazio has since deleted his Facebook account, but as parents have been warning their teenagers for nearly a decade now, it's almost impossible to erase something from the internet once it hits social media.  Unfortunately for Richard, this was no exception: [pictures] Of course, this type of aloof behavior from Mar-A-Lago guests who pay annual membership dues of $200,000 to Trump's business interests, will be exploited to the maximum extent possible by outraged Democrats.  We're awaiting an impeachment motion from Nancy Pelosi which should be forthcoming at any moment. While the picture above was likely plenty to get him "Fired" from the club, DeAgazio was far from finished.  Here is a lovely picture with Steve Bannon...[…]  But he still wasn't done, at 1:35AM DeAgazio posted the following pics of Prime Minister Abe and Trump reacting after news broke that North Korea had "launched a missile in the direction of Japan"...."HOLY MOLY!!!"

Caught On Tape: Trump Crashes Mar-A-Lago Wedding With Japanese Prime Minister Shinzo Abe --Trump's weekend golf getaway with Japanese Prime Minister Shinzo Abe to Mar-A-Lago (a.k.a. "The Winter White House") is getting increasingly bizarre by the second.  Earlier today we wrote about Richard DeAgazio, a 72-year-old Palm Beach businessman, Trump supporter, actor and Mar-A-Lago member, who decided post selfies to Facebook with the "Nuclear Football" then proceeded to effectively live blogged Trump and Prime Minister Abe's reaction to an international crisis involving a North Korean missile launch (see "Random Mar-A-Lago Guest Posts Selfie With "Nuclear Football" Briefcase"). But, in the midst of entertaining a foreign leader and addressing an international crisis with a rogue state, Trump apparently also found time to crash the wedding of Vanessa Jane Falk (36) and Carl Henry Lindner IV (33) at his signature resort.  And, lest you think we're joking, here is a picture of Trump with the happy couple:  And, of course, the obligatory picture with the bridesmaids...no doubt that kisses were given all around.  Unfortunately, the fun doesn't end there as the President decided to deliver a personal toast to the bride and groom at their reception.  Everything started off just fine with the customary congratulatory remarks but turned back to the slightly bizarre when Trump decided to thank the couple of being long-time members of Mar-A-Lago, a membership for which he noted they had "paid him a fortune."  Per CNN:"I saw them out on the lawn today," Trump said of the bride and groom Saturday, who were standing nearby. "I said to the Prime Minister of Japan, I said, 'C'mon Shinzo, let's go over and say hello.' ""They've been members of this club for a long time," Trump said of the newlyweds. "They've paid me a fortune."

 Yes, Donald Trump is a monster. But his agenda isn’t all bad -- Dreaming up insults for Donald Trump is the latest party game for the same people whose view on the world induced millions to vote for him last November. That does not invalidate the insults. But it does reinforce the view of his more ardent fans that he is a brave outsider, seeking to smash the so-called liberal elite that does not argue but merely derides. More serious, by playing the man not the ball, the insults detract from the more important question of where on earth the leader of the western world is heading. A president can be a mendacious bastard – and often has been – yet can still be an effective leader.For the moment, effective is hardly the word for Trump. After another chaotic week in Washington, he seems like a rickety truck full of explosives, hurtling downhill towards both America and the new world order. It is crowded with relatives, shock jocks, generals and tycoons, none with experience of collaborative management. Already Trump’s two most senior aides, Steve Bannon and Reince Priebus, have fallen out. It is mesmerising, in an Armageddon sort of way.What is intriguing is how the Washington establishment is instinctively fighting back like a cat in a corner. The corridors of Washington are filling with the flapping gowns of constitutional lawyers, brandishing “checks and balances”. Judges declare the president’s orders illegal. The FBI leaks intelligence to bring down Trump’s national security adviser, Mike Flynn. The Pentagon overrules the president’s support for torture. Nato demands reassurances. Congressional leaders investigate secret dealings with Russia. Obamacare is said to be safe for now. Trump is a natural, bloody-minded revolutionary, no less so for the thrust of his revolution not being to everyone’s taste. He arrives at the White House on the centenary of Lenin’s arrival in St Petersburg. Both sought to “drain the swamp”, to face down an old regime of officials, judges, foreign financiers and the press. Both savaged their enemies and drew succour from dispossessed provinces. Trump might well subscribe to the quote, attributed to Lenin: “A lie told often enough becomes the truth”. Almost nothing Trump said in his progress to office seems reliable, if only because his “policy” was mostly shot from the hip.  Much of his platform, and of what he has so far attempted in office, was repellent or stupid. But some was sensible, at least in intent.

GOP Congress unnerved by Trump bumps | TheHill: The crush of crises that have consumed the first month of the Trump administration are frustrating and unnerving congressional Republicans looking for guidance and details from the White House on key policy issues like healthcare and tax reform. Some in the GOP are shrugging off the barrage of negative headlines, chalking it up to an unorthodox president and growing pains for a new administration still staffing up. Other key voices in the party say the Trump controversies are adding up and preventing Republicans from devoting their full attention to their top legislative priorities: repealing and replacing ObamaCare and overhauling the Tax Code. “It is a distraction,” Senate Foreign Relations Chairman Bob Corker (R-Tenn.) said this week after Trump fired his national security adviser, Michael Flynn, and news outlets reported close ties between Trump campaign aides and Russia. “I mean every day you guys, you're not focused on tax reform right now... nor [are] the American people. It's taking away from other efforts.” The health and tax issues are extremely complex and leaders and committee chairmen are operating on tight timelines; any major delays could jeopardize the agenda Republicans hope to fulfill in Trump’s first 200 days.

Ryan: 'We are exactly on track' | TheHill: Speaker Paul Ryan (R-Wis.) says President Trump and GOP lawmakers in Congress are "exactly on track" to accomplish their agenda for Trump's first 200 days in office. “We’re working on the same plan,” Ryan said during an interview airing Thursday evening on Fox News' "Hannity." "What I did during the transition with my counterpart in the Senate, [Majority Leader] Mitch McConnell [R-Ky.], is we put together a 200-day plan for the president to get this agenda that we all have agreed on, through the system. And we are exactly on track and on our timeline with our agenda," Ryan said. The GOP leader's comments came hours after Trump helmed a sprawling press conference at the White House where he slammed media coverage of several controversies surrounding his administration and dismissed reports of turmoil.Trump insisted that his administration was "running like a fine-tuned machine" and called last month's rocky rollout of his travel ban executive order "perfect." Trump also defended his decision Monday to fire his national security adviser Michael Flynn after reports that Flynn misled senior White House officials about a phone call with Russia's ambassador. Despite the media spectacle, Ryan argued that Trump has been refreshing to conservatives who could not accomplish their goals under former President Barack Obama. “He likes getting stuff done and I love that about him," Ryan said. "We’ve been waiting for this for a long time. Those of who have been conservatives pent up here fighting the Obama administration, the progressive left, he is a conservative and he is ready to take on these challenges, so that is what I’m excited about. He moves so fast that people are scrambling to catch up.”

Trump To Nominate Former Bear Stearns Chief Economist For International Treasury Role -- Having filled up his administration to the brim with former Goldman staffers, to the point where even President Trump realizes there may be too many "Goldman Guys" on his team, Bloomberg reports that in an attempt to branch out, Donald Trump plans to nominate David Malpass, 60, the former Bear Stearns economist, as U.S. Treasury undersecretary for international affairs.For those trading FX, his role will be critical: "His first job will be to help guide policy as the world wonders whether the new administration will make a habit of talking up or down other countries’ currencies."Malpass will report to the Treasury secretary on the U.S.’s international economic relationships, most importantly with China. Ties between the world’s two largest economies have become more tenuous since Trump’s election. The Republican and his advisers have not only talked about China and Japan artificially manipulating their currencies -- after walking back a pledge to label the former as a manipulator in the early days of the administration -- but have also moved foreign exchange markets by jawboning the U.S. and Canadian dollars, Mexico peso, and the euro. In other words, with much confusion within the Trump admin over whether the US Dollar should be stronger or weaker, Malpass will - hopefully - provide some much needed clarity. He will also be the point person, i.e., fall guy, should Trump's dollar policy backfire.

Steven Mnuchin Is Confirmed as Treasury Secretary - The Senate confirmed Steven T. Mnuchin, a former Goldman Sachs banker and Hollywood film financier, to be secretary of the Treasury Department on Monday, putting in place a key lieutenant to President Trump who will help drive the administration’s plans to overhaul the tax code, renegotiate trade deals and remake financial regulations. By a vote of 53 to 47, the Senate confirmed Mr. Mnuchin, who was Mr. Trump’s top fund-raiser during his campaign. During a long debate over Mr. Mnuchin’s credentials, Democrats argued that Mr. Mnuchin’s experience on Wall Street exemplified corporate malpractice that led to the 2008 financial crisis. During his confirmation hearing before the Senate Finance Committee last month, Mr. Mnuchin was scolded by Democrats for failing to disclose nearly $100 million in assets and for not revealing his role as a director for an investment fund based in the Cayman Islands, a well-known tax haven. Republicans on the committee broke with protocol and pushed Mr. Mnuchin’s vote to the Senate floor after a boycott by Democrats. Mr. Mnuchin, 54, is the latest member of Mr. Trump’s cabinet to edge through the confirmation process on a largely party-line vote. Last week, Tom Price was approved as secretary of health and human services and Betsy DeVos narrowly won confirmation to lead the Education Department.The new Treasury secretary will have little time to celebrate. He will be under pressure to help finish the Trump administration’s tax plan, to accelerate the rollback of regulations and to raise the government’s borrowing limit.

Steven Mnuchin Is Confirmed by Senate to Be Treasury Secretary -- Steven Mnuchin was confirmed as U.S. Treasury secretary, filling the role of chief spokesman for the dollar and steward for the Trump administration’s economic priorities. The former Goldman Sachs banker won in a 53-47 Senate vote on Monday in which only one Democrat broke ranks and supported Mnuchin. He was sworn in Monday night by Vice President Mike Pence at the White House. After several delays in the Senate vetting process, Mnuchin is expected to push ahead quickly with top administration goals to dismantle financial regulations and slash taxes. Almost immediately, he’ll be immersed in preparing for the expiration of the debt limit suspension and his first meeting of G-20 finance ministers and central bank governors in Germany, both coming up next month. Mnuchin will play a leading role should President Donald Trump start any economic confrontations -- with China, for example -- as the new administration seeks a more balanced approach with countries that run large trade surpluses with the U.S. While he pledged on the campaign trail to designate China a currency manipulator, Trump has since backpedaled on those remarks and Mnuchin has indicated such a label can only be applied if warranted. “Our nation’s financial system is truly in great hands with him,” Trump said at the swearing in ceremony. “We are going to have no problem.” Mnuchin has already sent signals on America’s long-held dollar policy, telling the Senate a strong dollar is important over the long term and that it’s currently “very, very strong.”

Steve Mnuchin, Who Played Key Role in Foreclosure Crisis, Confirmed As Treasury Secretary (video)  NEP’s William Black appears on The Real News Network discussing that a Mnuchin-owned bank made hundreds of billions of dollars of fraudulent mortgage loans that caused a financial catastrophe. You can view with transcript here.

More Wall Street Bankers Set to Join Donald Trump’s Treasury Department - Former Goldman Sachs banker Steve Mnuchin, who was tapped by President Donald Trump to serve as his next Treasury secretary, is apparently looking to staff his administration with Wall Street and Washington insiders.  Mnuchin is reported to be considering Jim Donovan — a partner and managing director at Goldman Sachs who raised money and advised both Mitt Romney in 2012 and Jeb Bush in 2016 — is being considered for deputy treasury secretary. Justin Muzinich, who served as a banker at Morgan Stanley before starting his own firm Muzinich & Co, is being discussed for undersecretary for domestic finance or counselor. Finally David Malpass, an economist who worked for President Ronald Reagan and President George H. W. Bush, is being talked about for undersecretary for international affairs. Malpass held an important role at Bear Sterns for years, before the bank’s spectacular 2008 implosion during the 2008 financial crisis.  It is not surprising that Mnuchin would gravitate toward both Wall Street types and traditional Republicans for key treasury department posts, given his own professional background. In addition to having a 17-year career at Goldman Sachs (during which he played a major role in causing the 2008 economic collapse), Mnuchin is perhaps best known for purchasing the California bank IndyMac in 2009, which he promptly renamed OneWest Bank. His habit of readily foreclosing on people’s homes triggered protests outside Mnuchin’s Bel Air mansion in 2011.   Mnuchin has also gotten in trouble for being less than forthright about potential conflicts of interest. Mnuchin misrepresented his management of finance entities like one in the Cayman Islands which contain assets worth more than $240 million in total. Although his involvement in these entities is not illegal, it does raise questions about whether Mnuchin would plan on effectively regulating the finance industry upon taking office.

McConnell sets up votes on six Trump nominees | TheHill: Senate Majority Leader Mitch McConnell(R-Ky.) is teeing up votes on six additional Trump nominees as Republicans try to end a Democratic slow walk of the president's picks. McConnell filed cloture on Monday night for Rep. Mick Mulvaney (R-S.C.) to lead the Office of Management and Budget, Scott Pruitt to lead the Environmental Protection Agency, Wilbur Ross to head the Commerce Department, Rep. Ryan Zinke (R-Mont.) to be the Interior secretary, Ben Carson to lead the Department of Housing and Urban Development, and former Texas Gov. Rick Perry to be Energy secretary. The move sets up initial votes for all of Trump's nominees still left on the Senate calendar, which allows them to come before the full Senate. Democrats could easily drag out votes on the six nominees for more than a week and the Senate is poised to leave town on Friday for the week-long Presidents Day recess. Absent a deal the Senate will take its first vote on Mulvaney Wednesday and a final vote as early as Thursday. That would tee up a first vote for Pruitt on Thursday, with Democrats able to drag out debate time and delay a final vote on the EPA hopeful's nomination into Friday night. Under Senate rules if leadership wants to skip over the 30 hours of debate on any nominee they need to get an agreement, potentially giving Democrats the leverage to drag out debate on any one nominee for days.Though Democrats will likely put up a fight over Mulvaney other picks-like Perry and Zinke—are considered less controversial.

Wilbur Ross, Trump's Commerce Dept Pick, To Keep 11 Investments Including Chinese Govt-Backed Company  --In the hint that members of Trump's administration may be "compromised" by conflicts of interest, the WSJ reports that Trump's pick for Commerce Secretary, Wilbur Ross Jr, plans to keep millions of dollars invested in offshore entities "whose values could be affected by policies that he implements as commerce secretary." Ross, the 79-year-old private-equity billionaire has said that if he is confirmed, he will sell at least 80 business assets and investment funds over the next several months. But he plans to hold on to investments in an oil-tanker company and 10 other entities that invest in shipping and real-estate financing, according to federal financial-disclosure and ethics filings. It isn’t clear why Mr. Ross is retaining these 11 assets. One particular assets which will raise eyebrows is a co-investment with the Chinese government’s sovereign- wealth fund in Diamond S Shipping Group Inc., one of the world’s largest owners and operators of medium-range oil tankers, according to its website. Ross’s private-equity firm in 2011 led a group of investors, including state-owned China Investment Corp., which injected a total of about $1 billion into the company.

Trump Team Leery of Having Too Many ‘Goldman Guys’ in Top Posts  -- Goldman Sachs Group Inc. banker Jim Donovan is under consideration for the No. 2 job at the Treasury Department, said a person familiar with the deliberations, but he’s got one big thing working against him. Too many “Goldman guys” already have high-up positions in the Trump administration, the person said, and that could knock Donovan down to one of the undersecretary positions -- possibly undersecretary of the Treasury for domestic finance. The presence of several former Goldman officials at the highest reaches of the administration runs counter to the president’s regular attacks on Wall Street firms during the campaign. “Donald Trump’s Argument for America,” a two-minute advertisement that ran in prime-time days before the election, featured Goldman Chief Executive Officer Lloyd Blankfein in an segment about corporate chieftains pocketing the wealth of American workers. The Goldman hires have also given Democrats fodder for attacks on Trump for stocking his government with officials from the investment bank. Now, the White House seems sensitive to the issue and is taking it into consideration as it attempts to fill remaining top posts.

 Elizabeth Warren probes Goldman Sachs’ ties to Trump White House - CNN - The market value of Goldman Sachs soared by $4 billion last Friday as President Trump signed an order to begin the process of dismantling Dodd-Frank, with former Goldman president Gary Cohn standing behind him. Cohn just walked away from Goldman Sachs with $285 million to become Trump's top economic adviser. Lately he has also become the face of the White House's financial deregulation push, giving interviews on television and in newspapers.  Goldman's (GS) stock price has skyrocketed 33% since the election as Wall Street cheers the regulation-busting and promises of tax cuts. It also can't hurt that Trump has appointed a handful of Goldman alumni to powerful positions in his administration. Now, Senator Elizabeth Warren wants Goldman Sachs to explain just how much "influence" the bank has over Trump's economic policies. "Dismantling Dodd-Frank would be a financial boon for large banks, including Goldman Sachs," Warren and fellow Democratic Senator Tammy Baldwin wrote in a letter sent on Thursday to Goldman Sachs CEO Lloyd Blankfein. The senators called on Blankfein to reveal whether Goldman Sachs was involved in drafting the two executive orders that Trump signed on Friday. One order kicked off the process of rolling back the 2010 post-crisis financial reform law and the other set the stage for eliminating the Fiduciary Rule, a law that required investment advisers to act in the best interests of their clients. Noting that Cohn was at Trump's side, Warren and Baldwin said the orders "raise our concerns about the degree to which Mr. Cohn's advice to President Trump is good for Wall Street, but bad for Americans."  In a statement, Goldman Sachs told CNNMoney, "We've had no involvement in the drafting of any executive orders."

Christie called to DC for Tuesday lunch with Trump | TheHill: New Jersey Gov. Chris Christie (R) is reportedly meeting President Trump on Tuesday for lunch in Washington, D.C. Christie and the president are scheduled to address several topics, including opioid addiction across the country, NJ Advance Media reported, citing sources with knowledge of the situation. Christie's wife, Mary Pat Christie, is also scheduled to attend the lunch. A source told NJ Advance Media that Jared Kushner and Kellyanne Conway reached out to Christie to set up the meeting.Christie was a strong supporter of Trump during his presidential campaign after the New Jersey governor ended his own bid for the White House. He was rumored to have been under consideration for the attorney general position in Trump's cabinet, but was ultimately passed over for Jeff Sessions. The New Jersey governor said last year he turned down several offers to serve in Trump's administration.

President Trump to Chris Christie: Try the meatloaf - — New Jersey Gov. Chris Christie says President Donald Trump made him order meatloaf when they dined together at the White House this week. Christie and his wife, Mary Pat, joined Trump at the White House on Tuesday. The Republican governor said while guest hosting a New York sports talk radio show Thursday that Trump pointed out the menu and told people to get whatever they want. Then he said he and Christie were going to have the meatloaf. “This is what it’s like to be with Trump,” Christie said. “He says, ‘There’s the menu, you guys order whatever you want.’ And then he says, ‘Chris, you and I are going to have the meatloaf.’” Trump said “I’m telling you, the meatloaf is fabulous,” according to Christie. Trump and Christie discussed the nation’s opioid epidemic during the lunch. Christie on Wednesday signed a series of bills he requested to address the crisis, including a five-day limit on initial prescriptions for opioids and mandating state-regulated insurance plans cover treatment. He said he didn’t talk with Trump about any jobs.

McCain announces opposition to Trump's pick for budget chief | TheHill: Sen. John McCain(R-Ariz.) announced Wednesday that he will not support Rep. Mick Mulvaney's (R-S.C.) nomination to lead the Office of Management and Budget (OMB). McCain stressed his opposition wasn't personal but focused on Mulvaney's previous policy positions, accusing the conservative lawmaker of working to "torpedo" Senate efforts to increase defense spending. "My decision to oppose this nomination is not about one person. It is not about one Cabinet position," said McCain, the chairman of the Armed Services Committee. "This is not political. This is about principle." "[He] has spent his last six years pitting the national debt against our military," McCain said of Mulvaney. McCain argued that confirming Mulvaney would effectively pit the White House's budget office against the Pentagon. "Voting in favor of Congressman Mulvaney’s nomination would be asking Secretary Mattis to spend less time fighting our enemies overseas and more time fighting inside-the-beltway budget battles with an OMB director," he said.

Mulvaney sworn in as White House budget chief | TheHill: Mick Mulvaney was sworn in Thursday night as President Trump's pick to lead the Office of Management and Budget. Vice President Pence administered the oath of office to Mulvaney, calling the South Carolina GOP lawmaker "a happy warrior on behalf of fiscal responsibility." "Mick, President Trump has asked you to lead the Office of Management and Budget, a vital role in a day and age of deficits and debt," Pence said.Mulvaney was narrowly confirmed along party lines Thursday in a 51-49 vote. Sen. John McCain (Ariz.) was the only Republican to oppose Mulvaney, a fiscal hawk who has previously opposed increases to the military budget. "Voting in favor of Congressman Mulvaney’s nomination would be asking Secretary Mattis to spend less time fighting our enemies overseas and more time fighting inside-the-beltway budget battles with an OMB director," McCain said Wednesday on the Senate floor.

Trump offers national security adviser post to Vice Admiral Harward: sources | Reuters: The Trump administration has offered the job of White House national security adviser, vacated by former U.S. intelligence official Michael Flynn, to Vice Admiral Robert Harward, said two U.S. officials familiar with the matter on Wednesday. It was not immediately clear if Harward, a former deputy commander of U.S. Central Command who has Navy SEAL combat experience, had accepted the offer, according to sources. A White House spokesperson had no immediate comment. Flynn resigned on Monday after revelations that he had discussed U.S. sanctions on Russia with the Russian ambassador to the United States before President Donald Trump took office. Losing his national security adviser so soon after taking office is an embarrassment for the new Republican president, who has made national security a top priority. Harward, a Rhode Island native who went to school in Tehran before the Shah was toppled in 1979, did a tour on the National Security Council under former Republican President George W. Bush, working on counterterrorism. He also has combat experience on SEAL teams and served in Iraq and Afghanistan. Harward now works as an executive for defense contractor Lockheed Martin, with responsibility for its business in the United Arab Emirates in the Middle East.

Robert Harward Said To Reject Trump's Offer To Become National Security Advisor --It has been a day of turmoil for President Trump, who after finding himself on the defensive following Monday's resignation by Mike Flynn (which may or may not lead to legal charges) and allegedly getting snubbed by Vladimir Putin, now has another potential crisis on his hands: according to both the FT and CBS, Trump's pick for National Security Advisor, Robert Harward - a senior executive at Lockheed Martin - has turned down the President's offer, citing "obvious dysfunctionality" in the administration. According to the FT, it is not yet a complete rejection as "Trump is trying to convince his preferred candidate to succeed Michael Flynn as national security adviser to change his mind after the retired admiral tapped for the role told the US president that he could not accept the White House position."Mr Trump asked Robert Harward, a retired navy special forces officer to succeed Mr Flynn, who was fired as national security adviser on Monday. At a press conference on Thursday, he said his decision to replace Mr Flynn had been made easier because he had an “outstanding” candidate to serve as a replacement.But Mr Harward is said to have turned Mr Trump down. “Harward is conflicted between the call of duty and the obvious dysfunctionality,” said one person with first hand knowledge of the discussions between Mr Trump and Mr Harward. The second person said Mr Trump had asked Mr Harward to return to the White House for another meeting to try to change his mind.As the FT adds, "one of the people familiar with Mr Harward’s decision said he was concerned about whether the top advisers around Mr Trump would allow him to install his own staff on the NSC — particularly after suggestions that KT McFarland, Mr Flynn’s deputy, had been asked to remain. When he was offered the position, Mr Harward had told Mr Trump that he wanted some time to think over the idea."

Linda McMahon: Senate confirms former WWE executive for Small Business Administration post - The Senate voted to confirm former professional wrestling executive Linda McMahon to lead the federal Small Business Administration. Ms McMahon, who served as the CEO of World Wrestling Entertainment Inc, earned the support of more Democrats than any of President Donald Trump's other nominees. She was approved by a 81 to 19 vote. Although Ms McMahon's affiliation with the premier professional wrestling organisation in the US, her appointment to the role is not necessarily an unusual choice, as she is no stranger to politics.She stepped away from her role in the business, which she ran with her husband, Vince, for two bids for the US Senate beginning in 2009. Prior to her run for the Senate, Ms McMahon served on the Connecticut Board of education, but resigned in 2010 after state election officials restricted political campaign activity of board members. Ms McMahon remained active in Republican politics largely as a donor after her failed Senate bids. During the election, she donated some $7.5m to super PACs that supported Mr Trump's campaign. However, she initially endorsed New Jersey Gov Chris Christie before he dropped out of the Republican primaries.

Republicans Revolt: Urge Trump To Withdraw Puzder Nomination Over "Undocumented Worker" - Following Betsy DeVos' narrow confirmation, it seems Andrew Puzder may not be so lucky.The President's pick for labor secretary faces a Republican revolt as CNN reports a number of top Senate Republicans have urged Trump to withdraw the Carl's Jr. CEO's nomination. EXCLUSIVE: Top Senate Rs have urged the WH to withdraw Puzder nomination. There are 4 firm no votes and up to 12, source says. Next on CNN.  As CNN reports,Top Senate Republicans have urged the White House to withdraw the Andrew Puzder nomination for labor secretary, a senior GOP source said, adding there are four firm Republican no votes and possibly up to 12.Puzder needs at least 50 votes to pass with the tie-breaking vote of Vice President Mike Pence, and Republicans only hold control of 52 seats.  Puzder, the CEO of the company that owns the Hardee's and Carl's Jr. fast food chains, has faced fierce opposition mostly from Democrats in part related to his position on labor issues as well as the fact that he employed an undocumented housekeeper.  This would inject yet more turmoil into a tempestuous first few weeks for Trump's tenure as Republicans can lose 2 Republican votes and still secure a nominee, as they did with DeVos, but 4 is a dagger, as Democrats have solidified in opposition.

Puzder withdraws as Trump’s Labor nominee - — President Trump’s young administration suffered another high-profile casualty Wednesday when Andrew Puzder, Trump’s pick to run the Labor Department, withdrew his name amid allegations that he had abused his wife and had hired an undocumented house cleaner.Puzder’s bid for the job collapsed a day before he was set to appear in front of the Senate Health, Education, Labor, and Pensions Committee for his confirmation hearing. CNN reported Wednesday that there were four firm Republican votes against the nominee, dooming his chances.“I am honored to have been considered by President Donald Trump to lead the Department of Labor and put America’s workers and businesses back on a path to sustainable prosperity,” Puzder said in a statement. The White House did not comment.

R. Alexander Acosta, Law School Dean, Is Trump's New Pick for Labor - Moving quickly after his first choice for labor secretary withdrew his nomination amid controversy, President Trump made a seemingly safe selection on Thursday in R. Alexander Acosta, a Florida law school dean and former assistant attorney general. In Mr. Acosta, Mr. Trump has chosen a nominee with deep experience in labor relations, law and education. The pick answers concerns about the lack of diversity in the Trump administration, in that Mr. Acosta would be the first Hispanic in the president’s cabinet. And his chances of being confirmed appear relatively high, since Mr. Acosta, currently the dean of Florida International University’s law school, has made it through the Senate process three times for different roles. “Alex is going to be a key part of achieving our goal of revitalizing the American economy, manufacturing and labor force,” Mr. Trump said as he called on the Senate to confirm Mr. Acosta swiftly. A Miami native, Mr. Acosta’s most relevant experience to the job of labor secretary is his time at the National Labor Relations Board, where he was a member from 2002 to 2003, under President George W. Bush. Mr. Bush later tapped Mr. Acosta to be assistant attorney general for the Justice Department’s civil rights division, one of the highest positions at the agency. Continue reading the main story Advertisement Continue reading the main story He went on to become the United States attorney for the Southern District of Florida, where his office prosecuted the lobbyist Jack Abramoff, the terrorism suspect Jose Padilla and founders of the Cali cartel. He achieved the conviction of Charles Taylor Jr., the son of Liberia’s former leader, for torture. His official biography said his office also prosecuted several bank-related cases and targeted health care fraud.

Trump unleashes fury after four long weeks - POLITICO: After stewing in anger during four rocky weeks in the White House, President Donald Trump had his say on Thursday. He spent 80 minutes in an impromptu East Room news conference shredding his critics, relitigating the election, bragging about his crowds, crowing about his accomplishments and denying, deflecting and obfuscating a series of mushrooming bad stories that have dogged his presidency and depressed his approval ratings. Story Continued Below It was an extraordinary scene in the White House, which Trump essentially turned into a venue for a campaign rally, trashed the country's most influential news outlets, cited approval polls and spread misinformation. It came two days before Trump hits the road for a campaign rally in Florida, where he said the crowds will be "massive." "I won," Trump said at one point, explaining to the media why they weren't important, even as he dissected their coverage and said he coveted better stories. "The people get it." He put blame at the feet of his predecessor, Barack Obama, as he lamented that his administration doesn’t get the credit it deserves. “To be honest, I inherited a mess. It’s a mess. At home and abroad, a mess,” he said. Trump said he was baffled by the “hatred” coming from the media, and insisted that he’s being unfairly picked on — “I’m really not a bad person, by the way.”It appeared to be a cathartic moment for a president who has found his early days in the White House overwhelming at times, and has found running the government harder than he expected, aides and allies say. He has grown especially frustrated with the leaks streaming from within his government, which he calls “illegal” while claiming the resulting stories are “fake news.” But on Thursday, he seemed to be in his element, the TV showman jousting with reporters, dissecting individual questions, telling reporters to hush and asking for a friendly reporter in the room. “I love this. I’m having a good time doing it,” the president said as he found his groove. It was Trump’s decision to hold such an extended news conference and it was made Thursday morning, according to a White House aide briefed on the matter. After weeks of getting pounded by the media — something the president has privately and publicly fumed about — he made it clear to advisers that he wanted to speak in an unfiltered way.

 Donald Trump’s Alternative-Reality Press Conference -  New Yorker - It was “insane,” a “marathon rant” at the media, and “a press conference for the ages.” Before you accuse me of liberal bias, these were the terms that Fox Business Channel’s Charles Gasparino, the home page of the New York Post, and Fox News’s Shepard Smith used, respectively, to describe the performance that Donald Trump put on during a lengthy press conference in the East Room of the White House on Thursday.Nominally, the White House had hastily scheduled the press conference so that Trump could announce he was nominating Alexander Acosta, the dean of Florida International University College of Law, for the post of Labor Secretary. But it was clear something strange was afoot when Trump walked in alone—without Acosta. Then, when the President started to talk, his tone was one of thinly suppressed fury.After briefly lauding Acosta’s credentials, Trump thanked Paul Singer, a conservative Wall Street billionaire who used to oppose him and now supports him, for paying him a visit. (One of the few things Trump seems actually to like about being President is having supplicant rich guys come and pay homage to him.) Then he changed tack and said, “I’m here today to update the American people on the incredible progress that has been made in the last four weeks since my Inauguration . . . I don’t think there’s ever been a President elected who in this short period of time has done what we’ve done.”For more than hour on Thursday, he stood at a White House lectern, the yellowness of his hair accentuated by the gold drapes hanging behind him, and demonstrated, again, that he long ago escaped the bounds of reality that restrict most mortals. He talked about his various executive orders, his meetings with the leaders of the United Kingdom and Canada, and his fifty-five-per-cent approval rating in the latest Rasmussen poll.  Much of his time, however, Trump spent berating the press. He singled out the New York Times, the BBC, CNN, and, particularly, “CNN Tonight with Don Lemon,” which he described as “a constant hit.” Breaking new ground, he also criticized the Wall Street Journal, saying it “did a story today that was almost as disgraceful as the failing New York Times’ story, yesterday.” (The report in question said U.S. intelligence agencies have grown so distrustful of Trump that they are holding back from him some of the sensitive information they have gathered.) He even admonished a reporter from a Jewish magazine, Ami, who had the gall to bring up the recent rise in anti-Semitic attacks, telling him to “sit down,” and adding, “I am the least anti-Semitic person that you’ve ever seen in your entire life.”

Donald Trump’s anti-press conference would be funny – if it weren’t so scary - Watching Donald Trump’s freak show of a press conference, it’s painfully clear that we have all made a terrible mistake. For the last several months we all thought we were watching the presidential version of Celebrity Apprentice. Trump was going to walk into our living rooms, fire somebody at random, and then happily walk out. In fact, we have our shows all mixed up. This is actually a very long season of The Office, with our new president playing the role of a self-obsessed buffoon who clearly thinks he’s smart, funny, kind and successful. Trump is the boss we all know so well, and never want to see again. The one winging it at every turn, in every sentence. The one who just read something, or talked to somebody, and is now an Olympic-sized expert. “I have been briefed,” he declared, as he explained what passes for his poodle-like policy towards Vladimir Putin. “And I can tell you one thing about a briefing that we’re allowed to say, because anybody that ever read the most basic book can say it: Nuclear holocaust would be like no other. They’re a very powerful nuclear country and so are we. If we have a good relationship with Russia, believe me, that’s a good thing, not a bad thing.” In theory, the press conference was called to reveal the name of the all-important Labor Secretary, whose identity will only get recalled on Jeopardy. He’s replacing the guy who quit after a reporter dug up the video tape of his ex-wife on Oprah. Talk about a bad hombre. But all that was just a bait-and-switch for the real subject of Trump’s obsession: himself. In painful detail, the president took the trouble to explain his thought process in real time, as problems bubble up to the thing that sits under his combover. Most White House reporters and presidential historians long for this kind of insight: how does a commander-in-chief deal with a crisis? What is his decision-making approach to all the world’s challenges? Sadly in Trump’s case, it turns out the answers are astonishingly simple.

Trump’s Watered-Down Ethics Rules Let a Lobbyist Help Run an Agency He Lobbied -- Geoff Burr spent much of the last decade as the chief lobbyist for a powerful construction industry trade group. Burr sought to influence a host of regulations of the Department of Labor, opposing wage standards for federal construction contracts and working against an effort to limit workers’ exposure to dangerous silica dust.In the Obama administration, someone like Burr would have been barred by ethics rules from taking a job at an agency that he had lobbied.In the Trump administration, Burr now has a top job at the Labor Department.Burr is the first publicly known example of a former lobbyist who was able to take a job in the government as a result of President Donald Trump’s watering down of ethics rules in place during the Obama administration.As a candidate, Trump regularly railed against lobbyists and led crowds in chants of “Drain the swamp!” But as president, Trump last month signed an executive order that weakened significant aspects of the Obama ethics policy, including scrapping a ban on lobbyists joining agencies they had recently lobbied. Ethics experts say Burr’s hiring is a troubling example of how the new administration has greased the revolving door.

Conflict Over Trump Forces Out an Opinion Editor at The Wall Street Journal -- The Wall Street Journal’s editorial features editor has left the paper following tensions over the section drifting in a pro-Donald Trump direction. News of the departure of Mark Lasswell, who edited op-eds for the Journal, comes as the paper’s internal tensions over Trump have begun to spill into public view. The reliably hawkish, pro-trade, small government conservative Journal op-ed page has been challenged by the rise of the populist, nationalist Trump movement. The Journal’s opinion pages have been a showcase for the intra-right divide over Trump, featuring Trump-sympathetic writers like Bill McGurn alongside anti-Trump columnists such as Bret Stephens. Lasswell appears to be a casualty of that divide, and his dismissal a victory for the pro-Trump faction on the editorial staff. According to two sources with direct knowledge of the situation, Lasswell was in effect phased out over a period of months from the paper. He took a book leave during the election following conflict with his boss Paul Gigot, the editorial page director, about the extent to which the page should run material sympathetic to Trump. "We don't talk about internal personnel or editorial deliberations, but suffice to say your information is false in multiple respects,” Gigot said in a statement. “We appreciate Mark Lasswell's contributions to the Journal and wish him well. The Journal editorial page's coverage of Donald Trump speaks for itself, including numerous op-eds from outside contributors and staff editorials pro and con throughout the campaign and now as President. That coverage will continue.” A Wall Street Journal spokesperson declined to identify any false information.

Mary Jo White Seriously Misled the U.S. Senate to Become SEC Chair – Pam Martens - Less than two weeks after Mary Jo White was nominated to become Chair of the Securities and Exchange Commission by President Barack Obama on January 24, 2013, White filed an ethics disclosure letter advising that she would “retire” from her position representing Wall Street banks at the law firm Debevoise & Plimpton. White wrote on this subject in great detail, stating: “Upon confirmation, I will retire from the partnership of Debevoise & Plimpton, LLP. Following my retirement, the law firm will not owe me an outstanding partnership share for either 2012 or any part of 2013. As a retired partner, I will be entitled to the use of secretarial services, office space and a blackberry at the firm’s expense. For the duration of my appointment, I will forgo these three benefits, though I may pay for some secretarial services at my own expense. Pursuant to the Debevoise & Plimpton, LLP Partners Retirement Program, I will receive monthly lifetime retirement payments from the firm commencing the month after my retirement. However, within 60 days of my appointment, the firm will make a lump sum payment, in lieu of making monthly retirement payments for the next four years. Within 60 days of my appointment, I also will receive payouts of my interest in the Debevoise & Plimpton LLP Cash Balance Retirement plan and my capital account.”Yesterday it was widely reported in the business press that Mary Jo White is returning to her former law firm as a partner representing clients who face government investigations. She will also fill the newly created position of Senior Chair of the law firm.This news is highly significant because it would appear that the U.S. Senate was seriously misled by White’s ethics letter in its deliberations to confirm her as the top cop of Wall Street. The news is also highly significant because it will mark the fourth time in four decades that Mary Jo White has spun through the revolving doors of Debevoise & Plimpton (where she represented serial law violators) to government service (prosecuting serial law violators). The timeline is as follows:

New Documents Show Trump Retains Direct Tie to Businesses - New documents confirm that President Donald Trump retains a direct tie to his business interests through a revocable trust now being overseen by one of his adult sons and a longtime executive of the Trump Organization. Trump is the sole beneficiary of the Donald J. Trump Revocable Trust, which is tied to his Social Security number as the taxpayer identification number, according to documents published online by the investigative nonprofit ProPublica. And Trump can revoke the trust, which was amended three days before his inauguration, at any time. The details about the trust were included in a Jan. 27 letter to the Washington liquor board that notes Donald Trump Jr. and Allen Weisselberg are its new trustees. The Trump trust holds a liquor license for the hotel that opened last fall in the federally owned Old Post Office building. The trust contains a mix of cash from Trump's sales of stock investments over the summer and his physical and intellectual properties, such as Trump Tower in New York, Mar-a-Lago in Florida and branding rights. The details align with what Trump and attorney Sheri Dillon outlined at a Jan. 11 news conference about Trump's plan for what would become of his global business empire while he's president. The previous ethics advisers to President Barack Obama and President George W. Bush and the leader of the Office of Government Ethics have said Trump has not gone nearly far enough to absolve himself of potential conflicts of interest. Trump's two adult sons and Weisselberg are running the company while Trump is president, but Trump himself still financially benefits from it. Past precedent has been for presidents to sell off their holdings and place the cash into a truly blind trust — not one overseen by a family member — before taking office, even though there's no legal requirement to do so. There are far stricter ethics rules governing top administration officials and Cabinet members than the president himself.

Senate Dems ask DHS inspector general for probe of Trump’s business arrangement | TheHill: Several Senate Democrats penned a letter to the Department of Homeland Security’s inspector general Friday, raising questions about President Trump’s potential conflicts of interest. The senators say that Trump may have violated the Emoluments Clause of the Constitution, which bars the president from using the office for personal gain. “It would appear that any payment for goods or services, or benefit conferred, from the federal government to the Trump Organization would benefit the President and therefore be an emolument prohibited by the Constitution,” the letter to Inspector General John Roth reads.They specifically focus on the arrangement of Trump’s large business holdings, under which he handed control of the Trump Organization to his sons and put his assets into a trust. “The arrangement raises significant potential for conflicts of interest and risks the perception that President Trump is exploiting his public office for his family’s private gain,” they wrote. And they raise questions about the cost associated with Trump and his family’s visits to their properties outside of Washington; Trump has spent the past three weekends at the Mar-a-Lago resort in Palm Beach.The senators write that if staff, security and military aides are being charged for stays at Mar-a-Lago, “it directly benefits the President’s business and allows him to profit off of every vacation he takes to one of his properties.”  “We believe your office must conduct a thorough investigation into these issues and continuously monitor the potential for conflicts and violations of the Domestic Emoluments Clause of the Constitution during President Trump’s term,” they write.

Made For Each Other - Kunstler -  Don’t be fooled by the idiotic exertions of the Red team and the Blue team. They’re just playing a game of “Capture the Flag” on the deck of the Titanic. The ship is the techno-industrial economy. It’s going down because it has taken on too much water (debt), and the bilge pump (the oil industry) is losing its mojo. Neither faction understands what is happening, though they each have an elaborate delusional narrative to spin in the absence of any credible plan for adapting the life of our nation to the precipitating realities. The Blues and Reds are mirrors of each other’s illusions, and rage follows when illusions die, so watch out. Both factions are ready to blow up the country before they come to terms with what is coming down. What’s coming down is the fruit of the gross mismanagement of our society since it became clear in the 1970s that we couldn’t keep living the way we do indefinitely — that is, in a 24/7 blue-light-special demolition derby. It’s amazing what you can accomplish with accounting fraud, but in the end it is an affront to reality, and reality has a way of dealing with punks like us. Reality has a magic trick of its own: it can make the mirage of false prosperity evaporate. That’s exactly what’s going to happen and it will happen because finance is the least grounded, most abstract, of the many systems we depend on. It runs on the sheer faith that parties can trust each other to meet obligations. When that conceit crumbles, and banks can’t trust other banks, credit relations seize up, money vanishes, and stuff stops working. You can’t get any cash out of the ATM. The trucker with a load of avocados won’t make delivery to the supermarket because he knows he won’t be paid. The avocado grower will have to watch the rest of his crop rot. The supermarket shelves empty out. And you won’t have any guacamole. There are too many fault lines in the mighty edifice of our accounting fraud for the global banking system to keep limping along, to keep pretending it can meet its obligations. These fault lines run through the bond markets, the stock markets, the banks themselves at all levels, the government offices that pretend to regulate spending, the offices that affect to report economic data, the offices that neglect to regulate criminal misconduct, the corporate boards and C-suites, the insurance companies, the pension funds, the guarantors of mortgages, car loans, and college loans, and the ratings agencies. The pervasive accounting fraud bleeds a criminal ethic into formerly legitimate enterprises like medicine and higher education, which become mere rackets, extracting maximum profits while skimping on delivery of the goods. All this is going to overwhelm Trump soon, and he will flounder trying to deal with a gargantuan mess. It will surely derail his wish to make America great again — a la 1962, with factories humming, and highways yet to build, and adventures in outer space, and a comforting sense of superiority over all the sad old battered empires abroad. I maintain it could get so bad so fast that Trump will be removed by a cadre of generals and intelligence officers who can’t stand to watch someone acting like Captain Queeg in the pilot house.

Trump undertakes most ambitious regulatory rollback since Reagan - President Trump has embarked on the most aggressive campaign against government regulation in a generation, joining with Republican lawmakers to roll back rules already on the books and limit the ability of federal regulators to impose new ones.After just a few weeks in office, the new administration is targeting dozens of Obama-era policies, using both legislative and executive tactics. The fallout is already rippling across the federal ­bureaucracy and throughout the U.S. economy, affecting how dentists dispose of mercury fillings, how schools meet the needs of poor and disabled students, and whether companies reject mineral purchases that fuel one of the world’s bloodiest conflicts.The campaign has alarmed ­labor unions, public safety advocates and environmental activists, who fear losing regulations that have been in place for years, along with relatively new federal mandates. Business groups, however, are thrilled, saying Trump is­ responding to long-standing complaints that a profusion of federal regulations unnecessarily increases costs and hampers their ability to create jobs.Under Trump, “there’s great optimism that all of them will be addressed,” said Rosario Pal­mieri, vice president for labor, legal and regulatory policy at the National Association of Manufacturers.Trump and congressional Republicans are working to strip rules away at an unprecedented rate. One of the most powerful levers is the Congressional Review Act, a 1996 law that gives lawmakers the power to nullify any regulation within 60 days of enactment. Before Trump took office, the Congressional Review Act had been successfully used only once, to overturn a Clinton administration ergonomics rule in 2001. So far this year, the House has moved to nullify eight new rules and is considering dozens more. Two of those measures — which would loosen environmental restrictions on waste-mining companies and financial disclosure requirements on oil and gas firms — have cleared the Senate and are on their way to the White House for the president’s signature. A more extensive assault on government regulation is likely to come.

Heads up—the GOP is helping Wall Street pick your pocket -- While the headlines are dominated by White House leaks and personnel scandals, the Trump administration and Republicans in Congress have been quietly helping the financial industry siphon off your retirement savings. First, the administration announced that it was reviewing a rule scheduled to take effect in April requiring financial advisors to work in their clients’ best interests. Yes, you read that correctly. Some people presenting themselves as financial advisors can now legally steer you to rip-off investments, a glaring problem the Obama administration addressed in a commonsense rule six long years in the making. The rule, backed by the Consumer Federation of America, Senator Elizabeth Warren, Vanguard founder John Bogle, and others, applies to brokers, plan consultants, and others advising participants in 401(k)-style plans and IRAs who don’t already adhere to a fiduciary standard. Among other things, it prohibits financial professionals from pretending to offer disinterested retirement advice while working on commission and from steering retirement savers to higher-cost investments when similar but lower-cost options are available. Importantly, the rule protects job-leavers from being lured into rolling over their pensions and 401(k)s into higher-cost IRAs, at a time in their life when many people are vulnerable to bad advice. How can anyone argue against the fiduciary rule with a straight face? The financial services industry counters that if some clients don’t get bad advice, they may not be able to afford advice at all. This is like dietitians arguing that clients may not be able to afford nutritional advice if it’s not paid for by Coca Cola. The industry also says the rule could put some people out of business, which isn’t reason to oppose it—it goes without saying that we shouldn’t prop up a business model where survival is dependent on fleecing savers.

Let s Make Regulations Reasonable Again --As President Donald Trump settles into the White House, many financial industry executives are looking forward to celebrating what one has termed "the bonfire of the rule books," anticipating candidate Trump's promise to eliminate two existing regulations for every new one that is created. While this "ding-dong-the-witch-is-dead" reaction to the current regulatory environment is understandable, it should be tempered by our memory of the problems excessive deregulation has caused in the past.No one wants to return to the Wild West environment in which financial institutions could do anything they wanted — and some did ― causing a financial crisis that wrecked the economy and the housing industry. There is a need for meaningful financial regulation, but the operative word is "meaningful," which implies both necessary and reasonable. Some of the mortgage regulations in place today are neither necessary nor reasonable. Take the Real Estate Settlement Procedures Act's ban on referrals. The regulation, largely ignored in the past but enforced rigorously by the Obama administration, allows compensation in a mortgage transaction only for tangible products or services provided. It is designed to prohibit elaborate schemes, primarily involving mortgage companies, real estate brokers and title insurers, that provide no benefits to consumers and arguably increase their costs. But the regulation ensnares arrangements that potentially benefit consumers and don't harm them at all.  Members Mortgage Co., for example, helps credit union members obtain loans and we pay the credit unions a fee for sending their members to us. The RESPA rule theoretically prohibits this arrangement, but it seems reasonable and justifiable to me. Regulators will admit, at the ground level, that the failure to accommodate arrangements like Members, in which financial institutions are working with other financial institutions, is a gap in the RESPA regulations. But no one wants to talk about that, so I end up struggling to defend a business model that has served credit unions and their members well for 25 years, with no adverse impact on either.

 A higher leverage ratio can prevent crises, and that matters – Bank Think - A core purpose of a cost-benefit analysis in the regulatory process is, quite plainly, to avoid overly costly rules. But such analyses can also validate regulatory policy. That appears to be the case with proposals to toughen the leverage ratio.Determining whether regulations truly solve a problem as intended is notoriously difficult. But when regulators are required to do a cost-benefit analysis in concert with a pending regulatory change, it can help ensure that the regulation’s benefits at least cover, if not exceed, the costs of the rule.  In a new research paper, we broadly apply the framework developed by staff at the Bank of England to measure the costs and benefits of having banks operate with relatively more equity and less debt. Specifically, we examine the costs and benefits of increasing the equity-to-asset leverage ratio for U.S. banks from 4%, which was the 2014 standard, to 15%. We chose 15% because a recent study shows that under certain conditions, a 15% leverage ratio can be optimal. A variant of this standard was also proposed in a 2013 bill by Sen. Sherrod Brown, D-Ohio, and then-Sen. David Vitter, R-La. The leverage ratio we selected also exceeds the 10% ratio proposed in the Financial Choice Act, although the Choice Act — which is forming the basis of efforts to roll back the Dodd-Frank Act — allows banks to choose a tough leverage ratio requirement in exchange for regulatory relief.  The benefits of a higher leverage ratio include a lower probability of a banking crisis, since the more capitalized a bank is the more likely it can withstand large shocks that lower the value of its assets. The costs arise from the fact that equity capital may be more expensive to the financial institution than debt. Those costs mean that banks may pass higher funding costs on to borrowers, which would result in less capital formation and a lower real gross domestic product. However, we find that in almost all cases, the benefits of a more stable financial system outweigh the costs.To estimate the benefits, we rely on annual data from 1892 to 2014 on U.S. banking crises and the aggregate capital-to-asset ratio for the entire U.S. banking system. Specifically, we find that increases in the capital-to-asset leverage ratio are associated with declines in the probability of a banking crisis.

Trump’s and Hensarling’s Fact-Free Attack on Dodd Frank --Yves Smith - Jeb Hensarling, now the chairman of the House Financial Services Committee, has long had Dodd Frank in his crosshairs under the dodgy premise that it put lots of burdens on banks. Putting aside the fact that Hensarling would take this position irrespective of whether it was true, bank noise-making on this front has to be taken with a fistful of salt, since their baseline is that any restriction on their ability to loot and pillage their freedom of operation must be beaten back on principle, even if it might be for the good of the institution.  Andrew Haldane of the Bank of England described why banks need to be curbed in his 2010 speech, The $100 Billion Question: […] In other words, individuals in financial institutions will take risks because more risk means more upside. And since the upside goes to the employees and bosses, and catastrophic losses fall on society at large, financiers have every incentive to take as many gambles as they can get away with. But Trump in his Presidential campaign repeatedly claimed that Dodd Frank was hurting growth by constraining bank lending. This view may be due to Trump embracing bog standard Republican ideology about the evils of regulations, or may be based on his self-serving belief from his days in real estate that loans are always more trouble to get than he’d like and banks ought to be delighted to hand over money to him. Obviously, some evil force was getting in the way.  On a high level, the idea that Dodd Frank has a macro impact on lending is dodgy. For starters, big corporations use bank loans only for limited purposes, such as revolving lines of credit (which banks hate to give but have to for relationship reasons because they aren’t profitable) and acquisition finance for highly leveraged transactions (and the robust multiples being paid for private equity transactions says there is no shortage of that). Banks lay off nearly all of the principal value of these loans in syndications or via packaging them in collateralized loan obligation. They are facing increased competition from the private equity firm’s own credit funds, which have become a major force in their own right. Otherwise, big companies rely on commercial paper and the bond markets for borrowing. And with rates so low and investors desperate for yield, many have been borrowing, for sure….but not to invest, but to a large degree to buy back their own stock.

Jeb Hensarling's Alternative Facts - Adam Levitin, Credit Slips  - House Financial Services Committee Chairman Jeb Hensarling has an alternative fact problem. In a Wall Street Journal op-ed Hensarling alleged that "Since the CFPB’s advent, the number of banks offering free checking has drastically declined, while many bank fees have increased. Mortgage originations and auto loans have become more expensive for many Americans.”  The problem with these claims?  They are verifiably false.  Free checking has become more common, bank fees have plateaued after decades of steep increases, and both mortgage rates and auto loan rates have fallen. One can question how much any of these things are causally related to the CFPB, but using Hensarling's logic, the CFPB should be commended for expanding free checking and bringing down mortgage and auto loan rates. Hmmm.   Below the break I go through each of Chairman Hensarling's claims and demonstrate that each one is not only unsupported, but in fact outright contradicted by the best evidence available, general FDIC and Federal Reserve Board data.  Chairman Hensarling doesn’t actually say that the CFPB’s responsible for the decline in the number of free checking accounts.  Instead, he implies a connection.  But that's exactly the conclusion he wants readers to reach, otherwise the observation is irrelevant to his attack on the CFPB.   Three things are problematic about his claim on the number of free checking accounts. 

  1. There’s no reliable evidence that the number of free checking accounts has actually declined.  In fact, the American Bankers Association’s own numbers show that free checking has increased from from 53% to 61% of accounts. Curiously, Chairman Hensarling doesn’t give the CFPB credit for that.    
  2. Other talking points Hensarling blames the Durbin Interchange Amendment, not the CFPB for the supposed decline in free checking.  So which one is it, Durbin or the CFPB? 
  3. It’s hard to see what the mechanism would be between the CFPB and a decline in free checking.

Chairman Hensarling also implies that the CFPB is responsible for "many bank fees hav[ing] increased."  He doesn't specify fee type, and there's precious little data that breaks down specific bank fees.   The chart below shows that these fees haven't increased because of the CFPB.  They've been basically flat since the CFPB became effective.  There's a causal story that relates to the Fed's overdraft regulation (that is now the CFPB's overdraft regulation), but it's the exact opposite story than the one Hensarling is telling. 

Republicans to predatory companies: Grab as much as you can - Catherine Rampell - The White House may be in chaos. But at least Congress is addressing the issue Americans care about most: making it easier for the finance industry to rip them off. Last week, Jeb Hensarling (R-Tex.), chairman of the House Financial Services Committee, circulated an outline of his latest plan to repeal Dodd-Frank. Dodd-Frank, you may recall, was put in place after the financial crisis to reduce our chances of having another one.  The law isn’t perfect, but it did have at least one critical, mostly popular component: It created an agency dedicated solely to helping consumers fight back when financial institutions cheat or mislead them. This agency is called the Consumer Financial Protection Bureau (CFPB). It oversees large banks, thrifts and credit unions, along with lots of companies in the “nonbank” universe, such as mortgage brokers and servicers, payday lenders, debt collectors, private student lenders and credit bureaus. While the CFPB may not have the same name recognition as, say, the Federal Reserve, many of its actions have generated big headlines.  The bureau has also, among other things, sued pension-advance companies that fleece veterans, and it ordered the firms that left low-income users of prepaid RushCards unable to access their own money to pay $13 million in restitution and fines.  In its five years of existence, the bureau says it has recovered $11.7 billion for more than 27 million consumers

Plans to ease big-bank rules ignore lessons of the crisis - Bank Think - The Trump administration and Congress appear eager to press ahead with reform to roll back much of the Dodd-Frank Act. Unfortunately, many of the early reform proposals would provide relief applicable only to large banks, diverting focus away from the burden of community banks.  If successful, this approach would reverse recent gains to financial stability made by Dodd-Frank and further erode the competitiveness of community banks. It is remarkable that reform proposals which would benefit Wall Street banks are even being discussed just eight years after the end of the financial crisis. It took more than 60 years to repeal the Glass-Steagall Act of 1933, and most of the other Great Depression banking reforms remain in place today. Either our collective memories are much shorter than they once were, or Dodd-Frank was misguided from the start. I believe the former is more accurate. A review of the causes of the financial crisis should refresh our memories. Somewhere around the year 2000, Wall Street banks—the largest investment and commercial banks—began to significantly increase their interest in subprime mortgage lending because they discovered that they could apply the securitization process to this segment of the market. Low initial interest rates and rapidly rising home prices masked the default risk. As the housing bubble expanded, the creditworthiness of the home buyers declined while leverage increased. Everyone that noticed the surge in risk didn’t care, and everyone that cared didn’t notice.  Mortgage brokers, Wall Street banks and credit rating agencies surely noticed risk building up, but the enormous profits for not caring were too good to pass up. Honest brokers that accurately reported their clients’ financial conditions lost business to those that exaggerated or chose to believe their clients’ “alternative” income and employment history. Banks securitized the risky mortgages, (mis)represented them as high quality and sold them to investors, shedding the default risk in the same way that a used car dealer sells a lemon without a warranty. Credit rating agencies that refused to provide the AAA ratings the banks demanded lost business to the agencies that issued a rubber stamp.

Trump's Dodd-Frank review could do a lot of good — if done right -- An executive order issued earlier this month provides a better sense of where the White House intends to go on financial regulation.  The seven “core principles” laid out in the order — including preventing taxpayer bailouts; advancing American interests in global negotiations; and making regulation efficient, effective, and tailored — are generally not controversial. There is room for debate on whether the White House identified the right seven principles; consumer protection is not among them, for example. But the main debate will be about whether current policy is already achieving the goals the White House has enumerated. The order directs the secretary of the Treasury to report to the president within 120 days on how existing laws and policies promote or inhibit the seven core principles.  Major policy changes never go entirely as planned. The Bipartisan Policy Center has found that Dodd-Frank and other post-crisis reforms made the financial system safer and better protected consumers from risky financial products. But the reforms have also produced some unintended consequences, including:

  • A lack of coordination and unnecessary duplication of, and conflict between, rules.
  • The migration of certain activities from banks to nonbanks or across borders, and the curtailment of other activities.
  • Binding constraints on the business decisions of firms, sometimes resulting in “cliff effects” where regulations cause the provision of financial services or products to drop more steeply than would be expected from competitive market forces.

A formal review could serve as a comprehensive assessment of the post-crisis regulatory environment. For a model, U.S. policymakers should look at the European Commission’s call for evidence on the impact of financial rules and regulations on the European economy, and whether there are unnecessary regulatory burdens, inconsistencies, gaps or unintended consequences.

Crapo: 'Toxic' Senate will take time to address housing finance reform, Dodd-Frank -- Senate Banking Committee Chairman Mike Crapo said Wednesday that although he plans to begin working on housing finance reform and changes to the Dodd-Frank Act, the poor relationship between Democrats and Republicans will slow any progress. "The climate right now in the Senate is toxic as I have ever seen," the Idaho Republican said at an event sponsored by the law firm Jones Walker. "What is happening in the Senate right now…is a very slow process, much more slow than ever we have seen before and that impacts everything else." Democrats have slowed President Trump's Cabinet appointees, eating up days at a time on a single nominee, which makes finding floor time to pass legislation difficult. "Congress can in most cases walk and chew gum at the same time, so that doesn't mean there is going to be no action on any other issue, but it means that...floor time in the Senate is much more difficult to get than in the House," Crapo said. However, Crapo, who led previous legislative efforts at reforming the housing finance system, said it remains a "very high priority," while adding that he has taken up the issue with top Trump administration officials, including Treasury Secretary Steven Mnuchin. "My hope would be" that housing finance reform gets passed "within the next 12 months, but the practical reality is it might" take longer, Crapo said. He said both old concepts for housing finance — including one he co-sponsored with then Senate Banking Committee Chairman Tim Johnson, D-S.D., in 2013 — and new ones will be discussed. The Johnson-Crapo bill was approved by the committee in 2014, but lacked enough support to make it to the full Senate. The plan would have created a Federal Deposit Insurance Corp.-type model for the mortgage business, with an explicit government guarantee for catastrophic losses.

Reg relief may not mean lower compliance costs for banks — Nearly 10 years since the onset of the financial crisis, the once all-consuming demand for improved safety and soundness in banking has been replaced by a single-minded pursuit of a streamlined regulatory structure emphasizing economic growth. Banks are all but pleading for regulatory relief, hoping it can help stave off a new wave of consolidation in the industry, which they claim is driven by compliance costs from all these new rules. But whether regulatory relief — if it ever happens — results in lower compliance costs is an open question.

Senate Panel Presses Yellen on Financial Regulation - Senate Democrats on Tuesday enlisted Janet L. Yellen, the Federal Reserve chairwoman, as an expert witness against Republican plans to roll back postcrisis financial regulations. In testimony before the Senate Banking Committee, Ms. Yellen said repeatedly that the new safeguards were effective and that regulation was not impeding economic growth. Senator Sherrod Brown of Ohio, the ranking Democrat on the committee, asked Ms. Yellen whether regulation had reduced the risk of financial crises. “I believe the financial system is much more resilient than it was,” she said. Are businesses unable to get loans? No, Ms. Yellen responded. Are banks unable to compete with foreign rivals? No, she said. Are consumers better protected against predation? Yes, she said. Mr. Brown closed with a flourish, declaring that he would summarize the testimony, “Steps taken after the crisis made our economy stronger, our financial system more stable, our banks better capitalized and our consumers better protected.” The performance drew muted criticism from Senate Republicans, who pressed Ms. Yellen to say that the postcrisis pendulum had swung too far in the direction of regulation. In part, the tempered tone of their questions reflected the reality that Republicans are in power, and free to move forward with plans to reduce regulation. President Trump has criticized the postcrisis overhaul of financial regulation as a “disaster.” He signed an executive order this month instructing the Treasury Department to assess the effect of those regulations. Republicans also are considering new legislation. The new chairman of the banking committee, Senator Mike Crapo, an Idaho Republican, said he hoped the Fed would cooperate with the Trump administration in its efforts to reduce financial regulation. “It is time to reassess what is working and what is not,” Mr. Crapo said. “Financial regulation should strike a proper balance between the need for a safe and sound financial system and the need to promote a vibrant, growing economy.” Senator Patrick J. Toomey, Republican of Pennsylvania, went further, expressing the hope that the Fed would “refrain from issuing major new regulations” until Mr. Trump had the chance to name his people to senior roles at the central bank, including the position of vice chairman for regulation, created after the crisis to oversee rule making.

 The upshot for banking from Yellen's Senate appearance -- Federal Reserve Chair Janet Yellen appeared Tuesday before an uncommonly collegial hearing of the Senate Banking Committee, but the lack of outward drama masked the fact that lawmakers from both parties were using her testimony to lay the groundwork for a broader battle over the future of regulatory reform. Yellen faced questions on scrapping the Fed's most important stress test, whether regulatory burden was truly keeping banks from lending, and whether she supported a recent Trump administration executive order calling for a sharp reduction in regulation. In what is historically true for any Fed chairman, Yellen provided plenty of ammunition for both sides, noting that lending appeared robust while also supporting the aims of President Trump's recent actions. Following is a guide to the key points at the hearing. Sen. Richard Shelby, R-Ala., who chaired the committee in the last Congress, asked whether, given the Fed’s recent changes to its annual Comprehensive Capital Analysis and Review stress testing regime, the central bank would be willing to make even greater alterations. “As a regulator, you will continue to monitor that, and if it needs to be tailored, you’ll do whatever it takes?” Shelby asked. Yellen replied, "Yes, we believe very strongly in tailoring to make sure regulations fit the risk profiles of particular institutions, especially for smaller institutions." But Sen. Pat Toomey, R-Pa., went further, saying that he had “big problems” with CCAR because he views it as costly and redundant. While the Dodd-Frank Act Stress Test is required by the Dodd-Frank Act, CCAR is not, he said, and since capital levels have risen substantially since the crisis, Toomey asked Yellen if she would consider discarding CCAR altogether. “Isn’t CCAR at least somewhat duplicative, and since it is very costly and not mandated by statute, would you consider bringing it to an end at some point in the foreseeable future?” Toomey asked. Yellen defended the test as a "key part of the regulatory process." Two of the top Democrats on the committee, ranking member Sherrod Brown of Ohio and Sen. Elizabeth Warren of Massachusetts, asked Yellen a series of questions about whether banks are making loans in an effort to disprove claims made by Trump that the Dodd-Frank Act has curbed credit availability. Yellen referenced a number of statistics, including a small-business survey that suggested that only 4% of small-business owners said they were unable to receive all of the loans they wanted. Yellen further added that commercial and industrial lending have rebounded to pre-2008 levels and overall lending on banks’ portfolios has rebounded to pre-crisis levels. “So the data do not back the president up there,” Warren said. Republicans on the committee did not concede the point. Sen. Thom Tillis, R-N.C., said there is research suggesting that the slower rate of small-business creation and expansion that has accompanied the slow-growth post-crisis environment has led to lower demand for small-business loans.

Trump’s Push to Meddle With the Fed Is Part of a Global Trend - President Trump has asked his financial regulators to subject their financial regulations to “more rigorous regulatory impact analysis” and to “restore public accountability within federal financial regulatory agencies” in one of his executive orders. That sounds pretty unobjectionable. But for the Federal Reserve, the most important American financial regulator, the traditional response would have been: Leave us alone. The Fed, the nation’s central bank, has long prized its independence. It has thought that it should decide for itself the best way to regulate American financial institutions, unfettered by unsophisticated, and potentially venal, political oversight. But political leaders around the world are not at all shy about interfering with what the central banks do. Mr. Trump’s executive order reflects a global mood. Politicians in Britain and elsewhere in Europe have also started to publicly lament the conduct of their central banks. During her testimony to Congress this week, Janet Yellen, the Fed chairwoman, was criticized for both the Fed’s monetary policy and its regulation of banks. Representative Andy Barr, Republican of Kentucky, suggested that the slow growth in the wake of the Fed’s quantitative easing program underscored “the failure of unconventional policies to deliver the expected results.” Other legislators chimed in with similar criticism. Legislators also blamed the Fed for the sort of overregulation that the president’s executive order is designed to address. The House Financial Services Committee chairman, Jeb Hensarling of Texas, criticized “a failed regulatory state” for impeding growth, with the implication being that the Fed was part of the problem. Senator Pat Toomey, Republican of Pennsylvania, argued that the Fed was incorrectly concluding that the “prospect for growth is not at all changed by the prospect of tax reform and regulatory reform.”

Fed President Admits US Banks Have Only "Half The Equity They Need" -- In a scathing editorial published in the Wall Street Journal today, the president of the Federal Reserve Bank of Minneapolis, Neel Kashkari, blasted US banks, saying that they still lacked sufficient capital to withstand a major crisis. Kashkari makes a great analogy. When you’re applying for a mortgage or business loan, sensible banks are supposed to demand a 20% down payment from their borrowers. If you want to buy a $500,000 home, a conservative bank will loan creditworthy borrowers $400,000. The borrower must be able to scratch together a $100,000 down payment. But when banks make investments and buy assets, they aren’t required to do the same thing. Remember that when you deposit money at a bank, you’re essentially loaning them your savings. As a bank depositor, you’re the lender. The bank is the borrower. Banks pool together their deposits and make various loans and investments. They buy government bonds, financial commercial trade, and fund real estate purchases. Some of their investment decisions make sense. Others are completely idiotic, as we saw in the 2008 financial meltdown. But the larger point is that banks don’t use their own money to make these investments. They use other people’s money. Your money. A bank’s investment portfolio is almost entirely funded with its customers’ savings. Very little of the bank’s own money is at risk. You can see the stark contrast here. If you as an individual want to borrow money to invest in something, you’re obliged to put down 20%, perhaps even much more depending on the asset. Your down payment provides a substantial cushion for the bank; if you stop paying the loan, the value of the property could decline 20% before the bank loses any money. But if a bank wants to make an investment, they typically don’t have to put down a single penny. The bank’s lenders, i.e. its depositors, put up all the money for the investment. If the investment does well, the bank keeps all the profits. But if the investment does poorly, the bank hasn’t risked any of its own money. The bank’s lenders (i.e. the depositors) are taking on all the risk.

Who Will Watch the Banks Under Trump? -- Nearly a decade after a devastating financial crisis, the U.S. remains poorly prepared for a repeat. So it’s unsettling that Daniel Tarullo, the Federal Reserve official who has done the most to make the country’s banks stronger, plans to step down -- and all the more important that President Donald Trump find a worthy replacement. The 2008 crisis exposed weaknesses at the heart of the U.S. financial system. Big banks had so little loss-absorbing capital that they rapidly faltered, bringing down the economy and leaving the government with no option but to rescue them at taxpayer expense. Shortages of cash made matters worse, forcing emergency asset sales that added to the losses. Appointed in 2009, and guided by the Dodd-Frank financial reform, Tarullo led efforts to strengthen the financial system. The Fed adopted capital requirements significantly more demanding than those laid down by international regulators, and tied them to liquidity rules aimed at ensuring banks would always have enough cash to meet their near-term obligations. It introduced regular stress tests designed to assess banks’ ability to weather a crisis, and demanded that they produce “living wills” describing how they could go bust without causing wider harm. Tarullo’s work is far from done. On average, the largest U.S. banks now have about $6 in equity for each $100 in assets (according to international accounting standards). That’s more than in 2007, but still not enough. The stress tests aren’t yet sufficiently realistic. Tarullo had a plan for improving them, but he won’t be around to see it through. And the living wills still give the public too little information. Tarullo seems optimistic about what will happen after he leaves. He says Trump’s “core principles” for financial regulation -- which include avoiding bailouts and addressing systemic risk -- are a “good starting point.” Certainly, maintaining Tarullo’s push for more equity capital would be an excellent way to further those principles. Crucially, by making the whole system more resilient, that would also allow the regulatory burden to be lifted in other areas.

Banks Ask Lawmakers to Ease Capital Rules, End Card Fee Cap - Chief executives at the biggest U.S. regional banks are asking U.S. lawmakers to consider easing capital requirements and repealing part of the Dodd-Frank financial overhaul that caps fees banks charge retailers on debit-card transactions. Regional banks don’t pose risks to the financial system that have caused concern among policymakers, executives of 18 banks said in a Feb. 13 letter to the top Republican and Democratic lawmakers in Congress. The banks include U.S. Bancorp, PNC Financial Services Group Inc., and Capital One Financial Corp. Financial regulations should be "appropriately tailored" to regional banks and Congress should review the impact regulations adopted after the 2008 financial crisis have had on the industry and U.S. economy, according to the letter. President Donald Trump has directed regulators to review financial rules and report back on suggested changes within 120 days, one of the first steps his administration has taken to do "a big number" on Dodd-Frank. Major changes to the law would need to be made by Congress. The bank CEOs’ top priorities in Washington also include a corporate tax rewrite and requiring regulators to do a cost-benefit analysis for all new rules. Congress should also eliminate a controversial provision, known as the Durbin Amendment, that capped swipe fees on debit cards. Banks have been fighting to repeal the provision for years, arguing that their costs have increased and the government shouldn’t set prices. Retailers say the cap helps maintain lower prices for consumers at the register. The banks said lawmakers should consider simplifying various requirements about how much capital banks should hold as mandated by the 2010 Dodd-Frank Act and international standards adopted after the financial crisis. “No one has comprehensively considered the cumulative impact of regulations implemented in the wake of the financial crisis," according to the letter.

Scrap Basel for Servicers' Sake, MBA Chair-Elect Says - Even with "a more fiscally conservative, limited-government, and less regulation-minded administration" in place, "bumpy waters still lie ahead" for mortgage servicers, the chairman-elect of the Mortgage Bankers Association said.For one thing, the Basel III capital requirements are making it hard for banks to stay in the servicing business, said David Motley, who is also the president of the $1.2 billion-asset Colonial Savings in Fort Worth, Texas.As a result, institutions are selling mortgage servicing rights at a record pace, he said Wednesday at the Mortgage Bankers Association servicing conference in Dallas.When banks sell MSRs, they lose an asset that earns money and "the natural hedge" of the fee income that servicing provides in a rising interest rate environment, said Motley.This indirectly hurts borrowers, he argued. "The punitive capital treatment reduces demand for MSRs, creating a less liquid market that could result in lower prices for mortgages sold in the secondary market, and higher rates for consumers."Hence, regulators need to scrap Basel III, Motley said. "Let performance, capacity and customer service be the primary drivers of who gets market share in servicing, not excessively high capital standards on one segment of the industry." The government also needs to reduce the regulatory burden on servicers put in place by the Consumer Financial Protection Bureau, especially the uncertainty regarding enforcement, he said. This would free up funds at servicers to support innovations like giving consumers more self-service payment options. That burden is why the cost to service a performing loan has increased from about $60 to nearly $160 per year from 2008 to 2013, while the cost to service a nonperforming loan has risen from nearly $500 to around $2,300 over the same time period. "The punishment doesn't fit the crime" when it comes to CFPB enforcement actions, Motley said, and "don't get me started about the Department of Justice's use of the False Claims Act" for its enforcement actions on Federal Housing Administration loans.

How banks want to reshape anti-money-laundering regime — While markets and stakeholders wait to see what comes of the new administration’s plans to scale back the Dodd-Frank Act, banks are pushing regulators to revisit the long-established procedures around anti-money-laundering. In a position paper published Thursday by The Clearing House Association, which represents the largest banks, banking representatives called on lawmakers and regulators to rethink how banks combat money laundering and counter the finance of terrorism — known as AML/CFT compliance.

What (else) banks want from Washington – (9 slides) Financial firms are going on offense in Washington, pressing a policy agenda that would have been unimaginable just a few months ago. Some proposals, like reforming the Consumer Financial Protection Bureau, have been floated before while others began to gain traction after Republicans swept the November elections. Here's a look at some of the industry's requests.

Why 'America First' is bad for American bankers | American Banker - An “America First” trade-in-goods policy means a similarly protectionist U.S. approach to trade in finance, including banking. However, such a financial trade policy would not construct impregnable armor that strengthens the U.S., but would rather be something akin to Superman’s “Fortress of Solitude.”  In real life, a Fortress of Solitude for U.S. banking would lead to the lowest common denominator of regulations imposed differently by each country, which in turn would quickly crumple the financial stability on which even the smallest community banks depend. One day after Federal Financial Analytics issued a brief on increasing protectionism in global financial services trade — which was reported on by American Banker — the European Union’s top finance official made very clear that the EU would retaliate if the Trump administration were to divorce the U.S. from the cross-border financial regulatory framework.  These comments might lead one to assume that Europe is determined to maintain its own Fortress of Solitude from banks in the U.S. and the U.K. — which is experiencing its own protectionist wave with Brexit — that EU officials fear would be poorly regulated. But in fact, the EU’s regime is often less stringent than either the U.S. or U.K. Even more importantly, it’s completely dysfunctional on the most critical financial-stability question of all: how to ensure that weak banks fail without taking their sovereign governments along for the ride.  What is really at the heart of the EU’s concern is a long-established principle of cross-border trade in financial services: If we can’t operate freely in your country, then you’re out of ours. Other critical trade-in-finance centers, especially those in emerging markets and China, are at least as bound by this principle, often establishing express barriers to entry with little regard for safety and soundness. The more the U.S. isolates itself from trade with these formidable competitors, the faster and more certainly they will buttress their own financial fortresses, widening the moat and adding a few pikestaffs just in case the U.S. misses the point. The president’s Feb. 3 executive order on financial reform set out a principle to “advance American interests in international financial regulatory negotiations and meetings,” presumably referring to the Financial Stability Board and the Basel Committee. The tenor seems aimed squarely at enhancing U.S. competitiveness, not at crafting the global framework demanded after the 2008 crisis.

Wall Street Banks Are Trading in Their Own Company’s Stock: How Is This Legal? --  Pam Martens  --  Wall Street banks like Citigroup, JPMorgan Chase, Bank of America and others traded millions of shares of each other’s stocks – as well as trading millions of shares of their own publicly traded stock. The trades were not directed to a regulated stock exchange like the New York Stock Exchange. Instead, the trades were conducted internally by the Wall Street bank’s own Dark Pool – an entity appropriately named for its darkness and hands-off regulation.  In an effort to create the illusion that there is some element of transparency about what is going on in these Dark Pools, Wall Street’s self-regulator, FINRA, began reporting three-week old trading data to the public on June 2, 2014. That’s when Wall Street On Parade first made the stunning discovery that the banks were trading in their own company stock. (See related articles below.)  According to the FINRA data, for the week of November 7, 2016 (which included the Tuesday Presidential election in the U.S.) Dark Pools traded 158.8 million shares of Bank of America’s stock. That was more than three times the number of shares traded the prior week in Bank of America shares by Dark Pools. Of the 158.8 million shares traded, 1.2 million shares were traded in 6,850 separate trades by an internal Dark Pool at Bank of America’s Merrill Lynch unit called Instinct X. The same week, one of Citigroup’s myriad Dark Pools, Citi Cross, traded 360,924 shares in 2,026 separate trades in its own stock. JPMorgan Chase’s Dark Pool, JPM-X, traded 2.2 million shares of its own publicly traded stock in 5,042 trades the week of November 7. The SEC has given a more benign sounding name to Dark Pools, calling them Alternative Trading Systems or ATS. As if it’s any help to the investing public, the SEC grandly provides a regular listing of the Dark Pools. But as we pointed out in a previous article on Citigroup’s Automated Trading Desk (ATD), the SEC doesn’t seem to have a solid handle on just how big internalized trading is at the mega Wall Street banks.

SEC Weighs Curbing Investigators’ Powers to Probe Wall Street - The Securities and Exchange Commission’s interim chief has quietly initiated a review that could make it harder for government lawyers to open investigations into corporate wrongdoing, said three people with knowledge of the matter. Michael Piwowar, the Republican serving as the agency’s acting chairman, has requested an examination of what’s known internally as delegated authority, the people said. It gives senior attorneys across the SEC powers to start probes, inspect firms and sign-off on some financial products without seeking approval from Piwowar and the other politically-appointed commissioners who oversee the regulator. Piwowar, through a representative, declined to comment. Any rollback of authorities could be felt particularly hard in the SEC’s enforcement division. It’s now common practice for officials to issue subpoenas and negotiate settlements without SEC commissioners weighing in, except in the biggest and most-sensitive cases. Staff attorneys argue the process allows them to move quickly and avoid getting bogged down in wrangling among commissioners. When commissioners get involved, investigations become “a more drawn out process,” said Alec Koch, a former SEC enforcement attorney now in private practice at King & Spalding. “It goes from hours or days to weeks potentially.”The examination Piwowar has asked for is wide-ranging and not limited to the enforcement unit, said two of the people, who requested anonymity to discuss an initiative that isn’t public. Other SEC divisions regulate corporate disclosures, stock markets and mutual funds. While staff has some ability to act unilaterally, Piwowar and other commissioners must vote to approve rules, enforcement settlements and lawsuits against alleged wrongdoers.

US banks ‘wasting billions’ trying to track crime - The US’s biggest banks are wasting billions of dollars each year trying to track criminal activity, according to a powerful lobby group which is arguing for a radical overhaul of the way the US keeps tabs on terrorists, money launderers and tax dodgers. The Clearing House, a trade association that represents banks including JPMorgan Chase, Citigroup and Bank of America, put out a report on Thursday recommending a much stronger role for the US Treasury’s Financial Crimes Enforcement Network (FinCEN), which enforces anti-money laundering rules and collects hundreds of thousands of reports on suspicious transactions each year from banks around the country. At present, the report said, banks are “effectively deputised” individually by the government to prevent, identify, investigate and report criminal activity. Big financial firms will spend at least $8bn on AML compliance this year around the world, the report noted, not much less than the $9.5bn budget of the FBI. Most of that spending is “of limited benefit” to law enforcement or national security, it said, and in some cases hurts US interests in developing markets. The report recommends that FinCEN take sole authority for examining banks’ compliance efforts, replacing a mishmash of agencies, while beefing up its resources for supervision and enforcement. Meanwhile, the banks would not be required to probe and report every transaction that could possibly raise a red flag, but rather focus on investigating transactions based on specific concerns relayed to them by law enforcement.

Banks fail to enforce cybersecurity standards on third-party providers: FDIC watchdog — Banks are woefully unprepared to face potential cybersecurity threats stemming from third-party technology providers, according to a report issued Wednesday by the Federal Deposit Insurance Corp.’s independent watchdog. The FDIC's Office of Inspector General found that financial institutions failed to include important cybersecurity provisions in their contracts with the third-party firms. Subscribe Now

America's CEOs Have Never Been More "Optimistic" -- It's not just US consumer optimism that recently hit all time highs (even if, as UMichigan explained last week, it was largely split according to party lines). According to a recent analysis by Bank of America, in the current earnings season which is gradually coming to a close, despite tepid guidance, "one read on corporate optimism is at a record high."As BofA's Savita Subramanian writes, "guidance during 4Q earnings season is typically less positive than in other quarters as management sets a low bar for the year. While the ratio of above- vs. below consensus guidance has remained weak so far this month at 0.55, it is up from 0.44 in January and slightly above the post-2000 average of 0.48 for both months."And yet, while managements’ official outlooks may be nothing to write home about, commentary on earnings calls has been notably optimistic. A simple count of mentions of the word “better” relative to mentions of “worse” or “weaker” on earnings calls is tracking its highest in over two years. And the word “optimistic” has been used on a record 51% of the calls this quarter, the highest ever in our data history.Ironically the incidence of record high "optimism" mentions took place just one quarter after it hit a record low.And while on t he surface, this is great news for the future as it suggests companies may finally redirect their spending away from buybacks and dividends and into corporate growth, hiring and capex, it also means that the threshold for disappointment is the lowest it has ever been, and the pressure on both Trump and the Fed to deliver an environment that satisfied America's CEO has never been higher.

ABA endorses tech firm's online lending platform - A Chicago technology company that enables banks to make small-business loans online got an endorsement Monday from the American Bankers Association.The privately held Akouba will offer its origination and underwriting platform to ABA-member banks, which will receive preferred pricing, according to a press release announcing the agreement. The deal is designed to give smaller banks a better chance of competing with marketplace lenders. Participating banks will establish their own credit policies, and the online loan application process will carry each bank’s own branding.“The small-business loan application process is very time-sensitive and costly for banks, and there is a need to simplify and accelerate the process,” Bryan Luke, a Hawaii banker who is chairman of an ABA advisory council, said in the release.Akouba is one of several tech companies that offer online lending platforms to banks. “We have implemented a lot of the same technology strategies online lenders use and given those tools to banks as a platform,” Akouba CEO Chris Rentner said in a 2016 interview.The ABA selected Akouba following what the trade group described as an extensive due diligence process. ABA spokesman John Hall said in an email that more such a nnouncements are in the pipeline.

Crooks, like borrowers, flock to online lenders - Speed and ease of use have made online lenders increasingly popular with consumers, but those same qualities have put them in fraudsters’ cross hairs.There were approximately a million cyberattacks targeting online lending applications in 2016, according to a report from the security firm ThreatMetrix. Had the thieves been successful in every attempt, $10 billion would have stolen. Overall, the number of attacks specifically aimed at alternative lending increased 150% from the third quarter of 2016 to the fourth quarter.Although the entire financial services industry is a hot target for cybercriminals, online lenders are perhaps particularly vulnerable. They differentiate themselves based on their ability to process loan applications quickly. For cybercriminals, that’s an advantage. Meanwhile, the rise in attempts underscores the need for financial firms that manage digital identity and authenticate customers to evolve.The amount of new loan application fraud is higher than ever before as cybercriminals buy, trade, augment and monetize stolen identity credentials for financial gain, perhaps seeing these new players as a softer target than some of the larger established banks, said Vanita Pandey, vice president of strategy and product marketing at ThreatMetrix. Online lenders “typically make decisions more quickly – that’s one of their selling points – and use nontraditional metrics to lend,” Pandey said. “They also often target the unbanked, so their appetite for risk is higher and may be seen as easier targets” in the eyes of fraudsters. That dynamic makes it important for online lenders to be vigilant with security, said Diwakar Choubey, chief executive of MoneyLion, a New York-based online lending firm.

A well-informed consumer base can help issuers fight fraud - Fraud reached record highs last year, and online shoppers took the biggest hit. According to a report released earlier this month by Javelin Strategy & Research, in 2016 fraud increased a staggering 40% for identity card-not-present (CNP) transactions. With Americans now making 51% of purchases online, that increase in online identity theft is especially concerning.  The key to combating identity theft is consumer education. With a better understanding of why it's on the rise, what can be done to avoid it, and how to mitigate the repercussions of ID theft if it's already happened, people can successfully protect themselves from this rising threat. (And continue with online shopping, which has become nothing less than an American way of life.)  EMV chip cards have played a role. Chip cards are actually more secure than magnetic stripe cards, at least during in-person transactions. Chip cards have eliminated the ability for criminals to counterfeit cards and use them in person at brick and mortar retailers, because the chips and new card readers work together to create a unique token that verifies each transaction.  When that source of revenue dried up, fraudsters had to find other means of making money. Because online transactions only require basic card information and don’t require chip authentication, e-commerce became the path of least resistance for card fraud. Credit card companies generally don't hold customers liable for fraudulent purchases, but the responsibility to notice and promptly report suspicious activity still falls on the customer. Giving consumers the information that makes them aware of the fraud threat is key.

OCC fintech charter: Something Ds and Rs can both love - The U.S. has become an intensely and dangerously divided nation.  I believe it is essential that we look for common ground to rebuild the trust needed to unite us once again and to move America forward. I believe one such opportunity is the plan to grant national bank charters to financial technology firms. As the Office of the Comptroller of the Currency moves forward to grant national bank charters to fintech companies, unity of purpose could be achieved by stepping back to consider the broad policy goals that Democrats and Republicans typically seek in regulating and supervising financial services markets and businesses. Republicans are right that market competition will yield lower prices and better products, improving the lives of all Americans. Democrats are right that a national regulatory framework is key to promoting that sort of healthy competition from coast to coast. Both Democrats and Republicans want to address the financial needs of smaller Main Street businesses. Both parties understand that small and midsize businesses are the ones creating the jobs of the future. Both Republicans and Democrats prefer simplicity over complexity. The OCC charter would do these things and more. By clarifying the national regulatory framework, as well as providing a stamp of approval of a strong regulator, a national bank charter would promote greater capital formation and liquidity that will help improve prices for borrowers up and down the income and credit spectrum. Democrats and Republicans likewise should both focus their attention on the fact that the OCC will provide strong supervision and hands-on government oversight of the financial sector. They should emphasize policies that promote transparency, consumer protection and financial inclusion. The OCC meets these tests. Eliminating the Office of Thrift Supervision under the 2010 Dodd-Frank Act eliminated the “regulatory arbitrage” opportunity that previously existed when firms could choose between the OCC and OTS. A strong OCC should give Republicans and Democrats a means to encourage safe innovation that benefits small businesses, creates good jobs and saves consumers lots of money.

Why some fintech firms are saying no thanks to OCC charter — Some fintech firms are flatly rejecting the Office of the Comptroller of the Currency's creation of a charter for such firms, citing fears that it will come with too many strings attached. “This provides zero benefit to innovation,” said Timothy Li, the founder and CEO of Kuber, an online lender targeting college students. “It’s a self-serving act.”

New York seeks to expand authority over fintechs - The New York State Department of Financial Services is hoping to expand its authority to marketplace lenders, brokers, merchant cash advance companies and others that previously could operate in the state without a license.Tucked inside New York Gov. Andrew Cuomo’s proposed budget for the coming year, the changes would force a wide range of companies to become subject to the state regulator.“New York is trying to throw a wide net for everyone who solicits business in the state of New York through the internet,” .  If passed, the measure would expand licensing requirements to all companies that make personal loans of $25,000 or less or commercial loans of $50,000 or less, regardless of the interest rate charged. Previously, the state required companies in that category to obtain a license only if they charged more than 16% interest.  Moreover, the measure would expand coverage to companies that are involved in the loan process, whether or not they are directly making the loan. The new definition covers any company that “solicits … purchases or acquires … [or] arranges or facilitates” the origination of loans to New York residents. This would include marketplace lenders – the platforms that connect lenders and borrowers – as well as merchant cash advance companies and any firm that trades loans. Online lenders that partner with out-of-state banks would also be covered, but the banks themselves would not have to get a license.  The measure would also make space for New York’s superintendent of financial services to exempt companies that “facilitate low cost lending in any community” from the licensing requirement. “It typically takes a year or more to grant licenses,”     “You're going to be subject to supervision by the New York Department of Financial Services, and that adds a whole new layer of costs and burdens to doing business in the state,” Pearson said.  The proposal underscores the difficulty states will face in uniting to create a more coherent licensing system to compete with the Office of the Comptroller of the Currency's fintech charter. It may also hasten a likely battle between state regulators, which oppose the federal charter, and the OCC over the legality of the comptroller's actions. State regulators have said the OCC lacks the power to offer a charter of this kind for fintech firms.

Small-business lending has a diversity problem - It is disturbing how easy it is to prove the large gap between lending capital available to male and/or white-small business owners and the capital available to women and minority small-business owners.A 2016 study by Biz2Credit, an online marketplace for small-business funding, showed that female-owned businesses receive loan approvals 33% less often than male-owned businesses. There’s an even greater bias against minority-owned companies. Minority-owned firms are less likely to receive loans than nonminority firms and, in fact, are more likely not to apply for loans due to rejection fears, according to findings from the U.S. Department of Commerce Minority Business Development Agency. If they do get loans, minority-owned firms are more likely to receive lower loan amounts than nonminority firms and pay higher interest rates on business loans.Faced with irrefutable evidence of lending and investment bias in the marketplace, the Small Business Administration embarked on an initiative last year to better understand the basis of the problem. The SBA’s research, in conjunction with the Library of Congress and economists at Pepperdine Graziadio School of Business and Management and Duke University’s Fuqua School of Business, found that the racial and gender makeup of investment boards directly impacts the investment decisions those boards make – especially with regard to race and gender of loan and investment recipients. In other words, we found diverse investment boards are more likely to invest in diverse companies. Importantly, the SBA research also found that the problem of investing equality is likely to be even more pronounced in private equity, as the venture capital industry has not kept pace with investing in people of diverse backgrounds. A 2016 report in TechCrunch on active venture and microventure firms found that about 8% of investing partners are women, and about 7% of partners in the top 100 firms are women. The National Venture Capital Association reports that 87% of venture capitalists are Caucasian, while 89% are male. Furthermore, a Future List analysis of ethnic and gender diversity among senior ranks at venture capital firms reports that firms have become “a little more diverse in the past 12 months while many all-white-male firms stayed that way.” Clearly, one of the root problems of investing disparities is lack of diversity among those who make investment decisions.The takeaway could not be clearer: Lenders and capital providers need to recruit more women and minorities into investment decision-making positions to get more small-business loans to women and minorities.

Is AI making credit scores better, or more confusing? - A consumer’s credit score used to be a commonly understood number — the time-honored FICO score — that banks all used in their underwriting. But banks increasingly are relying on dozens of scores that reflect a variety of data sources, analytics and use of artificial intelligence technology. The use of AI offers lenders the ability to get a precise look into someone’s creditworthiness and score those previously deemed unscorable. But such scoring techniques also bring uncertainty: What it will take to convince regulators that AI-based credit scores are not a black box? How do you get a system trained to look at the interactions of many variables, to produce one clear reason for declining credit? Data scientists at credit bureaus and banks are working to find answers to questions like these. There are two main reasons to use artificial intelligence to derive a credit score. One is to assess creditworthiness more precisely. The other is to be able to consider people who might not have been able to get a credit score in the past, or who may have been too hastily rejected by a traditional logistic regression-based score. In other words, a method that looks at certain data points from consumers’ credit history to calculate the odds that they will repay. Machine learning can take a more nuanced look at consumer behavior. “A neural network more closely mimics the way humans think and reason, whereas linear models are more dogmatic — you’re imposing structure on data as opposed to letting the data talk to you,” said Eric VonDohlen, chief analytics officer at the online lender Elevate. The more complex reasoning of artificial intelligence can find things in the data that wouldn’t be apparent otherwise.

Should banks spell out how they invest customer deposits? – American Banker podcast - Trust and transparency can be strengthened and like-minded borrowers and banks can be brought together if transactions are “tagged” and investments are explained, argues Bruce Cahan, adjunct professor at Stanford University.

CFPB Looking to Alternative Data to Help Unbanked: The Consumer Financial Protection Bureau is seeking feedback on the benefits and risks of using alternative data sources, such as rent or utility payments, that would allow lenders to build a credit history for unbanked consumers. The bureau plans to hold a public field hearing Thursday in Charleston, W.Va., during which consumer advocates and industry representatives will discuss the impact of using unconventional sources of information. Alternative data could be used to establish a track record and payment history for unbanked and underbanked consumers that tend to skew low-income and minority. An estimated 45 million consumers face barriers to accessing credit, or pay more for it, because they have no credit history, the bureau said. "We want to learn more about whether this kind of alternative data could open up greater access to credit for many Americans who are currently stranded outside the mainstream credit system," CFPB Director Richard Cordray said in prepared remarks for the hearing. The push for using alternative data comes amid a clampdown on payday loans, cash remittances, prepaid cards and other products. To get a loan, a consumer must have a credit score, which is created by one of the three major credit bureaus built on mountains of data culled primarily from credit card purchases. Rent is omitted from credit files because rents are collected "by millions of landlords scattered all over the country, and data on those payments is not collected in any systematic way," Cordray said.By contrast, debt collectors often report data on the debts they are collecting, such as unpaid medical bills, even though the actual medical providers typically do not report such information to the credit bureaus. As a result, credit files may contain information on bills a consumer failed to pay, but not information such as rent that the consumer did pay, Cordray said.

The Watchdog Protecting Consumers May Be Too Effective - Gretchen Morgenson, NYT - In its promise to roll back the Dodd-Frank financial reform act of 2010, the Trump administration hasn’t provided many details. It’s a safe bet, however, that the Consumer Financial Protection Bureau, the federal agency charged with protecting consumers from financial miscreants, will be a target. Why would the president want to rein in the only federal agency dedicated to the consumer finance beat? Perhaps it has been a little too effective in pursuing wrongdoing by banks, consumer credit reporting companies, credit card issuers and student loan collectors. While these activities have earned kudos from Main Street, the bureau has also made powerful enemies among financial institutions whose executives have the ear of Mr. Trump and other Republicans. According to a leaked memo that emerged late this week, Jeb Hensarling will move forward with legislation to weaken the bureau and its enforcement powers. Republican lawmakers like Mr. Hensarling have been trying to hobble the bureau ever since its creation in 2012 under Dodd-Frank. But none of these efforts have gotten far. With a new administration in town, the momentum against the bureau is building, Although it’s unlikely the bureau will be eliminated, its structure as an independent agency whose budget does not have to be approved by Congress may be threatened.  Future rule-making could also come under fire. “If the C.F.P.B. was to adopt new regulations,” she said, “there would be greater potential for Congress to put a stop to it by removing C.F.P.B.’s authority to adopt those rules or taking action after the fact to undo the regulations.” Reducing the bureau’s power would deal a blow to consumers, because other federal finance regulators just don’t have their interests at heart. Entities such as the Federal Reserve Board and the Office of the Comptroller of the Currency are charged with monitoring banks for safety and soundness. Historically, this has translated to a regulatory focus on profitability at these institutions. And if those profits come at the expense of consumers, well, c’est la vie.

Judge to rule soon on temporary Choke Point halt — Banks could get an official breather from Operation Choke Point as early as next week. U.S. District Judge Gladys Kessler is set to rule on whether to halt the controversial policy, in which the Justice Department and federal regulators allegedly pressured banks to cut off ties with certain targeted industries, including payday lenders.

GOP bill would eliminate Consumer Financial Protection Bureau | TheHill: Two Republican lawmakers introduced Tuesday companion bills to eliminate the Consumer Financial Protection Bureau (CFPB), the controversial watchdog agency long targeted by the GOP. The bills from Sen. Ted Cruz(R-Texas) and Rep. John Ratcliffe (R-Texas) would repeal Title X of the Dodd-Frank Act, which established the CFPB. Republicans have long sought to eliminate or drastically reform the CFPB, but Cruz and Ratcliffe’s approach goes further than current GOP proposals to reshape the bureau. Cruz said in a statement his bill “gives Congress the opportunity to free consumers and small businesses from the CFPB’s regulatory blockades and financial activism, which stunt economic growth.” “While there’s much more to do to scale back the harmful regulatory impositions of Dodd-Frank, this legislation takes a critical step in the right direction,” said Cruz.Ratcliffe said “President Trump has made it clear he’ll join us in our fight to dismantle Dodd-Frank,” possibly referring to the president’s pledge to deconstruct the law without providing details on how the White House would like to do so. “I’m optimistic at our renewed chances of advancing this effort with a willing partner in the White House,” said Ratcliffe. Republicans have consistently opposed the CFPB since the agency opened in 2011. They say the bureau — controlled by an independent director with regulatory and punitive power — is unaccountable and too powerful. House Republicans have proposed replacing the director with a bipartisan commission and letting Congress control the CFPB budget, currently funded by the Federal Reserve.

Interim fixes to rein in the CFPB -- Republican lawmakers and Trump administration officials have made clear their opposition to the Consumer Financial Protection Bureau. Yet beating back CFPB policies might be a longer and more difficult fight than many in the industry would like. Opponents of the bureau have put on the table removing CFPB Director Richard Cordray as well as legislative reform of the bureau among the steps to overturn the agency’s policies. But CFPB hawks in Congress have pledged to block such attempts. Therefore, backers of regulatory reform should consider what other administrative steps, which would have more of a pinprick effect but still be beneficial, could be utilized in challenging CFPB rules. Here, the other regulatory agencies could come into play. This was evident when President Trump’s executive order outlining “core principles” for regulation gave a role to the Financial Stability Oversight Council in identifying rules targeted for possible reform. The order did not give the FSOC total control of the regulatory review – perhaps because the council is made up of Democratic-appointed agency heads – but instead requires the Treasury secretary to report recommendations directly while consulting with FSOC members. Yet the FSOC could have a more substantial role once the Trump administration can appoint new heads of the prudential regulators. Existing law already gives those agencies and other government bodies significant authority to monitor and challenge CFPB rules.  The Federal Trade Commission, bank regulatory agencies and the Department of Justice all have signed memoranda of understanding with the CFPB to require agency notification and coordination on investigations and enforcement activities. For example, in certain instances the FTC must be provided with 60 days’ notice before the CFPB can commence certain types of actions. If Treasury finds that the CFPB is engaged in investigations, enforcement activity or rulemakings that are problematic, Treasury should encourage the other agencies, particularly the FTC and DOJ, to insist on a strict adherence to these notification and coordination requirements. While this will not stop a determined CFPB, it could slow the CFPB down, and could force the CFPB to take some of the Trump deregulatory agenda into account in order to short-circuit these roadblocks.

 Read Between the CFPB's Lines for Marketing Services Guidance - Recently, the Consumer Financial Protection Bureau fined Prospect Mortgage for violations of Section 8 of the Real Estate Settlement Procedures Act. The initial reaction by many is to point to this case as additional evidence of the dangers of, and reasons to avoid, co-marketing and marketing services agreements. I see it differently: Notice what the CFPB did not say. Rather than determine that MSAs, lead agreements or co-marketing agreements were simply illegal, the CFPB found only certain behaviors illegal. Moreover, with all due respect to the respondents, the alleged activities are of the sort that it is not surprising that the CFPB took action. Indeed, while few would object to paying for leads, in this case the actual real estate agents — not merely the brokers — received dollars under the lead fee payments from brokers to actually steer customers to the lender. Hence, the CFPB is effectively alleging that the lead agreement was merely a vehicle to disguise actual payments to real estate agents for steering borrowers. With respect to the MSAs at issue in the Prospect case, the CFPB alleges that payments were reduced or discontinued, not on the basis of what services were provided, but rather based upon the capture rate of business from referrals. If true, this is a cardinal compliance sin which would predictably result in enforcement action. A similar defect was alleged with respect to desk agreements. The CFPB says these desk rentals were valued based on referrals rather than market value of the space — a fatal flaw to any such agreement. The point is that companies engaged in various marketing efforts should not look at this latest action as an indicator that such arrangements are doomed. Rather, these enforcement actions underscore the fact that there is no substitute for a common sense application of principles that can be drawn from prior enforcement actions, agency guidance and a general understanding of the regulatory and legislative intent behind the rules. Using such tools, it is not earth-shaking that the alleged activities resulted in an enforcement action. As such, those pointing to this case as further evidence that MSAs are not safe are misguided because what Prospect engaged in need not — should not — be part of any compliant marketing arrangement.

The CFPB’s Big Opponent, Jeb Hensarling, Rivals Trump in the “Make Stuff Up” Category - Yves Smith --Chairman of the House Financial Services Committee, has long been loaded for bear as far as financial regulations in general and the Consumer Financial Protection Bureau (CFPB) in particularly are concerned. So one would think given his long-standing antipathy that he’d be able to make at least a semi-plausible case against Dodd Frank, particularly given that it is such a behemoth of a bill that it isn’t particularly well crafted. Nope. In an an op-ed for the Wall Street Journal, Hensarling laid out his bill of particulars against the CFPB, which he called a “rogue agency”. In a new post at Credit Slips, Georgetown law professor Adam Levitin shows that the claims are demonstrably false. To the extent that there have been changes in bank behavior, they can’t be attributed to Dodd Frank.  Drawing on Levitin’s post, we’ll put Hensarling’s claims in two categories: utterly inaccurate versus trumped up. Utterly Inaccurate Claims:

  • Fewer free checking accounts. Hensarling made a claim that is sneaky: “The number of banks offering free checking has drastically declined,” to get readers to reach that conclusion. But even with the number of banks shrinking as consolidation continues (and the CFPB has squat to do with that), this assertion is bogus.
  • Higher bank fees. This one is particularly rich, since the CFPB is now in charge of overseeing banks for overdraft abuses, and the overall fee reductions there have to be so large as to offset anything else Hensarling might be trying to pin on the agency. Or is Hensarling weirdly trying to assert that because banks can’t gouge consumers as much with their overdraft chicanery, they are raising the rack rate of other fees?
  • More costly auto loans. Levitin provides data consistent with the Strategy + Business analysis:
  • Fewer banks, bankers and hiring in the economy. No joke, this is what Hensarling said:With consumer protection outside the democratic process, consumers were harmed by a reduction in competition. With fewer lenders serving fewer borrowers, fewer businesses employed fewer workers. This isn’t even coherent. The argument kinda sorta seems to be that the CFPB constrained consumer borrowing, which in turn reduced business opportunities. But any look at the data shows growth in consumer credit post crisis. (Levitin thinks Hensarling is trying to make the Trump argument, that regulation hurt lending to businesses, but as he points out, the CFPB has nothing to do with business lending).

Appeals court aids CFPB in constitutionality case, but adds a twist -- A federal appeals court agreed Thursday to scrap an earlier ruling against the Consumer Financial Protection Bureau's constitutionality, saying it will revisit the issue at a hearing on May 24, while also opening the door to discuss a new wrinkle in the case.  The U.S. Court of Appeals for the D.C. Circuit said it agreed to consider the CFPB's petition on an "en banc" basis, allowing 10 judges to revisit a decision made last year by a three-judge panel of the court. The decision effectively wiped out that ruling, which found that the CFPB's single-director structure was unconstitutional and struck down the Dodd-Frank Act's provision that a CFPB director could only be fired "for cause."  The decision was a victory for the CFPB, but the agency is far from out of the woods. Now it must convince a majority of the judges that Dodd-Frank provided appropriate checks and balances for the agency. It will also have to tackle a new, unexpected issue, according to questions asked by the appeals court in its decision Thursday.  The court wants the two sides in the case — PHH Corp. and the CFPB — to weigh in on these issues:

  • Is the single-director structure consistent with the Constitution and, if not, what is the way to solve that problem?
  • Can the court decide the case without addressing the question of constitutionality?
  • What happens if the court decides that the administrative law judge who initially decided the case is an "inferior officer" under the law rather than an "employee" of the CFPB?

While the first two questions have previously been discussed, the last one is a surprise. It means the court is preparing to take up the matter of whether agencies can appoint their own administrative law judges or whether they should be appointed by the president.  Consumer advocates and civil rights groups praised the D.C. Circuit's order.But the victory may be short-lived. The full 10-judge court (Judge Merrick Garland recused himself) could reinstate the earlier court ruling — or go beyond it.

Court of Appeals agrees to rehear CFPB case, agency to fight "unconstitutional" ruling | 2017-02-16 | HousingWire - If President Donald Trump wants to fire Consumer Financial Protection Bureau Director Richard Cordray, he’s going to have to wait a little longer to do it, as the U.S. Court of Appeals for the District of Columbia Circuit ruled Thursday in favor of the CFPB. The ruling allows the embattled agency to defend the constitutionality of its leadership structure. The ruling stems from the CFPB’s fight against PHH, which started with a $103 million increase to a $6 million fine initially levied against PHH for allegedly illegally referring consumers to mortgage insurers in exchange for kickbacks. The fight ended, or so it appeared, with the CFPB’s leadership structure being declared unconstitutional by the U.S. Court of Appeals for the District of Columbia Circuit in a 2-1 vote.  The CFPB fought that ruling, asking the court to rehear the case en banc, meaning that it wanted the entire court to hear the case, rather than the three judges who ruled on the case in October. And Thursday, the full court of appeals granted that request, meaning the CFPB can now defend its constitutionality before the full court. In agreeing to rehear the case en banc, the decision from October that declared the CFPB’s leadership structure unconstitutional is vacated.  And that means the CFPB can continue to operate as is until further notice. That also means that President Trump cannot fire Cordray unless it’s for cause. The previous decision made the CFPB director fireable at will, but that’s not the case anymore. According to the court, arguments in the appeal are scheduled for May 24, 2017.  The court’s ruling dictates that the parties should address the following issues at the hearing:

    • 1. Is the CFPB's structure as a single-Director independent agency consistent with Article II of the Constitution and, if not, is the proper remedy to sever the for-cause provision of the statute?
    • 2. May the court appropriately avoid deciding that constitutional question given the panel's ruling on the statutory issues in this case?
    • 3. If the en banc court, which has today separately ordered en banc consideration of Lucia v. SEC, 832 F.3d 277 (D.C. Cir. 2016), concludes in that case that the administrative law judge who handled that case was an inferior officer rather than an employee, what is the appropriate disposition of this case?

The full ruling can be read here.

Consumer Agency Can Demand Answers About Foreclosed Homes, Judge Rules At a time when many Republicans are urging President Trump to weaken the Consumer Financial Protection Bureau, a federal judge has now upheld its authority to issue a subpoena in a housing finance investigation. Judge Nancy G. Edmunds of Federal District Court in Detroit has ruled that one of the nation’s largest providers of seller-financed homes must comply with a demand for documents and other information from the consumer agency. The bureau has been looking into whether the terms of some of these sales violated federal truth-in-lending laws. In recent years, these kinds of deals have ballooned in poorer neighborhoods as lower-income Americans have found it harder to obtain mortgages and as private investment firms have stepped in to offer alternative financing since banks often will not lend to them. The agency filed a lawsuit in November after one such provider, Harbour Portfolio Advisors of Dallas, refused to comply with an administrative subpoena. Harbour Portfolio had argued that the agency had no authority to investigate its sale of formerly foreclosed homes to poor people through high-interest installment payment contracts — often referred to as contracts for deed. The market for such contracts, and Harbor Portfolio’s role in it, was featured in a  New York Times front-page article last year. The judge’s ruling on Wednesday was the latest in a series of actions against Harbour. In May, seven Democratic United States senators led by Richard Blumenthal of Connecticut and Sherrod Brown of Ohio wrote to the consumer agency, expressing concern over the lack of protections for low-income home buyers in contract-for-deed financing.

Fannie Mae’s Focus Will Not Change with New Administration, CEO Says: The arrival of President Trump has not changed Fannie Mae's plans for 2017, especially its emphasis on automated loan validation and other customer-focused innovations, CEO Timothy Mayopoulos said Friday. "The change in administration hasn't affected our approach to our business,” Mayopoulos said in an interview after the company’s fourth-quarter media call. “We've been in conservatorship now for over eight years, and it's very clear to us what our business objectives are." The government-sponsored enterprise is "focused on enhancing the housing finance system and bringing innovation to the market, things like [the loan-validation product] Day 1 Certainty that we think will be good for the housing finance system regardless of whatever changes might get made by this administration or any future administration," he said.He has yet to sit down with new Treasury Secretary Steve Mnuchin. Throughout the conservatorship Fannie Mae executives have met regularly with Treasury officials, and those meetings are expected to continue. Fannie Mae's fourth-quarter net earnings more than doubled to $5.04 billion from a year earlier. For the full year, Fannie Mae had net earnings of $12.3 billion, up 12% from 2015. The company does not control some of the drivers of its results, such as interest rate changes and home prices, Mayopoulos said during the media call. "As today's numbers demonstrate, these factors can cause significant volatility in our financial results, and they may have a positive or negative effect in a quarter or year," he said. Fannie Mae made $9.6 billion in dividend payments to Treasury in 2016 and plans to pay another $5.5 billion in March. With the March payment, Fannie will have made $159.9 billion in dividend payments to Treasury.

Fannie Mae Unveils Efforts to Simplify Servicing: Fannie Mae is making technological updates and implementing policy and operational changes as part of an effort to improve servicing. Central to the government-sponsored enterprise's so-called Simplifying Servicing initiative are updates it made to its loss mitigation tool, Servicing Management Default Underwriter, including a new user interface. These changes will become effective immediately, Fannie Mae said Tuesday. Through SMDU, servicers determine borrowers' eligibility for Fannie Mae's loss mitigation programs. The new SMDU tool was designed to integrate better into servicing platforms. Additionally, Fannie Mae said that decisions made using the tool would provide servicers with representation and warranty relief. "SMDU eliminates risk, uncertainty and complexity in the default and loan modification process by simplifying eligibility determinations and offering real-time answers on the best solutions for borrowers," Varma Penmatsa, vice president of servicing digital products at Fannie Mae, said in a news release. "The outcome is a simpler experience for both servicers and borrowers." Later this year, Fannie Mae plans to automate the creation of modification cases in the HomeSaver Solutions Network platform through SMDU to reduce the need for manual entry.Beyond the updates to SMDU, Fannie has made other operational and policy changes aimed to improving servicing. Beginning in February, Fannie eliminated the requirement that servicers report single-family mortgage-backed securities swap security balances. Fannie Mae also aligned the investor reporting due dates for various remittance-type mortgage loans and standardized liquidation reporting with Freddie Mac.

MBA: Mortgage Delinquencies Increased in Q4, Foreclosures Decreased - From the MBA: Delinquencies Increase in Fourth Quarter from Ten-Year Lows, Foreclosure Starts Continue Decline in Latest MBA Mortgage Delinquency Survey The delinquency rate for mortgage loans on one-to-four-unit residential properties increased to a seasonally adjusted rate of 4.80 percent of all loans outstanding at the end of the fourth quarter of 2016. The delinquency rate was up 28 basis points from the previous quarter, and was three basis points higher than one year ago, according to the Mortgage Bankers Association's (MBA) National Delinquency Survey.The percentage of loans on which foreclosure actions were started during the fourth quarter was 0.28 percent, a decrease of two basis points from the previous quarter, and eight basis points lower than one year ago. This is the lowest rate of new foreclosures started since the fourth quarter of 1988.The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the fourth quarter was 1.53 percent, down two basis points from the third quarter and 24 basis points lower than one year ago. This was the lowest foreclosure inventory rate since the second quarter of 2007.The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 3.13 percent, an increase of 17 basis points from last quarter, and a decrease of 31 basis points from last year. "We saw a mixed set of results in the most recent survey. Mortgage delinquencies increased in the fourth quarter for the first time since 2013, while both new foreclosure starts and the percentage of loans in foreclosure continued to decline. "The overall delinquency rate in the fourth quarter increased across all loan types - FHA, VA and conventional - as compared to the third quarter. However, it should be noted that last quarter's overall delinquency rate was at its lowest level since 2006. It is not unexpected that delinquencies could eventually increase off such a low base. We continue to see strong fundamentals in the overall economy, such as rising home values and increased employment, which bodes well for the future performance of FHA, VA and conventional loans.

Mortgage Delinquencies Rise Most In 7 Years As Rates Spike -- For the first time since Q1 2013, mortgage delinquencies rose QoQ in Q4. The jump from 4.52% (of total loans) to 4.80% is the largest since Q1 2010 and hit as mortgage rates spiked following President Trump's election and Fed Chair Yellen's jawboning and rate-hike. Of course, levels remain 'low' relative to the extreme highs of the financial crisis. One word springs to mind - "contained".  Doesn't bode well for Q1 2017. But then again, it's probably nothing... "contained"

Negative Equity Plagues Ohio Homeowners -  Ohio ranked No. 3 in the nation at the end of last year among states with the highest share of homeowners with mortgages that are seriously underwater, or have negative equity in their homes, according to a new report. The number of underwater Ohio homeowners represented 16.30 percent of all homeowners in the state, which ranked just behind Illinois, where 16.6 percent of homeowners were underwater, and Nevada, which took the top spot for underwater homeowners at 19.5 percent, according to the report from Attom Data Solutions of Irvine, Calif., the parent company of RealtyTrac Inc. The Dayton metro area fared somewhat better, but not much, despite benefiting from a long-term trend in home price appreciation that pushed the average sales price in the Dayton area to an all-time record of $161,380 in June, and $138,101 in December — a new record for the month, according to the Dayton Area Board of Realtors. Still, 20 percent of Dayton-area homeowners were underwater at the end of last year, ranking the local metro No. 4 among the 88 largest metro areas in the country for the share of underwater homeowners, according to Attom. Including the Dayton area, four of the top five metros with the highest share of underwater homeowners in the fourth quarter of 2016 were in Ohio: Cleveland (21.5 percent), Akron (20.1 percent) and Toldeo (19.9 percent). The highest percentage of metro area negative equity properties was found in Las Vegas, where 22.7 percent of homeowners were underwater at the end of last year, according to Attom. Nationally, overall home equity has been steadily rising since negative equity peaked in 2009, driving down the total share of underwater U.S. homeowners to 9.6 percent at the end of last year. That was down from 11.5 percent in the fourth quarter a year earlier, Attom reports.

JPM Teams with Fintech to Deliver Digital Mortgage Platform - JPMorgan Chase has partnered with fintech firm Roostify to build a digital self-service mortgage platform that will allow consumers to upload and electronically sign mortgage documents. The platform, which is expected to be rolled out later this year, will be integrated with Chase's backend Mortgage Express loan origination system. In addition to the document upload and e-signature capabilities, the new platform will also allow prospective borrowers to message with Chase loan officers and to track the status of their applications. Real estate agents will also be able to receive updates on the loan process for pending sales. The new platform will expand on Chase's current online mortgage offerings, which are limited to the pre-approval stage of the application process. Existing Chase customers will be able to access to platform through their online account, and their personal information will be prefilled into online forms. Consumers will also be able to access the platform through the Chase mobile banking app. "Customers today want a simple, fast and online loan originations process," Chase Mortgage CEO Mike Weinbach said in a memo to employees. "The new digital offering is a big moment for our business and more importantly for our customers." The mortgage technology play comes as retail origination volume at the company is up. Originations in the retail channel increased 23% year over year to $44.3 billion for 2016. Still, that figure is a fraction of the $101.4 billion in retail mortgage origination volume Chase recorded in 2012.

 MBA: Mortgage Applications Decrease in Latest Weekly Survey - From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey - Mortgage applications decreased 3.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 10, 2017.  ... The Refinance Index decreased 3 percent from the previous week. The seasonally adjusted Purchase Index decreased 5 percent from one week earlier. The unadjusted Purchase Index increased 1 percent compared with the previous week and was 3 percent higher than the same week one year ago. ... The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) decreased to 4.32 percent from 4.35 percent, with points remaining unchanged at 0.34 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The first graph shows the refinance index since 1990. It would take a substantial decrease in mortgage rates to see a significant increase in refinance activity - although we might see more cash-out refis. The second graph shows the MBA mortgage purchase index. Even with the recent increase in mortgage rates, purchase activity is still holding up - and up 3 percent from the same week one year ago. However refinance activity has declined significantly.

Refi Share of Applications Drops to Lowest Level Since 2009: Mortgage applications decreased 3.7% from one week earlier, according to the Mortgage Bankers Association. The refinance share of mortgage activity decreased to 46.9% of total applications, its lowest level since June 2009, from 47.9% the previous week. The MBA's Weekly Mortgage Applications Survey for the week ending Feb. 10 found that the refinance index decreased 3% from the previous week. The seasonally adjusted purchase index decreased 5% from one week earlier, while the unadjusted purchase index increased 1% compared with the previous week and was 3% higher than the same week one year ago. The adjustable-rate mortgage share of activity increased to 7.5% from 6.9%, while the Federal Housing Administration share remained unchanged at 11.9% from the week prior. The VA share of total applications decreased to 11.8% from 12.7% and the USDA share of total applications increased to 1% from 0.9% The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) decreased 3 basis points to 4.32%. For 30-year fixed-rate mortgages with jumbo loan balances (greater than $424,100), the average contract rate increased 1 basis point 4.28%.

Lawler: Some Data on Institutional Holdings of Single-Family Properties -- From housing economist Tom Lawler: Some Data on Institutional Holdings of Single-Family Properties.
Invitation Homes, Blackstone Group’s single-family rental operator, recently went public, and its prospectus included some information on its portfolio of single-family rental properties. Other publicly-traded entities in the single-family rental business also provide such information, and I figured I’d compile some data.  Here is a table showing the number of single-family homes owned by selected publicly-traded companies (or subsidiaries of such companies). These totals include homes held for sale. *Silver Bay reported 8,837 SF homes, but the total excluded homes for sale, which I have estimated American Homes 4 Rent merged with American Residential Properties, Inc. in 2006, and that merger involved the “acquisition” of about 8,938 homes, bringing AH4R’s total property holdings to about the same as Invitation Homes.  Below is a table showing the geographic distribution of single-family homes held by these institutions. Note that reporting by “geographic market” in some cases varies by institution. E.g., one institution combines Charlotte and Raleigh, NC into one market, while another breaks those markets out separately. Also, two institutions have an “other” category – American Homes 4 Rent (a significant number of homes owned are in this category) and Colony Starwood Homes.

 How Resilient Is the U.S. Housing Market Now? – NY Fed - Housing is by far the most important asset for most households, and, not coincidentally, housing debt dwarfs other household liabilities. The relationship between housing debt and housing values figures significantly in financial and macroeconomic stability, as events during the housing bust of 2006-12 clearly demonstrated. This week, Liberty Street Economics presents five posts touching on various aspects of housing, from the changing relationship between mortgage debt and housing equity to the future of homeownership. In today’s post, we provide estimates of housing equity and explore how vulnerable households are to declines in house prices, using methods introduced in our paper “Tracking and Stress Testing U.S. Household Leverage.”  The extreme price dynamics that hit the housing market in the first decade of the 2000s created wild swings in housing leverage—the ratio of housing debt to housing values. Indeed, the sharp drop in home prices that began in early 2006 caused large numbers of households to lose a significant share of their wealth; in many cases, the leverage ratio for borrowers exceeded 100 percent, meaning that their property was worth less than the mortgage debt. From 2007 to 2011, more than eight million individuals received foreclosure notices, according to the Quarterly Report on Household Debt and Credit, a publication of the New York Fed’s Center for Microeconomic Data. These mortgage defaults played an important role in the destabilization of the financial system that ultimately led to the Great Recession. And the dramatic reduction in equity made it more difficult for many millions of mortgagors to benefit from lower rates, given that the ease (and cost) of mortgage refinance depends on equity.

Housing Starts at 1.246 Million Annual Rate in January --From the Census Bureau: Permits, Starts and Completions: Privately-owned housing starts in January were at a seasonally adjusted annual rate of 1,246,000. This is 2.6 percent below the revised December estimate of 1,279,000, but is 10.5 percent above the January 2016 rate of 1,128,000. Single-family housing starts in January were at a rate of 823,000; this is 1.9 percent above the revised December figure of 808,000. The January rate for units in buildings with five units or more was 421,000.  Privately-owned housing units authorized by building permits in January were at a seasonally adjusted annual rate of 1,285,000. This is 4.6 percent above the revised December rate of 1,228,000 and is 8.2 percent above the January 2016 rate of 1,188,000. Single-family authorizations in January were at a rate of 808,000; this is 2.7 percent below the revised December figure of 830,000. Authorizations of units in buildings with five units or more were at a rate of 446,000 in January. The first graph shows single and multi-family housing starts for the last several years.Multi-family starts (red, 2+ units) decreased in January compared to December.  Multi-family starts are up year-over-year.Multi-family is volatile, and the swings have been huge over the last five months.Single-family starts (blue) increased in January, and are up 6% year-over-year.  The second graph shows total and single unit starts since 1968.  The second graph shows the huge collapse following the housing bubble, and then - after moving sideways for a couple of years - housing is now recovering (but still historically low), Total housing starts in January were above expectations.  Also November and December were revised up sharply.

New Residential Housing Starts in January Beat Consensus - The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for January new residential housing starts.The latest reading of 1.246M was above the Investing.com forecast of 1.220M. The December count was revised upward by 53K. Here is the opening of this morning's monthly report: Privately-owned housing starts in January were at a seasonally adjusted annual rate of 1,246,000. This is 2.6 percent (±11.0 percent)* below the revised December estimate of 1,279,000, but is 10.5 percent (±15.3 percent)* above the January 2016 rate of 1,128,000. Single-family housing starts in January were at a rate of 823,000; this is 1.9 percent (±10.8 percent)* above the revised December figure of 808,000. The January rate for units in buildings with five units or more was 421,000. [link to report] Here is the historical series for total privately-owned housing starts, which dates from 1959. Because of the extreme volatility of the monthly data points, a 6-month moving average has been included.

New Residential Building Permits: January Above Forecast - The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for January new residential building permits. The latest reading of 1.285M was an increase from 1.228M in December and above the Investing.com forecast of 1.230M. December was revised upward by 18K.Here is the opening of this morning's monthly report: Building Permits Privately-owned housing units authorized by building permits in January were at a seasonally adjusted annual rate of 1,285,000. This is 4.6 percent (±2.0 percent) above the revised December rate of 1,228,000 and is 8.2 percent (±1.6 percent) above the January 2016 rate of 1,188,000. Single-family authorizations in January were at a rate of 808,000; this is 2.7 percent (±1.9 percent) below the revised December figure of 830,000. Authorizations of units in buildings with five units or more were at a rate of 446,000 in January. [link to report] Here is the complete historical series, which dates from 1960. Because of the extreme volatility of the monthly data points, a 6-month moving average has been included.

Housing Starts Disappoint As Building Permits Surge, Driven By Rentals -- While having been gradually relegated to B-grade economic data status, today's housing starts and building permits report from the Commerce Department, painted a mixed picture, with January starts declining 2.6%, from 1.279million to 1.246 million, below expectations of a 0.1% increase, however due to the upward prior revision, today's absolute print beat expectations of 1.222 million units started (forecast range 1168k - 1320k from 77 economists). Looking inside the data, single family starts rose to 823k, while multifamily starts fell to 423k in Jan.  But while January housing starts were lukewarm, building permits jumped by far more impressive 4.6%, rising from 1.228MM to 1.285MM, driven entirely by multi-family, aka rental, units which soared by 23.5%, as single-family unit permits declined by 2.7% to 808K.Finally, while little tracked, housing completions fell to 1047k in Jan., from 1109k the prior month, as single-family completions rose to 800k; multifamily completions fell to 247k in Jan.Overall, s table housing report, although as the charts below show, both starts and permits remain locked in a multi-year range, well below the pre-crisis highs, as builders are looking for a signal to take take a major push forward in new home construction.

January was a good month for housing permits and starts -- I wanted to make a brief comment on this morning's report on housing permits and starts.  Bottom line: this was a very good report. Here's why:

  • 3 month rolling average of single family permits at a new post-recession high
  • 3 month rolling average of starts at a new post-recession high
  • 3 month rolling average of total permits less than 1% off post recession high from 18 months ago that was caused by a NYC-induced spike

Total permits improved while single family home permits declined slightly from last month's post-recession high for a single month, due to a big jump in multi-family permits.  I do expect housing growth to slow down and possibly stop by about mid-year due to both higher interest rates and negative YoY real wage growth. But in the meantime, housing is doing well, and this will contribute to good general economic growth throughout this year.

Comments on January Housing Starts --  Bill Mcbride - The housing starts report released this morning showed starts were down in January compared to December 2016, however starts in December (and November) were revised up sharply.  Starts in January were actually somewhat above consensus - and above the preliminary release for December.
Note that multi-family is frequently volatile month-to-month, and has seen especially wild swings over the last five months.  Single family starts were solid in January.  This first graph shows the month to month comparison between 2016 (blue) and 2017 (red). Starts were up 10.5% in January 2017 compared to January 2016. My guess is starts will increase around 3% to 7% in 2017. This is a solid start to 2017. Below is an update to the graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market, and starts are important because that is future new supply (units under construction is also important for employment). These graphs use a 12 month rolling total for NSA starts and completions.  The rolling 12 month total for starts (blue line) increased steadily over the last few years - but has started to decline.  Completions (red line) have lagged behind - but completions have been generally catching up (more deliveries, although this has dipped lately).  Completions lag starts by about 12 months. I think most of the growth in multi-family starts is probably behind us - in fact multi-family starts probably peaked in June 2015 (at 510 thousand SAAR) - although I expect solid multi-family starts for a few more years (based on demographics).

NAHB: Builder Confidence decreased to 65 in February --The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 65 in February, down from 67 in January. Any number above 50 indicates that more builders view sales conditions as good than poor. From NAHB: Builder Confidence Continues to Settle Back to Sustainable Levels in February Builder confidence in the market for newly-built single-family homes declined two points in February to a level of 65 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). ...“With much of the decline this month resulting from a decrease in buyer traffic, builders continue to struggle to minimize costs while dealing with supply side challenges such as a lack of developed lots and labor shortages,” said NAHB Chief Economist Robert Dietz. “Despite these constraints, the overall housing market fundamentals remain strong and we expect to see continued growth this year as some of these concerns are addressed.” All three HMI components fell in February. The component gauging current sales conditions dipped one point to 71, and the index charting sales expectations in the next six months registered a three-point decline to 73. The component measuring buyer traffic dropped five points to 46.  Looking at the three-month moving averages for regional HMI scores, the Northeast fell two points to 50 and the Midwest rose one point to 65. The South dipped one point to 67 and the West held steady at 79 for the third month in a row.

No place like home: America’s eviction epidemic - These days, there are sheriff squads whose full-time job is to carry out eviction and foreclosure orders. There are moving companies specialising in evictions, their crews working all day, every weekday. .  Low-income families have grown used to the rumble of moving trucks, the early morning knocks at the door, the belongings lining the curb. In America, families have watched their incomes stagnate, or even fall, while their housing costs have soared. Median rent has increased by more than 70% since 1995.  The result? Today, the majority of poor renting families in America spend more than half of their income on housing, and at least one in four dedicates more than 70% to paying the rent and keeping the lights on. It is estimated that millions of Americans are evicted every year because they can’t make rent. In Milwaukee, Wisconsin, a city of fewer than 105,000 renter households, landlords evict roughly 16,000 adults and children each year. That’s 16 families evicted through the court system daily. New York City sees 60 marshal evictions a day. The most recent version of the American Housing Survey asked people: “Do you think you’ll be evicted soon?” Renters in more than 2.8m homes said yes. A landlord can evict tenants through a formal, court process. But there are other ways, cheaper and quicker ways, to remove a family. Some landlords take off the front door. Nearly half of all forced moves experienced by renting families in Milwaukee are “informal evictions” that take place in the shadow of the law. If you count all forms of involuntary displacement – formal and informal evictions, landlord foreclosures, building condemnations – you discover that between 2009 and 2011 more than one in eight Milwaukee renters experienced a forced move. That is a shockingly high amount of residential insecurity. The face of America’s eviction epidemic belongs to mothers with children. Until recently, the housing court in New York City’s South Bronx had a daycare facility inside it because there were so many children coming through its doors. Eviction’s fallout is severe. Losing a home sends families to shelters, abandoned houses, and the street. It invites depression and illness, compels families to move into degrading housing in dangerous neighbourhoods, uproots communities, and harms children. Eviction is not merely a condition of poverty; it is a cause of it too.

 Hotels: Solid Start to 2017 -- From HotelNewsNow.com: STR: US hotel results for week ending 4 February - The U.S. hotel industry reported mostly negative results in the three key performance metrics during the week of 29 January through 4 February 2017, according to data from STR.
In a year-over-year comparison with the week of 31 January through 6 February 2016:
• Occupancy: -1.5% to 55.6%
• Average daily rate (ADR): +0.2% to US$119.58
• Revenue per available room (RevPAR): -1.3% to US$66.51
The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.  The red line is for 2017, dashed is 2015, blue is the median, and black is for 2009 - the worst year since the Great Depression for hotels. 2015 was the best year on record for hotels. So far occupancy in 2017 is slightly ahead of 2015, and well ahead of the median rate.    For hotels, this is the slow season of the year, and occupancy will pick up into the Spring.

 Houses as ATMs No Longer –NY Fed - Housing equity is the primary form of collateral that households use for borrowing. This makes it a potentially important source of consumption funding, especially for younger households. In a previous post we showed that owner’s equity in residential real estate has finally, thanks to increasing home prices, rebounded to and essentially re-attained its 2005 peak level. Yet in spite of a gain of more than $7 trillion in housing equity since 2012, so far homeowners haven’t been tapping this equity at anything like the pace we witnessed during the housing boom that ended in 2006. In this post, we analyze the changes in equity withdrawal.  The blue line in the chart below shows total owner’s equity in real estate from the Flow of Funds—this is the same series as in our previous post. It shows a dramatic rebound in aggregate home equity over the last several years. The red line shows the combination of two ways that households can withdraw equity—assuming they have some—without selling the house: they can originate a junior lien against the property or they can refinance using a cash-out refinancing of an existing first-lien mortgage. The series in the chart, which we have shown in an earlier post on household debt, captures both of these, while excluding the equity withdrawal associated with selling a home.

A Close Look at the Decline of Homeownership – NY Fed - The homeownership rate—the percentage of households that own rather than rent the homes that they live in—has fallen sharply since mid-2005. In fact, in the second quarter of 2016 the homeownership rate fell to 62.9 percent, its lowest level since 1965. In this blog post, we look at underlying demographic trends to gain a deeper understanding of the large increase in the homeownership rate from 1995 to 2005 and the subsequent large decline. Although there is reason to believe that the homeownership rate may begin to rise again in the not-too-distant future, it is unlikely to fully recover to its previous peak levels. This is a disconcerting finding for those who view homeownership as an integral part of the American Dream and a key component of income security during retirement.

When It Comes to Moving, Millennials Are Stuck in the Mud -- Fairly or not, the millennial generation has a reputation as footloose and fancy-free. Or, to put it less kindly, slow to launch—slower to get married, buy a house, and have kids than the young people of previous generations. So you’d think they’d be moving all over the country, discovering whether they’d rather live in a micro-apartment in the Midwest, say, or telecommute from an old farmhouse a couple of hours outside a big city. In fact, they’re moving around significantly less than previous generations did at the same ages, according to Census data tabulated by Richard Fry, a senior researcher at Pew Research Center. Last year, 20 percent of Americans ages 25 to 35 had moved within the past year. That compares with 26 percent when the same age group was composed of Generation X in 2000, and 27 percent when it was made up of “late boomers” in 1990. But it’s not just young people. The share of the population that has moved at least once within the past year, a key measure of mobility, has followed the same trend among other cohorts of the working population, as the chart below shows. It may be that the job market is weaker today, at least in parts of the country, than the national unemployment numbers say, Fry said. Or it may be that millennials are frozen in place by a housing market that’s still short of supply to meet the demand. Under that theory, older homeowners aren’t trading up for more expensive homes, choosing instead to remain in cheaper models, thereby limiting the number of starter homes on the market. Mobility is important to the economy. People who move spend money on houses, furniture, real estate agents, and moving companies. People moving to pursue a job are often seen as a sign of a healthy economy. Fry didn’t have data handy for every age cohort, but he did pull figures for the 25-35 group. In 2000, when that group was made up of Gen Xers, 50 percent of respondents said they moved for housing-related reasons, like wanting to own or to live in a nicer neighborhood. Meanwhile, 21 percent of that age group moved for job-related reasons in 2000. Fast-forward to 2016, and the gap has narrowed substantially.

How Much Must A Family Earn To Live In Each Major US City --London-based realtor Nested produced the 2017 Rental Index in conjunction with their recent Real Estate Index. The study illustrates the price of renting per square foot in 10 major US cities and a number of metropolises worldwide. The research conveys the minimum gross salary required to support an individual and a family of four in rented property based on the minimum space recommended for one person, and for four people respectively. Some of the key findings:

  • The top three most expensive cities to rent in worldwide are American: San Francisco, New York City and Boston
  • At $1.09 per square foot, Detroit is the cheapest of the American cities included, and is more affordable than Cape Town, Bangkok and Jakarta.
  • New York City and San Francisco are five times more expensive than Detroit, and three times more expensive than Houston

The study was undertaken to understand the costs associated with renting as an individual and as a family, and to determine whether cities are becoming increasingly unaffordable. The inclusion of the global ranking alongside the US ranking allows easy comparison between the two, and illustrates the relative unaffordability of major US cities compared to other global settlements.The price per square foot of property was calculated based upon current market listings for all locations researched, while the minimum space recommended for one person and four people is laid out in guidelines from an urban planning authority. The gross salary guideline was included to help illustrate relative affordability.

Just Released: Total Household Debt Nears 2008 Peak but Debt Picture Looks Much Different – NY Fed - The latest Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data showed a substantial increase in aggregate household debt balances in the fourth quarter of 2016 and for the year as a whole. As of December 31, 2016, total household debt stood at $12.58 trillion, an increase of $226 billion (or 1.8 percent) from the third quarter of 2016. Total household debt is now just 0.8 percent ($99 billion) below its third quarter 2008 peak of $12.68 trillion, and 12.8 percent above the second quarter 2013 trough. But debt looks very different in 2016 than it did the last time we saw this level of indebtedness.  For the year as a whole, household debt rose $460 billion, the strongest growth in nearly a decade, signaling continued improvement in credit conditions. Mortgage debt rose $231 billion (or 2.8 percent) during 2016, although balances on home equity lines of credit (HELOCs) fell slightly, by about $14 billion (or 2.9 percent) for the year. But HELOCs were the exception: every other form of debt rose during 2016, including auto debt (up $93 billion, or 8.7 percent), credit card debt (up $46 billion, or 6.3 percent), and student debt (up $78 billion, or 6.3 percent). HELOC debt leveled off in the second half of the year. Delinquency rates, meanwhile, held stable at relatively low levels in the fourth quarter, and were again down relative to 2015. As of December 31, 4.8 percent of outstanding debt was in some stage of delinquency. Of the $607 billion of delinquent debt, $412 billion was seriously delinquent (at least 90 days late, or “severely derogatory”).  At recent growth rates, household debt will re-attain its previous peak during 2017. But the liability side of household balance sheets looks quite different this time around, compared with the last peak seen in the third quarter of 2008. First of all, delinquencies are much lower. In the third quarter of 2008, 8.5 percent of total household debt was delinquent, compared with the current quarter’s 4.8 percent mentioned above; the serious delinquency rate was 5.1 percent, compared with today’s 3.3 percent. The delinquency trends are also quite different: delinquency rates continued to deteriorate significantly after the third quarter of 2008, with serious delinquency reaching 8.7 percent of outstanding balances in 2010. Today, delinquency has been relatively steady at low levels. Other measures of payment distress, like the rate at which mortgage debts transition into delinquency, are even lower relative to the pre-recession period.

NY Fed: Household Debt Increases Substantially, Approaching Previous Peak --- The Q4 report was released today: Household Debt and Credit Report.
From the NY Fed: Household Debt Increases Substantially, Approaching Previous Peak The Federal Reserve Bank of New York today issued its Quarterly Report on Household Debt and Credit, which reported that total household debt increased substantially by $226 billion (a 1.8% increase) to $12.58 trillion during the fourth quarter of 2016. This marked the largest quarterly increase in total household debt since the fourth quarter of 2013, and debt today is now just 0.8% below its peak of $12.68 trillion reached in the third quarter of 2008. Every type of debt increased since the previous quarter, with a 1.6% increase in mortgage debt, 1.9% increase in auto loan balances, a 4.3% increase in credit card balances, and a 2.4% percent increase in student loan balances. This boost in balances was in part driven by new extensions of credit, with a large increase in the volume of mortgage originations and a continuation in the strong recent trend in auto loan originations. This report is based on data from the New York Fed's Consumer Credit Panel, a nationally representative sample of individual- and household-level debt and credit records drawn from anonymized Equifax credit data. Mortgage balances increased and mortgage originations reached the highest level seen since the beginning of the Great Recession. Mortgage delinquencies remained mostly unchanged and the delinquency transition rates for current mortgage accounts improved slightly. New foreclosure notations reached another new low for the 18-year history of this series. Overall delinquency rates were roughly stable this quarter. This quarter saw the lowest number of bankruptcy notations in the 18-year history of this series, continuing an overall downward trend since the financial crisis.

NY Fed Household Debt Report: Signs of Debt Growth? -- Kevin Erdmann - The New York Fed reports that household debt rose in 2016 4Q.  This is a positive sign.  The scenario for continued recovery would center on housing recovery and mortgage recovery.  Positive signals include a decline in shelter inflation, a rise in non-shelter inflation, a rise in interest rates, a rise in housing starts and prices, and a rise in mortgages outstanding.  If that doesn't come together, I expect the Fed to overtighten and to trigger a contraction. Last month's CPI data suggests a possible shift in this direction.  Now, the 2016 4Q household debt data also suggests a positive shift.  Mortgage debt increased by about $130 billion and other household debt also increased. In both cases, I am concerned that these are just the latest head-fake.  Data from commercial banks suggests that the mortgage data is.  So, I remain tentatively neutral-to-bearish, in wait-and-see mode.  There isn't any reason that the expansion should reverse simply due to its age, but this seems like a context where, nevertheless, the risks of being exposed to a contraction are higher than usual.

Retail Sales increased 0.4% in January -- On a monthly basis, retail sales increased 0.4 percent from December to January (seasonally adjusted), and sales were up 5.6 percent from January 2016. From the Census Bureau report: Advance estimates of U.S. retail and food services sales for January 2017, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $472.1 billion, an increase of 0.4 percent from the previous month, and 5.6 percent above January 2016. ... The November 2016 to December 2016 percent change was revised from up 0.6 percent to up 1.0 percent.  This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).  Retail sales ex-gasoline were up 0.2% in January. The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993. The increase in January was above expectations, and sales for December were revised up. A solid report.

Retail Sales: January Growth Continues to Improve - The Census Bureau's Advance Retail Sales Report for January released this morning showed continued growth improvement over the December increase. Headline sales came in at 0.4% month-over-month to one decimal, and the December number was revised upward from 0.6% to 1.0%. Today's headline number was above the Investing.com consensus of 0.1%. Core sales (ex Autos) came in at 0.7% MoM, which was above the Investing.com consensus of 0.3% and the December Core was revised upward. Here is the introduction from today's report:Advance estimates of U.S. retail and food services sales for January 2017, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $472.1 billion, an increase of 0.4 percent (±0.5 percent)* from the previous month, and 5.6 percent (±0.9 percent) above January 2016. Total sales for the November 2016 through January 2017 period were up 4.6 percent (±0.7 percent) from the same period a year ago. The November 2016 to December 2016 percent change was revised from up 0.6 percent (±0.5 percent) to up 1.0 percent (±0.2 percent). Retail trade sales were up 0.2 percent (±0.5 percent)* from December 2016, and up 5.6 percent (±0.7 percent) from last year. Gasoline Stations sales were up 14.2 percent (±1.4 percent) from January 2016, while Nonstore Retailers were up 12.0 percent (±1.8 percent) from last year. [view full report]The chart below is a log-scale snapshot of retail sales since the early 1990s. The two exponential regressions through the data help us to evaluate the long-term trend of this key economic indicator.

 US Spending Spree Has Retail Sales Growing At Fastest Pace In Nearly Five Years - Confirming that the US economy is indeed heating up considerably and the Fed is rapidly falling behind the curve, not only did today's blistering CPI  come in well ahead of expectations, printing at the fastest pace since 2013, with the core CPI coming in at a dangerously "overheated" 2.3%, above both expectations of a 2.1% print, and well above the Fed's target of 2.0%, but moments ago the Census Dept. released January retail sales data which showed that after a tepid holiday spending season, US consumers started off 2017 with a bang driven perhaps by optimism over Trump's new administration, as headline retail sales jumped 0.4% in the month, better than the 0.1% expected, after rising an adjusted 1.0% in December (up from 0.6%). Sales have now grown in every month since August last year.  Retail sales excluding autos rose by a blistering 0.8%, double the expected 0.4%, and also double the upward revised 0.4% in December, while the Control Group also rose 0.4%, more than the 0.3% expected, and in line with last month's 0.4% (the retail sales ‘control group’ excludes food services, automobile dealers, building materials and gasoline stations). On an Y/Y basis, retail sales surged 5.6%, the biggest annual increase in nearly 5 years, since early 2012. The figures indicate that the US consumer has been busy spending since Trump’s election in November, despite recent weakness in wages, which on a real basis have tumbled, prompting some to wonder how much longer can this spending spurt continue, especially in light of the surge in inflation, which rose 2.5% in January, the fastest rise in nearly 5 years. A breakdown of key spending categories shows that virtually every retail spending subsector showed growth except for Motor Vehicles, which dipped 1.4% on the month, and miscellaneous store retailers, which were down 0.2% in January. Furniture and home furnishing stores, as well as Internet retailers were both unchanged on the month.

In The Lapse Of Luxury: When The Rich Stop Spending -- Two years ago, it looked like a slam dunk of a business idea…Neiman Marcus, one of the world’s pre-eminent luxury retail brands, was ready to go public amid near daily headlines about the world’s rich, the not-so-rich and the wannabe rich paying ever higher prices for, well, you name it…Bigger homes in the Hamptons. The priciest art work. The “blingiest” of diamonds. The haughtiest of haute couture.But something happened between 2015 and now.

  • It’s not just Neiman Marcus, which last month killed its plans for an IPO (after reporting five straight quarters of declining sales).
  • Or home prices in the Hamptons, which recently fell 17% compared to year-ago levels.
  • Or art market prices, which crashed last year as well.
  • Or even dull jewelry sales, with Tiffany’s reporting vastly disappointing numbers.

(How desperate does it look when a “luxury brand” like Tiffany’s spends $10 million to appeal to the unwashed, overindebted masses for its first-ever Super Bowl commercial?) Quite simply, “The Best of Everything” doesn’t seem to work anymore as an investment strategy.And amid a stock market that continues to march higher and higher, that’s a problem. Luxury spending, broadly speaking, is a leading economic indicator. That’s especially so in an economy like ours that’s leveraged so closely with the ups and downs of the stock and property markets.

  New delinquent U.S. car loans at 8-year peak: NY Fed survey | Reuters: More Americans fell behind on their car loan payments in the fourth quarter, bringing auto delinquencies to their highest since the height of the financial crisis, Federal Reserve Bank of New York data released on Thursday showed. Car loans delinquent by 30 days or more grew to $23.27 billion, the most since $23.46 billion in the third quarter of 2008. They were up from $22.98 billion in the prior quarter. Seriously delinquent auto loans whose payments were 90 days or more past due jumped to $8.24 billion in the fourth quarter, the highest since the third quarter of 2016, according to the survey. Delinquency is a predictor on possible losses for carmakers, which often make low interest loans to attract buyers. Last month, Ford Motor Co's (F.N) finance arm said it expected a pickup in loan losses from historically low levels following a rise in delinquencies and car possessions. "Credit losses have been at historically low levels for quite some time, and we continue to see credit losses increase toward more normal levels," Ford Credit said in a presentation of its fourth-quarter results and 2017 outlook. The increase in late loan payments coincided with drivers loading up on debt to buy the latest car, trunk and SUV models, fueling expectations for record auto sales in 2017. In the fourth quarter, $142 billion in car loans were generated, giving 2016 the most auto loan originations in the 18-year history of the data, the New York Fed said. Auto debt hit $1.16 trillion, with a $93 billion rise over the year.

Wolf Richter: “Seriously Delinquent” Auto Loans Surge -- Bank regulators have been warning, now it’s happening.The New York Fed, in its Household Debt and Credit Report for the fourth quarter 2016, put it this way today: “Household debt increases substantially, approaching previous peak.” It jumped by $226 billion in the quarter, or 1.8%, to the glorious level of $12.58 trillion, “only $99 billion shy of its 2008 third quarter peak.” Yes! Almost there! Keep at it! There’s nothing like loading up consumers with debt to make central bankers outright giddy.Auto loan balances in 2016 surged at the fastest pace in the 18-year history of the data series, the report said, driven by the highest originations of loans ever. Alas, what the auto industry has been dreading is now happening: Delinquencies have begun to surge. This chart – based on data from the Federal Reserve Board of Governors, which varies slightly from the New York Fed’s data – shows how rapidly auto loan balances have ballooned since the Great Recession. At $1.112 trillion (or $1.16 trillion according to the New York Fed), they’re now 35% higher than they’d been during the crazy peak of the prior bubble. Note that during the $93 billion increase in auto loan balances in 2016, new vehicle sales were essentially flat:No way that this is an auto loan bubble. Not this time. It’s sustainable. Or at least containable when it’s not sustainable, or whatever. These ballooning loans have made the auto sales boom possible.  But despite record low interest rates, the bane of the automakers is now taking place relentlessly: “Seriously delinquent” auto loan balances, composed of all loans that are 90+ days past due, rose in Q4 to 3.8% of total auto loan balances. That puts them right between Q1 and Q2 of 2013, as auto credit was recovering from the Financial Crisis. Last time auto loan delinquencies had surged to that level was after Q3 2008, as the Financial Crisis was tearing into the economy: These seriously delinquent auto loans are an indication of what is next:

  • Losses at auto lenders, particularly those specializing in lending to subprime borrowers, but also other lenders, including captives, such as Ford Motor Credit, which had already warned in its most recent outlook that “we continue to see credit losses increase.”
  • Tightening auto credit for consumers, as those losses begin to exact their pound of flesh from the lenders.

Apple Will Fight 'Right to Repair' Legislation - Apple representatives plan to tell Nebraska lawmakers that repairing your phone is dangerous. Apple is planning to fight proposed electronics "Right to Repair" legislation being considered by the Nebraska state legislature, according to a source within the legislature who is familiar with the bill's path through the statehouse.The legislation would require Apple and other electronics manufacturers to sell repair parts to consumers and independent repair shops, and would require manufacturers to make diagnostic and service manuals available to the public.  Nebraska is one of eight states that are considering right to repair bills; last month, Nebraska, Minnesota, New York, Massachusetts, Kansas, and Wyoming introduced legislation. Last week, lawmakers in Illinois and Tennessee officially introduced similar bills. According to the source, an Apple representative, staffer, or lobbyist will testify against the bill at a hearing in Lincoln on March 9. AT&T will also argue against the bill, the source said. The source told me that at least one of the companies plans to say that consumers who repair their own phones could cause lithium batteries to catch fire. Motherboard is protecting the identity of the source because they are not authorized to speak to the press. So far, Nebraska is the only state to schedule a hearing for its legislation. Apple did not respond to a request for comment. AT&T did not immediately respond to a request for comment.

Consumer Price Index: Headline CPI Rises to 2.5% -  The Bureau of Labor Statistics released the January Consumer Price Index data this morning. The year-over-year non-seasonally adjusted Headline CPI came in at 2.50%, up from 2.07% the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 2.27%, up from the previous month's 2.20%. This is the second month of Headline CPI above 2% since June 2014, 30 months ago. Here is the introduction from the BLS summary, which leads with the seasonally adjusted monthly data: The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.6 percent in January on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 2.5 percent before seasonal adjustment. The January increase was the largest seasonally adjusted all items increase since February 2013. A sharp rise in the gasoline index accounted for nearly half the increase, and advances in the indexes for shelter, apparel, and new vehicles also were major contributors. The energy index increased 4.0 percent in January as the gasoline index advanced 7.8 percent and the index for natural gas also increased. The food index, which had been unchanged for 6 consecutive months, increased 0.1 percent.The food at home index was unchanged, while the index for food away from home rose 0.4 percent. The index for all items less food and energy rose 0.3 percent in January. Most of the major component indexes increased in January, with the indexes for apparel, new vehicles, motor vehicle insurance, and airline fares all rising 0.8 percent or more. The shelter index rose 0.2 percent, a smaller increase than in recent months. [More…] Investing.com was looking for a 0.3% increase MoM in seasonally adjusted Headline CPI and 0.2% in Core CPI. Year-over-year forecasts were 2.4% for Headline and 2.1% for Core. The first chart is an overlay of Headline CPI and Core CPI (the latter excludes Food and Energy) since the turn of the century. The highlighted two percent level is the Federal Reserve's Core inflation target for the CPI's cousin index, the BEA's Personal Consumption Expenditures (PCE) price index.

January Producer Price Index: Final Demand Increased 0.6% - Today's release of the January Producer Price Index (PPI) for Final Demand came in at 0.6% month-over-month seasonally adjusted, up from last month's 0.2%. It is at 1.6% year-over-year, unchanged from last month, on a non-seasonally adjusted basis. Core Final Demand (less food and energy) came in at 0.4% MoM, up from 0.1% the previous month and is up 1.2% YoY. Investing.com MoM consensus forecasts were for 0.3% headline and 0.2% core. Here is the summary of the news release on Final Demand: The Producer Price Index for final demand increased 0.6 percent in January, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices rose 0.2 percent in December and 0.5 percent in November. (See table A.) On an unadjusted basis, the final demand index climbed 1.6 percent for the 12 months ended January 2017.In January, over 60 percent of the advance in the final demand index is attributable to a 1.0-percent increase in prices for final demand goods. The index for final demand services moved up 0.3 percent. Prices for final demand less foods, energy, and trade services rose 0.2 percent in January after inching up 0.1 percent in December. For the 12 months ended in January, the index for final demand less foods, energy, and trade services climbed 1.6 percent. More… Since our focus is on longer-term trends, we continue to track the legacy Producer Price Index for Finished Goods, which the BLS also includes in their monthly updates. As this overlay illustrates, the Final Demand and Finished Goods indexes are highly correlated.

 US Producer Prices Spike Most Since September 2012 As Energy Costs Soar --Following explosive inflation in Germany and China, US producer prices printed hotter than expected at 1.6% YoY (final demand) with a notably 0.6% MoM jump (versus 0.3% exp) - the biggest monthly jump since September 2012.It's not the economy, it's energy stupid! In January, over 60 percent of the advance in the final demand index is attributable to a 1.0-percent increase in prices for final demand goods. Prices for final demand goods moved up 1.0 percent in January, the largest rise since a 1.0-percent advance in May 2015. Three-fourths of the January increase can be traced to the index for final demand energy, which jumped 4.7 percent. Prices for final demand goods less foods and energy climbed 0.4 percent. The index for final demand foods was unchanged. "Over half of the January increase in prices for final demand goods is attributable to the gasoline index, which advanced 12.9 percent"

Over Half a Trillion 2016 Trade Deficit -  Robert Oak - The U.S. December 2016 monthly trade deficit decreased 3.2% from last month and now stands at $44.3 billion.  For all of 2016, the trade deficit increased 0.4% from the year previous.  While that doesn't sound like much, the total amount is -$502.3 billion.  This is in spite of petroleum imports being much less of a trade deficit factor.  China alone is almost half of the trade deficit.  While pundits proclaim Trump will start a trade war, with these kind of figures, surely that war is long over and America obviously surrendered.  Graphed below are imports and exports graphed and by volume since 1995 and note the global trade collapse in 2009.  For the year the goods trade deficit decreased by -1.6% to $750.1 billion while the services surplus shrank by -5.5% to be $247.8 billion.  Imports are in maroon and exports are shown in blue, both scaled to the left.  Below are the goods import monthly changes, seasonally adjusted.  On a Census basis, overall imports increased by $3.7 billion to $187.241 billion.  Passenger car imports was $1.351 billion more in just a month to $15.3 billion.   Imported passenger cars now exceeds crude oil imports, which were slightly over $10 billion.

  • Industrial supplies and materials:  +$1.092 billion
  • Capital goods:  +$0.982 billion
  • Foods, feeds, and beverages:  -$0.157 billion
  • Automotive vehicles, parts, and engines:  -$1.617 billion
  • Consumer goods:  +$0.142 billion
  • Other goods: -$0.291 billion

Below is the list of good export monthly changes, seasonally adjusted, by end use and on a Census accounting basis, increased by $4.933 billion to $126.581 billion.  The reason for the good showing is an almost two billion dollar increase in aircraft and aircraft engines exports.

  • Automotive vehicles, parts, and engines:  +$0.167 billion
  • Industrial supplies and materials:  +$0.731 billion
  • Foods, feeds, and beverages:  -$0.095 billion
  • Capital goods: +$3,332 billion
  • Consumer goods:  +$0.722 billion
  • Other goods: +$0.618 billion

The China trade deficit is always the largest trade deficit of any other nation by a long shot.  December saw a seasonally adjusted $30.192 billion China trade deficit  The China trade deficit for 2016 actually decreased $20.1 billion due to $20.4 billion less in imports. but it is still a massive $347 billion.  This is 47% of the total goods trade deficit.  The annual 2015 the trade deficit with China was $367.2 billion.   The below graph shows monstrous annual trade deficit with China.

LA area Port Traffic "Surges" in January --From the Port of Long Beach: Port Traffic Surges In JanuaryRenewed activity at the Port of Long Beach’s largest terminal and extra ships calling ahead of the Lunar New Year pushed cargo 8.7 percent higher in January compared to the same month a year ago...The month’s total container traffic growth was notable since TEU traffic in January 2016 jumped 25 percent from the same month in 2015. “It was a tough benchmark, so we’re very happy with the way the new year is starting in Long Beach,” said Board of Harbor Commissioners President Lori Ann Guzmán. From the Port of Los Angeles: Port of Los Angeles Records Busiest January in Port's 110-Year HistoryThe Port of Los Angeles handled 826,640 Twenty-Foot Equivalent Units (TEUs) in January 2017, an increase of 17.4 percent compared to January 2016. It was the busiest January in the port’s 110-year history, outpacing last January, which was the previous record for the first month of the year. It was also the second-best month overall for the Port, eclipsed only by last November’s 877,564 TEUs.  The January surge is due in part to retail stores replenishing inventories after the holidays, a trend of increased U.S. exports and cargo ships calling ahead of the Lunar New Year, when goods from Asia slow down considerably.  Container traffic gives us an idea about the volume of goods being exported and imported - and usually some hints about the trade report since LA area ports handle about 40% of the nation's container port traffic. The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).  To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average.

 Rate of U.S. Export Growth to China Soars in 2016: For the sixth month in a row, the exports of soybeans from the U.S. to China led to a year-over-year surge in the exchange rate adjusted growth rate of trade between the two countries. The following chart shows the spike in the growth rate of U.S. exports to China through the end of 2016, which closely resembles the previous spike in 2013 that was also driven by the mass export of that year's bumper crop in soybeans. At the same time, the year over year growth rate of goods imported by the U.S. from China continued to rise into positive territory, suggesting growing strength in the U.S. economy. Focusing on U.S. soybean exports again, the following chart shows our estimates of the volume of monthly exports of soybeans from the U.S. to China for each month of 2016 with respect to the amount of soybeans exported during those months in previous years. In real terms, or rather, the terms of the quantity of U.S. soybean exports, 2016 is the best year on record, with the greatest contribution coming in the third quarter of 2016. The conditions that led to that outcome must be considered to be unique however, in that the world's second largest exporter of soybeans, Brazil, experienced a drought that reduced that nation's crop yields, which prompted China to turn to the U.S. market earlier in the year to fulfill a significant portion of their demand. At the same time, thanks to nearly ideal growing conditions, the U.S. had a bumper crop of soybeans available to export - the largest since 2014. Combined, those two factors delivered a real boost to the U.S. economy from the export of soybeans to China in the third and fourth quarters of 2016, with the third quarter benefiting more from the unique circumstances that made those increased exports possible.

Truck freight index shows demand surge in January to highest levels since early 2014 -- Truck freight index shows demand surge in January to highest levels since early 2014 – DC Velocit: A monthly index released today found that for-hire truckload freight demand in January outstripped available capacity by the widest levels in nearly three years. It's unclear, though, if that signals an upturn in shipping activity, or if January's results are due to pent-up demand following a slowdown in factory production during the holiday season. According to consultancy ACT Research, the wide supply-demand gap was triggered by a surge in freight volume as measured in ACT's index, which soared in January by 23 points over December's levels to the highest point in three years. Truck capacity that was either sitting idle or being underutilized began to get absorbed near the end of 2016 and into January, the consultancy said. Based on the January data, ACT President Kenny Vieth said he is cautiously optimistic about the demand outlook for 2017. On one hand, last month's numbers may reflect an acceleration of the trend that began late last year, Vieth said. However, because the results deviated so strongly from historical trends, Vieth surmised that a lot of freight was sidelined during lengthy plant shutdowns during December, and that demand was subsequently pushed into January. The last couple of years have been difficult for truckload carriers, as a sluggish economy and excess truck capacity gave shippers and freight brokers strong leverage over pricing. Several forecasts have said that rates will firm as the year progresses, but mainly due to expected capacity reductions triggered by the federal government's mandate that all trucks built after the year 2000 be equipped with electronic logging devices (ELDs). It is thought that the conversion from paper to digital logs will force many independent truckers—which account for the vast swath of the nation's truck fleet—out of business due to higher compliance costs and an unwillingness to work with computerized logbooks.

AAR: Rail Traffic increased in January -- From the Association of American Railroads (AAR) Rail Time Indicators. Graphs and excerpts reprinted with permissionJanuary 2017 wasn’t a great start of the year for U.S. rail traffic, but it wasn’t terrible either. Total carloads were up 2.9% (28,341) over last January, thanks mainly to a 35,798 (11.9%) increase in carloads of coal. ... Intermodal was down 1.8% on U.S. railroads in January 2017, but it was still the second-best January for intermodal on record.This graph from the Rail Time Indicators report shows U.S. average weekly rail carloads (NSA).  Dark blue is 2017. Rail carloads have been weak over the last decade due to the decline in coal shipments.U.S. railroads originated 996,573 total carloads in the four weeks of January 2017, up 2.9% (28,341 carloads) over January 2016. ...Coal carloads were up 11.9% (35,798 carloads) in January 2017. Coal carloads had fallen so low last year there didn’t seem to be anywhere to go but up. The second graph is for intermodal traffic (using intermodal or shipping containers): U.S. intermodal volume in January 2017 was down 1.8% from January 2016, as a 1.7% decline in containers joined a 3.0% decline in trailers. Still, weekly average volume of 255,267 containers and trailers in January 2017 was the second highest (behind last year) for January in history.

Can Donald Trump get high-speed-rail on track in America? | McClatchy DC: Could Donald Trump be the president who brings high-speed rail to America? The Obama administration spent nearly $10 billion to improve passenger rail service across the country. While it accomplished that goal to some degree, it did not build the faster trains passengers can ride in Europe, Japan and China. Trains in other countries can travel 200 mph or more, but no train in the United States as yet travels faster than 150 mph. Most go much more slowly than that. Trump has proposed a $1 trillion investment in U.S. infrastructure, and he has expressed interest in improving roads, bridges, airports and passenger trains. The subject came up in a White House news conference Friday with Japan’s prime minister, Shinzo Abe. Through a translator, Abe said Trump would make “major-scale investments” in infrastructure, including high-speed rail. He said Japanese technology could cut the travel time between Washington and New York to one hour from the current three. Before a meeting with airline executives on Thursday, Trump had openly lamented the lack of high-speed rail in the United States. “I don’t want to compete with your business,” Trump said, “but we don’t have one fast train.”

Wolf Richter: Trump Promises “Fast Trains,” Japan’s Railway Stocks Soar -- Do Trump and California suddenly see eye-to-eye on high-speed rail?  President Donald Trump met with airline CEOs at the White House on Thursday. At the core of the discussion was the overhaul of the Federal Aviation Administration, including changes to the “totally out of whack” national air-traffic control system. He had other goodies for the airline CEOs. Afterwards, Southwest Airlines CEO Gary Kelly told reporters that the meeting had been “delightful.” It seems they’d gotten pretty much what they’d wanted. “We are very well-aligned on some very key topics: income tax reform, regulatory reform, and especially growing our industry,” he said. But something wasn’t picked up by the US media, though it was picked up by hedge funds and other speculators: In his remarks, Trump mentioned high-speed rail in the US. And on Friday, Japanese stocks dealing with high-speed rail systems soared on huge volume! And even in China, it happened. In his remarks (transcript) to the aviation CEOs, Trump said this about US high-speed rail, while complaining about airports:As an example, some of you were saying yesterday to me that you go to China, you go to Japan, they have fast trains all over the place. We don’t have one. I don’t want to compete with your business — (laughter) — but we don’t have one fast train.And a few sentences on US airports and the Middle East later, he added: And we have an obsolete plane system, we have obsolete airports, we have obsolete trains. We have bad roads. We’re going to change all of that, folks. You’re going to be so happy with Trump. I think you already are. “We’re going to change all of that, folks.” And that apparently includes high-speed rail in the US. This was followed up by Japanese Prime Minister Shinzo Abe, who after his meeting with Trump on Friday in his remarks (transcript) mentioned investment by Japan Inc. in the US, and then veered into high-speed rail and what Japanese companies with expertise in high-speed rail could do in the US to help move these projects forward. It would be nurtured with federal stimulus funding:

“Civil Rights Groups” Throw Public Under the Bus on Net Neutrality for Their Big Telco Donors -- Yves Smith --Lee Fang has an important new story at The Intercept on how some major not-for-profits that present themselves a stalwart defenders of civil rights are acting as anything but that. Phone and cable providers have had net neutrality in their crosshairs since the early 2000s. In the past, they’ve been beaten back by determined and well-organized efforts of what are mainly small fry: the content providers who stand to lose out in a world where connectivity providers can meter service speeds by website and their allies in the tech community and academia. In that Brave New World, big media, shopping, and entertainment sites would be able to afford to pay to play to have snappy, or at least adequate, download speeds, and small fry would be strangled. This would have the effect of reinforcing the existing tendencies to monopoly and oligopoly in a whole range of activities, and with it, the ability to extract rents. And who is fighting hard for the right of the pipelines to squeeze newbies and niche players at the expense of the behemoths, reducing diversity and effectively, freedom of expression? None other than some soi disant civil rights groups that get big bucks from telcos. But they are doing it in a sneaky way that they may have hoped would not be understood by the rubes their nominal clientele. As Fang explains: The Obama administration’s Federal Communications Commission established net neutrality by reclassifying high-speed internet as a regulated phone-like telecommunications service, as opposed to a mostly unregulated information service. But now Trump’s new FCC Chairman Ajit Pai, a former Verizon attorney, is pushing to repeal the net neutrality reform by rolling back that re-classification — and he’s getting help not only from a legion of telecom lobbyists, but from civil rights groups. In a little-noticed joint letter released last week, the NAACP, Asian Americans Advancing Justice, OCA (formerly known as the Organization for Chinese Americans), the National Urban League, and other civil rights organizations sharply criticized the “jurisdictional and classification problems that plagued the last FCC” — a reference to the legal mechanism used by the Obama administration to accomplish net neutrality. Instead of classifying broadband as a public utility, the letter states, open internet rules should be written by statute. What does that mean? It means the Republican-led Congress should take control of the process — the precise approach that is favored by industry…

Industrial Production decreased 0.3% in January -- From the Fed: Industrial production and Capacity Utilization - Industrial production decreased 0.3 percent in January following a 0.6 percent increase in December. In January, manufacturing output moved up 0.2 percent, and mining output jumped 2.8 percent. The index for utilities fell 5.7 percent, largely because unseasonably warm weather reduced the demand for heating. At 104.6 percent of its 2012 average, total industrial production in January was at about the same level as it was a year earlier. Capacity utilization for the industrial sector fell 0.3 percentage point in January to 75.3 percent, a rate that is 4.6 percentage points below its long-run (1972–2016) average.  This graph shows Capacity Utilization. This series is up 8.8 percentage points from the record low set in June 2009 (the series starts in 1967). Capacity utilization at 75.3% is 4.6% below the average from 1972 to 2015 and below the pre-recession level of 80.8% in December 2007. The second graph shows industrial production since 1967. Industrial production decreased in January to 104.6. This is 19.7% above the recession low, and is close to the pre-recession peak. This was below expectations of no change, but December was revised up.

Empire State Manufacturing Survey: Significant Expansion in February - This morning we got the latest Empire State Manufacturing Survey, which shows strong growth. The diffusion index for General Business Conditions at 18.7 was a jump of 12.2 from the previous month's 6.5. The Empire State Manufacturing Index rates the relative level of general business conditions in New York state. A level above 0.0 indicates improving conditions, below indicates worsening conditions. The reading is compiled from a survey of about 200 manufacturers in New York state. Here is the opening paragraph from the report.Business activity expanded at a solid clip in New York State, according to firms responding to the February 2017 Empire State Manufacturing Survey. The headline general business conditions index rose twelve points to 18.7, its highest level in more than two years. The new orders index climbed to 13.5, and the shipments index advanced to 18.2, pointing to substantial increases in both orders and shipments. The unfilled orders index rose above zero for the first time in more than five years. Delivery times were reported as longer, and inventories increased. Labor market conditions improved, with both employment and hours worked moving higher. After reaching multiyear highs last month, the prices paid and prices received indexes were little changed. Indexes assessing the six-month outlook continued to convey a high degree of optimism about future conditions. [source] Here is a chart of the current conditions and its 3-month moving average, which helps clarify the trend for this extremely volatile indicator:

Philly Fed: Manufacturing Conditions Continued to Improve in February -- Earlier from the Philly Fed: Manufacturing Conditions Continued to Improve in February Results from the February Manufacturing Business Outlook Survey suggest that growth in regional manufacturing is broadening. The diffusion indexes for general activity, new orders, and shipments were all positive this month and increased notably from their readings last month. The surveyed firms continued to report growth in employment and work hours. Although they moderated from last month, the future indexes for growth over the next six months continued to reflect a high degree of optimism.  The index for current manufacturing activity in the region increased from a reading of 23.6 in January to 43.3 this month and has remained positive for seven consecutive months. ... Firms continued to report overall increases in manufacturing employment this month. ... The current employment index fell 2 points but has now registered its third consecutive positive reading. Firms reported an increase in work hours this month: The average workweek index increased 7 points and has now been positive for four consecutive months.  Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Philly Fed Explodes To 33-Year Highs - A 10-Standard-Deviation Beat --Against expectations of a 18.0 print, February's Philly Fed exploded higher to 43.3 – the highest since January 1984. This is a 10-standard-deviation beat, led by a surge in new orders and the workweek, despite a decline in 'hope' and the number of employees. Everything is Awesome America... especially in Philadelphia?  And as the full breakdown shows, the number of employees declined, as did inventories and prices received.

 NFIB: Small Business Optimism Index increased slightly in January  --Earlier from the National Federation of Independent Business (NFIB): National Federation of Independent Business Monthly Survey Shows Another Gain in Small Business OptimismSmall business optimism rose again in January to its highest level since December 2004, suggesting that the post-election surge has staying power, according to the monthly National Federation of Independent Business (NFIB) Index of Small Business Optimism, released today.... The Index reached 105.9 in January, an increase of 0.1 points. The uptick follows the largest month-over-month increase in the survey’s history. Five of the Index components increased and five decreased, but many held near their record high... [T]he seasonally adjusted average employment change per firm posting a gain of 0.15 workers per firm, the best reading since September 2015 and historically, a strong showing. ... Fifty-three percent reported hiring or trying to hire (up 2 points), but 47 percent reported few or no qualified applicants for the positions they were trying to fill. Fifteen percent of owners cited the difficulty of finding qualified workers as their Single Most Important Business Problem (up 3 points).

Weekly Initial Unemployment Claims increase to 239,000 -- The DOL reported:In the week ending February 11, the advance figure for seasonally adjusted initial claims was 239,000, an increase of 5,000 from the previous week's unrevised level of 234,000. The 4-week moving average was 245,250, an increase of 500 from the previous week's revised average. The previous week's average was revised up by 500 from 244,250 to 244,750.  The previous week was unrevised. The following graph shows the 4-week moving average of weekly claims since 1971.

 CBO: There’s more slack in the labor market than you thought --OTE readers know that in the quest for full employment, we pay a lot of attention to the extent of slack in the labor market (and btw, our next podcast episode will focus on this concept of labor market slack—what is it, how much is there, etc. We know…we can hardly wait, too!). One way economists try to gauge this concept of slack is to compare the actual value of labor market indicators to the theoretical value of where they’d be at full employment. So when a recent CBO revision pretty significantly raised the budget office’s estimate of the potential labor force, we took notice: their revision suggests there’s more slack in the job market than they previously thought. What is “potential labor force?” It’s CBO’s estimate of what the labor force would be if the economy were at full capacity and the unemployment rate was at its “natural rate” (the lowest rate consistent with stable inflation). In order to project budget outlays and receipts, CBO needs to guesstimate various quantities in the economy, like employment, the labor force, unemployment, and average compensation. They’re often revising such estimates, as they should when new info comes upon the scene, and in their latest revision, they tweaked up the size of the 2016 and 2017 potential labor force by almost one million for this year, or 0.6% of the total. CBO’s incorporation of race (and hence the rising share of the population that is Hispanic) for the first time and increases in educational attainment were two of the revision’s main drivers. The following figure shows actual and potential labor force participation rates, which we’ll call LFPR and LFPR* (the rates are just the actual and potential labor force as a share of the working-age population). The gap between the two has diminished as the job market has tightened, but it has yet to close.

Bill Gates: the robot that takes your job should pay taxes - Robots are taking human jobs. But Bill Gates believes that governments should tax companies’ use of them, as a way to at least temporarily slow the spread of automation and to fund other types of employment.It’s a striking position from the world’s richest man and a self-described techno-optimist who co-founded Microsoft, one of the leading players in artificial-intelligence technology.In a recent interview with Quartz, Gates said that a robot tax could finance jobs taking care of elderly people or working with kids in schools, for   which needs are unmet and to which humans are particularly well suited. He argues that governments must oversee such programs rather than relying on businesses, in order to redirect the jobs to help people with lower incomes. The idea is not totally theoretical: EU lawmakers considered a proposal to tax robot owners to pay for training for workers who lose their jobs, though on Feb. 16 the legislators ultimately rejected it.

Fed's Harker Blames 'Prime-Aged' American Male Joblessness On Drug Abuse -- For 60 years the labor force participation rate of 25-54 year old men in America has declined. There are many reasons for this existential decline, but Philly Federal Reserve President Pat Harker explained today during a Q&A session that he is concerned that more 25-54 year old men are out of the workforce and blamed "drug abuse" for the problem.

  • Says decline in employment of prime-aged men, between age of 25 and 54, a source of “significant concern”
  • Opiate abuse is part of the reason for the decline in male employment in U.S., also “there are people who are just disconnected from the workforce”

That's a lot of druggies...This is not the first time Fed officials have claimed 'drug abuse' as an excuse for the failure of their policies. As we detailed previously, via The Intercept's Matt Stoller, in 2011, unemployment was at a near crisis level. The jobless rate was stuck around 9 percent nationally, an unusually high number due to the continuing effects of the financial crash. House Democrats were aghast.“With almost five unemployed Americans for every job opening, too many people remain jobless because of a lack of work, not a lack of wanting to work,” said Congressman Lloyd Doggett, D-Tex. So in early November 2011, they introduced a bill to reauthorize Federal unemployment benefits, an insurance program designed to aide those looking for work.Behind closed doors at the Federal Reserve however, the conversation struck a different tone.The Federal Reserve’s mandate is to promote “maximum employment,” which essentially means: print enough money so that everyone who wants one has a job. Yet according totranscripts released this month after the traditional five-year waiting period, Federal Reserve officials in November 2011 were debating whether unemployment was caused by bad work ethics and drug use – rather than by the greatest financial crisis in 80 years. This debate then factored into the argument over setting monetary policy.

Bad news: real nonsupervisory wages have actually DECLINED over the last year -- This morning's inflation news was even worse than I expected based on the increase in gas prices. On a monthly basis prices rose +0.6%. Core prices rose +0.3%. More importantly, YoY CPI was up +2.5%.  Core YoY CPI was up+2.3%:This means real nonsupervisory wages are now actually *down* -0.1% YoY for the last year. Here is the actual level of real nonsupervisory wages for the last 3 years:Note that real wages rose due to the steep declined in gas prices in 2014-15, and have actually fallen -0.6% since their peak half a year ago. Meanwhile nominal retail sales had their second blowout positive month, so that even with the jump in inflation, real retail sales rose: How is it possible that people are spending more even though they are earning less, and interest rates are up since last July?  They are saving less:  The personal savings rate has been declining slightly for nearly a year.  It's not bad compared with the last 25 years, so there's no danger sign at this point.
In any event, inflation has already blown past the Fed's anticipated trajectory. Now we see if 2% is a target, or actually a ceiling.  I say ceiling. One thing to watch over the next week is how short and long term bonds react.  Do long bond yields go up? (relatively good news) or down (bad news). Does the yield curve remain intact or start to compress?

Prospects for Further Meaningful Wage Growth Are Dimming -- In the last several years, I have written a number of posts documenting the stagnation in average and median wages, followed by their improvement due to the steep decline in gas prices, for example here and here.  Since bottoming a year ago, gas prices have turned positive YoY, most recently up about 25%. Q4 2016 data on wages has been released, giving us a chance to take an updated look. We have a variety of economic data series to track both average and median wages:

  The first graph below shows the YoY% growth in each of the four measures: While each is noisy, the overall trends are clear. First, in this cycle as in the last, wage growth declined coming out of recessions, then rose as the expansion continued.  Second, secularly there has been an undeniable slowdown in wage growth, which was 4-6% in the late 1990s peak, 3-4% at the 2000s peak, and so far in this expansion is no better than 2-3%.  I believe this is in part due to how weak the employment situation was for so long into this expansion, but also secularly due to shifts in bargaining power, as employers learn over time that employees can be retained with lower and lower annual increases in compensation. Next, let’s zoom in on the last 5 years: Again, through the noise you can see that YoY wage growth was about 0.5%-2% in 2011-12, but has slowly improved to 2-3% in 2016.  That’s the good news.  The bad news is, none of these measures of wage growth show any accretion of the gains during the entire last year: despite a tighter job market, nominal wage growth *remained* at the +2% to +3% YoY level throughout the year. Now let’s turn to the real, inflation-adjusted measures. Our first graph starts out normed to 100 for each measure in 2001.With the exception of real compensation per hour (purple), none of the measures made any real improvement during the 2000s expansion.

UAW steps up efforts with foreign automakers, Tesla: The UAW is escalating its organizing efforts with several automakers and is using widely different strategies as it tries to translate ongoing campaigns into tangible wins, UAW leaders and other sources say. While the union's campaign to organize some automakers has appeared, at times, to stall in recent years, there are signs of renewed UAW activity in Mississippi with Nissan and in California with Tesla. Meanwhile, a fierce legal battle with Volkswagen rages on over the UAW's right to represent skilled trades workers at the automaker's plant in Chattanooga,Tenn. Taken together, the organizing efforts show a union that has refused to give up even after multiyear efforts that have yielded few big victories. The UAW is mounting a multipronged, nationwide push now because it is concerned that the Trump administration will be far more anti-labor than the Obama administration once it gets a labor secretary in place and establishes an agenda, according to a person familiar with the union's campaigns. Andrew Puzder, Trump's controversial nominee for labor secretary, withdrew his nomination on Wednesday, but it's unlikely he will be replaced by a nominee that labor unions like. UAW Treasurer Gary Casteel told the Free Press there has been a spike in interest for union representation at multiple auto plants operated by foreign automakers in recent months. Casteel said he isn't sure what is driving the interest but he has a few theories. Casteel said the increased attention on the loss of manufacturing jobs and on the North American Free Trade Agreement during the presidential campaign, along with President Donald Trump's focus on U.S. jobs, has, in some ways, benefited the UAW.

Immigration and the US labour force - The net effect of immigration on the employment and wages of US-born workers is often the source of contentious debates.  Less in dispute, which is unsurprising given that it’s a matter of simple arithmetic, is the effect of immigration on the growth of the US population and prime-age labour force. From a recent note by Goldman Sachs economists, emphasis ours:  Immigration plays an important role in US population dynamics. Net immigration has contributed 0.3- 0.4pp to total annual US population growth over the last 25 years (Exhibit 1). As the rate of natural population increase—the birth rate minus the death rate—has declined from 0.9 percentage points (pp) in the early 1990s to about 0.4pp recently, the contribution from net immigration to total population growth has risen from 30% in the 1990s to 40-50% recently. The Census Bureau projected in 2014 that the contribution from immigration to total population growth would rise to 60% by 2030. The effect of immigration on growth of the working age population is even more pronounced as immigrants are usually young relative to the aging domestic population (left panel of Exhibit 2). As a result, net immigration currently accounts for virtually all of the 0.5pp trend increase in the working age population. According to Census projections, the level of the US working age population would actually fall by about 0.2% per year in 2020-2030 in the absence of immigration (Exhibit 2, right panel). The tendency for immigrants to be younger is also reflected in labor force participation data as the participation rate of foreign-born individuals (65.9%) is a bit higher than that of their native-born counterparts (62.2%).

Trump’s Immigration Crackdown Triggers Anxiety Across U.S. Farms - Recent raids by U.S. immigration authorities targeting undocumented immigrants are creating a wave of distress through America’s agricultural sector, an industry that’s heavily dependent on foreign workers. Hundreds of arrests have been made in at least six states over the past week. That’s left undocumented workers afraid to travel and farmers pondering whether they can risk hiring them, according to organizations representing both groups. Farms in the western U.S. have already dealt with a dwindling labor supply, partly because of tightened border security for years, said Pete Aiello, general manager at Gilroy, California-based Uesugi Farms. He worries that things will get worse this year and his company may not be able to find enough contractors. “The mood is not good,” Aiello said. “It’s one of pretty significant trepidation.” During its seasonal peak, Uesugi takes on about 600 contract workers -- most of them born in Mexico -- to help pick, sort and pack its produce. More than half of U.S. farm workers are undocumented, according to the American Farm Bureau Federation. President Donald Trump’s threats against immigrants could add up to higher grocery bills as growers and companies wrestle with labor shortages, according to studies from the bureau and the U.S. Department of Agriculture.

 In California Farm Country, Trump’s Deportation Threat Looms Large - Yves here. This article seeks to give a sympathetic picture of illegal farm workers who have lived in the US so long as to be de facto natives.   One thing I wish I had a better grip on is precisely what drives the fact that these jobs are not done by Americans. The article points out that some of the people they interviewed has “decent” housing and could afford to have kids and even put a little money aside. So if the workers are able to live adequately at US expense levels, what is the arbitrage? Is it just that the employers are not paying what amounts to the 15% FICA between employer and employee share? That would also imply they aren’t deducting the expenses against their income taxes either (if you pay someone more than $650 a year, you need to issue a 1099). Is it simply that what the “undocumented” workers regard as acceptable housing and cars is something native Americans would not tolerate, as in despite living here, they really do have a vastly lower cost base? That is certainly true for some of the sweatshops caught in crackdowns, where workers were being paid below minimum wage and were also living in illegally overcrowded apartments.  And how much of it is due to the fact that the workplace conditions are illegal, as in the employers have serious workplace safety risks or are engaged in illegal activities (as in violating environmental or product safety regs), and “illegal” workers are preferred because they’d never rat them out?  It is true that farmers can’t quickly find substitutes for “illegal” resident and migrant workers. A few years ago, Alabama passed a law that cracked down on employers who used undocumented workers. The peach harvest rotted on the trees and the law was rescinded. But no one has a good idea of what it might take to get native workers to fill these jobs in terms of pay and work conditions. The story points out that barring or developing a program to phase out illegal farm workers might result in more automation rather than replacement by American laborers.  That is a long-winded way of saying that I wish there were better information, but by nature, you aren’t going to have great information about people who need to stay under the radar for their own protection.  To its credit, this article does have a critical bit of information:

“We Are Here To Fight” - Mexican Migrants Pick Arrest Over Deportation - Following reports that US immigration officials had launched countrywide raids and arrested hundreds of illegal aliens across the nation as a result of Donald Trump's recent immigration executive order, this morning the President weighed in on Twitter, stating that "the crackdown on illegal criminals is merely the keeping of my campaign promise. Gang members, drug dealers & others are being removed!" The crackdown on illegal criminals is merely the keeping of my campaign promise. Gang members, drug dealers & others are being removed!— Donald J. Trump (@realDonaldTrump) February 12, 2017Trump pushed back against criticism of the crackdown which as reported last night spread "panic" among the Hispanic community after 161 people were arrested in six counties around Los Angeles alone (of whom at least 151 had criminal histories). Meanwhile, immigration officials said the raids were routine, and that Trump wasn't behind them."This operation was in the planning stages before the administration came out with their current executive orders," ICE official David Marin said. Meanwhile, following yesterday's report that Mexicans are planning on "jamming US courts" as deportations are set to surge, today the WSJ writes that all but one of about 50 undocumented Mexican migrants at a meeting Saturday indicated they would rather risk detention and long court battles in the U.S. than return to Mexico voluntarily. The majority of migrants at the meeting in Phoenix, which included Mexican officials, signaled in a show of hands that they were ready to fight deportation in U.S. courts.“Even if that means detention for weeks?” asked former foreign minister Jorge Castaneda. “Even if it takes months,” shouted one woman. “Even if it takes years,” another yelled. “We are here to fight.”

Canada's Problem? US Refugee Crossings "Epidemic" Amid Fear, Distrust Of Trump -- In what some might call a 'win' for President Trump, Canadian immigration officials warn they are experiencing a "big surge [of refugees] coming across the border" with many of them proclaiming their distrust and fear of President Trump. In the first official report of a group of "asylum seekers" who are malcontent refugees in the U.S. trying to become refugees in Canada being apprehended, U.S. border security guards and a local sheriff caught three Somali nationals trying to sneak across an open stretch of the U.S.-Canada border on Tuesday, according to CBC News.Kris Grogan, a public affairs officer for U.S. Customs and Border Protection, saidborder officials on the U.S. side are becoming increasingly worried about asylum seekers trying to get into Canada."It is extremely dangerous to be putting yourself out into these elements where you could end up dying," he said.As CBC News first reported in January, hundreds of asylum seekers have walked into Canada through fields near the Emerson border.The issue came into the spotlight after two refugees from Ghana were hospitalized in Winnipeg after suffering frostbite on Christmas Eve while lost on Highway 75, near the Canada-U.S. border.The refugees were so badly frostbitten, they lost fingers and toes. Since the story of the two men became public, dozens of other asylum seekers, including a mother and two-year-old child, have crossed into Manitoba.

 The racial wealth gap: How African-Americans have been shortchanged out of the materials to build wealth - Wealth is a crucially important measure of economic health. Wealth allows families to transfer income earned in the past to meet spending demands in the future, such as by building up savings to finance a child’s college education. Wealth also provides a buffer of economic security against periods of unemployment, or risk-taking, like starting a business. And wealth is needed to finance a comfortable retirement or provide an inheritance to children. In order to construct wealth, a number of building blocks are required. Steady well-paid employment during one’s working life is important, as it allows for a decent standard of living plus the ability to save. Also, access to well-functioning financial markets that provide a healthy rate of return on savings without undue risks is crucial. Failures in the provision of these building blocks to the African-American population have led to an enormous racial wealth gap. The racial wealth gap is much larger than the wage or income gap by race. Average wealth for white families is seven times higher than average wealth for black families. Worse still, median white wealth (wealth for the family in the exact middle of the overall distribution—wealthier than half of all families and less-wealthy than half) is twelve times higher than median black wealth. More than one in four black households have zero or negative net worth, compared to less than one in ten white families without wealth, which explains the large differences in the racial wealth gap at the mean and median.  These raw differences persist, and are growing, even after taking age, household structure, education level, income, or occupation into account.

The Coming Class Wars - Charles Hugh Smith - Fast-forward to today, and an unexpected series of class wars are emerging as this longstanding social contract frays: social mobility has declined, fostering a divide between the traditional working class (also known as the lower-middle class) which finds itself increasingly exposed to the corrosive winds of globalization and neoliberal policies, and the upper-middle class of highly educated professionals and technocrats who have benefited from these policies, securing protected employment in higher education, government and Corporate America. Commentator Peggy Noonan’s influential essay described America’s nascent class war as pitting the protected class—those with secure pay and benefits —against the unprotected class of those with insecure employment and benefits. In other words, the divisive economic issue is not simply the quantity of each class’s income and wealth, but the quality of their respective economic security.  For example, if an unprotected household earns $80,000 in wages and $30,000 in benefits in a good year of full employment in benefits-rich jobs, and $30,000 in wages and no benefits in the following not-so-good year of zero-benefits part-time work, their average total earnings are $70,000 per year—a very respectable middle class income. But compare the difficulties posed by losing healthcare benefits and getting by on a $50,000 decline in wages vs the secure $70,000 earned year-after-year-after-year by a protected household. Consider the anxieties burdening the insecure household of two workers who cannot count on having benefits and full-time employment, who see their savings or retirement accounts built up in good years drained in bad years. Houses bought in good years are forced into foreclosure in bad years. To take another example: compare the security of a tenured professor in higher education with the insecure zero-benefits earnings of an “adjunct professor” whose annual teaching contract is subject to cancelation or modification every year of his/her career.

 Elon Musk doubles down on universal basic income: 'It's going to be necessary' --In an interview with CNBC in November, Tesla CEO Elon Musk joined a growing list of tech executives who support universal basic income as a possible solution to the widespread unemployment that automation will likely cause.Universal basic income is a system in which all citizens receive a standard amount of money each month to cover basic expenses like food, rent, and clothes.On Monday, Musk doubled down on his initial support for the concept. "I think we'll end up doing universal basic income," Musk told the crowd at the World Government Summit in Dubai, according to Fast Company. "It's going to be necessary."The economic forecasts for the next several decades don't bode well for the American worker. In March, President Barack Obama warned Congress about the looming threat of job loss, based on several reports that found that as much as 50% of jobs could be replaced by robots by 2030.The downside of that projection is that millions of people would wind up out of a job — a possibility Musk discussed at the summit."There will be fewer and fewer jobs that a robot cannot do better," he said. "I want to be clear. These are not things I wish will happen; these are things I think probably will happen."Executives who have endorsed UBI — a group that includes Y Combinator President Sam Altman and Facebook cofounder Chris Hughes — also say automation would dramatically increase a society's wealth."With automation, there will come abundance," Musk said. "Almost everything will get very cheap."

Trump Begins Crackdown On DREAMers: "We Are Hoping This Detention Was A Mistake" - As state after state lodges various complaints to block President Trump's immigration executive order, it appears he is following through on campaign promises in other ways. What seems to be the first detention of a so-called DREAMer, a 23-year-old illegal Mexican immigrant has been arrested in Seattle by U.S. Immigration and Customs Enforcement officers. President Trump has promised to crackdown on the estimated 11 million illegal immigrants in the United States, most of whom come from Mexico and other Latin American countries. While Trump campaigned on a promise to roll back Obama's executive actions on immigration, since assuming office he has kept his public comments on DACA vague. But now, as Reuters reports,U.S. authorities have arrested an immigrant from Mexico who was brought to the United States illegally as a child and later given a work permit during the Obama administration in what could be the first detention of its kind under President Trump.

Immigrants across the U.S. skip work, school in anti-Trump protest | Reuters: Businesses shut their doors, students skipped class and thousands of demonstrators took to the streets in cities across the United States on Thursday to protest President Donald Trump's immigration policies. Activists called "A Day Without Immigrants" to highlight the importance of the foreign-born, who account for 13 percent of the U.S. population, or more than 40 million naturalized American citizens. Trump campaigned against the estimated 12 million illegal immigrants, playing on fears of violent crime while promising to build a wall on the U.S.-Mexican border and stop potential terrorists from entering the country. While the number of participants in Thursday's protests could not be determined, many sympathetic business owners closed shop and working-class immigrants forwent pay for the day. Since taking office last month, the Republican president has signed an executive order temporarily banning entry to the United States by travelers from seven Muslim-majority countries and all refugees. That order was put on hold by federal courts. Immigrant rights groups have also expressed alarm after federal raids last week rounded up more than 680 people suspected of being in the country illegally.

Can Immigration Hurt the Economy? An Old Prejudice Returns - The Statue of Liberty was less than 40 years old when President Calvin Coolidge signed the Immigration Act of 1924. It barred immigration from most of Asia. It cut the overall quota of immigration from countries outside the Americas in half. And it limited immigrants from other countries to 2 percent of the number of people of that country’s ancestry in the United States in 1890 — restricting immigration mostly to people from Northern and Western Europe. Those from Eastern and Southern Europe, not to say Africans, brought too many “types of social inadequacy.” “Physically, the bodies of recent immigrants are sounder than those of the average American stock,” Harry H. Laughlin, appointed “expert eugenics agent” to the House Committee on Immigration and Naturalization, noted in 1922 testimony. “But with this sound body we have recently admitted inferior mental and social qualities of a constitutional nature which neither education nor better environment can be expected to raise above, or even to approximate, the average of the American descended from older immigrants.” The quota system was overhauled in 1965, and immigration law today is more evenhanded. Still, the suspicion of immigrants as threats to society remains close to the surface. By claiming that people from Muslim nations threaten national security, that Mexicans are drug dealers and rapists, that immigrants take the jobs of Americans or burden taxpayers by reliance on welfare, President Trump has drawn it back to the center of political debate. This time, suspicion is being buttressed by some economists with a proposition not too dissimilar to Laughlin’s: that immigrants could sap America’s vitality by bringing inferior cultural traits from their dysfunctional home countries to erode American social norms.

NYC Mayor Covers Public Schools With Leaflets: "We Will Not Turn Our Back On Immigrant Brothers & Sisters" -- In what appears to be an effort to quell the fear rising in the 'legal' immigrant community about President Trump's 'illegal' immigration policies, New York City Mayor Bill de Blasio - not one to shy away from scare-mongering that very fear into 'legal' immigrants- has leaflet-bombed the city's public schools reassuring 'immigrants' that they will not be bothered by President Trump’s 'illegal' immigration efforts."The City of New York supports all its residents. Everyone, including undocumented immigrants, can access most City services, such as going to school or using the healthcare system or other City services.  City employees will not ask about immigration status unless it is necessary to do their jobs. They must keep immigration status information confidential." Quick translation: [undocumented] = [illegal] but the former connotes no ill-will and implied they are pending documentation whereas the latter is what it is - the immigrants are in the country illegally, the noting of which will likely hurt someone's feelings. Full leaflet below:

 An ‘alternative facts’ South Dakota bill sparks fears for science education in the Trump era - This is the text of S.B. 55 that just passed in the South Dakota Senate, which purports “to protect the teaching of certain scientific information.”

    • Section 1. That chapter 13-1 be amended by adding a NEW SECTION to read:
      No teacher may be prohibited from helping students understand, analyze, critique, or review in an objective scientific manner the strengths and weaknesses of scientific information presented in courses being taught which are aligned with the content standards established pursuant to § 13-3-48.

It doesn’t mention any specific scientific subject, so what does it actually mean? The Argus Leader quoted Deb Wolf, a high school science instructional coach in the Sioux Falls School District, as saying the bill says that teachers can essentially teach what they want in science class as long as they do it in a certain way: “This is horrible, but let’s say I believe in eugenics.” S.B. 55 “says that I couldn’t be prohibited, I couldn’t be stopped from teaching that, as long as I did it in an objective scientific manner, and it doesn’t specify what that means.” The bill is one of four that have been introduced so far in 2017 in state legislatures — the others are in Indiana, Oklahoma and Texas  — that would allow science denial in the classroom. Since 2014, at least 60 “academic freedom” bills  — which permit teachers to paint established science as controversial — have been filed in state legislatures all over the country. Louisiana passed one in 2008, and Tennessee did, too, in 2012.

Idaho Drops Climate Change Language From K-12 Science Curriculum - Lawmakers in Idaho have approved new K-12 science standards that do not reference the established science of climate change and the impact of human activity on the environment. The Feb. 9 vote from the House Education Committee came mostly down party lines. According to Idaho Ed News , 11 Republicans on the panel approved the proposed slate of science standards after five paragraphs* mentioning the topics were removed from the initial draft. The committee's three Democrats voted against removing the climate change language. The omitted language includes, "Ask questions to clarify evidence of the factors that have caused the rise in global temperatures over the past century," and "human activity is also having adverse impacts on biodiversity through overpopulation, overexploitation, habitat destruction, pollution, introduction of invasive species and climate change." The language comes from the Next Generation Science Standards , which has been adopted by at least 18 states and the District of Columbia. The standards, which identify the science all K-12 students should know, were developed by 26 states and a number of national science and educational groups. But Republican Rep. Scott Syme said the initial draft of new state science standards did not teach "both sides of the debate." "I really didn't want to scrap everything they had done, just some," Syme said. "Actually most of these (rejected paragraphs) deal with three areas and didn't seem to me to present both sides of the picture." House Assistant Minority Leader Ilana Rubel criticized the committee's decision. "Not only do we owe it to our children to teach them 21st century science, but we owe it to the farmers, foresters and citizens of Idaho to take this issue seriously and not bury our heads in the sand," she said in a statement. 

No Thug Left Behind - In the Obama years, America’s public education system embarked on a vast social experiment that threatened to turn schools into educational free-fire zones. The campaign—carried out in the name of “racial equity”—sought to reduce dramatically the suspension rate of black students, who get referred for discipline at much higher rates than other students. From the top down, the U.S. Department of Education drove the effort; from the bottom up, local educational bureaucrats have supported and implemented it. “Racial equity” has become the all-purpose justification for dubious educational policies. Equity proponents view “disparate impact”—when the same policies yield different outcomes among demographic groups—as conclusive proof of discrimination. On the education front, “equity” does not seek equal treatment for all students. Instead, it demands statistical equivalence in discipline referrals and suspensions for students of every racial group, regardless of those students’ actual conduct. Equity advocates’ central premise is that teachers, not students, are to blame for the racial-equity discipline gap. They claim that teachers’ biases, cultural ignorance, or insensitivity are the gap’s primary causes. The key to eliminating disparities, they maintain, is to change not students’ but adults’ behavior. Equity supporters justify their agenda on grounds that the racial-equity discipline gap severely hampers black students’ chances of success in life. Kids who get suspended generally fail to graduate on time and are more likely to get caught up in the juvenile-justice system, they say. President Obama’s Department of Education made racial equity in school discipline one of its top priorities. “The undeniable truth is that everyday educational experience for many students of color violates the principle of equity at the heart of the American promise,” according to Arne Duncan, who served as education secretary until early 2016. “It is adult behavior that must change,” Duncan stated repeatedly. “The school-to-prison pipeline must be challenged every day.”   The public schools of St. Paul, Minnesota, are ahead of the curve in the racial-equity crusade. The violence and chaos that racial-equity policies have produced there should sound alarms across the nation about what can be expected by pursuing this course.

America's Outmoded "Factory Model" Educational System Needs To Be Radically Reinvented - I have long held that America's educational system is an outmoded "factory model" designed to produce interchangeable industrial and service workers en masse for an industrial economy of factories and a 1960s-era service sector that needed millions of employees with basic-skills: Is Our Education System Based on a Factory Metaphor? (November 15, 2005) Our "factory model" funnels hundreds or thousands of students into set courses within large mechanistic plants, regardless of their individual attributes, strengths and weaknesses. Like an assembly line of manufactured items, some students are "rejects" who couldn't make the "quality control" grade, and they're thrown on the scrap pile. what if a kid has no aptitude in math but is a near-wizard in metal-working? Do we scrap him because he didn't meet some factory-defined narrow standards for "knowledge worker"? What about all the jobs which aren't in biotech and technology? What if we required basic understanding of making meals with real food rather than the processed contents of a box? What if we required kids to know how to fill out a Schedule C form (small business) for a tax return, or change the oil in their car, or install shelving, or fill out a loan application and understand credit, adjustable rate mortgages and deductibles in insurance policies? Aren't these skills more productive for the vast majority of workers than advanced math? It's obvious that we desperately need a new decentralized, individualized and far more productive system of education. That is the core of my book The Nearly Free University and the Emerging Economy: The Revolution in Higher Education, in which I detail how we could design apprenticeships in virtually every field that would replace factory-model curriculum and teaching methods. Technology is now enabling personalized learning that helps each student master the one absolutely essential skill: learning to learn on their own.

Considerations On Cost Disease -- Tyler Cowen writes about cost disease. I’d previously heard the term used to refer only to a specific theory of why costs are increasing, involving labor becoming more efficient in some areas than others. Cowen seems to use it indiscriminately to refer to increasing costs in general – which I guess is fine, goodness knows we need a word for that. Cowen assumes his readers already understand that cost disease exists. I don’t know if this is true. My impression is that most people still don’t know about cost disease, or don’t realize the extent of it. So I thought I would make the case for the cost disease in the sectors Tyler mentions – health care and education – plus a couple more. First let’s look at primary education:  There was some argument about the style of this graph, but as per Politifact the basic claim is true. Per student spending has increased about 2.5x in the past forty years even after adjusting for inflation. At the same time, test scores have stayed relatively stagnant. You can see the full numbers here, but in short, high school students’ reading scores went from 285 in 1971 to 287 today – a difference of 0.7%.  There is some heterogenity across races – white students’ test scores increased 1.4% and minority students’ scores by about 20%. But it is hard to credit school spending for the minority students’ improvement, which occurred almost entirely during the period from 1975-1985. School spending has been on exactly the same trajectory before and after that time, and in white and minority areas, suggesting that there was something specific about that decade which improved minority (but not white) scores. Most likely this was the general improvement in minorities’ conditions around that time, giving them better nutrition and a more stable family life. It’s hard to construct a narrative where it was school spending that did it – and even if it did, note that the majority of the increase in school spending happened from 1985 on, and demonstrably helped neither whites nor minorities. I discuss this phenomenon more here and here, but the summary is: no, it’s not just because of special ed; no, it’s not just a factor of how you measure test scores; no, there’s not a “ceiling effect”. Costs really did more-or-less double without any concomitant increase in measurable quality. Second, college is even worse:

Democrats At Pennsylvania College Invite Students To Wear White Pins As Reminder Of Their "White Privilege" --Students at Elizabethtown College in Pennsylvania are being encouraged by the campus Democrat club to wear a white pin for a year to help them reflect on their "white privilege and the impact white privilege has on people of color."  The campaign was launched over the weekend by the Elizabethtown College Democrats, who say it aims to make students at the small and private liberal arts college in Pennsylvania more introspective about issues of race, especially in their predominantly white region of Lancaster County.Reached by College Fix via email, the President of the Elizabethtown College Democrats said that no matter how accepting white people are it "doesn’t stop them from being part of a system based on centuries of inequality."“Discussions about race are often perceived as being only open to people of color, but I think it is just as important for white people to partake in conversations about race,” Aileen Ida, president of the College Democrats, told The College Fix via email.Ida said white people are continually allowing for a societal system of oppression to occur unless they work against it. The white puzzle piece pin represents racial struggles of all sorts.“No matter how accepting someone is, that doesn’t stop them from being part of a system based on centuries of inequality,” she said, adding the campaign transcends politics.

Tiny US colleges' investments are outperforming Ivy Leagues with billion-dollar endowments — and they’re doing it with a strategy anyone can use -- The largest endowments in the world have considerable wealth, boasting multi-billion dollar reserves they continue to reinvest.  However, it may come as a surprise that last year, the smallest endowment funds outperformed the largest, James B. Stewart at The New York Times reported. Citing results released by The National Association of College and University Business Officers and the Commonfund Institute, the Times noted that endowment funds with $1 billion or more lost an average of 1.9% for fiscal year 2016. Those with $500 million to $1 billion lost an average of 2.2%.  But endowments with less than $25 million lost on average only 1%.  Harvard University, which at $35.7 billion has the largest endowment in the world, lost 2.2% for the year ended June 30, 2016. It lagged behind the rest of the Ivy League in returns.  Houghton College on the other hand, with a fraction of Harvard's wealth at $46.4 million, had an 11.85% gain for the year ended September 30, 2016. The relatively unknown liberal-arts college located in New York, which has a little over 1,000 undergrads, beat even the best performer in the Ivy league, Yale University, which had a 3.4% gain.

Private in Name Only: Lessons from the Defunct Guaranteed Student Loan Program - AEI » Read the full PDF.  Key Points:

  • Proposals to restore the federal government’s defunct guaranteed student loan program, called the Federal Family Education Loan (FFEL) program, are based on a faulty understanding of how it—and the federal Direct Loan program that replaced it—operate. The FFEL program involved private capital in name only, offering none of the benefits that market competition bring to bear.
  • Today’s Direct Loan program and the discontinued FFEL program are really two different designs of the same government-backed student loan program that entail the same kinds of financial risks for taxpayers.
  • Proponents of restoring the FFEL program wrongly argue that it reduced financial risk for taxpayers and students by restricting lending to only credentials that provided a positive return on investment or by varying terms based on the risk of each loan. They also erroneously assert that the 2010 switch to the Direct Loan program led to record levels of outstanding student debt and defaults.
  • Bringing private capital into the loan program in a way that adds value for the government and students is in conflict with other goals for the program. Private capital adds value in a loan program by varying terms and loan amounts for borrowers based on risk, denying access to credit for bad investments, and sharing in the financial risks. Yet the government student loan program’s goal is to avoid such practices.

Haunted by Student Debt Past Age 50 – NY Times editorial - The experience of being crushed by student debt is no longer limited to the young. New federal data shows millions of Americans who are retired or nearing retirement face this burden, as well as the possibility of having their Social Security benefits garnished to make payments. Americans age 60 and older are the fastest-growing age group of student loan debtors. Older debtors, many of whom live hand-to-mouth on fixed incomes, are more likely to default. When that occurs with federal loans, as happens with nearly 40 percent of such borrowers who are 65 and over, the government can seize a portion of their Social Security payments — even if it pushes them into poverty. About 20,000 Americans over the age of 50 in 2015 had their Social Security checks cut below the poverty line because of student loans, with poverty-level benefits falling even further for 50,000 others, according to a recent report by the Government Accountability Office. A report issued last month by the Consumer Financial Protection Bureau shows that the number of Americans aged 60 and older with student loan debt has grown fourfold over the last decade, to 2.8 million in 2015 from about 700,000 in 2005. The average amount owed by these borrowers has nearly doubled, to $23,500. Some older borrowers are carrying their own education loans, but most fell into debt helping their children or grandchildren, either by borrowing directly or co-signing loans. As these borrowers age, they have increasing difficulty keeping up loan payments while also paying for food, housing, medication, and dental and medical care. By 2015, a total of nearly 70,000 people age 50 and older had their Social Security benefits fall below the poverty line ­— or their benefits were already below and cut further — because of defaults on student debt.

Congress Threatens State-Run Retirement Plans for Private Workers - An ambitious California law intended to help create retirement security for low-income workers is in the crosshairs of the Trump-era Congress, which is moving to block the state and others from launching programs to automatically enroll millions of people in IRA-type savings plans. The push is one of the most direct confrontations yet with California and other liberal states by a GOP-led Congress emboldened by President Donald Trump's election. And it is intensifying the debate about whether conservatives who control Washington will honor their pledge to respect states' rights, even when states pursue policies out of step with the Republican agenda. By targeting the novel "auto IRA"-style programs, congressional Republicans are also provoking one of California's most visible leaders, state Senate President Pro Tem Kevin de Leon, the Democrat who championed the policy in California and nationwide and is leading a movement in the Legislature to resist Trump. The 2016 law being targeted requires employers to enroll 6.8 million California workers who have no access to a retirement savings account at work in a state-sponsored plan. Millions more in seven other states that have passed laws similar to California's would also be enrolled in those states. More states are weighing whether to join a movement that has been years in the making.

Single-Payer Health Care Bill Introduced In California Senate | California Healthline: Legislation introduced in the state Senate Friday would set California on a path toward the possible creation of a single-payer health care system ― a proposal that has failed to gain traction here in the past. The bill, which is a preliminary step, says that it is the “intent of the Legislature” to enact a law that would establish a comprehensive, single-payer health care program for the benefit of everyone in the state. The legislation, introduced by state Sen. Ricardo Lara (D-Bell Gardens), does not offer specifics of what the plan would look like, nor does it mention a timetable. A single-payer system would replace private insurance with a government plan that pays for coverage for everyone. Proponents argue that single-payer systems make health care more affordable and efficient, but opponents say they raise taxpayer costs and give government too much power. Medicare, the federally-funded health coverage for the elderly, is often held up as a model of what a single-payer system might look like.

UnitedHealth Improperly Took Money From Medicare, Suit Says - UnitedHealth Group, one of the nation’s largest health insurers, is accused in a scheme that allowed its subsidiaries and other insurers to improperly overcharge Medicare by “hundreds of millions — and likely billions — of dollars,” according to a lawsuit made public on Thursday at the Justice Department’s request. The accusations center on Medicare Advantage, a program through which people 65 or older agree to join private health maintenance organizations, or H.M.O.s, whose costs the government reimburses. The program was created in 2003 after UnitedHealth and other insurers said that managed care could help contain the overall cost of Medicare, which has strained the federal budget by rising faster than the rate of inflation. Instead of slowing Medicare costs, UnitedHealth may have improperly added excess costs in the billions of dollars over more than a decade, according to the lawsuit, which was unsealed in Federal District Court in Los Angeles. A spokesman for UnitedHealth disputed that assertion, saying it was based on faulty interpretations of Medicare rules.

U.S. healthcare costs to escalate over next decade: government agency | Reuters: The cost of medical care in the United States is expected to grow at a faster clip over the next decade and overall health spending growth will outpace that of the gross domestic product, a U.S. government health agency said on Wednesday. A report by the U.S. Centers for Medicare and Medicaid Services (CMS) cited the aging of the enormous baby boom generation and overall economic inflation as prime contributors to the projected increase in healthcare spending. Overall healthcare spending will comprise 19.9 percent of the economy in 2025, up from 17.8 percent in 2015, the report forecast. The pace of growth in U.S. spending on health is expected to pick up in 2017, increasing 5.4 percent over 2016. That compares with an estimated 4.8 percent spending uptick in 2016. Spending for 2016 was estimated at $3.4 trillion. When the final numbers are in, the growth in prescription drug spending for 2016 is expected to have slowed to 5 percent from 9 percent in 2015. However, CMS has forecast growth of 6.4 percent per year between 2017 and 2025, in part because of spending on expensive newer specialty drugs, such as for cancer and multiple sclerosis. The projections for 2016 to 2025 were made assuming that the Affordable Care Act (ACA), former President Barack Obama's signature healthcare law widely known as Obamacare, would remain intact. It does not take into account likely changes to the law. The Republican-led Congress and President Donald Trump have vowed to repeal and replace the ACA, but a viable replacement plan has yet to emerge. Trump signed an executive order on his first day in office last month to freeze regulations and enable government agencies to take other steps to weaken Obamacare.

Aetna, Humana Abandon $37 Billion Merger Blocked by Judge - Aetna Inc. ended its $37 billion takeover of Humana Inc., after deciding not to appeal a ruling by a federal judge who blocked the health insurers’ combination on antitrust grounds. The companies came to a mutual agreement to terminate the deal, and Aetna will pay Humana a $1 billion breakup fee, or about $630 million after taxes. A plan to divest some assets to Molina Healthcare Inc. -- a remedy that was rejected by the judge -- was also canceled, Aetna said in a statement Tuesday. Aetna and Humana, which had agreed to combine in July 2015, are free to make new deals or spend billions of dollars on buying back their own shares. Another massive health insurance deal, meanwhile, is grinding forward -- for now. Anthem Inc. said on Monday that it’s seeking a fast-track appeal of a different judge’s ruling that blocked its own proposed $48 billion acquisition of Cigna Corp. The federal judge who blocked the Aetna-Humana deal on Jan. 23 sided with Justice Department lawyers who said that allowing the insurers to combine would harm competition, mainly in the market for Medicare Advantage plans. “While we continue to believe that a combined company would create greater value for health care consumers through improved affordability and quality, the current environment makes it too challenging to continue pursuing the transaction,” Aetna Chief Executive Officer Mark Bertolini said in the statement. “Both companies need to move forward with their respective strategies.”

Humana Plans to Pull Out of Obamacare's Insurance Exchanges - Humana announced on Tuesday that it would no longer offer health insurance coverage in the state marketplaces created under the federal health care law, becoming the first major insurer to cast a no-confidence vote over selling individual plans on the public exchanges for 2018. President Trump immediately seized on the company’s decision as evidence that the Affordable Care Act needed to be repealed and replaced. “Obamacare continues to fail,” he said on Twitter. Obamacare continues to fail. Humana to pull out in 2018. Will repeal, replace & save healthcare for ALL Americans. https://t.co/glWEQ0lNR4  The company’s decision is likely to set off a contentious debate about who is to blame for the market’s current shakiness. While the president and Republicans have vowed to undo the health care law, they have yet to come up with a solid plan. Insurers are complaining loudly about the uncertainty surrounding what will happen in the coming years, even though many states’ exchanges have showed some signs of stability. Several major insurers have said they cannot begin to decide whether to offer coverage next year until the government clarifies if and how it plans to change the rules. Based in Louisville, Ky., Humana is not a major player in the individual exchanges and is among the national insurers, like Aetna and UnitedHealth Group, that have struggled to make money in the market. The company has steadily scaled back its presence, selling policies for 2017 in just 11 states. In early January, the company said the number of its customers buying coverage through the exchanges had dropped to about 150,000, a small fraction of the roughly 12 million individuals who initially signed up for coverage through the exchanges.

Cheaper drugs from Canada? Pharma despises the idea, but top senators are pushing HHS chief to try it - Instead of being gouged on the prices for old drugs, Americans could import certain meds from Canada if a bipartisan group of senators get their way.  Sens. Amy Klobuchar, D-Minn., Chuck Grassley, R-Iowa, and John McCain, R-Ariz., are pushing President Donald Trump’s new Department of Health and Human Services Secretary, Tom Price, to authorize cheap drug imports under strict circumstances. Their bill, the Safe and Affordable Drugs from Canada Act, would require the FDA to set up a “personal importation program” to allow individuals to import 90-day supplies of their meds from Canadian pharmacies.As the senators point out in their letter, a 2003 law allows the FDA to authorize imports in certain circumstances. First, though, the HHS secretary must sign off that they "pose no additional risk to the public's health and safety and would result in a significant reduction in the cost" for consumers."To qualify for importation, the senators' proposal would require products to be off patent or no longer marketed in the U.S. by the original developer. They'd need to be free of direct competition and to have seen a “significant, unexplained” price hike. The imported product would also need to be produced by a reputable company. The bill additionally calls for fast-track FDA reviews of competing drugs. On the safety point, pharma's trade group is pushing back. In a statement to FiercePharma, PhRMA pointed to a Drug Enforcement Administration report last year that concluded counterfeit fentanyl from China made its way to the U.S. through Canada and Mexico, worsening the current opioid crisis. Imports “would exacerbate these threats,” a PhRMA spokesperson said. Imported drugs wouldn’t “be subject to the U.S. Food and Drug Administration’s robust safety requirements, and there would be no way to trace the country of origin for the imported products. Even Canada has said it does not and would not be able to guarantee that U.S. citizens would receive products that are safe, effective and of high quality,” PhRMA’s spokesperson said.

 Hackers demand $3.6m bitcoin ransom to unlock Los Angeles hospital medical records - A cyberattack on Hollywood Presbyterian Medical Center's computer system has locked up access vital patient data, and the hackers responsible are demanding payment of over 9000 bitcoins ($3.6 million) to unlock the data.From IBTAn unnamed doctor has admitted that the hospital's computer system was hacked and is currently being held for ransom, adding that departments are now communicating through fax machines because they have no access to email. Furthermore, a number of patients have been transferred to other hospitals.Meanwhile, a separate report by Fox (Los Angeles) reaffirmed that the cyberattack has directly affected the 'day-to-day' operations of the hospital.

TPP is dead, but its legacy lives on - The Trans-Pacific Partnership was dead long before Donald Trump signed his executive order. But its damaging aspects, like stringent IP provisions, have just migrated to other agreements  U.S. President Donald Trump’s first week in office was, to put it mildly, tumultuous. In the midst of the complete upending of normal politics, reflected by developments like the travel ban on seven Muslim-majority countries and the promotion of ‘alternative facts’, it is easy to forget that one of his first acts as President was to veto U.S. participation in the Trans-Pacific Partnership (TPP), a trade deal among 12 Pacific economies that was a decade in the making.Ostensibly a ‘free trade’ deal, the TPP was opposed extensively by progressives for the last two years because of its far-reaching provisions that increased corporate power over trade at the expense of workers and consumers. The agreement’s damaging ambitions were most evident in the proposed provisions concerning intellectual property. The TPP provided explicit protections for ‘biologics’ (drugs manufactured in a living organism, rather than through chemical synthesis), the first trade agreement to do so. More damagingly, the agreement mandated the protection of clinical test data submitted for marketing approvals, with pharmaceutical data obtaining five to eight years of protection. This provision, called ‘data exclusivity’ or ‘marketing exclusivity’, prevents a generic company from relying on the clinical test results of the originator in order to prove the efficacy of its drug. It was justified using the argument that clinical trials are the most expensive part of drug development and hence there is a necessity to provide drug developers the ability to limit access to that data so as to incentivise research.

Louisville reports 52 overdoses in 32-hour period - Louisville experienced a severe spike in overdose calls last week with authorities responding to 52 calls in a 32-hour period. The city’s Metro Emergency Services said the calls began around midnight Thursday and continued through 8 a.m. Friday, with one fatality in a moving car. The calls came from more than 20 ZIP codes across the county, The Courier-Journal. “When we say overdoses, we usually mean heroin, but that included alcohol, prescription medications, etcetera,” Mitchelle Burmeister, spokesman for Metro Emergency Services, told The Courier-Journal.Burmeister said 34 of the 52 patients were transported to a hospital, and blamed the high number of overdoses already reported in 2017 on the increasing amount of drugs that are readily available. According to the report there were 695 cases through the month of January, an increase of 33 percent from last year.  “What generally is going on when you see this is someone has introduced a batch of fentanyl in the illicit drug supply that hasn’t been cut sufficiently,” Van Ingram, executive director of the Kentucky Office of Drug Control Policy, told The Courier-Journal. “I’m afraid it’s a reality we’re going to see repeated far too often.”  Emergency workers have been warned about potential exposure to harmful chemicals such as fentanyl during overdose calls, and law enforcement officials are working with the health department and local hospitals to identify possible patterns, The Courier-Journal reported.

Cancer Lawsuits Allege EPA-Monsanto Collusion - A new court filing made on behalf of dozens of people claiming Monsanto's Roundup herbicide gave them cancer includes information about alleged efforts within the U.S. Environmental Protection Agency (EPA) to protect Monsanto's interests and unfairly aid the agrichemical industry. The filing , made late Friday by plaintiff's attorneys, includes what the attorneys represent to be correspondence from a 30-year career EPA scientist accusing top-ranking EPA official Jess Rowland of playing "your political conniving games with the science" to favor pesticide manufacturers such as Monsanto. Rowland oversaw the EPA's cancer assessment for glyphosate , the key ingredient in Monsanto's weed-killing products, and was a key author of a report finding glyphosate was not likely to be carcinogenic. But in the correspondence, longtime EPA toxicologist Marion Copley cites evidence from animal studies and writes: "It is essentially certain that glyphosate causes cancer."  Attorneys for the plaintiffs declined to say how they obtained the correspondence , which is dated March 4, 2013. The date of the letter comes after Copley left the EPA in 2012 and shortly before she died from breast cancer at the age of 66 in January 2014. She accuses Rowland of having "intimidated staff" to change reports to favor industry, and writes that research on glyphosate, the key ingredient in Monsanto's Roundup, shows the pesticide should be categorized as a "probable human carcinogen." The International Agency for Research on Cancer, an arm of the World Health Organization, declared as much—that glyphosate was a probable human carcinogen —in March 2015 after reviewing multiple scientific studies. Monsanto has rejected that classification and has mounted a campaign to discredit IARC scientists.

Farmers in 10 States Sue Monsanto Over Dicamba Devastation -- Farmers across 10 states are suing Monsanto , alleging that the agrochemical company sold dicamba -tolerant cotton and soybean crops knowing that illegal spraying of the highly volatile and drift-prone herbicide would be inevitable.  Steven W. Landers, et al v. Monsanto Company was filed on Jan. 26 in the United States District Court for the Eastern District of Missouri, Southeastern Division. Kansas City law firm Randles & Splittgerber filed on behalf of Steven and Deloris "Dee" Landers and similarly harmed farmers in 10 states —Alabama, Arkansas, Illinois, Kentucky, Minnesota, Mississippi, Missouri, North Carolina, Tennessee and Texas. The farmers seek damages for claims including negligence, strict liability, failure to warn, conspiracy, disgorgement of profits and punitive damages. According to a press release from the law firm, Steven and Dee Landers operate their family owned farms in New Madrid County, Missouri, and have been in business since 1976. The Landers claim that their farms have been greatly damaged by the illegal spraying of dicamba on Monsanto's Roundup Ready Xtend crops, which are genetically engineered to resist dicamba and Roundup (aka glyphosate ). Bev Randles of Randles & Splittgerber told EcoWatch that the Landers' 1,550-acre farm primarily grows soybeans and corn. In 2016, they experienced dicamba damage on more than half of their crops and acreage, resulting in a reduction of their yields in approximately the same percentage, especially with respect to their soybeans. The farmers in the lawsuit allege that the biotech giant knowingly marketed its Xtend cotton and soybean seeds to farmers without any safe herbicide. The lawsuit claims that the company knew the only option purchasers would have to protect crops grown from those seeds would be to illegally spray dicamba to protect the crops from weeds.  "Monsanto chose to sell these seeds before they could be safely cultivated," said Randles. "Monsanto's own advertising repeatedly describes its Xtend seeds and its accompanying herbicide as a 'system' intended to be used together. But when Monsanto failed to get approval to sell the herbicide, it recklessly chose to go ahead and sell the seeds regardless."

Golden Rice – A Supreme Hoax, Part of A Supreme Crime - The program to breed a commercially deployable version of “golden rice” continues its perfect record of failure. In the latest screw-up, an attempt to back-cross a GM rice variety with a conventional Indian variety resulted in a crop with reduced yield, stunted growth, and growth abnormalities. The authors of the new study documenting this result blame the effects on transgenic interference with the plant’s growth hormones. Worse, the transgene is fully active not just in the rice grains as “intended”, but in the leaves as well. This resulted in reduced photosynthetic ability.These visible effects had not manifested in the GM variety. Therefore the engineers assumed the transgenic effect was “stable”, and that this stability of transgenic effect could be taken for granted throughout the process of back-crossing the transgene into the Swarma variety, perfecting this Indian version of golden rice, increasing the seed, and commercially deploying it.This is typical of how GMOs are developed. The entire process, from tissue culture to seed increase, focuses only on whether the crop visibly seems to meet commercial standards. That’s the full extent of the quality control and safety testing. It’s the same as how all alleged safety tests in the lab really have been tests of nothing but whether CAFO inmates can reach their slaughter weight being fed grain from the crop. This and similar industrial parameters comprise the sum total of the “safety tests” performed by corporations, accepted by regulators, and touted by regulators and media. The same paradigm applies to agronomic testing. Therefore it’s no surprise that under new conditions, conditions not as controlled as the laboratory greenhouse, GMOs often break out with completely unexpected deficiencies, sicknesses, and crop failures. This is especially true under real world agronomic conditions.

Judge to FDA: Agency Must Pull Aside Curtain on GE Salmon -- A U.S. District Court judge took the U.S. Food and Drug Administration (FDA) to task on Jan. 10 for withholding government documents related to the agency's approval of genetically engineered (GE) salmon . The judge's decision is a big win for public transparency, but it's also a small step toward finally doing a proper evaluation of the risks posed by GE animals—which could one day end up on our dinner plates. In 2015, the FDA approved GE salmon made from the DNA of three different animals: Atlantic salmon, deep water ocean eelpout, and Pacific Chinook salmon. The GE version is intended to grow faster than conventional farmed salmon, reportedly getting to commercial size in half the time. Even though this is the first time any government in the world has approved a GE animal for commercial sale and consumption, so far the FDA has taken a lackadaisical approach to evaluating the salmon's potential for harm to wild salmon and the environment. If the GE salmon were to escape , it could threaten wild salmon populations by outcompeting them for scarce resources and habitat, by mating with endangered salmon species, and by introducing new diseases. The world's preeminent experts on GE fish and risk assessment, as well as biologists at U.S. wildlife agencies charged with protecting fish and wildlife, heavily criticized the FDA for failing to evaluate these impacts. But the FDA ignored their concerns, so in March 2016, Earthjustice filed a lawsuit against the agency.  As part of the lawsuit , the FDA is required to compile a record of documents that illuminate the path the agency followed to reach its decision to approve the GE salmon—much like a student is required to show their work for a math problem in middle school. A complete record is essential in all cases. But it is especially important here because the FDA has so far refused to release most of the documents related to its decision, despite repeated requests for that information from Earthjustice's diverse set of clients under the Freedom of Information Act.

China closes live poultry markets amid deadly flu outbreak - China is ordering the closure of live poultry markets in its south-central regions as it grapples with the worst outbreak of bird flu in years that has killed at least 87 people. State media reported Friday that the National Health and Family Planning Commission ordered closures anywhere with cases of the H7N9 strain. Most reported cases have been found in the densely populated Yangtze and Pearl river deltas from Shanghai to Hong Kong. Those areas generally experience mild, wet winters that are ideal for the virus transmission. In all, more than 250 cases have been reported from 16 provinces and regions, including as far away as the southwestern province of Yunnan. The death toll since the start of the year has been unmatched since at least 2013. In addition to the market closures, the commission is training health workers in the screening, early diagnosis and treatment of the disease, while urging people to avoid contact with live birds. H7N9 is considered to be less virulent than the H5N1 strain that the World Health Organization has linked to hundreds of deaths worldwide over the last decade. H7N9 is not believed to be transmitted between humans, but rather by infected poultry. China has gained extensive experience in dealing with such crises since being hit by the 2003 SARS outbreak that was believed to have originated among animals in southern China. A preference among Chinese for live-bought, freshly-slaughtered poultry complicates the government's efforts to eradicate such diseases.

Commuters warned of new air pollution risk - Travelling by public transport exposes commuters to up to eight times as much air pollution as those who drive to work, a groundbreaking study found. In the latest evidence of the health risks posed by rising traffic levels, researchers found that drivers commuting in diesel cars did the most harm to the wellbeing of other travellers — producing six times as much pollution as the average bus passenger. The authors said that the results revealed a “violation of the core principle of environmental justice” because those who contributed most to air pollution in cities were least likely to suffer from it. People in poorer areas, who are more reliant on buses to get to work, suffer greater exposure than those in wealthier neighbourhoods, who are more likely to commute by car, according to the study by the University of Surrey. Air pollution causes 40,000 premature deaths a year in Britain and diesel vehicles are a large contributor to the problem, producing high levels of particulates and toxic nitrogen oxides, which can cause respiratory disease and heart attacks. Of Britain’s 5.4 million asthma sufferers, two thirds say that poor air quality makes their condition worse. The government will publish a plan in April for tackling air pollution after the previous one was ruled inadequate by the High Court. The latest study involved commuters wearing air pollution monitors who undertook hundreds of journeys by car, bus and Tube. Bus passengers were exposed to concentrations of particles, known as PM10, which were five times higher than those experienced by car commuters. Levels of PM2.5 fine particles, which can be more lethal as they are drawn deep into the lungs, were twice as high on buses as in cars. Bus journeys were typically 17-42 minutes longer than car journeys, meaning that bus passengers were exposed to higher levels of pollution for longer. Motorists tend to keep windows closed and are protected by filters stopping particles and dust from entering the interior. Bus passengers, by contrast, are subjected to pollution at stops when the doors are opened, often in places where queues of idling vehicles are pumping out high levels of toxic gas and particles. Diesel buses on average produce three times as many particles per mile as diesel cars but they typically carry 20 times as many people.

India’s Air Pollution Rivals China’s as World’s Deadliest -- India’s rapidly worsening air pollution is causing about 1.1 million people to die prematurely each year and is now surpassing China’s as the deadliest in the world, a new study of global air pollution shows. The number of premature deaths in China caused by dangerous air particles, known as PM2.5, has stabilized globally in recent years but has risen sharply in India, according to the report, issued jointly on Tuesday by the Health Effects Institute, a Boston research institute focused on the health impacts of air pollution, and the Institute of Health Metrics and Evaluation, a population health research center in Seattle. India has registered an alarming increase of nearly 50 percent in premature deaths from particulate matter between 1990 and 2015, the report says. “You can almost think of this as the perfect storm for India,” said Michael Brauer, a professor of environment and health relationships at the University of British Columbia and an author of the study, in a telephone interview. He cited the confluence of rapid industrialization, population growth and an aging populace in India that is more susceptible to air pollution.

Breathless in Bakersfield: is the worst air pollution in the US about to get worse? - The bluffs on Panorama Road offer a wide view of the northern half of Bakersfield, which is one of the few major population centres in California’s Central Valley.  On a clear day, the state’s dominant topographical features put the landscape, and one’s place in it, in sobering perspective. But clear days don’t happen all that often in Bakersfield. Emissions from agriculture, industry, rail freight and road traffic together create one of the country’s worst concentrations of air pollution – a condition exacerbated by geographic and climatic conditions that trap dry, dirty air over this southern section of Central Valley like the lid over a pot. Oil fields make up most of the view from the top of the bluffs, and the scent of petroleum is often detectable around the city. Dairies populated by hundreds of thousands of cows are scattered throughout the region, and their smell, too, is hard to miss. Massive warehouses and distribution centres on the outskirts of town bring in diesel trucks day and night from Interstate 5, the major north-south route that runs from Canada to Mexico (Los Angeles is about 100 miles to the south). Freight trains hauling oil rumble through the city, and its many refineries billow smoke into the air. Bakersfield and surrounding Kern County are the unlucky nexus of this pollution. The American Lung Association’s State of the Air 2016 report found the city’s air to be the worst in the United States for short-term and year-round particle pollution, and the second worst for ozone pollution.  The WHO’s latest ambient air pollution database ranks nearby Visalia-Porterville worst in the US. Bakersfield’s average reading in one 24-hour period in late January was 40.5 micrograms per cubic metre; over the mountains in somewhat smoggy Los Angeles, that number averages about 12. Of the wider metro area’s 875,000 people, about 70,000 are said to have asthma, 40,000 cardiovascular disease, and 27,000 chronic obstructive pulmonary disease.  Though some improvements have been made in recent years, the region continues to struggle with poor air quality and the health problems it brings. Now the election of Donald Trump to the presidency, and his appointment of an Environmental Protection Agency (EPA) head in Scott Pruitt who is actively opposed air quality regulations, has many worried that the small but steady improvements to the area’s air quality may all be undone.

 DuPont Settlement of Chemical Exposure Case Seen as 'Shot in the Arm' for Other Suits - A $671 million settlement announced Monday between DuPont Co. and lawyers representing thousands of people in Ohio and West Virginia could bring a swift end to years of litigation there, while fueling cases in other states where people have alleged health problems after a chemical used to make Teflon got into their drinking water. The proposed settlement, which needs to be approved by individual plaintiffs, comes amid growing concern over the potential effects of perfluorooctanoic acid, or PFOA, on drinking-water quality and health. It also comes as a range of other hazards to the nation's aging drinking-water infrastructure, from lead pipes to farm runoff to the presence of other industrial chemicals, gain widespread attention. In New York, Vermont and elsewhere, state investigations have found high levels of PFOA in water systems near current and former manufacturing sites where companies used the chemical for decades to make everything from Teflon frying pans to Gore-Tex waterproof jackets to pizza boxes. The DuPont settlement could provide a boost to other PFOA lawsuits that have sprung up against other companies in New York and other states, experts said Monday. But the experts also said that the facts in those cases, including the actions taken by companies and alleged health problems, would ultimately determine their outcome. "The fact that DuPont was willing to put up real money for settlement of these claims has to be a shot in the arm for plaintiffs' lawyers pursuing similar claims elsewhere," said Howard Erichson, a law professor at Fordham University School of Law. He cautioned that residents had yet to approve the settlement in principle between lawyers representing them and DuPont. Monday's settlement covers roughly 3,500 personal injury lawsuits against DuPont that grew out of an original lawsuit in 1999. Residents alleged that DuPont was negligent in allowing PFOA from its plant in Parkersburg, W.Va., to taint drinking water when the company knew for years about the contamination and potential health risks from PFOA exposure.

Will bioplastics repeat the biofuels saga? --The bioplastics market is growing rapidly, and EU lawmakers are taking the first steps towards regulating it. But bioplastics are already damaging the environment, and the pressure is on the Parliament and the Commission to not repeat the mistakes of the biofuels saga. In January, MEPs voted to promote bio-based plastics in packaging as part of their review of the waste directives. The European Commission also dipped its toes into the regulatory waters by publishing a roadmap ahead of its Plastics Strategy, which will focus on shifting plastics production away from fossil fuels. It is vital that they get it right before the market grows even larger. But what exactly are the problems with bioplastics? Your local café has probably started selling food and drinks in biodegradable or compostable packaging. They promote their “green” and “sustainable” credentials. Customers are happy and believe they are doing the planet good. Green sells. Like biofuels, the idea behind bioplastics seems simple: the oil used to make them is derived not from fossil fuels, but is instead produced by plants. A classic example is the Coca-Cola PlantBottle, which is made from 30% sugarcane ethanol, and which the company claims has “helped boost sales” and “can be used as an effective marketing tool”. Unfortunately, the green credentials of bioplastics are far from straightforward. The term “bioplastic” is complex, and difficult to explain on a bottle label. There are bioplastics which are “bio-based”, i.e. partly or fully made from plant biomass, and which can be designed to be biodegradable, recyclable, or neither. To make matters even more complicated, even “biodegradable” doesn’t mean what it sounds like here – biodegradable plastics only break down quickly when processed by specialised industrial equipment; throwing them in the compost at home won’t work. There are also bioplastics which are fully oil-based but are biodegradable.

Trump administration sued over protection for vanishing bumble bee | Reuters: An environmental group sued U.S. President Donald Trump's administration on Tuesday for delaying a rule that would designate the rusty patched bumble bee as an endangered species. The U.S. Fish and Wildlife Service, a branch of the Interior Department, in September proposed bringing the bee under federal safeguards. The rule formalizing the listing of the vanishing pollinator, once widely found in the upper Midwest and Northeastern United States, was published in the Federal Register on Jan. 11 and was to take effect last Friday. The Natural Resources Defense Council (NRDC) said the listing has been delayed until March 21 as part of a broader freeze ordered by Trump's White House on rules issued by the prior administration aimed at protecting public health and the environment. The group argued in a lawsuit filed in the U.S. District Court for the Southern District of New York that U.S. wildlife managers had violated the law by abruptly suspending the bumble bee listing without public notice or comment. They said the rule technically became final when it was published in the Federal Register. The lawsuit seeks to have a judge declare that the U.S. Fish and Wildlife Service acted unlawfully and to order the agency to rescind the rule delaying the bumble bee's listing.

Beetles Have Killed 5 Million Acres Of Colorado Forests (And Counting)― Two different species of tiny beetles have destroyed more than 5 million acres of Colorado forests, according to a new report. The mountain pine beetle, a native insect that burrows into and kills primarily lodgepole, ponderosa, Scotch and limber pines, has damaged about 3.4 million acres, the Colorado State Forest Service said in its annual report released Wednesday. The spruce beetle is responsible for taking out another 1.7 million acres. The insects, which are each barely half a centimeter long, thrive on weakened trees ― meaning the dense, mature, drought-plagued forests of Colorado are a perfect target for them. It’s likely the threat they pose will only increase: Climate models predict that Colorado, which has already warmed 2 degrees in the last 30 years, will warm between 2.5 and 6.5 degrees Fahrenheit by 2050. The pine beetle epidemic began in 1996 and peaked in 2008, slowly tapering off as the beetles ran out of mature pine trees to infect. Overall, Colorado’s forests have seen a 30 percent increase in dead trees in the last seven years, for a total of around 834 million trees. That’s about 1 in every 14 trees in the state, notes Colorado State University. The CSFS is an agency affiliated with the university’s Warner College of Natural Resources.  Those dead trees will present a number of problems moving forward, and come with an increased risk of massive forest fires.

Famine fears rise as Somalia suffers worst drought in decades --  Amina Jamila has been locked in a battle for survival for months. When her family’s 400 goats and camels started dying in droves after rains failed for the third consecutive year, she and her husband trekked 30 kms with their five children and few remaining animals across an arid, featureless region of Somalia. The pastoralists now live in a homemade shelter built of sticks and tarpaulins in a camp that is home to 450 families and growing every day as more people seek sanctuary from Somalia’s worst drought in decades. Animal carcases litter the landscape around the makeshift homes in Uusgare, a village in Puntland region. “If it wasn’t for the help of friends and family some of us would be dead,” Ms Jamila says. “We are used to dry conditions but we’ve never seen anything like this before.” Elders at the camp say the conditions are the driest since the 1950s and they have called the drought Lagamalito, which means “the worst” in Somali. More than half of Somalia’s 12m population are in need of assistance, with 2.9m at serious risk of famine if rains due in April are not better than average, the UN warns. That number is rising by the week as people’s animals, in most cases their only assets, die in front of them. “Most people here have lost about 90 per cent of their livestock,” says Abshir Hirsi Ali, a village chief. “For the pastoralists that means they’ve lost everything.” About 260,000 Somalis died during the last famine five years ago, and the Red Cross is already reporting drought-related deaths in northern parts of the country. The number of severely malnourished children referred last month to the stabilisation centre at the main hospital in Garowe, Puntland’s capital, is 70 per cent higher than a few months ago, medics say.  One diplomat says sometimes only one-eighth of the aid reaches its target. Aid agencies are already warning that conditions risk deteriorating because of poor rains. The situation is exacerbated by the threat posed by al-Shabaab, a militant Islamist group with ties to al-Qaeda, which controls some of the worst-affected areas.

Four Famines Mean 20 Million May Starve in the Next Six Months - More than 20 million people – greater than the population of Romania or Florida – risk dying from starvation within six months in four separate famines, UN World Food Programme chief economist Arif Husain says. Wars in Yemen, northeastern Nigeria and South Sudan have devastated households and driven up prices, while a drought in East Africa has ruined the agricultural economy. “In my not quite 15 years with the World Food Programme, this is the first time that we are literally talking about famine in four different parts of the world at the same time,” he told Reuters in an interview. “It’s almost overwhelming to comprehend that in the 21st century people are still experiencing famines of such magnitude. We’re talking about 20 million people, and all this within the next six months, or now. Yemen is now, Nigeria is now, South Sudan is now,” he said. “Somalia, when I look at the indicators in terms of extremely high food prices, falling livestock prices and agricultural wages, it’s going to come pretty fast.” The global humanitarian system is already struggling with a historic surge in migration, huge operations in Syria, Iraq and Afghanistan, and serious situations in Ukraine, Burundi, Libya and Zimbabwe. “Then you have places like Democratic Republic of Congo, Central African Republic, Burundi, Mali, Niger, where people are chronically food insecure but… there’s just not enough resources to go around.”

Climate Change Is A Far Bigger Threat To Wildlife Than We Thought, Study Says | The Huffington Post: Climate Change Is A Far Bigger Threat To Wildlife Than We Thought, Study Says -- A global analysis of Earth’s threatened and endangered species has upended our scientific understanding about the extent to which climate change is affecting wildlife.  “We are massively underreporting what is going on,” James Watson, a co-author of the new study and director of science and research initiatives at the Wildlife Conservation Society, told The Huffington Post. The research, published Monday in the journal Nature Climate Change, estimates that 47 percent of mammals and 23 percent of birds on the International Union for Conservation of Nature’s Red List of Threatened Species have been negatively affected by our changing planet. Those estimates are shockingly higher than previous assessments, which the authors note had shown 7 percent of listed mammals and 4 percent of birds were affected. The report adds to an ever-growing body of evidence that swift action is needed to tackle a phenomenon that’s driving a biodiversity crisis, sea-level rise, drought and extreme heat.   Elephants were among the most vulnerable to climate change effects, the study found.   For the analysis, a team of researchers from Australia, Italy and Britain combed through all relevant studies published from 1990 to 2015 that documented a species that was affected or not by changes in climate. For each of those more than 2,000 species, the authors categorized the effect as negative, positive, unchanged or mixed.  Of the 873 mammal species looked at, 414 were hurt by climate change, with elephants, primates and marsupials among the most vulnerable. For threatened birds, 298 of 1,272 species are experiencing negative effects, with waterfowl and birds who live at high altitudes being among the hardest hit, according to the findings. Of course, effects vary greatly for each species. Overall, though, it’s clear that many more animals are in trouble than had been thought. And given that the analysis looked only at mammals and birds, which are by far the most studied species but represent only a small percentage of the biodiversity on Earth, the problem could be far worse than the findings suggests, according to Watson.

House Passes NRA-Backed Bill Legalizing the Killing of Bear Cubs in Wildlife Refuges - The Republican-sponsored legislation was introduced by Alaska Rep. Don Young and was supported by the National Rifle Association (NRA) and a number of hunting groups . House Joint Resolution 69 (H. J. Res. 69), citing authority under the Congressional Review Act, would rescind U.S. Fish and Wildlife Service rules enacted in August that are meant to maintain a sustainable population of native Alaskan wildlife. But on the House floor, Young said his measure was about overturning "illegal" Obama administration rules and ensuring the "right of Alaskans and the right of Alaska to manage all fish and game." He claimed that special interest groups were spreading "falsehoods" and "propaganda."  "They talk about killing [wolf] puppies and grizzly bears," Young said. "That does not happen nor, in fact, is it legal in the state of Alaska under our management."  Opponents argue that if the measure becomes law, it would allow the use of "inhumane" hunting tactics such as:

  • Killing black bear cubs or mother with cubs at den sites
  • Killing brown bears over bait
  • Trapping and killing brown and black bears with steel-jaw leghold traps or wire snares
  • Killing wolves and coyotes during denning season
  • Killing brown and black bears from aircraft

"This bill allows the use of inhumane tactics such as trapping, snaring, and baiting bears, and killing wolves and coyotes—and their pups. It even allows shooting bears from helicopters," said Rep. Betty McCollum, a Democrat from Minnesota, who voted "No" on the resolution. "As a strong advocate for our public lands and natural treasures, I will continue to fight extreme proposals like this that erode bedrock conservation laws and expose animals to abuse." "Killing hibernating bears, shooting wolf pups in their dens, and chasing down grizzlies by aircraft and then shooting them on the ground is not the stuff of some depraved video game," After Thursday's vote, the bill is now up for possible consideration in the Senate.

India’s militant rhino protectors are challenging traditional views of how conservation works -- In Kaziranga, a national park in north-eastern India, rangers shoot people to protect rhinos. The park’s aggressive policing is, of course, controversial, but the results are clear: despite rising demand for illegal rhino horn, and plummeting numbers throughout Africa and South-East Asia, rhinos in Kaziranga are flourishing.  Yet Kaziranga, which features in a new BBC investigation, highlights some of the conflicts that characterise contemporary conservation, as the need to protect endangered species comes into contact with the lives and rights of people who live in and around the increasingly threatened national parks. India must balance modernisation and development with protections for the rights of local people – all while ensuring its development is ecologically sustainable.To understand what’s at stake in Kaziranga, consider these three crucial issues:

  • 1. The militarisation of conservation. The BBC feature shows park rangers who have been given the license to “shoot-on-sight”, a power they have used with deadly effect. In 2015 more than 20 poachers were killed – more than the numbers of rhino poached that year.  The programme accuses the rangers of extra-judicial killings of suspected rhino poachers. This resonates with a wider trend in the use of violence in defence of the world’s protected areas and the growing use of military surveillance technologies to support the efforts of conservation agencies.
  • 2. The rights of local and indigenous populations. The BBC story also points to the growing conflict in and around Kaziranga between the interests and rights of local and indigenous people and the need to protect threatened species. Groups including Survival International – which features in the BBC story – claim that well-meaning conservation projects have denied and undermined the rights of indigenous groups around the world. The group calls for these rights to be placed at the heart of modern approaches to conservation – and most enlightened environmentalists now agree. It’s increasingly hard to look at conservation without also considering human rights and social issues.
  • 3. Can we keep expanding protected areas? To protect threatened species across the world, conservationists have called for more and more land to be placed under protection. Renowned biologist EO Wilson, for instance, wants us to set aside “half the planet”. In an unconstrained world, dedicating half the earth to the protection of the most threatened species and the world’s important habitats might seem like a sensible way to avoid the risks of what people fear might trigger the next great extinction. In reality, there are few places left where such a proposal might practically be implemented.

From drought to flood, nation's biggest dam topped for first time in 50 years - -- California has spent the last six years grappling with a brutal drought. Now parts of the Golden State are suffering from the opposite problem: too much water. Extreme flooding this weekend washed away chunks of highway, derailed trains and inundated homes in Northern California. At Lake Oroville, a major man-made reservoir, water began flowing over a never-before-used emergency spillway at the Oroville Dam. On Sunday evening, the situation turned hazardous for residents near the 770-foot-tall dam. State officials warned around 4:40 p.m. local time that two of the dam's spillways could fail this afternoon due to severe erosion.  California's Department of Water Resources ordered residents to immediately evacuate from the low levels of Oroville and areas downstream. A flash flood warning went into place for parts of Butte County. Oroville Dam lies about 150 miles northeast of San Francisco. Opened in 1968, the colossal infrastructure supplies water for farms in the Central Valley and homes and buildings in Southern California. Early Sunday morning, Lake Oroville crested at 902.59 feet above sea level — a record high, according to the California Department of Water Resources. The reservoir is considered full at 901 feet, and it reached that level around 8 a.m. on Saturday. That's when water began pouring over the emergency outlet for the first time in the reservoir's nearly 50-year history. Water had already started flowing through the dam's heavily damaged main spillway. Heavy rains late last week caused the concrete structure to unexpectedly cave in, leaving a 30-foot-deep hole that continues to grow.

  Biggest fear at Oroville Dam: A 30 foot wall of water - A new storm system forecast for later this week put water officials on a race against time. Bill Croyle, the acting director of the state Department of Water Resources, said they planned to continue discharging flows at a rate of 100,000 cubic feet per second, with the hope of lowering the reservoir level by 50 feet. The biggest concern was that a hillside that keeps water in Lake Oroville — California’s second largest reservoir — would suddenly crumble Sunday afternoon, threatening the lives of thousands of people by flooding communities downstream. With Lake Oroville filled to the brim, such a collapse could have caused a “30-foot wall of water coming out of the lake,” Cal-Fire incident commander Kevin Lawson said at a Sunday night press conference. Bill Croyle, acting director of the state Department of Water Resources, called the storms "fairly small" and said the public "won't see a blip in the reservoir" levels, now dropping about eight inches an hour. Croyle said it was not the weather he was concerned about so much as the damage done to the dam's already compromised main spillway during days of sustained heavy releases of water. "It's holding up really well," Croyle said, but continued mass water releases could be causing hidden damage to the rocky subsurface adjacent to the concrete chute. A swarm of trucks and helicopters dumped 1,200 tons of material per hour onto the eroded hillside that formed the dam ’s emergency spillway. One quarry worked around the clock to mine boulders as heavy as 6 tons. An army of workers mixed concrete slurry to help seal the rocks in place. At the main spillway, a different and riskier operation was underway: Despite a large hole in the concrete chute, officials have been sending a massive amount of the swollen reservoir’s water down the spillway to the Feather River in a desperate attempt to reduce the lake’s level. The objective is to lower the level enough so that the lake can accept runoff from the upcoming storms without reaching capacity.

Why America’s Tallest Dam Is Suddenly in Danger  Engineers are racing to lower water levels at Lake Oroville in northern California before storm clouds open up again, adding new strain to the nation’s tallest dam. When it comes to unthinkable disasters involving dams, one might think of war torn Iraq, where the beleaguered Mosul Dam is in critical condition after years of war and neglect. Suddenly, an infrastructure calamity was possible in America. How did this happen, seemingly all of a sudden? Events of the last week unspooled like the beginning of a disaster movie, with a partial collapse of the Oroville Dam’s main off-ramp for high water, and dangerous erosion beneath an emergency spillway. Almost 200,000 people downstream were evacuated—a precaution in the still unlikely event the movie ends very badly.  Dam operators have spent days preparing for new storms, continuing to spill enough water out of the lake to accommodate incoming rain, according to the California Department of Water Resources. More than 125 construction teams have set about 1,200 tons of rocks and boulders in place to shore up the emergency spillway, and the department is using drone video in addition to on-the-ground monitoring.The fast pace of events though has obscured a more basic question: Why is California flooding? After all, the last several years have seen combined heat and drought that became so bad that Governor Jerry Brown declared a state of emergency in 2014. Weather whiplash, it turns out, is normal in the Golden State, even if this year falls toward the extreme. Conditions in the state are so variable that it’s common to see departures in precipitation of as much as 200 percent from long-term averages. The state experiences most of its rain between October and April. And when it comes down during those months, it can drop in sheets. Meanwhile, April to September are generally dry. It has no analog anywhere else in the continental U.S.

As Oroville Dam Drains, A Problem Remains --As discussed previously, the biggest priority for California officials tasked with restoring the damaged Oroville Dam as they race against a coming Wednesday storm, is to plug the hole in the damaged spillway while draining as much water as possible ahead of the coming rainfall. The good news, as the chart below shows, is how the water level at the Oroville reservoir has been declining over the last 24 hours. According to a spokesman for the Department of Water Resources water is pouring down the facility's damaged main spillway at a rate of about 100,000 cubic feet per second, or nearly twice the rate as water flowing into it. By 10 a.m., the lake's water level was 4 feet lower than the emergency spillway, which suffered damage during its first ever water release over the weekend. Officials added that the water level of Lake Oroville has been steadily dropping at a rate of roughly 3 to 4 inches per hour. A subsequent tweet by the California Office of Emergency Services updated that as of 12:30pm Pacific, the lake level had declined to 6 feet below the damaged emergency spillway.Video from 12:30 today. Water released over Lake Oroville spillway at 100K cfs. Lake level 6' below Emerg. spillway. pic.twitter.com/DKbe1mwgZi— Cal OES (@Cal_OES) February 13, 2017 Workers with the CA Department of Water Resources are scrambling to reduce the lake's overall water level to 50 feet below the emergency spillway elevation of 901 feet. That mission has taken on added urgency ahead of the previously reported heavy rains expected later in the week. According to a subsequent tweet by the California DWR, the dam is now releasing over 110,000 cubic feet per second from the main Oroville Spillway, with the lake level dropping around 8' per day.And in addition to the threat of the upcoming rains, a residual risk with the emergency spillway is that the erosion from the overflowing water may erode the earth by the dam, destabilizing the structure. According to AP, the erosion at the head of the emergency spillway threatens to undermine the concrete wall and allow large, uncontrolled releases of water from Lake Oroville. Those flows could overwhelm the Feather River and other downstream waterways and levees and flood towns in three counties.

California Dam Crisis Leaves Power Market Short of Big Hydro -  As state officials rush to repair an emergency spillway for the Oroville dam -- just 150 miles (241 kilometers) north of San Francisco -- an 819-megawatt hydropower plant, capable of supplying about 600,000 homes with electricity, remains shut there until authorities judge it is safe to come back online. That’s the equivalent of two natural gas-fired power plants that will need to kick into gear elsewhere in California to make up for the lost supplies, according to Bloomberg New Energy Finance.  Almost 200,000 people have been forced to evacuate as the damaged spillway threatens to flood an area that’s also home to about a dozen power plants, based on data compiled by Bloomberg New Energy Finance. The boost in gas demand resulting from their shutdown would come just as California’s supplies of the power-plant fuel are constrained. The Aliso Canyon gas storage field outside of Los Angeles has been closed since a massive leak in late 2015, and operators are still waiting for permission from the state to restart. “Gas generation probably needs to pick up the slack from what you lose at the Oroville Dam,” said Het Shah, an energy analyst at BNEF. “You need two gas facilities to fill in that gap.”On Monday, wholesale gas at the PG&E City Gate hub in Northern California was at a five-year high for the date, trading at a premium of 39 cents above the U.S. benchmark Henry Hub, data compiled by Bloomberg show. Three 230-kilovolt power lines in the area had been de-energized as of late Monday, said Steven Greenlee, a spokesman at California ISO, which oversees the region’s power grid. No other problems have occurred on the grid in relation to the dam, Greenlee said.

Evacuees from California dam allowed home even as storms near | Reuters: Californians who were ordered to evacuate due to a threat from the tallest dam in the United States can now return home after state crews working around the clock reinforced a drainage channel that was weakened by heavy rain. Officials had ordered 188,000 people living down river from the Oroville Dam to evacuate on Sunday and reduced that to an evacuation warning on Tuesday, Butte County Sheriff Kory Honea said. That means people can move back to their homes and businesses can reopen, but they should be prepared to evacuate again if necessary, Honea told a news conference. Both the primary and backup drainage channels of the dam, known as spillways, were damaged by a buildup of water that resulted from an extraordinarily wet winter in Northern California that followed years of severe drought. The greater danger was posed by the emergency spillway, which was subject to urgent repairs in recent days. Though damaged, the primary spillway was still useable, officials said. More rain was forecast for as early as Wednesday and through Sunday, according to the National Weather Service, but the state Department of Water Resources said the upcoming storms were unlikely to threaten the emergency spillway. Evacuees received more good news from President Donald Trump, who declared an emergency in the state, authorizing the Federal Emergency Management Agency and the Department of Homeland Security to coordinate disaster relief efforts.

Oroville Dam: Feds and state officials ignored warnings 12 years ago - More than a decade ago, federal and state officials and some of California’s largest water agencies rejected concerns that the massive earthen spillway at Oroville Dam — at risk of collapse Sunday night and prompting the evacuation of 185,000 people — could erode during heavy winter rains and cause a catastrophe.  Three environmental groups — the Friends of the River, the Sierra Club and the South Yuba Citizens League — filed a motion with the federal government on Oct. 17, 2005, as part of Oroville Dam’s relicensing process, urging federal officials to require that the dam’s emergency spillway be armored with concrete, rather than remain as an earthen hillside. The groups filed the motion with FERC, the Federal Energy Regulatory Commission. They said that the dam, built and owned by the state of California, and finished in 1968, did not meet modern safety standards because in the event of extreme rain and flooding, fast-rising water would overwhelm the main concrete spillway, then flow down the emergency spillway, and that could cause heavy erosion that would create flooding for communities downstream, but also could cause a failure, known as “loss of crest control.” This weekend, as Lake Oroville’s level rose to the top and water couldn’t be drained fast enough down the main concrete spillway because it had partially collapsed on Tuesday, millions of gallons of water began flowing over the dam’s emergency spillway for the first time in its 50-year history.  On Sunday, with flows of only 6,000 to 12,000 cubic feet per second — water only a foot or two deep and less than 5 percent of the rate that FERC said was safe — erosion at the emergency spillway became so severe that officials from the State Department of Water Resources ordered the evacuation of more than 185,000 people. The fear was that the erosion could undercut the 1,730-foot-long concrete lip along the top of the emergency spillway, allowing billions of gallons of water to pour down the hillside toward Oroville and other towns downstream. Such an uncontrolled release from California’s second-largest reservoir while it was completely full could become one of the worst dam disasters in U.S. history.

Oroville Dam unprepared for climate change, critics warned years before crisis: For nearly nine years, two California counties have been waging a legal fight with the state’s Department of Water Resources over how the agency manages Oroville Dam. Plumas and Butte counties, which surround the reservoir and stretch from snowy peaks in the Sierra Nevada to farmlands in the Central Valley, sued in 2008 to challenge an environmental review that was part of the state’s application for a new federal permit for the dam. The counties accused state officials of recklessly failing to take into account the impacts of global warming in their long-term plans for operating the dam. Now county officials say the emergency of the past few days, including the sudden evacuation of more than 180,000 people, shows just how well-founded their concerns were – and how important it will be for California to change how dams are managed as rising temperatures shrink the average snowpack in the Sierra and change the timing of snowmelt runoff. Bruce Alpert, the Butte County counsel, said state officials should have changed their procedures for operating Oroville Dam years ago to begin to adapt and reduce the risks of dangerous floods. “They just haven’t been operating it with an eye towards the range of possibilities, from extreme drought to extreme precipitation,” Alpert said. “They could have studied the 21st century range of climate a lot better than they did.”That complaint adds to a list of concerns that have been voiced about the dam for years but have now taken on new urgency. Activists and county officials are also pointing to what they say are design flaws in the dam, accidents and maintenance problems, and a resistance among water districts that depend on water from the reservoir to pay for safety-enhancing upgrades.

Broken California Dam Is a Sign of Emergencies to Come - A deluge of repeated rainstorms set the stage for the near-disaster at the Oroville Dam in California, a crisis that foreshadows what the Golden State can expect more of with climate change, several experts said. The situation at Oroville — in Butte County, Calif., northeast of Sacramento — happened after both an infrastructure failure and a weather event, said Daniel Swain, a climate scientist with UCLA. A series of storms powered by a phenomenon known as the atmospheric river hit Northern California this winter. Those filled Oroville, prompting the release of water onto its spillway. Then that structure suffered a sinkhole that became apparent last week. Dam operators over the weekend stopped sending water down the spillway, and flows crested the alternate “emergency” spillway, essentially a hillside. When that caused soil erosion headward, or in the direction toward the structure, dam officials feared the concrete spillway would collapse, sending a 30-foot wall of water downstream, causing “catastrophic flooding,” Gov. Jerry Brown (D) said in a letter to President Trump yesterday. The state ordered evacuations, and 188,000 people left their homes. While it's too soon for studies that would look for a climate link to the Oroville drama, experts said climate models show California likely will swing between devastating droughts and extreme storms. That could cause significant problems if the state's infrastructure isn't ready, they said. “These biggest events that cause the biggest problems are the ones we are pretty sure are going to become more common,” Swain said. “We're seeing the stresses of the current climate upon our infrastructure, and seeing in some cases it's enough to cause really big problems.” “And we know that in the future, we're going to add to those stresses at both ends of the spectrum,” he added.

20% of dams in populated areas lack emergency plan: As the nation's 84,000 dams continue to age, a growing number of people downstream are at risk, experts say. That's not only because of older infrastructure but also because of population growth around some of the dams. More than a quarter were developed primarily for recreational purposes, according to National Inventory of Dams data from 2016. "The nation’s dams are aging, and the number of high-hazard dams is on the rise," according to a 2013 report from the American Society of Civil Engineers. "Many of these dams were built as low-hazard dams protecting undeveloped agricultural land. However, with an increasing population and greater development below dams, the overall number of high-hazard dams continues to increase." That problem was highlighted this week as nearly 200,000 people evacuated an area near California's Oroville Dam, about 150 miles northeast of San Francisco. California water officials were worried that erosion they discovered Sunday at the top of its emergency spillway could send a 30-foot tall wall of water down the Feather River and through the Northern California cities of Oroville, Yuba City and Marysville. The population of Oroville, the county seat of Butte County that's less than 10 miles downriver from Oroville Dam, has more than doubled since the dam was completed in 1968. Most U.S. dams were completed between 1950 and 1980. A small fraction of dams, 2.8%, were built before 1900.

The Oroville Crisis Exposes The Vulnerability Of America's Entire National Dam System - Adam Taggart - To make sense of the fast-developing situation at California's Oroville Dam, Chris spoke today with Scott Cahill, an expert with 40 years of experience on large construction and development projects on hundreds of dams, many of them earthen embankment ones like the dam at Oroville. Scott has authored numerous white papers on dam management, he's a FEMA trainer for dam safety, and is the current owner of Watershed Services of Ohio which specializes in dam projects across the eastern US. Suffice it to say, he knows his "dam" stuff.Scott and Chris talk about the physics behind the failing spillways at Oroville, as well as the probability of a wider-scale failure from here as days of rain return to California.Sadly, Scott explains how this crisis was easily avoidable. The points of failure in Oroville's infrastructure were identified many years ago, and the cost of making the needed repairs was quite small -- around $6 million. But for short-sighted reasons, the repairs were not funded; and now the bill to fix the resultant damage will likely be on the order of magnitude of over $200 million. Which does not factor in the environmental carnage being caused by flooding downstream ecosystems with high-sediment water or the costs involved withevacuating the 200,000 residents living nearby the dam. Oh, and of course, these projected costs will skyrocket higher should a catastrophic failure occur; which can't be lightly dismissed at this point. Scott explains to Chris how this crisis is indicative of the neglect rampant across the entire US national dam system. Oroville is one of the best-managed and maintained dams in the country. If it still suffered from too much deferred maintenance, imagine how vulnerable the country's thousands and thousands of smaller dams are. Trillions of dollars are needed to bring our national dams up to satisfactory status. How much else is needed for the country's roads, railsystems, waterworks, power grids, etc?

The UN is warning of catastrophic dam failure in the battle for Syria - (Reuters) - The United Nations is warning of catastrophic flooding in Syria from the Tabqa dam, which is at risk from high water levels, deliberate sabotage by Islamic State (IS) and further damage from air strikes by the U.S.-led coalition. The earth-filled dam holds back the Euphrates River 40 km (25 miles) upstream of the IS stronghold of Raqqa and has been controlled by IS since 2014. Water levels on the river have risen by about 10 meters since Jan. 24, due partly to heavy rainfall and snow and partly to IS opening three turbines of the dam, flooding riverside areas downstream, according to a U.N. report seen by Reuters on Wednesday. "As per local experts, any further rise of the water level would submerge huge swathes of agricultural land along the river and could potentially damage the Tabqa Dam, which would have catastrophic humanitarian implications in all areas downstream," it said. The entrance to the dam was already damaged by airstrikes by the U.S.-led coalition, it said. "For example, on 16 January 2017, airstrikes on the western countryside of Ar-Raqqa impacted the entrance of the Euphrates Dam, which, if further damaged, could lead to massive scale flooding across Ar-Raqqa and as far away as Deir-ez-Zor." The town of Deir-ez-Zor, or Deir al-Zor, is a further 140 km downstream from Raqqa, and is besieged by IS. The U.N. estimates that 93,500 civilians are trapped in the town, and it has been airdropping food to them for a year.

Has this year’s record rain finally ended California’s epic drought? Not really. - After praying for rain over five dry years, Californians are now praying for a break. The state is being soaked. Its biggest reservoirs, once at record lows, are at capacity or overflowing from record-setting rain and snow. That includes the Oroville Lake reservoir behind the Oroville Dam, where nearly 200,000 Northern California residents were evacuated for fear that an eroding wall that holds water back would crumble and wash them away. The drama caused by massive amounts of precipitation raises a question: Is California’s epic, record-setting drought, five years long, finally over? The answer is yes and no. According to the National Oceanic and Atmospheric Administration (NOAA), the northern half of the state that gets more winter rain is drought-free, while much of the middle and southern portion is still in moderate to severe drought. Santa Barbara County, where a lake that supplies its water remains at 16 percent capacity despite rain elsewhere in the state, is still experiencing extreme drought. “The further south you go, well, it’s pretty arid down there,” said David Miskus, a meteorologist for the Climate Prediction Center at NOAA. Lake Cachuma, shared by Santa Barbara and the Santa Ynez Valley, fell as low as 7 percent of capacity in October, but the area is “target zero for some heavy rain coming in the next few days.” That was then, Miskus said, and what’s happening now is a potential game changer. California’s last abnormal winter, 1982 to 1983, brought precipitation that was 88 percent higher than the 30-year average. This winter’s precipitation is nearly 120 percent higher. Together with last year’s high winter precipitation, it’s making a huge dent in the drought. Last year the snow stopped a bit too soon. This year there’s so much more that “if it stops snowing completely and melted normally,” Miskus said, precipitation is so high that it would remain significantly above normal by April 1, when California’s winter ends and state water officials measure the amount of snow that will recharge rivers and reservoirs.

Mexico City, Parched and Sinking, Faces a Water Crisis — On bad days, you can smell the stench from a mile away, drifting over a nowhere sprawl of highways and office parks. When the Grand Canal was completed, at the end of the 1800s, it was Mexico City’s Brooklyn Bridge, a major feat of engineering and a symbol of civic pride: 29 miles long, with the ability to move tens of thousands of gallons of wastewater per second. It promised to solve the flooding and sewage problems that had plagued the city for centuries. Only it didn’t, pretty much from the start. The canal was based on gravity. And Mexico City, a mile and a half above sea level, was sinking, collapsing in on itself. It still is, faster and faster, and the canal is just one victim of what has become a vicious cycle. Always short of water, Mexico City keeps drilling deeper for more, weakening the ancient clay lake beds on which the Aztecs first built much of the city, causing it to crumble even further.It is a cycle made worse by climate change. More heat and drought mean more evaporation and yet more demand for water, adding pressure to tap distant reservoirs at staggering costs or further drain underground aquifers and hasten the city’s collapse.In the immense neighborhood of Iztapalapa — where nearly two million people live, many of them unable to count on water from their taps — a teenager was swallowed up where a crack in the brittle ground split open a street. Sidewalks resemble broken china, and 15 elementary schools have crumbled or caved in.  Much is being written about climate change and the impact of rising seas on waterfront populations. But coasts are not the only places affected. Mexico City — high in the mountains, in the center of the country — is a glaring example. The world has a lot invested in crowded capitals like this one, with vast numbers of people, huge economies and the stability of a hemisphere at risk.

February 2017 ENSO update: bye-bye, La Niña!  -NOAA blog - Well, that was quick! The ocean surface in the tropical Pacific is close to average for this time of year, putting an end to La Niña, and forecasters expect that it will hover around average for a few months. Let’s dig in to what happened during January, and what the forecast looks like.  This La Niña wasn’t exactly one for the record books. Our primary index, the three-month-average sea surface temperatures in the central Pacific Niño3.4 region, only dipped to about 0.8°C cooler than the long-term average during the fall of 2016. However, these cooler-than-average temperatures persisted for several months, and the atmosphere over the tropical Pacific responded as expected to the cooler waters. Namely, during the fall and winter to date, the Walker Circulation was strengthened: stronger near-surface east-to-west trade winds, stronger upper-level west-to-east winds, more rain than usual over Indonesia, and less rain over the central Pacific. Monthly sea surface temperature in the central tropical Pacific Niño 3.4 region, from OISST.v2 temperature data. Data shown is the difference from the 1981-2010 average. Climate.gov graph from CPC data. During January, the sea surface temperature edged close to normal, and the average temperature in the Niño3.4 region was just about 0.3°C below normal by the end of the month. (Note, this is using the weekly OISST data. There are some differences between our sea surface temperature data sets, which Tom described in detail here.) Another factor that we watch is the temperature of the tropical Pacific Ocean below the surface. Over the past few months, the amount of cooler-than-average water at depth has been decreasing, and by the end of January it had disappeared. These deeper waters often give an idea of what we can expect at the surface in following months. Meaning, the lack of cooler water at depth makes it unlikely that the surface will cool off again substantially in the next few months.

So Long, La Niña; Arctic Temperatures Soar 63°F in 24 Hours - In its latest monthly advisory, issued Thursday, NOAA’s Climate Prediction Center (CPC) sounded the death knell for the 2016-17 La Niña. SSTs in the benchmark Niño 3.4 region (in the equatorial Pacific) warmed to 0.3°C below average during early February; SSTs of 0.5°C or more below average in this region are required to be classified as weak La Niña conditions. As further evidence of the demise of La Niña, subsurface cold waters across the equatorial Pacific have completely vanished, and much warmer-than-average waters built off the coast of Peru in late January and early February, bringing unusual El Niño-like flooding rains to that nation. The 2016 - 2017 La Niña event was one of the weakest and shorted-lived La Niñas on record, lasting just six months and peaking with sea surface temperatures (SSTs) in the Niño3.4 region of 0.8° below average. According to CPC, only one other La Niña since 1950 has been this short and weak: the 1967 - 1968 event, which lasted five months, and also peaked at SSTs of 0.8°C below average in the Niño 3.4 region. . Some of the computer models are calling for a return of El Niño conditions by the second half of 2017. CPC’s current consensus forecast for the September—November 2017 period estimates a 12% chance of La Niña conditions, 40% chance of neutral conditions, and a 48% chance of El Niño. The latest Australian Bureau of Meteorology models are more aggressive about El Niño, showing development by this spring. If El Niño materializes in 2017, it would give us an unusual three-year series of El Niño/La Niña/El Niño: something that has only happened once since 1950—in 1963/1964/1965.  The temperature at the northernmost land station in the world, Kap Morris Jesup, located on the northern coast of Greenland at 83.65°N latitude, soared to a remarkable 35°F (1.5°C) on Wednesday—beating the previous day’s high of -22°F by a shocking 57°, and marking a temperature more typical of June at this frigid location. The mercury skyrocketed an astonishing 63°F (34.8°C) in just 24 hours, from -29°F at 15 UTC February 7 to 33°F at 15 UTC February 8. As summarized by Jason Samenow of the Capital Weather Gang on February 6, the incredible warmth in the Arctic is due to a massive hurricane-force North Atlantic storm that bottomed out on Monday with a central pressure of 932 mb—a common reading in Category 4 hurricanes, and one of lowest pressures ever measured in a storm in this region.  The warm air flowing into the Arctic this week was reinforced by a second massive extratropical storm that pounded Iceland on Wednesday, which brought sustained winds of 61 mph, gusting to 91 mph, to the Reykjavik Airport.

Meet El Niño’s cranky uncle that could send global warming into hyperdrive -- You’ve probably heard about El Niño is driven by changes in the Pacific Ocean, and shifts around with its opposite, La Niña, every 2-7 years, in a cycle known as the El Niño Southern Oscillation or ENSO.  But that’s only part of the story. There’s another important piece of nature’s puzzle in the Pacific Ocean that isn’t often discussed.It’s called the Interdecadal Pacific Oscillation, or IPO, a name coined by a study which examined how Australia’s rainfall, temperature, river flow and crop yields changed over decades. Since El Niño means “the boy” in Spanish, and La Niña “the girl”, we could call the warm phase of the IPO “El Tío” (the uncle) and the negative phase “La Tía” (the auntie).These erratic relatives are hard to predict. El Tío and La Tía phases have been compared to a stumbling drunk. And honestly, can anyone predict what a drunk uncle will say at a family gathering? Like ENSO, the IPO is related to the movement of warm water around the Pacific Ocean. Begrudgingly, it shifts its enormous backside around the great Pacific bathtub every 10-30 years, much longer than the 2-7 years of ENSO. The IPO’s pattern is similar to ENSO, which has led climate scientists to think that the two are strongly linked. But the IPO operates on much longer timescales.   Several recent studies have shown that the IPO phases, El Tío and La Tía, have a temporary warming and cooling influence on the planet.Rainfall around the world is also affected by El Tío and La Tía, including impacts such as floods and drought in the United States, China, Australia and New Zealand.  In the negative phase of the IPO (La Tía) the surface temperatures of the Pacific Ocean are cooler than usual near the equator and warmer than usual away from the equator.

January 2017: Earth's 3rd Warmest January on Record -- January 2017 was the planet's third warmest January since record keeping began in 1880, said NOAA's National Centers for Environmental Information (NCEI) on Thursday. NASA also rated January 2016 as the third warmest January on record. The only warmer Januarys were 2016 (highest) and 2007 (second highest). Global ocean temperatures during January 2017 were the second warmest on record, and global land temperatures were the third warmest on record. Global satellite-measured temperatures in January 2017 for the lowest 8 km of the atmosphere were the sixth warmest in the 39-year record, according to the University of Alabama Huntsville (UAH).  It's remarkable that Earth saw its third warmest January on record without any help from El Niño, which works to raise global air temperatures by exporting heat from the oceans. Sea-surface temperatures in the Niño 3.4 region of the tropical Pacific rose into the cool side of the neutral range during January, although a La Niña Advisory was still in effect. In contrast, the warmest and second warmest Januarys (2007 and 2016) both occurred during an El Niño event.

NSW heatwave: Unprecedented fire conditions are 'as bad as it gets': NSW is facing the "worst possible fire conditions" in its history with a "catastrophic" warning in place across large slabs of the state after a heatwave smashed temperature records on Saturday. Rural Fire Service (RFS) Commissioner Shane Fitzsimmons said the situation was as "bad as it gets" and warned it was set to get worse on Sunday when winds are expected to sweep through scorched parts of mid to northern NSW."To put it simply [the conditions] are off the old scale," he said. "It is without precedent in NSW". Commissioner Fitzsimmons said "catastrophic" fire ratings had been issued only once before in NSW - in 2013 - since national standardised ratings were introduced in 2009. Sunday's catastrophic fire rating will stretch from Dubbo to Coonabarabran to Port Stephens, affecting the Central Ranges, North Western NSW and the Greater Hunter. Related Content NSW's biggest power user Tomago pleads for AGL not to curb supply Threat of blackouts looms as NSW bakes in heatwave "This is an area three to five times larger than January 2013," he said, when more than 140 fires burned across the state. "[Any fire] will consume whatever is in its path." On Saturday afternoon, the RFS said 49 bushfires or grassfires were already burning across NSW, 17 of which were not contained but no loss of life or property had been recorded. Commissioner Fitzsimmons said conditions in some parts of NSW could be worse than Victoria's Black Saturday fires, Australia's worst ever fire disaster which claimed 173 lives in 2009.

Humans causing climate to change 170 times faster than natural forces -- For the first time, researchers have developed a mathematical equation to describe the impact of human activity on the earth, finding people are causing the climate to change 170 times faster than natural forces. The equation was developed in conjunction with Professor Will Steffen, a climate change expert and researcher at the Australian National University, and was published in the journal The Anthropocene Review. The authors of the paper wrote that for the past 4.5bn years astronomical and geophysical factors have been the dominating influences on the Earth system. The Earth system is defined by the researchers as the biosphere, including interactions and feedbacks with the atmosphere, hydrosphere, cryosphere and upper lithosphere. But over the past six decades human forces “have driven exceptionally rapid rates of change in the Earth system,” the authors wrote, giving rise to a period known as the Anthropocene.   Explaining the equation in New Scientist, Gaffney said they developed it “by homing in on the rate of change of Earth’s life support system: the atmosphere, oceans, forests and wetlands, waterways and ice sheets and fabulous diversity of life”. “For four billion years the rate of change of the Earth system has been a complex function of astronomical and geophysical forces plus internal dynamics: Earth’s orbit around the sun, gravitational interactions with other planets, the sun’s heat output, colliding continents, volcanoes and evolution, among others,” he wrote. “In the equation, astronomical and geophysical forces tend to zero because of their slow nature or rarity, as do internal dynamics, for now. All these forces still exert pressure, but currently on orders of magnitude less than human impact.” Greenhouse gas emissions caused by humans over the past 45 years, on the other hand, “have increased the rate of temperature rise to 1.7 degrees Celsius per century, dwarfing the natural background rate,” he said. This represented a change to the climate that was 170 times faster than natural forces.

Toxic Chemicals Banned in 70s Found in Deep Ocean Creatures - English researchers have discovered an alarming amount of toxic pollution in the bodies of amphipods living in the deep sea trenches of the Pacific Ocean . The research team from Newcastle University, the James Hutton Institute and the University of Aberdeen caught and tested small crustaceans in the Mariana and Kermadec trenches, which reach about 30,000 feet deep.Dr. Alan Jamieson led the team and is lead author of the study , Bioaccumulation of persistent organic pollutants in the deepest ocean fauna , which was published online in the journal Nature Ecology & Evolution in February. "Here we identify extraordinary levels of persistent organic pollutants in the endemic amphipod fauna from two of the deepest ocean trenches … " the study abstract states. The study also explains that the creatures tested contained more pollutants than similar crustaceans from some of the earth's most polluted waters, including China's Liaohe River and Japan's Suruga Bay.  The amphipods held "10 times the level of industrial pollution than the average earthworm," a Newcastle press release stated .

‘Extraordinary’ pollution found in deep Mariana trench - Highly toxic pollutants have been found in the world’s deepest sea trenches, a sign of the environmental damage wreaked by human activity on even the planet’s most remote habitats, according to new research. The results of surveys in the Mariana and Kermadec trenches, published in the latest edition of Nature Ecology & Evolution, highlight both the scope of human ecological impact and the resilience of some synthetic compounds used in common industrial and consumer products. Scavenging, shrimp-like crustaceans in Pacific Ocean canyons many kilometres underwater are contaminated with extremely high levels of long-banned chemicals that have persisted in the environment for decades, scientists say. Alan Jamieson, an academic from the UK’s Newcastle University who led the research, said his team found contamination levels similar to those in Japan’s Suruga Bay area, a notorious industrial pollution black spot in the Pacific Ocean. “We still think of the deep ocean as being this remote and pristine realm, safe from human impact, but our research shows that, sadly, this could not be further from the truth,” Mr Jamieson said. “The fact that we found such extraordinary levels of these pollutants in one of the most remote and inaccessible habitats on earth really brings home the long-term, devastating impact that mankind is having on the planet.”

Scientists study ocean absorption of human carbon pollution -- As humans burn fossil fuels and release greenhouse gases, those gases enter the atmosphere where they cause increases in global temperatures and climate consequences such as more frequent and severe heat waves, droughts, changes to rainfall patterns, and rising seas. But for many years scientists have known that not all of the carbon dioxide we emit ends up in the atmosphere. About 40% actually gets absorbed in the ocean waters. The process of absorption is not simple – the amount of carbon dioxide that the ocean can hold depends on the ocean temperatures. Colder waters can absorb more carbon; warmer waters can absorb less. So, a prevailing scientific view is that as the oceans warm, they will become less and less capable of taking up carbon dioxide. As a result, more of our carbon pollution will stay in the atmosphere, exacerbating global warming. But it’s clear that at least for now, the oceans are doing us a tremendous favor by absorbing large amounts of carbon pollution. How much carbon dioxide is being absorbed by the oceans is an active area of research. In particular, scientists are closely watching the oceans to see if their ability to absorb is changing over time. . Such a study is the topic of a very recent paper published in the journal Nature. The authors studied recent ocean carbon dioxide uptake and in particular the mystery of why it appears the oceans are actually becoming more absorbing. The authors describe a slowdown in a major ocean current called the overturning circulation. That circulation brings dense salty water from the surface to the depths of the ocean while simultaneously bringing colder but less salty and dense water upwards. Why is this important current slowing down? It’ possible that global warming is a culprit.

As sea levels rise, vital salt marshes are disappearing: (AP) — The Ridgway's rail is a rare bird that relies on the salt marshes south of Los Angeles to survive. And that's why its future is in doubt — the salt marsh is disappearing under rising seas. Scientists working with the federal government said the rail's plight at Seal Beach National Wildlife Refuge is indicative of what's happening to salt marshes around the country. Their assessment of eight of the country's coastal salt marshes found that half will be gone in 350 years if they don't regain some lost ground. The other four also are backsliding, and coastal communities and wildlife will suffer as the marshes continue to deteriorate.Salt marshes are ecosystems along the coast flooded frequently by seawater. They provide vital habitat for animals, such as birds, crustaceans and shellfish, and are important for their role in protecting coastal areas where people live from flooding and erosion. The U.S. Geological Survey set about to determine the danger that erosion poses to eight salt marshes on the two coasts. The group, led by Ganju, a Woods Hole, Massachusetts-based oceanographer, was surprised to find all eight marshes losing ground, some significantly. Their findings were published in January in the journal Nature Communications. The scientists said salt marshes around the country are falling victim to pressures such as sea-level rise and including land development and damming rivers. Natural erosion also plays a role.

Reclaiming native ground: Can Louisiana’s tribes restore their traditional diets as waters rise? -- When Theresa Dardar was growing up in Houma, her mother used to take her to visit relatives across land thick with oak, hackberry, and palmetto until they reached her grandfather’s house. Back then, tribal members fed themselves well—with seafood, of course, but also with the livestock they raised, the fruits and vegetables they planted, and the marsh hens they extricated from their fur traps. They hunted for turtle and alligator, too, and gathered medicinal plants from the land.  That’s because there was land. Viewed from above in the early 20th century, Pointe-au-Chien was surrounded by a dense thicket of green, broken up by splashes of blue. Those proportions flipped over Dardar’s lifetime. The land vanished until the community became a narrow neck of high ground surrounded almost entirely by open water. The area immediately around Terrebonne Bay, which includes Pointe-au-Chien, went from 10 percent water in 1916 to 90 percent in 2016, according to geographer Rebekah Jones, a Ph.D. candidate at Florida State University. The U.S. Geological Survey said the larger Terrebonne Basin lost almost 30 percent of its land from 1932 to 2010. Today, the property surrounding Dardar’s grandfather’s home bears little resemblance to the place she visited as a child. “There’s no more trees,” she said. “There’s a little strip of land where he and my uncle lived. … The piece of land is so small now that I don’t think anyone would be able to live there.” This is the dilemma Dardar spends much of her time agonizing over. She has lived in Pointe-au-Chien for more than 40 years, in a house overlooking a bayou lined with shrimp boats.  She’s watched that shrimping business dwindle, and the trapping business disappear altogether. And she’s seen neighbors give up on their gardens and animals.

In order to understand the danger posed by sea-level rise, we need to look to the past - Climate scientists predict that, by the end of the century, rising temperatures could melt enough ice from the Arctic and Antarctica to raise sea levels by two to four feet, depending on how much more carbon dioxide and other greenhouse gases humans continue to pump into the atmosphere. But our oceans are subject to natural fluctuations as well; everyone knows about daily tides, but scientists also study what they call “interannual sea level variations”—tidal cycles that can span years or decades, which govern just how far inland the oceans reach.  A new study finds that, thousands of years ago, the waters around Southeast Asia—specifically, the Java Sea—temporarily rose nearly two feet. Should such a rise naturally occur again, coupled with climate change-induced sea level increases, it could spell disaster for the tens of millions of people who live near sea level in the region. Clearly, understanding how sea levels have fluctuated in the past can provide critical insights into what will happen along coasts in the future, but observational records only go back so far. To estimate sea levels going back thousands of years, the researchers looked at coral microatolls—small, circular coral colonies. Microatolls grow outward in concentric rings, and the top layer grows or dies down over time, based on the height of the water. Much as scientists can use a tree’s rings to measure its age and growing conditions, researchers can approximate historical sea levels from analyses the coral structures. While it’s becoming ever more clear that the Earth responds rapidly to climate change, exactly what caused the rapid rise of the ocean in Southeast Asia over 6,000 years ago is still a mystery. “One of the things that my community—sea level geologists—try to do is go back into the past to try and work out when sea levels changed, how fast they changed, and what the mechanisms are,” Horton says. “And in this case we’ve solved the first two. Now our community is trying to understand the processes.”

Scientists have just detected a major change to the Earth’s oceans linked to a warming climate -- A large research synthesis, published in one of the world’s most influential scientific journals, has detected a decline in the amount of dissolved oxygen in oceans around the world — a long-predicted result of climate change that could have severe consequences for marine organisms if it continues. The paper, published Wednesday in the journal Nature by oceanographer Sunke Schmidtko and two colleagues from the GEOMAR Helmholtz Centre for Ocean Research in Kiel, Germany, found a decline of more than 2 percent in ocean oxygen content worldwide between 1960 and 2010. The loss, however, showed up in some ocean basins more than others. The largest overall volume of oxygen was lost in the largest ocean — the Pacific — but as a percentage, the decline was sharpest in the Arctic Ocean, a region facing Earth’s most stark climate change. The loss of ocean oxygen “has been assumed from models, and there have been lots of regional analysis that have shown local decline, but it has never been shown on the global scale, and never for the deep ocean,” said Schmidtko, who conducted the research with Lothar Stramma and Martin Visbeck, also of GEOMAR. Ocean oxygen is vital to marine organisms, but also very delicate — unlike in the atmosphere, where gases mix together thoroughly, in the ocean that is far harder to accomplish, Schmidtko explained. Moreover, he added, just 1 percent of all the Earth’s available oxygen mixes into the ocean; the vast majority remains in the air. Climate change models predict the oceans will lose oxygen because of several factors. Most obvious is simply that warmer water holds less dissolved gases, including oxygen. “It’s the same reason we keep our sparkling drinks pretty cold,” Schmidtko said. But another factor is the growing stratification of ocean waters. Oxygen enters the ocean at its surface, from the atmosphere and from the photosynthetic activity of marine microorganisms. But as that upper layer warms up, the oxygen-rich waters are less likely to mix down into cooler layers of the ocean because the warm waters are less dense and do not sink as readily.

It’s about 50 degrees warmer than normal near the North Pole, yet again -- Peer at a map of the Arctic and it glows fluorescent red. The warmth, compared to normal, is again nearly off the charts. It’s crazy and perhaps unsettling, but we have seen it coming.  In my Feb. 1 story, ‘Beyond the extreme’: Scientists marvel at ‘increasingly nonnatural’ Arctic warmth, I stated computer models predicted yet another round of incredible warmth in a week’s time. Current data show these predictions have verified.Friday’s temperatures very near the North Pole are about 50 degrees warmer than normal, according to a temperature analysis by the National Oceanic and Atmospheric Administration.Reports from the ground offer further evidence of the unusual intensity of the high-latitude warmth.On Wednesday, as the flux of warm air surged into the Arctic, the northernmost land station in the world in northern Greenland shot up 43 degrees (24 Celsius) in just 12 hours, cresting the melting point: Early in the week, weather station Nord, in northeast Greenland, broke its all-time February high-temperature record by almost four degrees (two Celsius), the Danish Meteorological Institute reported.In Svalbard, Norway, the island located about midway between continental Norway and the North Pole, high temperatures in the settlement of Longyearbyen have hovered near 40 degrees this entire week, compared with normal highs in the low-to-mid teens. Each day, these temperature were near or exceeded records. The warmth funneled toward the North Pole as winds converged winds between a monster storm in the North Atlantic and a giant area of high pressure over northern Europe.

 Something is very, very wrong with the Arctic climate - This Arctic winter has startled even the most even-keeled scientists, with records set for low sea ice extent, high temperatures and other indicators of a climate gone awry. Sea ice has plummeted to record lows and stayed there as pulses of unusually warm air have swept across the region, with the latest one set to reach the North Pole on Thursday. According to the National Snow and Ice Data Center (NSIDC), sea ice extent hit record lows for the months of November, December and January.   This comes on the heels of a year in which sea ice extent hit its second-lowest level on record at the end of the summer melt season in September.  The new figures for January sea ice extent, released on Tuesday, showed sea ice extent averaged 5.17 million square miles for the month, which was the lowest January extent in the 38-year satellite record. This is 100,000 square miles, or slightly larger than the state of Oregon, below the previous lowest January extent in January 2016. To put it in a longer-term perspective, sea ice extent during January was 487,000 square miles below the January 1981 to 2010 long-term average. This means the Arctic was missing an area of sea ice about the size of South Africa. Keep in mind that this is the middle of winter, when much of the high Arctic is still shrouded in darkness.Sea ice throughout the past three months has been especially low in the Kara, Barents and Bering Seas. Remarkably, during January the sea ice edge remained north of the Svalbard Archipelago in far northern Norway, which typically is surrounded by sea ice during the winter. This retreat, the NSIDC stated, was "largely due to the inflow of warm Atlantic water along the western part of the archipelago." The NSIDC cited the analysis of a NASA researcher, Richard Cullather, who found that the winter of 2015-2016 was the warmest on record in the Arctic during the satellite era, which began there in 1979.

Sea Ice Hits Record Lows at Both Poles - Arctic temperatures have finally started to cool off after yet another winter heat wave stunted sea ice growth over the weekend. The repeated bouts of warm weather this season have stunned even seasoned polar researchers, and could push the Arctic to a record low winter peak for the third year in a row. Meanwhile, Antarctic sea ice set an all-time record low on Monday in a dramatic reversal from the record highs of recent years. Prelim NSIDC (daily) data indicates #Antarctic sea ice has dropped below its previously all-time lowest #seaice extent on record (satellite) pic.twitter.com/gKTrHzXumw Sea ice at both poles has been expected to decline as the planet heats up from the buildup of greenhouse gases in the atmosphere. That trend is clear in the Arctic, where summer sea ice now covers half the area it did in the early 1970s. Sea ice levels in Antarctica are much more variable, though, and scientists are still unraveling the processes that affect it from year to year. The large decline in Arctic sea ice allows the polar ocean to absorb more of the sun’s incoming rays, exacerbating warming in the region. The loss of sea ice also means more of the Arctic coast is battered by storm waves, increasing erosion and driving some native communities to move. The opening of the Arctic has also led to more shipping and commercial activity in an already fragile region.Temperatures in the Arctic have repeatedly spiked since the beginning of the freezing season last fall. The influx of warmth is caused by storms moving up from the Atlantic Ocean dragging warm air with them. During this latest event, temperatures above 80 degrees north latitude reached nearly 30°F (15°C) above normal winter temperatures of about -22°F (-30°C). Temperatures over the weekend peaked above even the maximum seen during last winter, another exceptionally warm one for the Arctic. The temperature rise, along with the winds and waves churned up by the storm, can stymie sea ice growth and even cause local melt.

Antarctica just shed a Manhattan-sized chunk of ice - The growing crack in the Larsen C ice shelf is the most dramatic example of change in Antarctica right now. But it isn’t the continent’s only frozen feature changing in a warming world. Ice around the continent is disappearing as the air and water heat up and the less dramatic breakdowns are just as important to understanding the fate of the ice and the world’s coastal areas. The Pine Island Glacier on the coast of West Antarctica is a case in point. A massive iceberg roughly 225 square miles in size — or in more familiar terms, 10 times the size of Manhattan — broke off in July 2015. Scientists subsequently spotted cracks in the glacier on a November 2016 flyover. And in January, another iceberg cleaved off the glacier. Satellite imagery captured the most recent calving event, which Ohio State glaciologist Ian Howat said “ is the equivalent of an ‘aftershock’” following the July 2015 event. The iceberg was roughly “only” the size of Manhattan, underscoring just how dramatic the other breakups have been.

The Antarctic ice sheet is the smallest it’s ever been - A few days ago, the US National Snow and Ice Data Center announced that the Antarctic sea ice contracted to just 883,015 sq. miles, which is the smallest on record. Experts assert that, if changes are not made to pollution and our fossil fuel industry, a number of species will be threatened as sea levels (and temperatures) continue to rise. The Antarctic ice sheet goes through a cycle of expansion and contraction every year. Ultimately, the ice that exists around the continent melts during the southern hemisphere’s summer, which occurs towards the end of February, and expands again when autumn sets in.However, that melting is increasing dramatically. This week, the US National Snow and Ice Data Center (NSIDC) announced that the sea ice contracted to just 883,015 sq. miles (2.28m sq. km). The announcement came on February 13, and these numbers mean that the ice is now at the smallest extent on record, reaching just a little smaller than the previous low of 884,173 sq. miles, which was recorded February 27, 1997.  NSIDC director Mark Serreze asserts that we will need to wait for measurements in the coming days before officially confirming this new all-time low; however, he is not optimistic. “Unless something funny happens, we’re looking at a record minimum in Antarctica,” Serreze told Reuters.

Could a £400bn plan to refreeze the Arctic before the ice melts really work? -- Physicist Steven Desch has come up with a novel solution to the problems that now beset the Arctic. He and a team of colleagues from Arizona State University want to replenish the region’s shrinking sea ice – by building 10 million wind-powered pumps over the Arctic ice cap. In winter, these would be used to pump water to the surface of the ice where it would freeze, thickening the cap. The pumps could add an extra metre of sea ice to the Arctic’s current layer, Desch argues. The current cap rarely exceeds 2-3 metres in thickness and is being eroded constantly as the planet succumbs to climate change. “Thicker ice would mean longer-lasting ice. In turn, that would mean the danger of all sea ice disappearing from the Arctic in summer would be reduced significantly,” Desch told the Observer. Desch and his team have put forward the scheme in a paper that has just been published in Earth’s Future, the journal of the American Geophysical Union, and have worked out a price tag for the project: $500bn (£400bn). It is an astonishing sum. However, it is the kind of outlay that may become necessary if we want to halt the calamity that faces the Arctic, says Desch, who, like many other scientists, has become alarmed at temperature change in the region. They say that it is now warming twice as fast as their climate models predicted only a few years ago and argue that the 2015 Paris agreement to limit global warming will be insufficient to prevent the region’s sea ice disappearing completely in summer, possibly by 2030.

A massive lake of molten carbon the size of Mexico is discovered under the US, and it could cause climate CHAOS  --  A huge well of molten carbon that would spell disaster for the planet if released has been found under the US.Scientists using the world's largest array of seismic sensors have mapped a deep-Earth area, covering 700,000 sq miles (1.8 million sq km).This is around the size of Mexico, and researchers say it has the potential to cause untold environmental damage.The discovery could change our understanding of how much carbon the Earth contains, suggesting it is much more than we previously believed.  It would be impossible to drill far enough down to physically 'see' the Earth's mantle, so a team of researchers used a massive group of sensors to paint a picture of it, using mathematical equations to interpret their results.The study, conducted by geologists at Royal Holloway University in London, used a huge network of 583 seismic sensors that measure the Earth's vibrations, to create a picture of the area's deep sub surface. Known as the upper mantle, this section of the Earth's interior is known for by its high temperatures where solid carbonates melt, creating distinctive seismic patterns.What they found was a vast buried deposit of molten carbon, which produces carbon dioxide and other gases, situated under the Western US, 217 miles (350km) beneath the Earth's surface.As a result of this study, published in Earth and Planetary Science Letters, scientists now believe the amount of CO2 in the Earth's upper mantle may be up to 100 trillion metric tons. In comparison, the US Environmental Protection Agency estimates the global carbon emission in 2011 was nearly 10 billion metric tons – a tiny amount in comparison.

US GDP, Energy Consumption and CO2 Emissions - A review of the structure of US GDP, imports and exports shows that none of these variables has contributed to the fall in US CO2 emissions post-2008 finance crash. The main contributions to reduced CO2 come from high energy prices and recession (36%), gas substitution for coal (20%) and growth in wind and solar (15%) which more or less corroborates the findings of Roger Andrew’s in his recent post on this topic. At the review stage of his recent post The causes of the recent decrease in US greenhouse gas emissions, I suggested to Roger that he may wish to look into US exports and imports and the changing shape of US GDP as possible additional causes for the recent fall in US CO2 emissions. Roger suggested that maybe I could do this.  We have heard a lot recently about offshoring US industry, and the need to account for CO2 embedded in traded goods and so I decided to have a look. Figure 1 The makeup of US GDP according to  UN StatisticsThere are a number of interesting and key observations to be made from Figure 2. 1) “Services” that includes things  like government, healthcare, education, defence and finance accounts for over 50% of US GDP but the proportion has changed little over the 45 year period, 2) transport etc and retail etc have both expanded steadily. The consumption part of the economy has grown and now accounts for 25%; 3) Construction has declined steadily and now accounts for only 4% (Figure 3); 4) manufacturing accounted for 13% of the economy in 2015 (Figure 3) and has changed little over 45 years, which is difficult to reconcile with the rhetoric emanating from the Trump camp. One must presume that manufacturing jobs lost in the rust belt have been replaced in other parts of the country; 5) Mining etc appears to have contracted with time, with perhaps a minor expansion in the last decade marking higher energy prices and the shale boom; and finally 6) agriculture etc, comprises only 1% of the US economy which I find to be astonishingly low. There are two further points to make. First, I can see nothing in these data to account for the decline in CO2 emissions since 2008. And second, agriculture accounts for around 7% of US emissions, but only 1% of the economy.

Climate change and financial markets - In February 2016, the ESRB published a report estimating the impact of a transition to clean energy on financial markets. Keeping global warming below 2°C  – as agreed in Paris – will require substantial reductions in global greenhouse gas emissions over the next few decades. To reduce emissions, economies must reduce their carbon intensity. Given current technology, this implies a decisive shift away from fossil-fuel energy and related physical capital.The ESRB argues that if the transition were to occur too late and/or abruptly, it could affect systemic risk via three main channels:
(i) the macroeconomic impact of sudden changes in energy use
(ii) the sudden revaluation of carbon-intensive assets
(iii) a rise in the incidence of natural catastrophes
To quantify the importance of these channels, the ESRB report proposed that policymakers aim for enhanced disclosure of the carbon intensity of non-financial firms. They called for the related exposures of financial firms be stress-tested under the adverse scenario of a late and sudden transition.  Using a sample of firms that covers the full range of carbon intensity from renewable energy firms to coal firms, Sowerbutts examines the effect of the Paris agreement on their returns in the framework of an event study. Comparing the cumulative abnormal returns experienced by a petroleum refining company (CVR Energy) and a wind turbine manufacturing company (Nordex) in the immediate aftermath of the announcement of the Paris Agreement on 12 December 2015, he finds that the reaction was immediate and persistent. Prices jumped immediately on the first trading day, meaning a positive abnormal return of 4% for Nordex and a negative abnormal return of 4% for CVR energy, with gradual declines to end up at a cumulative abnormal return of 6% over the whole period (see figure below).

The New York Times on the Republican carbon tax proposal - From the editorial page:The new Climate Leadership Council argues that conservatives should support a carbon tax because it is a more market-friendly approach than Mr. Obama’s regulations. And after a carbon tax is put in place, the council says, the government should eliminate most of those rules, since they won’t be needed. But there are legitimate fears that the tax alone might not achieve emission reductions on the scale needed to save the planet from out-of-control warming, and that regulations and other policies like public investments in renewable energy will be needed, too. Neither President Trump nor Republicans in Congress have embraced the proposal. Many conservatives believe they’ll be able to dismantle Mr. Obama’s regulations through administrative, legal or legislative maneuvers, without compromising. Plus, many are philosophically opposed to, and politically fearful of, any new taxes. Their dismissal of the council’s proposal is myopic and puts their party out of step with the country. A large majority of Americans want the government to address climate change — 78 percent of registered voters support taxing emissions, regulating them or doing both, according to a Yale survey conducted after the election. The Republican elders are offering their party an opening to change the conversation. It should take the cue. Here is my previous post on the proposal.

The proposed US carbon tax – a recipe for disaster - A group of Republican elder statesmen have recommended that the US adopt a $40/ton carbon tax as the “most efficient and effective way of reducing CO2 emissions”. This post reviews the potential economic impacts of such a tax on the US energy sector. It concludes that the impacts on the oil and natural gas sectors would be comparatively minor but that the impacts on the coal sector would be severe. Electric utilities with a high percentage of coal in their generation mix could well be driven into bankruptcy.  This is contained in a document entitled The Conservative Case for Carbon Dividends, written under the auspices of the Climate Leadership Council, “an international research and advocacy organization whose mission is to mobilize global opinion leaders around the most effective, popular and equitable climate solutions.” It contains little in the way of detail, but its main provisions are: …. a gradually increasing tax on carbon dioxide emissions, to be implemented at the refinery or the first point where fossil fuels enter the economy, meaning the mine, well or port ….. All the proceeds from this carbon tax would be returned to the American people ..… outright repeal of the Obama administration’s Clean Power Act and the elimination of most if not all onerous EPA regulations And the rationale for the tax is: Economists are nearly unanimous in their belief that a carbon tax is the most efficient and effective way to reduce carbon emissions. A sensible carbon tax might begin at $40 a ton and increase steadily over time, sending a powerful signal to businesses and consumers, while generating revenue to reward Americans for decreasing their collective carbon footprint How would a $40/ton (I assume a 2,000lb short ton) carbon tax affect energy prices for CO2-emitting sources, specifically oil, natural gas and coal? To calculate this we need CO2 emissions data for these energy sources, which the EIA supplies in its January 2017 Monthly Energy Review Figure 1 plots running 12-month averages of monthly CO2 emissions from oil, gas and coal between January 1990 and October 2016, the last month for which EIA gives emissions data.  According to EIA the US petroleum sector, including the burning of gasoline, diesel, aviation fuel etc. and the manufacture of other refined products such as lubricants, asphalt and plastics, emitted 2,542 million tons of CO2 over the November 2015-October 2016 12-month period. Multiplying this by the $40/ton carbon tax yields $101.7 billion in tax revenue. With oil consumption over this period at 7.14 billion barrels this represents an increase of $14.24/bbl, or about 25% relative to the present ~$56/bbl price of Brent crude.

The Distributional Consequences of the Carbon Tax from the Climate Leadership Council --Martin Feldstein, Ted Halstead, and Greg Mankiw (FHM) are singing the praises of a proposed carbon tax:  First, the federal government would impose a gradually increasing tax on carbon dioxide emissions. It might begin at $40 per ton and increase steadily. This tax would send a powerful signal to businesses and consumers to reduce their carbon footprints. Second, the proceeds would be returned to the American people on an equal basis via quarterly dividend checks. With a carbon tax of $40 per ton, a family of four would receive about $2,000 in the first year. As the tax rate rose over time to further reduce emissions, so would the dividend payments … According to a recent Treasury Department study the bottom 70 percent of Americans would come out ahead under a carbon dividends plan. Some 223 million Americans stand to benefit.  The study by John Horowitz, Julie-Anne Cronin, Hannah Hawkins, Laura Konda, and Alex Yuskavage is interesting in many ways including: To examine the effects of a sample carbon tax, OTA estimated the 10-year revenue effects of a carbon tax that started at $49 per metric ton of carbon dioxide equivalent (mt CO2-e) in 2019 and increased to $70 in 2028. We estimate that such a tax would generate net revenues of $194 billion in the first year of the tax and $2,221 billion over the 10-year window from 2019 through 2028. This revenue could finance significant reductions in other taxes. In 2019, this carbon tax revenue would represent approximately 50 percent of projected corporate income tax payments or 20 percent of the OASDI portion of the payroll tax. If the revenue were rebated to individuals it would amount to $583 per person in the U.S.

If you’re going to border-adjust a carbon tax, why stop there? -- The massive growth in China’s share of global exports coincided not only with a big decline in rich-world manufacturing employment and ensuing political turmoil, but also with a significant redistribution in world carbon dioxide emissions: So it’s interesting to read a proposal from Republican eminences arguing the government should tax carbon dioxide emissions, including from imported goods, and rebate the revenues to the public: Border adjustments for the carbon content of both imports and exports would protect American competitiveness and punish free-riding by other nations, encouraging them to adopt carbon pricing of their own. Exports to countries without comparable carbon pricing systems would receive rebates for carbon taxes paid, while imports from such countries would face fees on the carbon content of their products. In the absence of “border adjustment”, domestic consumers could avoid paying their carbon taxes — and, in principle, methane taxes, nitrous oxide taxes, and fluorinated gas taxes — by importing products from countries with laxer attitudes toward climate change. Emissions might drop in one part of the world but this would be mostly offset as pollution simply relocates elsewhere, such as to China. It would be the environmental equivalent of tightening regulatory standards on bank holding companies while letting risk migrate to other areas of the financial system. The best way to ensure fairness across countries is therefore to penalise imports from places without comparable systems. If a country really wants to discourage greenhouse gas emissions with taxes, those taxes have to be levied on all goods and services, not just those produced domestically. Anything else, such as the European Union’s proposed emissions trading system, would simply subsidise polluters abroad,  As it happens, any comprehensive greenhouse gas tax regime would tend to favour domestic production. Moving billions of tonnes of goods tens of thousands of miles is associated with a little more than three per cent of global carbon dioxide emissions, or about as much as all the emissions associated with industrial production and fossil fuel consumption in Japan. All of this makes sense, and seems to be legal under existing trade rules. The question is why the logic isn’t applied more broadly. If “border adjustment” is appropriate for discouraging pollution, why shouldn’t it also be used to uphold labour standards? What’s the point of having minimum wages, protections for collective bargaining, and occupational safety requirements if the jobs are just going to be offshored to countries — often less-than-democratic ones — with different priorities?

Conservative groups fight carbon tax proposal | TheHill: A coalition of conservative groups is fighting back against Republicans who are pushing for a tax on carbon dioxide emissions. The groups, including American Energy Alliance, Heritage Action for America and Americans for Tax Reform, are asking for a meeting with high-level White House officials to rebut last week’s meeting and presentation by former Republican officials like James Baker and Martin Feldstein. “Such a policy would place undue economic burdens on American families and businesses by intentionally increasing the cost of the energy they rely on every day,” the conservative groups’ leaders wrote to Gary Cohn, director of the White House National Economic Council. “A carbon tax would also be regressive — doing the most harm to our nation’s economically disadvantaged — and would destroy American jobs, particularly in the manufacturing sector.” The authors of the letter include some close Trump allies, like American Energy Alliance President Tom Pyle and the Competitive Enterprise Institute’s Myron Ebell, both of whom served in leading roles in Trump’s transition team. The Republicans pitching the carbon tax last week framed it as a conservative solution to climate change that would reduce the size of government by repealing nearly all of President Obama’s climate regulations. But Trump is unlikely to come out in favor of a carbon tax. He ruled it out completely during his campaign and said he believes that human-caused climate change is a hoax. Furthermore, the Republican-led House overwhelmingly passed a non-binding resolution last year strongly denouncing a carbon tax.

Message to enviros: chill on the carbon tax (and don't dismiss cap-and-trade so easily) - Charles Komanoff (of the Carbon Tax Center) at The Nation: Carbon-tax haters can relax. The proposal for a national carbon tax released on February 8 by high-level Republicans, including über-GOP consigliere James Baker, isn’t going anywhere. Financially and ideologically, the American right is wedded to carbon fuels. Trumpism runs on and reeks of them. Predictably, not a single Republican in Congress, and no one in the White House, has uttered a single positive word about the new carbon-tax plan. Nevertheless, the proposal’s intended audience may not be Beltway Republicans but rather those ordinary Americans, majorities in both parties, who say they want action on climate, and who therefore might yet figure in the political equation over climate policy. That group includes progressives. The carbon tax James Baker brought to the Trump White House on February 8 on behalf of the new Climate Leadership Council has a lot in common with I-732: The Council’s proposal is also avowedly revenue neutral. But rather than lowering an existing tax, it relies on a so-called tax-and-dividend model: As the state of Alaska does with oil revenues, revenues from the Council’s national carbon tax would be returned equally to all American households in quarterly “dividends” digitally deposited in Social Security accounts. The tax would start at $40 per ton of carbon dioxide. Earmarking all of the revenue to these dividends creates the political will to raise the tax every year, since the dividends rise in tandem with the tax rate. Ramping up the tax by $5 a year would shrink the use of carbon fuels so drastically that, by my calculations, US carbon emissions in 2030 would be 40 percent less than they were in 2005 (a standard baseline year). Government policy revolves around trade-offs, and on balance James Baker’s carbon tax is worth supporting.   Yet this progress comes with a catch. The council would phase out much of the Environmental Protection Agency’s regulatory authority over greenhouse gases and would outright repeal President Obama’s Clean Power Plan to cut emissions from electricity generation. It would also immunize fossil-fuel companies from lawsuits for damages done by their products—lawsuits such as those bound to arise from the revelations that ExxonMobil and other companies knew for decades about the climate damages their products cause, and lied about it.

Trump's likely science adviser calls climate scientists 'glassy-eyed cult' - The man tipped as frontrunner for the role of science adviser to Donald Trump has described climate scientists as “a glassy-eyed cult” in the throes of a form of collective madness. William Happer, an eminent physicist at Princeton University, met Trump last month to discuss the post and says that if he were offered the job he would take it. Happer is highly regarded in the academic community, but many would view his appointment as a further blow to the prospects of concerted international action on climate change. “There’s a whole area of climate so-called science that is really more like a cult,” Happer told the Guardian. “It’s like Hare Krishna or something like that. They’re glassy-eyed and they chant. It will potentially harm the image of all science.” Trump has previously described global warming as “very expensive … bullshit” and has signalled a continued hardline stance since taking power. He has nominated the former Texas governor Rick Perry, a staunch climate sceptic, as secretary of energy and hopes to put the Environment Protection Agency (EPA) under the leadership of Scott Pruitt, the Oklahoma attorney general, who has been one of the agency’s most hostile critics.

Trump Names Industry Lobbyist and Climate Science Denier Mike Catanzaro as Top White House Energy Aide - Steve Horn - GreenWire has reported that climate change denier Mike Catanzaro — a lobbyist for oil and gas companies Noble Energy,Devon Energy, Encana Oil and GasAmerican Fuel and Petrochemical Manufacturers (AFPM), and Hess Corporation — will soon become a top energy policy aide for President Donald Trump. Catanzaro's lobbying disclosure forms for quarter four of 2016 serve as a potential preview of energy policy to come from the Trump White House. During that quarter, Catanzaro lobbied against U.S. Bureau of Land Management (BLM) methane regulations, against U.S. Bureau of Safety and Environmental Enforcement offshore drilling regulations, and for oil and gas development on U.S. public lands. As DeSmog has reported, Catanzaro served as a top energy aide during Trump's presidential campaign. According to GreenWire, he is expected to serve as special assistant to Trump for energy and environmental issues under the umbrella of the White House National Economic Council. His activities will include “implementing the president's domestic energy and environment agenda and kind of managing the inter-agency process that deals with those issues,” a source close to the Trump administration told GreenWire. “This is likely to be the most influential domestic energy policy position within the White House [and] will comfort industry and conservatives who view him as a champion for free-market energy and environment policy.”

Acting EPA head: Hiring freeze challenges ‘our ability to get the agency’s work done’ -- The Environmental Protection Agency’s acting administrator, Catherine McCabe, told employees this week that the Trump administration’s federal hiring freeze “is already creating some challenges to our ability to get the agency’s work done.”The comments came in a weekly video update that McCabe, a career EPA employee who previously served as a top official in its New York regional office, has been producing for staff since President Trump took office last month.Virtually each week, she has sought to reassure EPA employees who privately — and publicly in some cases — have expressed concerns about Trump’s promises to scale back the agency’s regulatory role and his nomination of Oklahoma Attorney General Scott Pruitt, a longtime EPA antagonist, as its next leader.“We do recognize the transition has brought some challenges,” McCabe says in the most recent video, adding, “Whatever changes and challenges come, we know we can count on you to respond with professionalism. We will continue to do our best to ensure that this agency’s decisions and actions are based on our two bedrock principles: carrying out the law and ensuring that the best science informs all that we do.” McCabe didn’t elaborate on specific ways that the hiring freeze is hindering EPA’s work, but her brief comments echoed other government officials, who have argued that such a freeze is shortsighted.

Senate Dems want Pruitt vote delayed over emails | TheHill: Senate Democrats want to delay a vote on President Trump’s Environmental Protection Agency (EPA) nominee due to a pending court case regarding email records. Democrats on the Environment and Public Works Committee, led by Sen. Tom Carper(D-Del.), said that emails Oklahoma Attorney General Scott Pruitt’s office is likely to release publicly soon may be important in considering his nomination. “Granting this request — to schedule consideration of Mr. Pruitt’s nomination at a time that permits Senators to receive and review the information we previously requested — is compelled, in our view, by the Senate’s obligation to provide advice and consent on Mr. Pruitt’s nomination,” the Democrats wrote in a letter to Senate Majority Leader Mitch McConnell(R-Ky.). “These records are needed for the Senate to evaluate Mr. Pruitt’s suitability to serve in the position for which he has been nominated.” McConnell on Monday teed up a vote in the full Senate on Pruitt’s nomination. That vote will likely happen sometime this week. Pruitt has at times acted in his role as Oklahoma's attorney general in ways that benefit fossil fuel companies, including submitting a letter to the EPA that was written by an oil company.

Judge orders EPA nominee Scott Pruitt to turn over emails: An Oklahoma County District Court judge on Thursday ordered President Donald Trump's nominee to lead the EPA to turn over thousands of communications to a watchdog group. The order is the latest turn in a lawsuit against Oklahoma Attorney General Scott Pruitt brought by the Center for Media and Democracy earlier this month. CMD charges Pruitt violated the Oklahoma Open Records Act for declining to make public official documents the group has requested since 2015. Judge Aletia Haynes Timmons of the District Court of Oklahoma County instructed Pruitt's office to hand over the emails to CMD by Tuesday. The Oklahoma attorney general has 10 days to comply with the group's other records requests, Timmons ruled. CMD has sought correspondences between Pruitt's office and Koch Industries, other mining and drilling companies, and the Republican Attorneys General Association, which Pruitt chaired. As of Thursday's hearing, the office had produced 411 of the 3,000 emails CMD requested, according to the group. Timmons found "there was an abject failure to provide prompt and reasonable access to documents requested" by CMD.show chapters Controversy surrounds Trump's pick to lead EPA Wednesday, 18 Jan 2017 | 4:47 PM ET | 01:21 The decision comes ahead of Pruitt's confirmation to lead the Environmental Protection Agency, which is expected to take place on Friday.

EPA employees call on senators to reject Trump EPA pick: report | TheHill: In an unusual show of opposition for federal employees, Environmental Protection Agency workers have been calling their senators to urge them to reject President Trump’s pick to lead their agency, The New York Times reported Thursday. Scott Pruitt, the attorney general of Oklahoma, has sued the EPA more than a dozen times in his current post, alarming many of the agency’s employees, who fear that, if confirmed, he will work to dismantle its work. On the campaign trail, Trump railed against the environmental agency, calling it a “disgrace” and vowing to undo federal environmental rules and regulations.“Mr. Pruitt’s background speaks for itself, and it comes on top of what the president wants to do to EPA,” John O’Grady, a longtime EPA employee and president of the union representing its workers, told The Times. Still, the effort to rally the opposition of enough senators to reject Pruitt during his confirmation vote on Friday is a longshot. Only one GOP senator, Susan Collins (Maine), has said she will vote against Trump’s EPA pick. And Democratic Sens. Joe Manchin Joe Manchin (W.V.) and Heidi Heitkamp Heidi Heitkamp (N.D.) have both said they will support Pruitt.

Senator Collins to Oppose EPA Administrator Nominee’s Confirmation - — U.S. Senator Susan Collins announced today that she will oppose the confirmation of Scott Pruitt to become Administrator of the U.S. Environmental Protection Agency. Her full statement follows: “After careful consideration, I have decided to oppose the confirmation of Scott Pruitt, the nominee for Administrator of the Environmental Protection Agency (EPA). I have met at length with Mr. Pruitt, who is an accomplished attorney with considerable knowledge about environmental laws. We discussed many important environmental issues about which I care deeply—from EPA’s enforcement of landmark environmental laws, including the Clean Air Act and the Clean Water Act, to climate change and the Clean Power Plan, to protections from harmful pollutants such as lead and mercury. I also have reviewed testimony from his confirmation hearing. “In keeping with my past practice, regardless of which party is in the White House, I will vote for cloture on his nomination so that every Senator can have a clear, up or down vote on this important nomination of a member of the President’s Cabinet. But I will vote no on Mr. Pruitt’s confirmation. “The fact is, Mr. Pruitt and I have fundamentally different views of the role and mission of the EPA. That does not mean that I agree with every regulatory action that EPA has taken. At times, the Agency has been difficult to work with and unresponsive to bipartisan congressional concerns. But the EPA plays a vital role in implementing and enforcing landmark laws that protect not only our environment but also public health. “Specifically, I have significant concerns that Mr. Pruitt has actively opposed and sued EPA on numerous issues that are of great importance to the state of Maine, including mercury controls for coal-fired power plants and efforts to reduce cross-state air pollution and greenhouse gas emissions. His actions leave me with considerable doubts about whether his vision for the EPA is consistent with the Agency's critical mission to protect human health and the environment...

Scott Pruitt, longtime adversary of EPA, confirmed to lead the agency -- Scott Pruitt, who as Oklahoma’s attorney general spent years suing the Environmental Protection Agency over its efforts to regulate various forms of pollution, was confirmed Friday as the agency’s next administrator. Pruitt cleared the Senate by a vote of 52-46, winning support from two Democrats, Joe Manchin of West Virginia and Heidi Heitkamp of North Dakota. Only one Republican, Susan Collins of Maine, voted against him, saying he had “fundamentally different” views than she about the EPA’s role. The vote came after Democrats held the Senate floor for hours overnight and through the morning to criticize Pruitt as a pawn of the fossil-fuel industry and to push for a last-minute delay of his confirmation. Part of their argument was an Oklahoma judge’s ruling late Thursday that Pruitt’s office must turn over thousands of emails related to his communication with oil, gas and coal companies. The judge set a Tuesday deadline for the release of the emails, which a nonprofit group had been seeking for more than two years. Republicans pressed forward with the afternoon vote, saying Pruitt had been thoroughly vetted in recent months and calling on Democrats to end what Senate Majority Leader Mitch McConnell (R-Ky.) called “a historic level of obstruction” in holding up Trump administration nominees. Pruitt’s confirmation marked a serious defeat for environmental advocacy groups, which wrote letters, waged a furious social media campaign, lobbied members of Congress, paid for television ads and sponsored a series of public protests to keep the Oklahoman from taking the reins of EPA. “Scott Pruitt as administrator of the EPA likely means a full-scale assault on the protections that Americans have enjoyed for clean air, clean water and a healthy climate,” Michael Brune, executive director of the Sierra Club, said in an interview. “For environmental groups, it means we’re in for the fight of our lives for the next four years.”

EPA Official, After Years of Work to Thwart the Agency's Mission, Returns to Carry Out Trump Agenda -  David Schnare's career with the Environmental Protection Agency began in the agency's infancy in 1978 with the critical mission of implementing the new Safe Drinking Water Act. Over the next 33 years, he would call the EPA home as an enforcement lawyer and policy analyst, while also working in his outside time to try to undermine some of the agency's pressing priorities.  During his tenure at the EPA, Schnare simultaneously directed a conservative think tank's environmental program that opposed regulation as a pollution remedy. He testified to Congress that carbon regulations do greater harm to the environment than carbon dioxide. He also co-founded a legal organization funded partly by fossil fuel interests, and through that group launched an effort to make public climate scientists' private emails to call their work into question. Now in his late 60s, Schnare returns to the EPA in a far more powerful role: reshaping it under another foe of regulation, President Donald Trump. He is one of 11 appointees to the agency's beachhead team that is beginning to implement the administration's agenda, which Trump has promised will include a rollback of environmental regulations. Schnare said he's been asked to stay on full-time beyond the transition. That's a chilling prospect for environmental and climate activists, who worry his history of aggressive campaigns against scientists and fossil fuel regulation mean he will work against the agency's mission.

EPA staff told to prepare for Trump executive orders: sources | Reuters: Staff at the U.S. Environmental Protection Agency have been told that President Donald Trump is preparing a handful of executive orders to reshape the agency, to be signed once a new administrator is confirmed, two sources who attended the meeting told Reuters on Wednesday. A senior EPA official who had been briefed by members of the Trump administration mentioned the executive orders at a meeting of staffers in the EPA's Office of General Counsel on Tuesday, but did not provide details about what the orders would say, said the sources, who asked not to be named. "It was just a heads-up to expect some executive orders, that's it," one of the sources said. The second source said attendees at the meeting were told Trump would sign between two and five executive orders. Trump administration officials did not respond to requests for comment. Trump has promised to cut U.S. environmental rules - including those ushered in by former President Barack Obama targeting carbon dioxide emissions - as a way to bolster the drilling and coal mining industries, but has vowed to do so without compromising air and water quality. Trump has also expressed doubts about the science behind climate change and promised during his campaign to pull the United States out of a global pact to combat it. Since his election in November, he has softened that stance, saying he would keep an "open mind" to the climate accord. Trump's pick to run the EPA, Oklahoma Attorney General Scott Pruitt, is scheduled to face a Senate confirmation vote on Friday, according to a Senate aide, after a contentious hearing last month in which lawmakers pressed Pruitt on his ties to the oil industry. Pruitt sued the EPA more than a dozen times to block its regulations while he was the top prosecutor for the oil and gas producing state.

GOP bill would gut EPA - A House Republican is sponsoring legislation to do away with large portions of the Environmental Protection Agency (EPA), including environmental justice and greenhouse gas programs. Rep. Sam Johnson(R-Texas) introduced the Wasteful EPA Programs Elimination Act on Thursday, saying it would save $7.5 billion annually. That would leave the agency with a budget of less than $1 billion. Major EPA climate change programs would be eliminated under the measure.The legislation would also close all of the EPA’s regional offices, halt new regulations on ground-level ozone pollution and require the agency to lease unused property. “As a fiscal conservative, I believe Washington should be a good steward of taxpayers’ dollars,” Johnson said in a statement. “Part of being a good steward includes reining in unnecessary spending, holding agencies accountable for ‘waste,’ and getting rid of politicians’ ‘pet projects.’ For example, American taxpayers shouldn’t have to pay for the EPA’s many vacant and underutilized properties that the EPA’s own Inspector General identified as wasteful,” he said. The legislation is modeled after a report from the Heritage Foundation, which identified the EPA programs as wasteful.

One of the shortest bills ever was just introduced in Congress, it's basically just 'KILL THE EPA': So much for ponderous legislation that's too lengthy for lawmakers to read before voting. A new bill that would have sweeping consequences for every resident of the U.S., and in fact the world at large, contains just a single, all-important sentence. The bill, sponsored by freshman Republican Rep. Matt Gaetz of Florida, seeks to abolish the Environmental Protection Agency (EPA). As in, get rid of it entirely. Bing, bong, boom, poof... gone. Just like that! Who knew that destroying an entire bureaucracy could be so easy? Never mind sweating the small stuff, like who would then be in charge of regulating air and water pollution, environmental enforcement, Superfund sites and more. (Forget, too, about referring to all the relevant sections of U.S. law where the EPA appears, since that would cause the bill to add many pages, let alone another sentence.) With the EPA out of the way, presumably all environmental regulation would occur at the state level. To say the least, if the EPA is abolished, it would be a challenge to regulate pollutants like acid rain-causing sulfur dioxide and global warming-causing carbon dioxide which don't fit neatly within state lines. Not to mention, it would also be a tough task to pull off considering the paucity of state resources. Here's the entire bill: "The Environmental Protection Agency shall terminate on December 31, 2018." Is a screenshot more your thing? Here you go:

Scientists across the US are scrambling to save government research in 'Data Rescue' events -- Laptops in hand, roughly 150 people descended on an NYU building over the weekend to spend their Saturday downloading data.   Amid pizza boxes stacked next to a variety of 2-liter soda bottles, volunteers — mostly programmers, software developers, system administrators, scientists, and librarians by day — made their way through a list of government websites, flagging them to be preserved and downloading the data sets they contained. The 8-hour event, called Data Rescue NYC, is the latest in a series of similar gatherings organized by a group called the Environmental Data and Governance Initiative (EDGI). The organization is attempting to download and archive data generated by government agencies like the EPA and NOAA that they believe is at risk of being taken down by the Trump administration. EDGI is also working to save versions of webpages and monitor sites for changes to wording about topics like climate change.   By the end of the day on February 4, the New York volunteers had archived over 5,000 websites and downloaded nearly 100 gigabytes worth of data sets.   The downloading efforts have only been underway for a few months — EDGI formed after Trump’s election — but the work is already yielding results. The group’s monitoring work has revealed that descriptions of the negative environmental impacts of coal, as well as graphs showing the carbon dioxide emissions levels associated with different energy sources, are gone from the EIA website. On the EPA’s site, references to the US commitment to UN climate negotiations have been deleted, and phrasing has been changed on a variety of pages to emphasize “adapting” to climate issues, rather than mitigating the problem by addressing emissions. EDGI has also found that reports detailing the progress made on President Obama’s Climate Action Plan have disappeared from the State Department’s website. The plan itself was briefly taken down and then put back up.  “We feel like the administration has been called on a couple things they’ve tried to take down, and they’ve backtracked on a few things,”

Racing to the Bottom on Methane Emissions  – Clean air advocates are concerned that a bill in the state Senate would undermine efforts to control a major contributor to climate change. Over a 20-year time period, methane, the main component of natural gas, is 86 times more potent than carbon dioxide as a greenhouse gas. And Pennsylvania puts a lot of methane into the atmosphere – 115,000 tons in 2014 alone, according to the Department of Environmental Protection. SB 175 would prevent the DEP from imposing any regulations on emissions of methane that are more restrictive than federal regulations. But according to Joseph Minott, executive director of the Clean Air Council, federal regulations are intended to be the floor, not the ceiling. "The very way that the Clean Air Act and the Clean Water Act are written is to provide states the opportunity to go beyond the minimum that EPA requires," he points out. Pennsylvania is the second biggest producer of natural gas, and sponsors of the bill say imposing additional restrictions on methane emissions would put the state at a competitive disadvantage. But Minott contends that the legislature has a responsibility to protect the health and welfare of the people of the state.

Trump admin. wants Gold King Mine spill case dismissed | TheHill: The Trump administration is asking a federal court to dismiss a lawsuit by New Mexico and the Navajo Nation over a 2015 mine-waste spill caused by the Environmental Protection Agency (EPA). The Justice Department filed a brief Monday arguing that the EPA, as a government agency, has sovereign immunity because its workers and contractors were trying to clean up the abandoned Gold King Mine when it caused the spill in Colorado. The government is continuing the same argument of the Obama administration, which concluded in January that the EPA was legally barred from paying out the $1.2 billion in claims from people, businesses, governments and others who said they were harmed by the spill. Republicans and government representatives near the spill site slammed the Obama administration for that decision, saying its response to the incident was inadequate. “These claims against EPA ignore well-settled law that [the Comprehensive Environmental Response, Compensation, and Liability Act] does not waive EPA’s sovereign immunity to suit when its sole connection to the site at issue arises from exercising its authority under CERCLA to respond to other entities’ legacy contamination,” the Justice Department wrote to the federal court in New Mexico, referring to the 1980 law that established the Superfund program for major environmental cleanups. “Plaintiffs’ own allegations acknowledge that EPA became involved at the Gold King Mine not because of any historic involvement in the operations that resulted in mining waste, but rather by exercising its authority under CERCLA to assist in responding to environmental contamination caused by others,” attorneys wrote. The 2015 spill was caused by an EPA contractor who, working with federal and state employees, miscalculated the pressure of wastewater at the abandoned mine.

How Fishermen, Hunters, Bikers, and Hikers Are About to Lose Their Say on Public Land Use -  The House and Senate are getting rid of the rule under the Congressional Review Act (CRA), which allows members of Congress to vote on "resolutions of disapproval" during the initial 60 days after an agency publishes the new rule. Striking it this way also allows Congress to do it without public input, and it forbids the agency from revisiting or improving the rule in the future. Since the beginning of the year, the GOP majority in Congress has used the CRA to eradicate Obama administration rules barring the dumping of coal waste into streams, sales of guns to people with mental health disorders, methane leaks and flaring by oil and gas drilling operations on public lands, and payments to either the U.S. or foreign governments for the rights to extract oil, natural gas, or minerals.Killing the rule would be a huge setback for the $646 billion outdoor recreation industry, said Jessica Wahl of the Outdoor Industry Association. “Public lands are the backbone of our industry,” she told Men’s Journal. “In many of these states, the recreation economy is king. So you can’t say that on the one hand you support job creation, and on the other take a step that hampers the growth of the outdoor recreation industry.” Athan Manuel, the director of the Lands Protection Program for the Sierra Club, terms Planning 2.0 “a very common-sense modernization” that “takes into account everyone’s perspective, whether you’re an oil company or an environmental group,” by increasing transparency and public participation in a process barely changed in over 30 years. “I guess that level playing field bothered Republicans who want to go back to the days of the BLM only permitting logging, grazing, mining, and drilling.”

The Slow Confiscation of Everything – Laurie Penny - These days, the words of the prophets are written in whimsical chalk on the hoardings of hipster latte-mongers: “The end is nigh. Coffee helps.” In the days running up to the inauguration of Donald Trump, I saw this sort of message everywhere, and as panic-signals go, it’s oddly palliative. The idea that the Western world might soon be a smoking crater or a stinking swamp in does, in fact, make me a little more relaxed about the prospect of spending five dollars on a hot drink.  Fuck it. The planet, as we keep telling each other, is on fire. Might as well have a nice latte while we wait for the flames to slobber up our ankles. When you consider that some desperate barista boiled the entire philosophy of post-Fordist public relations down to its acrid essence,  it would be ungrateful not to. What have you got to lose? Five dollars and your pride, in the short term, but what will those be worth next year? Next week? Have you looked at the Dow Jones lately? Have you turned on the news? On second thoughts, best not—just drink your coffee and calm down. Look, they’ve drawn a little mushroom cloud in the milk foam. It’s quite beautiful, when you think about it.  The topic of apocalypse comes up a lot these days. It’s slipped into conversation as compulsively as you might mention any other potentially distressing disruption to your life plans, such as a family member’s member’s illness, or a tax audit. And yet the substance of the conversation has shifted in recent weeks and months from an atmosphere of chronic to acute crisis. The end seems to be slightly more nigh than it was last year; we talk about the Trumpocalypse with less and less irony as the Bulletin of the Atomic Scientists moves the Doomsday clock half a minute closer to midnight.  Of all the despicable things the runaway ghost train of the Trump administration has done in its first ferocious weeks, the attempt to utterly destroy every instrument of environmental protection is perhaps the most permanent. The appointment of fossil fuel tycoons and fanatical climate change deniers to key positions in energy and foreign policy, the immediate reinstitution of the Dakota Access and Keystone pipelines, the promise to pull out of the Paris Climate Pact—all moves crafted to please the oil magnates who helped put him in power—these are changes that will hasten the tick of the time bomb under civilisation as we know it. Racist laws can eventually be overthrown, and even a cultural backslide towards bigotry and nationalism can be slowly, painfully reversed. We don’t get a do-over on climate change. The vested interests agitating to strip the planet for parts know that, too—and they plan to profit from this particular apocalypse for as long as they can.

Trump signs law rolling back disclosure rule for energy and mining companies - President Trump signed a measure Tuesday that could presage the most aggressive assault on government regulations since President Reagan. The bill cancels out a Securities and Exchange Commission regulation that would have required oil and gas and mining companies to disclose in detail the payments they make to foreign governments in a bid to boost transparency in resource-rich countries. It is the first of a series of bills Congress is considering that would take advantage of the Congressional Review Act of 1996, which had been used only once before today. The act gives a new president and Congress the power to revoke rules and regulations promulgated by the previous administration in its final 60 legislative days. The previous time the review act was invoked was in 2001 to overturn a Clinton administration regulation about ergonomics. “It’s a big deal,” Trump said as he signed the measure in the Oval Office. “The energy jobs are coming back. Lots of people going back to work now.” The White House later issued a background paper saying the measure Trump signed “blocks a misguided regulation from burdening American extraction companies.” Hill Republicans are also seeking to use the Congressional Review Act to overturn regulations that would: prevent coal-mining operations from dumping waste into nearby waterways; restrict methane emissions by oil and gas operations on federal land; require federal contractors to self-certify that they comply with U.S. labor laws; require each state to issue annual ratings for teacher-prep programs; and introduce a planning rule for federal lands.

Trump signs bill undoing Obama coal mining rule | TheHill: President Trump on Thursday signed legislation ending a key Obama administration coal mining rule. The bill quashes the Office of Surface Mining's Stream Protection Rule, a regulation to protect waterways from coal mining waste that officials finalized in December. The legislation is the second Trump has signed into law ending an Obama-era environmental regulation. On Tuesday, he signed a Congressional Review Act (CRA) resolution undoing a financial disclosure requirement for energy companies. Both the mining and financial disclosure bills are the tip of a GOP push to undo a slate of regulations instituted in the closing days of the Obama administration. The House has passed several CRA resolutions, and the Senate has so far sent three of them to President Trump for his signature.Regulators finalized the stream protection rule in December, but they spent most of Obama’s tenure writing it. The rule is among the most controversial environment regulations the former administration put together. The coal mining industry said it would be costly to implement and lead to job losses across the sector, which is already suffering from a market-driven downturn in demand for its product. At the signing, Trump called the regulation "another terrible job killing rule" and said ending it would save "many thousands American jobs, especially in the mines, which, I have been promising you — the mines are a big deal." "This is a major threat to your jobs and we’re going to get rid of this threat," he added. "We’re going to fight for you."

Without Clean Power Plan, coal use could rise again -  The U.S. Department of Energy expects coal to regain its spot as the nation’s main energy source if the Clean Power Plan is not implemented, which would reverse a trend of natural gas dominance driven by lower prices and government incentives to switch to cleaner energy.In 2016, natural gas became the dominant source of energy in the U.S., and in Europe a surge of wind power was bumped coal from its number two spot as main energy provider.The Environmental Protection Agency issued a rule implementing the Clean Power Plan in 2015, but the U.S. Supreme Court stayed the enforcement of the rule pending legal challenges. Nonetheless, states and energy companies have created their own clean energy goals and plans, pushing towards a future with less reliance on coal and more use of natural gas and renewable energy. But President Donald Trump has pledged to curtail the EPA’s work to reduce the impacts of climate change, and has promised to rescue beleaguered coal country by rolling back the Clean Power Plan.But the economics and the politics of coal have been out of sync. While Trump plans to save coal, record low natural gas prices made it the top energy source for the first time last year. Energy companies around the country, stung by the high cost of burning coal, have switched plants from coal to natural gas, and other coal-fired power plants have been shut down. But without enforcement of the Clean Power Plan looming on the horizon, that trend could reverse, the Energy Department said. “In the scenario where the Clean Power Plan is not implemented, coal again becomes the leading source of electricity generation by 2019 and retains that position through 2032,” the department said in an analysis by the Energy Information Administration

Say Goodbye to Coal-Free Streams -- President Trump has officially killed the Office of Surface Protection's Stream Mining Rule, as he signed legislation undoing the Obama era protection Thursday. Surrounded by lawmakers, coal miners and friendly coal executives , Trump blasted the rule as "another terrible job killing rule" and promised to save jobs "especially in the mines, which, I have been promising you—the mines are a big deal." A report issued by the Congressional Research Service last month found that the rule would have eliminated a minimal amount of jobs in the coal industry, while generating an additional 250 jobs per year. "If Central Appalachian legislators really had the best interests of their constituents at heart, they would not have attacked this moderate rule," said Erin Savage of Appalachian Voices . "Instead of doing the bidding of coal industry lobbyists, they should be working to protect the health and well-being of Appalachian communities that depend on clean water."

Dominion plan to bury coal ash near Potomac River faces renewed opposition -- Environmental groups are mounting opposition to the final phase of a Dominion Virginia Power plan to bury nearly 1 million tons of coal ash at the utility company’s Possum Point plant near the Potomac River.The state Department of Environmental Quality has scheduled a hearing for Thursday on Dominion’s application for a permit to permanently seal the coal ash with vegetation, soil and synthetic membranes as part of the company’s efforts to comply with a nationwide federal mandate to safely dispose of all forms of the pollutant. Dominion, which stopped burning coal at the Prince William County site in 2003, had been storing the ash in five retention ponds.Last year, the state water board granted the company permission to discharge about 215 million gallons of treated coal ash water into a Potomac tributary, allowing Dominion to dredge the ash sediment and consolidate it into one pond that will also be drained before it is sealed.Environmentalists, who fought to block the earlier permit, say that evidence of some groundwater contamination at the Possum Point site makes the plan to keep the coal ash there dangerous to nearby residents and wildlife. Trucks excavate and carry coal ash from drained coal ash pond E at Possum Point Power Station in Dumfries, Va.in June, 26, 2015. (Kate Patterson /The Washington Post)Monitoring wells have shown elevated levels of nickel, boron and other metals in the groundwater, prompting Dominion to offer local households with private wells financial help to connect to Prince William’s public water system.Environmental groups and some local elected officials argue that the state should require the ash to be carted away and disposed of elsewhere, or recycle it into a cleaner form of ash that is used in cement, silica and other building materials.Dominion already recycles coal ash produced at some of its other sites in Virginia, selling about 1.4 million tons commercially during the past two years, according to a company spokesman.

In Australia and the US, sound climate policy is being held hostage by vested interests - The inauguration of billionaire property developer and reality TV star Donald Trump as the 45th President of the United States has presaged a new Dark Age of climate politics.  In an opening fortnight of controversial executive orders, President Trump has decreed the expansion of major fossil fuel developments including the controversial Keystone XL and Dakota Access oil pipelines, and the neutering of long-standing environmental protections. In addition, he and his leadership team have made it plain they intend to dismantle many of the Obama administration’s climate initiatives and withdraw from the Paris Climate Agreement. All this runs in direct counterpoint to the rapid decarbonisation required to avoid dangerous climate change. For Australian fossil fuel interests, President Trump’s war on climate appears particularly opportune. Just last week, Prime Minister Malcolm Turnbull and his senior ministers floated the idea of government backing for new coal-fired power stations as part of the government’s response to Australia’s “energy security” and expressed reticence over the country’s Renewable Energy Target.   For a country that has nurtured world-leading innovations in solar photovoltaic and other renewable energy technologies and that is particularly vulnerable to the effects of climate change – be it in the form of record heat, devastating floods, more widespread drought, coastal inundation from sea level rise combined with stronger tropical storms, or the demise of the Great Barrier Reef – doubling down on the traditional fossil fuel energy path is particularly short-sighted. Of course this hostility to climate action and the decarbonisation of our economies is not new. The attacks on climate action by the Trump presidency and the Turnbull government’s embrace of the discourse of “clean coal” reflect the toxic, partisan political war that has engulfed US and Australian climate policy over several decades. Sound policy has been held hostage by the same vested interests of a large and powerful fossil fuel sector and a traditional vision that jobs and economic growth can only come from the “extractivism” that has defined 19th and 20th century economics.

Power blackout tipped to spread nationwide - As Australia remains in the grip of a heatwave, the federal government has been warned of potential nationwide blackouts.The oppressive temperatures scorching much of Australia has already led to blackouts in South Australia, with the Coalition blaming the state’s energy shortfall on its reliance on renewable energy, sparking another fiery day in Parliament. But according to the Australian Energy Council (AEC) the entire nation’s system needs an immediate upgrade saying energy reliability is not just a state issue. “We’re seeing generators leave the market and we are not replacing them,” AEC chief executive officer Matthew Warren told ABC. “If you keep doing that, you will have more blackouts.” According to the Australian Energy Market Operator’s (AEMO) forecast, load shedding could cause blackouts in New South Wales on Friday. “A tightening supply/demand balance across South Australia and New South Wales over the coming days,” it said in a statement. Mr Warren said South Australia was the first to experience the power outages, “but Victoria is next”. “And if we don’t do anything about this, if we keep just doing nothing about energy policy … this will spread to New South Wales and Queensland and to the rest of the country,” he said.

SA power cuts: Nuclear energy should be considered as solution - Despite opposing a high-level nuclear waste dump in South Australia, state Liberal leader Steven Marshall is now proposing nuclear power as a potential solution to the state's energy reliability issues.Mr Marshall made the claims after last night's load shedding, which meant 90,000 customers lost power during extreme heat.That blackout followed other significant outages in recent months, including September's state-wide loss of power.A citizens' jury rejected high-level nuclear waste storage in November, prompting Mr Marshall to declare plans of "turning South Australia into a nuclear waste dump" were "now dead".But today he said that did not mean he or his party were against the production of high-level nuclear waste in South Australia, via nuclear energy generation."We've never ruled out the nuclear opportunity for energy. We made it very clear that we were not in the slightest bit interested in continuing to pour money into the hopeless case which was a nuclear repository in South Australia," he said.Mr Marshall denied the policy was hypocritical, but did not offer an explanation as to what would become of the highly radioactive spent fuel rods if a nuclear reactor was built in South Australia.He said all options should be on the table to "get baseload back in South Australia", including restarting the decommissioned Port Augusta power station — despite the demolition of one of its chimney stacks. "We need to consider reopening Port Augusta, we need to consider solar thermal, we need to consider nuclear opportunities, we need to consider pumped hydro," he said.

Climate change may overload US electrical grid -- As the planet warms due to climate change and hot days become more common, the US electrical grid could be unable to meet peak energy needs by century’s end, researchers warned Monday. The cost to upgrade the US electrical grid so it could cope with peak demands may be on the order of $180 billion, said the report in the Proceedings of the National Academy of Sciences. “As the electricity grid is built to endure maximum load, our findings have significant implications for the construction of costly peak generating capacity,” said the study. The current study factors in the effect of ever-more frequent and intense heat when it comes to peak electricity demand, or the maximum amount of electricity a given area would need at one time. Some areas will likely use less electricity, for instance in the northwestern United States, where cold days will become less intense. But other areas, like the southern United States, “could experience an increased number of spikes in electricity use as hot days become more prevalent,” said the study.These jumps in peak electricity demands “may require substantial investments by US electricity grids into peak electricity generating capacity.” Much of the costs to upgrade the grid would involve capacity, storage and transmission investments—not simply the cost of generating electricity.

US electric grid isn’t ready to handle our future climate -- Climate change is driven in part by our production of electricity. And there's a chance for feedback here, as the warming will significantly impact our overall consumption of electricity. In fact, it has been suggested that the majority of costs of climate change will likely come from the additional expense of indoor cooling. This will come through both a steady background of warmer temperatures and periods of high demand during extreme heat events. As it stands, the electricity grid is designed to withstand days of high usage, which typically fall on the hottest days of the year. Right now, US grid operators are typically capable of supplying 15 to 20 percent above the forecasted peak electricity load. If the intensity or frequency of these extreme heat days increases, our current grid may not be able to meet the demand. If it won't, then we need to evaluate the electricity supply infrastructure and provide additional investments in peak generation capacity, transmission, and storage.  The researchers combined their understanding of how peak load responds to daily temperature and combined it with projections of future temperature derived from climate models. This produced estimates of the changes we'll see in average load and daily peak load through the end of the century. As a direct result of climate change, they predict a 2.8 percent increase in average hourly load and a 3.5 percent increase in daily peak electricity demand. Peak loads would get peakier. The top 5 percent of daily peak load events would see usage up by anywhere from 6 to 21 percent, depending on the details of the model used. We'd also see more peaks. The number of days where the load was projected to be above the current top 5 percent went up significantly, doubling on the low range of estimates and going up by four times the current levels at the high end. The number of days above the current top 1 percent of days could be up to 1,500 percent more frequent. All of which tells us that increases in electricity generation or storage should be planned to overcome future climate change-induced temperature increases.

For the First Time, Wind on the Plains Supplied More Than Half Region’s Power -- Wind turbines across the Great Plains states produced, for the first time, more than half the region’s electricity Sunday. The power grid that supplies a corridor stretching from Montana to the Texas Panhandle was getting 52.1 percent of its power from wind at 4:30 a.m. on Sunday, Little Rock, Arkansas-based Southwest Power Pool Inc. said in a statement Monday. As more and more turbines are installed across the country, Southwest Power has become the first North American grid operator to get a majority of its supply from wind. That beats the grid’s prior record of 49.2 percent and the 48 percent that a Texas grid operator reached in March, Derek Wingfield, a spokesman, said in an e-mail. “Ten years ago we thought hitting even a 25 percent wind-penetration level would be extremely challenging, and any more than that would pose serious threats to reliability,” Bruce Row, Southwest Power Pool’s vice president of operations, said in the statement. “Now we have the ability to reliably manage greater than 50 percent. It’s not even our ceiling.” The power pool operates 60,000 miles of power grid across 14 states. Texas leads the U.S. wind industry with more than 20 gigawatts installed, followed by Iowa, Oklahoma, California and Kansas, according to the American Wind Energy Association.

Coal dominates in Texas as energy source -- According to the Electric Reliability Council of Texas, coal was the number one energy source for Texas in January, reports FuelFix. Coal provided nearly 36 percent of Texas’ energy, followed by natural gas at 30 percent and wind at 20 percent. Natural gas prices increased in January, which led to higher demand for the cheaper coal. Typically, natural gas is the dominant source of energy in Texas, with coal, wind, and nuclear power all following suit. However, wind energy is now the dominant source of renewable energy in the state, above hydroelectric and solar power. Last year, half of all electricity in the United States was produced by wind or natural gas. Texas leads the nation in energy production from wind. The state produced more than 20,000 megawatts of electricity, according to Houston Public Media. “That’s enough energy to power more than 5.7 million homes here in Texas, and also provide more than 25,000 jobs here in Texas,” said Tom Kiernan, head of the American Wind Energy Association.

As Poland chokes on smog, groups prepare complaint to EU (AP) -- TV stations flash pollution alerts. People don masks for their morning jogs. Preschools stop taking children outside to play. As smog across coal-addicted Poland hits crisis levels, four environmental groups announced Friday that they are preparing a complaint to the European Union accusing Poland of violating EU laws meant to control air pollution. Poland is one of the two most polluted countries in the 28-member bloc, along with Bulgaria. The main cause of air pollution is people burning poor quality coal, sometimes even plastics and other garbage, often in home furnaces that are not equipped to filter out damaging particles. One key pollutant is benzopyrene, a cancer-causing substance. Benzopyrene concentrations are on average five to seven times higher than the legal norm across Poland, and 12 to 15 times the legal norm in the dirtiest regions, particularly the regions around Krakow and Lodz, according to Agnieszka Warso-Buchanan, legal counsel on clean air for ClientEarth, one of the groups preparing the complaint. Warsaw's air is traditionally better than the southern areas, but this winter it has been bad as cold temperatures force people to burn more coal. A lack of strong winds has added to the problem and suddenly this year people have started wearing smog masks in public as awareness of the problem has grown.

India optimistic of being coal-free by 2050 -- India will not need to build another coal power plant after 2025 if renewables continue to fall in cost at their current rate, according to a report that suggests that carbon levels could be cut significantly beyond parameters agreed at the Paris climate talks. A report published on Monday by The Energy and Resources Institute (Teri) in New Delhi suggests that as long as renewables and batteries continue getting cheaper, they will undercut coal in less than a decade. If that happens, it will reduce the country’s carbon dioxide emissions by about 600m tonnes, or 10 per cent, after 2030, the report said. India is the world’s fastest growing major polluter, and its ability to curb carbon emissions will be vital in capping the rise in global temperatures. The report suggests that if the Indian ministers get their policies right, they will be able to go much further than they have already promised, and even eliminate coal-fuelled power entirely by the middle of the century. Ajay Mathur, director-general of Teri, said: “This is perfectly achievable if government gets its policies right. India’s power sector could be coal-free by 2050.” India is currently the world’s third-largest emitter of carbon dioxide behind China and the US, contributing about 4 per cent of the world’s total.

 Utilities vote to close Navajo coal plant at end of 2019 -- The utilities that own the Navajo Generating Station coal-fired power plant near Page are tired of overpaying for power and decided Monday to close the plant when their lease expires at the end of 2019. To run that long, the utility owners need to work out an arrangement with the Navajo Nation, which owns the land, to decommission the plant after the lease expires. Otherwise, the owners will have to close at the end of this year to have time to tear down the plant's three generators and be gone by 2020. Environmentalists cheered the decision to shutter one of the biggest polluters in the nation, while other stakeholders such as the U.S. Department of the Interior and coal supplier Peabody Energy hope to find a way for the Navajo Nation or another entity to step in and keep the plant going beyond 2019. The clock is ticking. The utilities want the lease extension settled with the tribe by July 1. The three-unit, 2,250-megawatt plant has been more expensive to run than natural-gas-burning plants. The closure will affect not only about 430 workers at the plant but also another 325 at Peabody's Kayenta Mine 80 miles away, which straddles the Navajo and Hopi reservations and has nowhere else to sell its coal, especially with the fuel falling out of favor nationally. An official of Salt River Project, an owner and the plant's operator, broke the news to plant employees Monday. "Obviously it is a difficult announcement to make, but a lot more difficult of an announcement to hear, and we are understanding of that," Deputy General Manager Mike Hummel said. "Our focus now is to take whatever steps we can take to keep the plant running through 2019." SRP officials said the power plant has been important in developing Arizona, but that the public utility has a duty to its 1 million customers to minimize costs. Hummel said discussions with the Navajo Nation already are underway to amend the lease to keep the plant running through 2019.

Geochemist Asks: Who Needs Yucca Mt. Anyway? - Dr. James Conca, in an article published in Forbes, sees the Yucca Mt. solution to the nation's spent fuel storage problem as, essentially, moot. “The problem this time is that most of our high-level nuclear waste is no longer high level,” Conca explains. “And most scientists agree we shouldn't dispose of spent nuclear fuel until we reuse it in our new reactors that are designed to burn it,” he said. Similar to car engines that re-burn exhaust that still carries volatile fuel atoms that can be for better gas mileage while burning up pollutants in the process, Conca is asking why the country would bury spent fuel that could be re-used in modern reactors, thereby stealing new energy from the same fuel and coming away with a less volatile radioactivity in the spent fuel in the process. In addition, if we buried useful fuel, we would just need to mine more uranium out of the ground for the new reactors. As a geochemist, Conca doesn't like the Yucca Mountain option, anyway. He doesn't argue that it is not safe, but argues that it would be a needlessly expensive project. “Besides, the highly-fractured, variably-saturated, dual-porosity Yucca Mt. volcanic tuff with highly oxidizing groundwater was the wrong rock to begin with, causing the cost to skyrocket and the technical hurdles to keep mounting,” he said. He argues that there are four types of radioactive waste. Transuranic waste (TRU) from the nuclear weapons program has a place to go – the Waste Isolation Pilot Program's underground repository near Carlsbad, N.M. Similarly, low-level radioactive waste (LLW) has six storage sites around the country. That takes care of the third most radioactive waste – transuranic – and the fourth most (or least) radioactive waste. While it may have made some sense to place the two hottest waste materials underground at Yucca Mountain forty years ago, when the proposal was first developed, it no longer does, says Conca.  Some of the TRU waste in storage in New Mexico is, in fact, hotter than some of the HLW stored at Hanford that has been in limbo for decades. During those same decades, and due to time and chemistry, the need for a separate repository for spent nuclear fuel and HLW fades, Conca says.

Toshiba’s Nuclear Reactor Mess Winds Back to a Louisiana Swamp (BBG - If you want to understand why Toshiba Corp. is about to report a multi-billion dollar write-down on its nuclear reactor business, the story begins and ends with a one-time pipe manufacturer with roots in the swamp country of Louisiana. The Shaw Group Inc., based in Baton Rouge, looms large in the complex tale of blown deadlines and budgets at four nuclear reactor projects in Georgia and South Carolina overseen by Westinghouse Electric Co., a Toshiba subsidiary. On Tuesday, Toshiba is expected to announce a massive write-down, perhaps as big as $6.1 billion, to cover cost overruns at Westinghouse, which now owns most of Shaw’s assets. The loss may actually eclipse the $5.4 billion that Toshiba paid for Westinghouse in 2006 and has forced the Japanese industrial conglomerate to put up for sale a significant stake in its prized flash-memory business. Toshiba had to sell off other assets last year following a 2015 accounting scandal. Toshiba made a big bet on a nuclear renaissance that never materialized, in part because it couldn’t build reactors within the timelines and budgets it had promised. The company had anticipated that Westinghouse’s next-generation AP1000 modular reactor design would be easier and faster to execute -- just the opposite of what happened. Now the Japanese company may exit the nuclear reactor construction business altogether and focus exclusively on design and maintenance. “There’s billions and billions of dollars at stake here,” says Gregory Jaczko, former head of the U.S. Nuclear Regulatory Commission (NRC). “This could take down Toshiba and it certainly means the end of new nuclear construction in the U.S.”

Waste disposal problems halt operations at FirstEnergy's Beaver County plant - FirstEnergy Corp.’s long-awaited plan to safely dispose of waste from its Beaver County coal-fired power plant has hit a major snag just six weeks after taking effect. The Akron, Ohio-based energy company acknowledged it has indefinitely shut down two of its three power generating units at Bruce Mansfield Power Station after encountering problems with its $200 million dewatering facility. The units “are currently offline as we make adjustments to the new coal combustion byproduct disposal process,” the company said in a statement. “The refinements are focused on making the material easier to handle for mine reclamation.” Another factor in halting operations at the two units is a challenging energy market, in which daily energy prices do not support their operation, a spokeswoman noted. Meanwhile, the third unit is temporarily offline as workers complete maintenance on the boiler.  The development is another blow to FirstEnergy’s ailing generation business, which has struggled to compete in the electricity market. Cheaper natural gas and lagging demand for electricity have weighed down profits at coal and nuclear power plants, which make up the majority of FirstEnergy’s generation. In November, the company said it is trying to sell all of its coal-fired plants in Pennsylvania to focus on its transmission and distribution businesses.

Ohio GOP targets clean energy standards, efficiency rules - --- It's been just six weeks since Gov. John Kasich vetoed a GOP bill that would have delayed for another two years mandates requiring power companies to sell an increasing percentage of renewable energy and help customers use less power.Rep. Louis Blessing, III, R-Cincinnati, began circulating a memo to House members Monday seeking co-sponsors for new legislation reducing state green energy and energy efficiency requirements on power companies.Kasich's Dec. 27  veto of House Bill 554 meant a return to mandates requiring that by 2027 at least 12.5 percent of a power company's sales be generated by renewable technologies like wind farms and solar arrays.The governor's veto also re-set the rules on energy efficiency, returning them to previous rules requiring that by 2027, the state's electric utilities cut customer peak demand by 22.5 percent compared with the highest demand in 2009.Blessing could not be reached for immediate comment. But his widely circulated memo makes clear that the legislation will be an effort to re-play a version of the defeated H.B. 554."I will soon be introducing legislation to revise Ohio Revised Code provisions that govern renewable energy, energy efficiency, and peak demand reductions," Blessing wrote.The legislation Blessing has in mind would, according to his memo:

  • Make renewable standards goals rather than mandates.
  • Clarify the law so that all energy goals and standards would end in 2027.
  • Change efficiency standard compliance to every three years rather than every year, meaning fewer reports to state regulators and more time to meet the annual benchmarks.
  • Reduce the 22.5 percent final energy efficiency target of 2027 to 17.2 percent.

The bill would also allow all customers, including residential customers, to opt out of paying for either efficiency programs or power company charges connected with the renewable standards.

Utica Shale Academy Prepares Students for Oil Jobs - The majority of American children attend traditional public schools. However, most public schools follow a college bound curriculum that does not meet the career choices for students not wishing to pursue a college education. Therefore, as the demand for skilled workers in the trades rises, parents are increasingly looking to alternative education choices for their children; one popular choice is charter schools. Although the number of charter school students is small compared to the current total of 50.4 million attending public schools, their increasing popularity is demonstrated by the doubling of charter school students from 1.3 million in 2008 to 2.6 million in 2014. To handle the increases in demand, the number of charter schools in the U.S. is now at approximately 6,800. These schools are spread across 43 states and the District of Columbia. The characteristics of charter schools vary from state to state, but basically, a charter school is a publicly funded school that typically has more flexibility over curriculum and teaching methods than traditional public schools. The name derives from the operational charter the school makes with applicable governing authorities. One example of a specialized charter school is the Utica Shale Academy (USA) in Columbiana County, Ohio. Due to its location, Columbiana County is considered part of Appalachia, sharing a common culture with neighboring western Pennsylvania and West Virginia. This area is active in shale oil production. USA meets the needs of those students wishing to go on to college studies, but also specializes in training students for careers in the oil and gas industry. USA’s unique focus is clear from its mission statement: The Utica Shale Academy provides a unique and vigorous learning environment through a specialized academic program which responds to employers’ and industries' current and emerging and changing global workforce needs and expectations through business/school partnerships.

New Protest Escalates Ohio Fracking Fight -   Conservation groups this week filed an administrative protest challenging a Bureau of Land Management oil and gas lease auction slated for Ohio’s Wayne National Forest. The protest takes aim at the Bureau’s refusal to adequately analyze the impacts of fracking on climate change, water quality and endangered species.“Our protest challenges the Bureau’s disturbing practice of favoring fracking industry interests over clean water, wildlife and human health,” said Taylor McKinnon of the Center for Biological Diversity. “With each new federal fossil fuel lease, the Trump administration pushes us closer to climate disaster.”The protest charges that the plan to allow hydraulic fracturing or “fracking” on 1,186 acres of Wayne would degrade streams and groundwater, fragment wildlife habitat and worsen climate change. The federal auction is scheduled for March 23.The groups also note that the federal environmental assessment for the lease auction failed to fully disclose fracking’s effects on the national forest. That’s because the government failed to study the increased surface disturbance, habitat fragmentation, and water-pollution impacts of opening up adjacent privately owned areas to oil industry development.“The Wayne National Forest is owned by all Americans, and it’s a special place that deserves protection,” said Nathan Johnson, an attorney with the Ohio Environmental Council. “Tens of thousands of citizens are demanding a halt to fracking in the Wayne. The public doesn’t want to see pipelines tearing up this forest, and we don’t want fracking chemicals staining its streams. This fight is about holding the federal government accountable to both the law and the will of the people.”

Ohio critics hope bats might slow down pipeline project - ABC News: The existence of the threatened species remains one of the impediments the partnership between Houston-based Spectra Energy and Detroit's DTE Energy face before receiving expected approval to build the 255-mile long NEXUS pipeline capable of transporting 1.5 billion cubic feet of gas per day from the shale fields of Appalachia into Michigan and Ontario, Canada. NEXUS cleared a big hurdle in November when the Federal Energy Regulatory Commission issued an environmental impact statement that found no problems with the company's proposed route. NEXUS now awaits the Commission's approval to begin construction, a step that could be delayed when one of its three Commission members resigned last week. Opponents of the project in Ohio's Summit and Medina counties aren't backing down from a fight that began with efforts to get the pipeline rerouted away from homes and businesses to less populated areas. The Commission ruled in the impact statement that alternative routes proposed by the city of Green in southern Summit County held no environmental advantages over the one proposed by NEXUS. The existence of northern long-eared bats, classified as a threatened species by the U.S. Fish and Wildlife Service, along the proposed route means NEXUS isn't completely out of the woods. The bats live in caves and other sheltered spots during winter months and nest in trees during spring and summer. Its threatened status means trees in their habitats are not supposed to be felled between April 1 and Sept. 30.

Eleven ‘Super-Lateral’ Wells for East Ohio - The Intelligencer: After drilling its 3.5-mile-long “Purple Hayes” well last year, Eclipse Resources now plans to bore 11 additional horizontal wells this year, each of which will stretch at least three miles from their points of entry into the earth. In horizontal Marcellus and Utica shale drilling, contractors initially drill vertically to a certain depth in the earth, typically at least one mile beneath the surface. Drillers then bore outward horizontally from this position. The 11 Eclipse “super-lateral” wells will stretch horizontally in the firm’s eastern Ohio operations, which include portions of Monroe, Belmont, Guernsey and Noble counties.Eclipse plans to spend $300 million for drilling and fracking this year, while the firm holds 112,000 acres. During the last three months of 2016, the driller produced 255 million cubic feet of natural gas per day, including 71 percent dry methane natural gas; 18 percent liquids such as ethane, propane and butane; and 11 percent crude oil. In December, Eclipse placed five wells on its “Holiday” pad, located in eastern Monroe County, into service. These wells are the first to see the company’s new “Gen-3” fracking technique. “The organizational changes we have made will not disrupt that capability which we plan to continue to demonstrate this year with some exciting new operational milestones we plan to undertake in our drilling program. With these management changes, the company has placed an increased emphasis on its desire to grow both through the drill bit and through accretive acquisitions opportunities,” Hulburt added.

Study finds methane spike in Pennsylvania gas country - New research shows a recent three-year surge in methane levels in northeastern Pennsylvania, a hub of the state's natural gas production. After sampling the region's air in 2012 and again in 2015, researchers found that methane levels had increased from 1,960 parts per billion in 2012 up to 2,060 in 2015, according to a study published Thursday in the journal Elementa: Science of the Anthropocene. During that span, the region's drilling boom slowed and natural gas production ramped up. The researchers said this shift in gas activity is possibly to blame for the spike in methane levels. "The rapid increase in methane is likely due to the increased production of natural gas from the region which has increased significantly over the 2012 to 2015 period," Peter DeCarlo, an assistant professor at Drexel University and a study author, said in a statement. "With the increased background levels of methane, the relative climate benefit of natural gas over coal for power production is reduced."Methane is a potent greenhouse gas. Its emissions have been hard for regulators to quantify, with the EPA only last year beginning to target reductions from oil and gas production.Also last year, the Obama administration released new rules to reduce methane leakage, but the Trump administration has targeted many such rules for repeal.Some states are also starting to find ways to reduce methane emissions from oil and gas activities. Colorado was the first state to adopt rules to control drilling-related methane emissions. Pennsylvania, the second-ranked state for natural gas production, is following suit. Democratic Gov. Tom Wolf last year launched a strategy to reduce the emissions from natural gas wells, compressor stations and pipelines. "Every single background measurement in 2015 is higher than every single measurement in 2012," DeCarlo told InsideClimate News. "It's pretty statistically significant that this increase is happening."

DEP links Lawrence County earthquakes to fracking - A series of small earthquakes in Lawrence County last year appear to have been linked to fracking operations at nearby Utica Shale wells, Pennsylvania regulators said today. The Pennsylvania Department of Environmental Protection announced the conclusion in an advisory for an online event it plans to hold tomorrow to disclose details of its findings.The series of low-magnitude earthquakes on April 25, 2016, in North Beaver, Union and Mahoning townships “had a marked temporal/spatial relationship to natural gas hydraulic fracturing activities by Hilcorp Energy Co.,” the department concluded after what it said was an extensive review involving the agency and outside scientific and industry partners.DEP plans to hold a webinar at 10 a.m. tomorrow to discuss the findings and procedures it has developed to reduce seismic risk from future oil and gas operations.A Hilcorp spokesman did not immediately respond to a request for comment. Observers have acknowledged since the first days following the small earthquakes that the depth, time and location of Hilcorp’s fracking operations at its North Beaver, NC Development well pad suggested a link with the series of seismic events, but state officials had not broadly announced public conclusions about the events until now. Researchers have linked fracking to earthquakes in several sites in eastern Ohio not far from the Lawrence County quakes, as well as in England, Canada and Oklahoma, but cases of recorded or felt earthquakes directly tied to fracking have been rare. The Lawrence County earthquakes are the first known incidents of fracking-linked quakes in Pennsylvania.

Pennsylvania correlates natural gas fracking with quakes: Pennsylvania environmental regulators have found a likely correlation between a natural gas company's fracking operation and a series of tiny earthquakes in western Pennsylvania last year. The quakes were recorded last April in Lawrence County, about 50 miles north of Pittsburgh and close to a natural gas well pad owned by Houston-based Hilcorp Energy Co. They were too weak to be felt by humans and no damage was reported. Fracking, a method to extract gas or oil from underground shale rock, has been tied to earthquakes in neighboring Ohio and other states, but never before in Pennsylvania, the nation's No. 2 natural gas-producing state. "This is the first time we have seen that sort of spatial and temporal correlation," Seth Pelepko, an official with the state's Department of Environmental Protection, said Friday.Hilcorp stopped fracking at the well pad after the quakes. Company spokesman Justin Furnace said Friday the company has no plans to resume fracking at the site and will continue to work with the state to address any future concerns. The company was using a technique at the well called "zipper fracturing," essentially the simultaneous fracking of two abutting horizontal wells. To reduce the likelihood of future quakes, Hilcorp agreed to discontinue the practice for wells less than a quarter-mile apart in the three townships where the quakes were recorded, DEP officials said. DEP also required Hilcorp to operate its own seismic monitors in the townships, to notify the agency within 10 minutes of any quakes of 1.0 or greater magnitude and to suspend fracking in the event of larger quakes. Hilcorp's fracking operations were also blamed for causing 77 earthquakes in Poland Township, Ohio, a few miles from last April's tremors in Pennsylvania. One of the 2014 temblors was magnitude 3.0, strong enough to be felt by residents and "potentially one of the largest earthquakes induced by hydraulic fracturing in the United States," Miami University (Ohio) geologists wrote in a 2015 study.

Pennsylvania to release findings on fracking, quakes - (AP) - Pennsylvania environmental regulators are set to release the findings of their investigation into a series of minor earthquakes that took place near fracking operations by an oil and gas company. The temblors, all too weak to be felt by humans, were recorded last April in Lawrence County, about 50 miles north of Pittsburgh and three-quarters of a mile from a natural gas well owned by Houston-based Hilcorp Energy Co. No damage was reported. The state Department of Environmental Protection has been investigating. Regulators are releasing their findings on Friday. DEP notes the quakes had a “marked … relationship” to Hilcorp’s drilling operation in terms of timing and location. Fracking, a method to extract gas or oil from underground shale, has been tied to earthquakes in neighboring Ohio and other states, but never in Pennsylvania, the nation’s No. 2 natural gas-producing state.

Enviro groups seek immediate block to Mariner East 2 pipeline - Moving quickly, anti-pipeline activists have appealed the Pennsylvania Department of Environmental Protection’s decision Monday to approve the fiercely contested Mariner East 2 pipeline and asked for an immediate halt to the $2.5 billion project.The Clean Air Council, the Delaware Riverkeeper Network, and the Mountain Watershed Association filed the appeal with the Pennsylvania Environmental Hearing Board, alleging that the DEP’s review process for the cross-state pipeline was flawed."Bowing to heavy political pressure, the Department of Environmental Protection greenlighted Sunoco’s ill-conceived and dangerous construction plans for Mariner East 2 without having all the information it needed to make a reasoned and reasonable decision," the groups said in their 110-page plea for supersedeas, the legal term for suspending the permits. The groups said they would suffer an “immediate and irreparable injury” if ground were broken on the pipeline and requested a construction halt until their appeal could be adjudicated. The pipeline, which is being built by Sunoco Logistics Partners LP of Newtown Square, would transport natural-gas liquids across Pennsylvania to Sunoco’s terminal in Marcus Hook.“Sunoco’s permit applications were woefully incomplete, inaccurate, and contradictory, and the DEP’s review and approval was utterly inadequate,” Joseph O. Minott, the Clean Air Council’s executive director, said in a statement. “What DEP has authorized with these permits is the destruction of Pennsylvania streams and wetlands, the endangerment of the public, and great damage to both public and private property.” The appeals were filed late Monday, only hours after the DEP issued a series of permits allowing Sunoco to encroach on hundreds of waterways and wetlands during construction of the underground pipeline, which is also known as the Pennsylvania Pipeline Project.

Another round of NGL infrastructure in Marcellus / Utica - Natural gas production in the Marcellus and Utica plays is projected to rise by 30% or more by 2022 under all of RBN’s forecast scenarios, and production of Northeast natural gas liquids is expected to increase even more quickly. Midstream companies are responding to this next phase of gas/NGL growth with plans for still more gas-processing plants, fractionators, NGL storage facilities, and NGL takeaway capacity––pipeline, rail, ship and barge. Also, Shell Chemicals continues to advance plans for an ethane-consuming steam cracker in Beaver County, PA, and another petrochemical company may soon decide to build a cracker in Ohio. Today we begin a new series on the latest push by midstreamers to keep pace with NGL growth in the epicenter of U.S. gas and NGL production. After growing at a breakneck pace throughout the 2010-15 period, rising from less than 1.7 Bcf/d in January 2010 to just over 21 Bcf/d in December 2015, natural gas production growth in the three Marcellus/Utica states––Pennsylvania, West Virginia and Ohio––slowed dramatically in 2016. As of November, it stood at about 22.6 Bcf/d, and in its latest Drilling Productivity Report (DPR), issued on February 13, the Energy Information Administration (EIA) projected that February 2017 production in the Marcellus/Utica would average ~23 Bcf/d. There are several reasons for the 2016 lull; they include the lack of pipeline takeaway capacity additions during most of last year; gas storage constraints last fall; and sagging NGL prices, due in part to low prices for crude oil and to high NGL takeaway costs. Now, though, with long-standing gas-pipeline constraints out of the region being relieved and with demand for gas from U.S. power generators, liquefied natural gas (LNG) exporters, and Mexico on the rise (see Part 4 of RBN’s Drill Down Report on moving Northeast gas to Gulf Coast/Texas export markets, I Saw Miles and Miles of Texas), Marcellus/Utica gas production is in for another period of sustained growth. Because of the region’s highly favorable production economics, all three of RBN’s three price scenarios––Advance, Growth and Cutback––show Northeast gas (and NGL) production increasing by leaps and bounds by 2022 (see Figure 1 for the gas outlook).

West Virginia DEP Won't Monitor Light, Sound Pollution at Compressor Sites - — Excessive light and sound may not pose the health threat that carcinogenic benzene and formaldehyde originating from a natural gas compressor can, but those living in the vicinity of such a station may find it difficult to get a good night’s sleep. After an objection filed by the West Virginia Oil and Natural Gas Association, the state’s Department of Environmental Protection has decided not to regulate the light and sound associated with such compressor stations, including the large one located less than two miles east of The Highlands known as the Battle Run Appalachia Midstream Services compressor in the Valley Grove area. “To say that we’re disappointed is an understatement. We feel like we got ambushed by this,” West Virginia Surface Owners’ Rights Organization Project Manager Julie Archer said. “This is just a complete disservice to the members of the public who have to live near these things.” According to Penn State University, natural gas compressor stations are usually placed at 40- to 70-mile intervals along a pipeline that takes the product to market. Compression is required to get the gas to move through the pipeline. The natural gas enters the compressor station via a pipeline that is connected to gathering lines, which are connected to individual gas wells. At the station, the gas is compressed either by a turbine, motor or engine. Last year, West Virginia University occupational and environmental health professor Michael McCawley participated in a study that suggests those living near fracking operations can experience “sleep disturbance, cardiovascular disease and other conditions that are negatively impacted by stress” because of light and sound pollution.  As the Marcellus and Utica shale boom proliferated in recent years, the number of compressor stations to move the material has also increased in both Ohio and West Virginia. “These things are just all over the place. . “There are limitations for some of the air pollutants. But they are basically saying it’s OK if people can’t sleep or can’t use a part of their house.”

Does the Australian LNG export experience foreshadow soaring U.S. natural gas prices? Two times last winter Australians living in the country's eastern region paid more than twice as much for natural gas as did Japanese customers taking delivery of liquefied natural gas (LNG) from the same region. (Australia has three separate natural gas pipeline networks which create three domestic natural gas markets, Eastern, Northern and Western.)The price spikes had eastern natural gas users, particularly business users, hopping mad about what they perceive as foolish energy policy. That policy, they say, gives away Australian energy resources at bargain prices to foreign countries while making domestic industries that are reliant on those resources less competitive because of high energy costs. In addition, the new volatility in gas prices makes planning difficult and expansion financially risky. The dust-up in Australia has some people thinking that the same thing could happen in the United States, something I pointed out in 2013. In the United States the Federal Energy Regulatory Commission has approved natural gas export terminals with a capacity of 17 billion cubic feet (bcf) per day. That represents 19 percent of current U.S. natural gas production. If all terminals for which applications are pending or expected are included, the number goes up to 42 bcf per day or about 47 percent of current production. Only one U.S. export facility is currently in operation. It's worth noting that U.S. marketed natural gas production is down a little over 1 percent for the 12-month period ending November 2016. During the same 12-month period net imports were about 654 bcf or about 2.7 percent of total consumption. That's right. The United States remains a net importer of natural gas even as it contemplates a major expansion of LNG export capacity. Back in Australia electricity blackouts in the state of South Australia are being blamed partly on the mothballing of a major new natural-gas-fired electric generating plant. The operator had contracted for large deliveries of natural gas at low prices to fuel the plant. But with the price of LNG exports from Australia soaring, it became so profitable to resell the gas for export that the plant was never opened. (That was before the domestic price spike. But by then the plant's gas was already committed.) The rapid expansion of natural-gas-fired electricity generating plants in the United States leaves the country vulnerable to similar dynamics that also include higher electricity rates. Most utilities get to pass fuel price increases on to their customers. And, LNG exporters cannot withhold deliveries and sell their contracted gas back into the domestic market if prices spike. They are obliged by long-term contracts with their customers to deliver.

What the FERC? How a lack of quorum could affect US oil and natural gas – Platts podcast  - On February 3, US Federal Energy Regulatory Commission lost its quorum when Chairman Norman Bay announced he had "gone fishin’" and left the agency in regulatory chaosChris Newkumet, DC bureau chief and chief editor of Inside FERC, and Maya Weber, editor of Inside FERC, join senior oil editors Meghan Gordon and Brian Scheid to mull over the impacts of the changes. What does FERC's current state mean for pipeline permitting and oil shipping rates and what does it say about partisanship in Washington?

What a pro-infrastructure administration can and cannot do -- As it builds out the nation’s oil and natural gas pipeline networks to keep pace with ever-changing needs, the midstream sector has faced a number of challenges, perhaps chief among them regulatory delays exacerbated by organized environmental opposition. An oft-repeated priority of the new administration has been to make it easier to advance the development of new energy infrastructure development. That raises a few questions. How much difference will this apparent change in attitude make? Should we expect a huge surge in new pipeline projects to be approved and move forward? Today we examine major projects that have faced drawn-out approval processes and evaluate the degree to which a new administration can grease the skids for new pipelines.A long list of major oil and gas pipeline projects have secured regulatory approval and been installed and started up since the beginning of the Shale Era a few years ago, but a number of others have encountered delay after frustrating delay. Seven poster children in this category of stuck or potentially stuck stand out: two crude-oil pipelines (Keystone XL and the Dakota Access Pipeline—DAPL) and five gas pipelines: Constitution, Rover, NEXUS, Atlantic Sunrise, and Northern Access. Their developers all thought they had done everything they had to do to win needed approvals, but, all of them faced major delays and most still await final approvals. Let’s start our review of these projects—and what a new administration can and can’t do—with the two oil pipelines, the very controversial Keystone XL (purple line in Figure 1) and DAPL (orange line).

Pipeline fire out in Louisiana; missing worker presumed dead - ABC News: A pipeline fire that broke out Thursday night in south Louisiana, injuring two people and killing one, has been extinguished. Phillips 66 said in a Monday morning news release that the fire was out as of 8:30 a.m. Officials in St. Charles Parish said they began receiving calls Thursday about an explosion and fire at the Phillips 66 pipeline station at Paradis (PAIR'-ah-dee), west of New Orleans. The cause of the blaze hasn't been determined. The pipeline carried liquid components of natural gas. At one point, 60 nearby homes had been evacuated. Two contract workers for Phillips were hospitalized. Phillips said Saturday that one missing employee was presumed dead. The company said the St. Charles coroner would begin an examination at the scene once the area was deemed safe.

Phillips 66 sees strong US export demand reviving midstream opportunities - Phillips 66 expects a revival in the US midstream space in 2017, as demand for exports of crude, products and LPGs remain strong, President Tim Taylor said Tuesday. "We see a resurgence of opportunities in the midstream," said Taylor, addressing attendees at Credit Suisse's 22nd Annual Energy Summit in Vail, Colorado. His comments were webcast. Taylor said Phillips 66 and its midstream master limited partnership, Phillips Energy Partners, continues to find ways to deal with the "nature of market changes," particularly around growth in exports of both crude and products. Phillips 66 is a stakeholder in the Dakota Access Pipeline, expected to come online in the second quarter of 2017.DAPL received its final permit to finish the line in February 2017 following a contentious battle with environmentalists. Completion of the pipeline will open cheaper transportation for North Dakota's Bakken crude. The line will carry the light, sweet crude into the Midwest oil hub of Patoka, Illinois, and onward to the US Gulf Coast via the Energy Transfer Crude Oil Pipeline, or ETCOP. Phillips 66 is also a stakeholder in ETCOP. This will give the landlocked crude port access, opening the door for exports, as well as lower transport costs for East Coast refiners, who pay high rail costs from North Dakota to the East Coast.

More Houston crude distribution infrastructure on the way. - More than a dozen crude oil pipelines can deliver up to 3.4 million barrels/day (MMb/d) to the greater Houston area, with another 550 Mb/d of capacity planned, and as domestic production starts to grow again, a new round of projects is under way to build-out the region’s distribution pipelines, storage and marine-dock infrastructure. The developers of these Houston-area projects include a range of midstream players: from large, diversified midstreamers that own the long-distance pipelines flowing into the region to smaller players planning their first Houston projects. Today we conclude a two-part blog series on the latest round of projects and on the increasingly intense competition for barrels. Because of Houston’s outsized role in refining and in hydrocarbon markets more generally, the RBN blogosphere has covered the region’s crude infrastructure extensively. For example: two deep-dive Drill Down reports (starting in October 2014 with Houston We Have A Problem, followed up with November 2015’s Stairway to Houston) as well as numerous blogs on similar topics (see Saving All My Crude For You and The Future of Houston Area Crude Infrastructure). As we said in Part 1 of this series, existing pipelines into Houston from the Permian Basin in West Texas, the Eagle Ford in South Texas, offshore Gulf of Mexico and the legacy South Texas region can carry as much as 1.85 MMb/d. Another 1.55 MMb/d can flow into Houston from the Cushing, OK hub via the two Enterprise Products Partners/Enbridge Seaway pipelines and TransCanada’s Marketlink. Still more capacity is in advanced stages of development. In the second quarter of 2017, Magellan Midstream Partners and Plains All American plan to complete a 100 Mb/d addition to their BridgeTex Pipeline (from the Permian to Houston) and in mid-2018 Enterprise plans to start up its 450 Mb/d Midland-to-Sealy, TX pipeline (ditto). Pipeline flows to Houston (which are expected to increase by 250 to 350 Mb/d in 2017 due to Permian growth, according to recent RBN projections) are augmented by waterborne imports, which averaged 950 Mb/d between January and November 2016, according to the Energy Information Administration (EIA).

Refugio explosion seen in Corpus Christi, Houston -  — The horizon looked fierce as Jake Ramirez started walking to a friend's house, just after midnight. It was supposed to be dark, but the sky he saw was filled with an ominous orange glow. "I just thought it had to be a big fire," Ramirez said of the big ball of light, which hovered over a ranch miles away in the distance. With that, he whipped out his cellphone and began filming. It's the same way many reacted after a natural gas pipeline unexpectedly exploded here early Wednesday morning. Refugio County Sheriff Raul "Pinky" Gonzales said the explosion occurred on rural ranch land known as Lake Pasture, near U.S. Highway 77 and state Highway 239. There were no reports of injuries, County Judge Robert Blaschke said. The ruptured pipeline belongs to Kinder Morgan Inc. Melissa Ruiz, a company spokeswoman, said the release and fire occurred on its Tejas pipeline system around 12:30 a.m. Wednesday. Kinder Morgan shut down the impacted pipeline segment, dispatched personnel to the site, and regulatory agencies were notified notified. http://www.caller.com/story/news/special-reports/energy-effects/2017/02/15/coastal-bend-industrial-incidents-since-2000/97966360/ People on social media reported a loud boom, then an orange fireball some estimated climbed as high as 200 feet, glowing in the distance. "We got calls from as far away as Katy, Corpus Christi and Beeville," said Stan Upton, Refugio County's emergency management coordinator. "A lot of people saw this thing."

Parsley to spend $2.8 billion in latest Midland basin acreage haul - Parsley Energy Inc., Austin, has agreed to acquire undeveloped acreage and producing oil and gas properties in Permian’s Midland basin from recently formed Double Eagle Energy Permian LLC for $2.8 billion. The deal covers 71,000 net acres and production of 3,600 boe/d as of Jan. 1. Parsley will receive 23 drilled but uncompleted (DUC) wells targeting the Lower Spraberry, Middle Spraberry, Wolfcamp A, and Wolfcamp B formations, with an average lateral length of 8,400 ft.  Parsley also will take 3,300 net horizontal drilling locations, 80% of which it will have operating control. Of the total, 1,800 net locations are in the Lower Spraberry, Wolfcamp A, and Wolfcamp B. The acquired horizontal drilling locations have an average lateral length of 6,600 ft, with more than 40% featuring lateral lengths of 7,500 ft or more. The purchase price consists of $1.4 billion of cash and 39.4 million units of Parsley stock valued at $1.4 billion. Parsley intends to finance the cash portion through equity and debt offerings. The deal is scheduled to close on or before Apr. 20.  After making more than $1 billion in deals for Permian assets last year, Parsley has kicked off 2017 by spending about $3.5 billion to continue its expansion in the basin. In January, the firm agreed in several deals to acquire undeveloped acreage and producing oil and gas properties in both the Midland and southern Delaware basins for $607 million in cash (OGJ Online, Jan. 11, 2017). The Double Eagle deal, Parsley’s largest to date, increases the firm’s Permian net lease holding to 227,000 acres, with 179,000 net acres in the Midland basin; and its Permian net horizontal drilling locations to 7,900, including 4,300 net locations in the Wolfcamp A, Wolfcamp B, and Lower Spraberry in the Midland basin, and Upper Wolfcamp in the southern Delaware basin. Parsley says the deal gives it a “sufficient acreage footprint to support more than 20 rigs focused on horizontal development.”

Passing On The Permian: Has The Bubble Grown Too Big?  Has the Permian Basin become too hot? More companies and enormous sums of capital continue to flood into West Texas to take advantage of the most prolific shale basin in North America. Rig counts are showing no sign of slowing down and new deals in the Permian are announced on what seems like a weekly basis. However, will the Permian bubble deflate? ExxonMobil dumped more than $6 billion in January to double its holdings in the Permian, as the oil supermajor decided to ramp up shale drilling instead of taking on more complex megaprojects offshore. But in the past, ExxonMobil has made a play for shale assets at the top of the market. In 2009, Exxon paid more than $30 billion for XTO Energy, a Texas shale gas driller, in what was widely seen in retrospect as an expensive play on a market that had already peaked.  With that context in mind, Exxon’s latest deal raises a few questions about the health of the Permian frenzy. Land prices have surged so high in the Permian Basin that some companies are starting to look elsewhere, according to Bloomberg. It is not uncommon these days to see land deals selling for more than $60,000 per acre, which Wood Mackenzie says is 50 times higher than four years ago and still 10 times higher than the Bakken today.In the past two years we have seen the Permian benefit at the expense of other drilling areas. Places like the Bakken and Eagle Ford have been hemorrhaging rigs, jobs, and capital, and consequently have suffered a sharp decline in production. Many companies drilling in those locations decamped for the Permian Basin, and the West Texas shale basin saw a corresponding increase in rigs and drilling activity. Wall Street, desperate for profits after nearly three years of poor returns on energy investments, has been dumping money into Permian drillers. Wall Street’s pot of money seems to be endless, and they are once againdumping money into oil and gas, and the Permian in particular. Related: Energy Storage Set To Boom In 2017 But land prices might have climbed too high. For every Parsley Energy – a small driller that is going all-in on the Permian – there are other companies taking a different approach. Bloomberg cites several companies that are passing on the Permian for less flashy locales – BP is looking to drill in Argentina’s Vaca Muerta, Newfield Exploration is expanding into Oklahoma’s STACK play, and Sanchez Energy is returning to the Eagle Ford, a shale play that has once again become an underdog.

What's with all the DUCs? -  The latest Drilling Productivity Report from the EIA, released yesterday (February 13, 2017), shows that while the combined rig count in the seven major U.S. shale plays rose about 25% in the fourth quarter of 2016 versus the previous quarter, and the number of wells drilled was up 29%, well completions were up a paltry 1%, leading to an increase in the inventory of drilled-but-uncompleted wells (DUCs). Completions accelerated a bit in January 2017, but DUCs still continued to rise. That certainly seems counterintuitive.  With crude oil prices stable in the low $50’s over the past few months you might think that producers would be pulling DUCs out of inventory, and in fact there have been statements to that effect in several producer investor calls. This is not just an exercise in energy fundamentals numerology. If the DUC inventory is increasing, then production will not be ramping up as fast as the growing rig count would imply. But what if, as some early signs indicate, the historical relationships are out of whack and the DUC inventory isn’t growing but rather declining? In that case, forecast models could be understating the outlook for production growth, and the market could be in for a more rapid and steeper rebound in oil and gas production than many expect. In today’s blog, we delve into the DUC inventory data and its potential upside risk to production forecasts.

Bringing Back Our People: Industry Combats Workforce Challenges - Lingering effects of the industry’s downturn are still wreaking havoc on the oil and gas workforce. A recent study by the University of Houston (UH) shed light on the potential HR nightmare – laid off workers who may never return to the industry. The study, which surveyed more than 700 adults who lost jobs in oil and gas within the past two years, found that 62 percent of respondents were still unemployed at the time of the survey. Additionally, only 13 percent of respondents who had been reemployed were in oil and gas.“Will those workers come back? Maybe, but there’s absolutely some evidence that we have damaged the workforce and we may not get a lot of those folks back,” Bob Newhouse said during the International Association of Drilling Contractors (IADC) Health, Safety, Environment and Training Conference Feb. 7-8 in Houston.  According to the U.S. Bureau of Labor Statistics, a massive decline in the labor force participation rate began in about 2000, said Newhouse. So while the unemployment rate is going down, there are fewer people in the workforce. “Another negative trend we’re seeing is women leaving the workforce,” he said. “That’s attributed generally to higher education attainment. More people are staying in school longer, which is good for educators, but it’s bad for the workforce, so there’s a push-pull.”     Oil and gas companies will need to focus on talent attraction as the industry recovers and job opportunities are created again. But this isn’t the oilfield of the 80s. Technologies have advanced and the workforce will need to be skilled enough to handle the changes

Oklahoma rocked by natural gas well explosion | Washington Examiner: A natural gas well exploded in Oklahoma Thursday afternoon, with reports of multiple injuries in Pittsburg County. A number of state and local emergency agencies responded to the well explosion, which occurred near the town of Quinton, about 150 miles east of Oklahoma City. The Quinton Police Department said the explosion in the major fossil fuel-producing state happened when the top of a natural gas well blew off, according to local channel News 9. Immediate reports indicated that one person had been flown by helicopter to a hospital in Tulsa. The explosion occurred as the U.S. Senate considers approving the state's attorney general, Scott Pruitt, to lead the Environmental Protection Agency.

TransCanada Tries Again for Nebraska's Approval of Keystone - TransCanada has rebooted its effort to build the Keystone XL oil pipeline across Nebraska, where it had met with opposition before it withdrew its application when the Obama administration denied the company a federal permit in late 2015. The company filed an application Thursday with the state's Public Service Commission, executives said on a conference call with investors and analysts to discuss earnings. Nebraska had been at the center of opposition to the pipeline, largely based on environmental concerns. TransCanada's latest move had been expected since Donald Trump was elected U.S. president. One of his first orders of business was to invite TransCanada to reapply for a permit from the U.S. State Department to allow the line to cross the border with the U.S. The company did so last month. Keystone XL's tentative route calls for it to originate in Alberta's oil sands region, cross the U.S. border into Montana and run through South Dakota to Steele City, Neb., where it would link to existing pipelines to Gulf Coast refineries and ports. Nebraska's permitting process, which requires a series of public hearings, could take up to a year and is expected to again draw strong opposition from residents, ranchers and farmers, as well as environmental groups. Landowners had expressed concern about use of eminent domain to seize land in the path of the pipeline. TransCanada has said the Gulf Coast is the natural destination for heavy Canadian oil because the many refineries in Texas and Louisiana are geared to process the sludgy crude into gasoline, diesel and other fuels. The company said it is working with potential shippers on the oil pipeline to assess demand for space on Keystone XL, with some customers wanting less than they did a few years ago and others signaling they may want more.

NM Groups Slam Move in Congress to Kill Methane Waste Rule - The U.S. House of Representatives today is slated to repeal the Bureau of Land Management's Methane Waste Rule, which requires drilling companies to capture excess methane at oil and gas wells on public land rather than burn or vent it into the atmosphere. The Obama-era rule went into effect only weeks ago, after years of public comment and hearings as well as a court challenge. Kent Salazar, a board member of the New Mexico chapter of Hispanics Enjoying Camping, Hunting and the Outdoors (HECHO), said companies should be required to install methane-capture equipment so the gas can be sold and generate royalties for taxpayers. "Especially now, New Mexico's in dire economic straits because of the drop in oil prices, and as citizens of the state of New Mexico, we're losing money when we lose our resource," he said. "When this methane is vented off, that's waste." Opponents of the Methane Waste Rule have said it imposes additional costs on the industry by requiring more equipment in remote locations. To scrap the law, the Congressional Review Act is being invoked, a rare tactic that requires only a simple majority in the House and Senate and forbids the BLM from crafting a similar rule in the future. Pollution from compounds in methane gas has been linked to respiratory disease and cancer, so Salazar argued that the Methane Waste Rule is needed to protect air quality in local communities. "It affects the health of the Native Americans (and) the Hispanics that live out by these wells," he said. "The natural gas that comes on methane has some other substances attached to it, such as benzene - which, when they enter the air like that and these people breathe it in, it causes health problems."

Boulder County keeps drilling moratorium despite warning - Boulder County did not drop its moratorium on oil and gas drilling Friday as Attorney General Cynthia Coffman demanded, a county official said, potentially setting up a court battle. Coffman, a Republican, told the heavily Democratic county last month the moratorium contradicts a Colorado Supreme Court ruling that only the state can regulate the industry. She warned she would file a lawsuit if county officials didn't rescind it by Friday. County officials say the moratorium is legal and is scheduled to stay in place until at least May 1 while they update their land-use regulations for oil and gas. County Attorney Ben Pearlman said the county is prepared to defend the moratorium in court. He said he believes the measure is legal because its purpose is to give the county time to revise its outdated regulations. "We've been working diligently on that," he said. Coffman said the county is wrong. "Plain and simple, Boulder County is violating state law and has left my office with no option other than to enforce the law," she said in a written statement. "It would be patently unfair for some local governments to be forced to comply with state law while allowing Boulder to continue with its illegal moratorium." Boulder has had a moratorium in place since 2012, extending it several times. Democratic state Sen. Matt Jones, who represents part of Boulder County, accused Coffman of acting "at the behest of oil and gas companies." He made the statement during a debate on the Senate floor.

Colorado Attorney General Sues Boulder County to End Fracking Ban - Colorado's attorney general is suing Boulder County over its fracking ban that has been in place for the last five years. Republican Attorney General Cynthia Coffman and the state of Colorado are plaintiffs in the lawsuit . The complaint to initiate the lawsuit was received by county officials on Feb. 14, KUNC reported. The AG's office had been threatening Boulder County with a lawsuit for several weeks over the county's moratorium on oil and gas development in unincorporated areas. The county first adopted the temporary ban back in Feb. 2, 2012 and has extended it several times. In a Jan. 26 letter to county commissioners, Coffman gave a Feb. 10 deadline to rescind the moratorium as it violates state law. Last May, Colorado's Supreme Court rulings on two cases prohibited local governments from preventing oil and gas development through the use of local bans. In light of the court's decisions, Coffman called Boulder County's continued ban "clearly unlawful." But Boulder County deputy attorney David Hughes disagrees. "Our position is that we are complying with state law and if attorney General Coffman just held off and let us complete our process, we think that is a perfectly viable option," Hughes told KUNC. "A lot of the open space that we bought over the years, the mineral rights had already been severed, so the open space doesn't provide protection in those instances." "In 2012 when the county adopted its regulations, it was looking at smaller well pads and now the trend is for these mega pads, we're looking at 20, 30 40 wells per pad," Hughes added. "Our regulations didn't really look at or address that issue." As KUNC explains, "after the state Supreme Court rulings, Boulder County rescinded its moratorium on new oil and gas permits that was set to expire in 2018. It was replaced by county commissioners with shorter time-outs, usually four to six months long. Most recently commissioners voted in December 2016 to extend it until at least May 1, 2017, while they revise the county's oil and gas regulations." But Coffman said in a statement about Tuesday's filing that the county had years to prepare with state law:

CU study links childhood leukemia in Colorado to oil and gas development -– Does living near areas of high-density oil and gas development increase the risk of childhood leukemia? A University of Colorado study released Wednesday appears to point to that conclusion. The study by the Colorado School of Public Health at CU Anschutz shows a link between young Coloradans diagnosed with acute lymphocytic leukemia and their proximity to high-density gas development. Researchers led by Dr. Lisa McKenzie looked at data from the Colorado Central Cancer Registry and compared that information from the Colorado Oil and Gas Information System. The study included 743 young Coloradans aged 0-24 years living in rural Colorado and diagnosed with cancer between 2001 and 2013. According to current research, more than 378,000 Coloradans live within one mile of oil and gas development. Although the study appears to show an association, researchers admit more research is needed to better understand the results. The researchers observed no association between non-Hodgkin’s lymphoma and high-density oil and gas development. Colorado's oil and gas industry has taken issue with the study and paints past research by Dr. McKenzie as "questionable." They released the following statement: "This is a very serious allegation. If you recall, Lisa McKenzie’s last major study in 2014 was disavowed by state health officials and in fact the state’s top health official went so far as to say the public could be “misled” by it. University researchers shouldn’t be in the game of scaring people just to secure additional funding. Still, public health is obviously of great concern to our industry and we will review her data immediately. We also look forward to the state’s review of the study.”

1,650 Illegal Oil Wells Still Polluting California Aquifers -- Gov. Jerry Brown's oil regulators failed to meet their own deadline Wednesday for shutting down 1,650 oil industry injection wells that are violating water-protection laws by dumping toxic fluid into protected California aquifers.  "Governor Brown's administration has decided not to protect our water from illegal contamination by the oil industry," said Hollin Kretzmann of the Center for Biological Diversity . "By failing to meet their own lax deadline for shutting down these polluting wells, state oil regulators have given Californians another reason not to trust a word they say."  All illegal oil-industry injection activities were supposed to be halted by Feb. 15, according to a promise made two years ago by California's Division of Oil, Gas and Geothermal Resources. The state could be imposing fines of up to $25,000 a day for every well that continues to operate in a protected aquifer.  But as of Wednesday, the state has shut just a portion of wells operating in aquifers that should be protected by the federal Safe Drinking Water Act. State officials quietly announced the indefinite delay in enforcing the law in mid-January.  In March of 2015, state officials testifying before the California senate pledged to stick to the February deadline and other aspects of a schedule approved by the U.S. Environmental Protection Agency (EPA). John Laird, the state's Secretary of Natural Resources, told senators that the Brown administration was "fully committed to meeting these deadlines."  The promises came in the wake of admissions by the Brown administration that state regulators had let oil companies operate thousands of injection wells that have been dumping wastewater into scores of protected underground water supplies in Monterey, Ventura, Kern and other counties (see interactive map ).  But instead of halting most of the illegal injections, state officials have moved forward with plans to exempt as many as 40 of these aquifers from water-protection laws. If these "aquifer exemption" applications are approved by the EPA, the oil industry would be allowed to make permanent use of these water supplies for the disposal of contaminated waste fluid.

Media Silent As Mystery Illness Plagues Residents One Year After Historic US Gas Leak --A year after the largest methane leak in U.S. history was sealed in Porter Ranch, California,residents are continuing to experience significant adverse health consequences. As SoCalGas - the company responsible for the blowout - uses fabricated gas shortages to justify reopening the Aliso Canyon gas storage facility, which has been shut down indefinitely since the leak occurred, a local doctor is now speaking out. Dr. Jeffrey Nordella has been treating Porter Ranch residents since the blowout of an underground methane storage well caused tons of methane gas to spewing the atmosphere in October 2015. A total of 5 billion cubic feet of methane was released into the atmosphere from October 23 to February 18, “or enough pollution to match the annual output of nearly 600,000 cars,The Guardian noted shortly after it was sealed. Though the leak was sealed last February, residents have continued to complain of symptoms. Though some local news outlets have provided consistent coverage of the disaster’s aftermath, most national outlets stopped covering the story after the blown-out well was closed and, consequently, the immediate drama of the story subsided. But Nordella says that since the gas leak began, he has been inundated with patients of all ages.“Those symptoms were broad but yet had a common denominator. Eye and nasal irritation, headache, nosebleed, sore throat, loss of voice, cough, shortness of breath, palpitations, nausea, vomiting, diarrhea, fatigue, and skin rashes were among the most common,” he said during a press conference at his urgent care facility last Wednesday.According to the local Daily News:“He’s seeing abnormal pulmonary functions among some of those patients, and low red blood cell counts in others. He’s reviewed the files of residents whose family members died and said he’s seen a rare case of anemia that can be connected to toxic exposure.” Nordella says the symptoms he’s seen in patients are “clearly different from those with a common upper respiratory tract infection, seasonal allergies, sinus infections, and viral bronchitis.” He also said multiple contaminants could be causing the variety of health issues.

Fracking Rule Text Disappears From Interior Department Website --  In Donald Trump 's first week as president, text describing two rules regulating the oil and gas industry was removed from an Interior Department website. The rules, limiting hydraulic fracturing and natural gas flaring on public lands, are in the crosshairs of the Trump administration.   The changes were noted by the Environmental Data and Governance Initiative or EDGI, which has been monitoring changes to federal web sites since Trump's inauguration. On Jan. 21, the Bureau of Land Management (BLM) page, which describes various regulations for how the oil and gas industry should operate on federal land, still included a section on the Methane and Waste Prevention rule. The regulation was part of the Obama administration's effort to reduce greenhouse gas emissions and the effects of climate change . By Jan. 28 , the section was gone. The rule , which is widely opposed by the oil and gas industry, limits fossil fuel companies' ability to vent and flare gas on public land, which releases methane , a greenhouse gas around 84 times more potent than carbon dioxide over a 20-year period. It was one of the first Obama era regulations to be targeted by a Republican-controlled Congress empowered by Trump. On Feb. 3, at least five days after the site had been updated, the House of Representatives voted to repeal the methane rule using the Congressional Review Act, which gives Congress 60 days to eliminate federal regulations legislators don't like. The bill awaits a Senate vote.  Also removed was text within a section on the Interior Department's hydraulic fracturing rule, Obama's primary attempt to limit the impacts of the controversial oil and gas extraction method. The page still notes that the rule exists but it no longer describes what it does. The deleted text stated that the regulation was meant "to ensure that when operations are undertaken on lands where a BLM permit is required, steps are taken to ensure wellbore integrity, proper waste water management and greater transparency about the process, including information about the composition of fracturing fluids."

Fracking And What New EPA Means For Your Health – Forbes - Health and safety concerns about fracking are huge and likely to grow even more if Scott Pruitt, a man who has been described as a “stenographer for the oil and gas industry," is confirmed as director of the Environmental Protection Agency. Pruitt has sued the EPA repeatedly while he was the attorney general in Oklahoma—a state suffering multiple earthquakes as a result of fracking, and where he took no action. This multipart report will review some of the myriad of health and environmental concerns and the competing business interests surrounding fracking. In order to understand the health problems, you need to first understand how fracking is done. For hydraulic fracturing, a.k.a. fracking, a well is initially drilled to an average depth of 7,700 feet. When it reaches the right depth, the well drill and pipes are redirected horizontally, extending 1,000-6,000 feet. A mixture of water, sand and chemicals is injected into the wells under high pressure to fracture, or crack, the shale, enabling gas to be released and flow up the well. The process requires heavy construction equipment. It’s estimated that 200 tankers are needed to haul in 1 million gallons of water, and that each deep well might require 2-10 million gallons of water mixed with thousands of gallons of a sand “proppant" and chemical mixture. What makes fracking especially hazardous is the very high pressure needed to shatter the rock, and that the metal and concrete well casings are often not strong enough to tolerate the intense pressure, resulting in leaks of toxic fluids. This "well integrity" has NOT been safer in new wells. Commonly used chemicals used include: (see table) In addition to the chemicals injected into the wells during the fracking process, other chemicals are released from the shale, including these: (see table)  But there are many others…and many of these are proprietary and, thanks to the “Halliburton Loophole,” which exempted the injection of these fracking chemicals (now euphemistically called “tools”) from the EPA’s regulation under the Safe Drinking Water Act. In many states, companies don’t even have to disclose what these chemicals are that they are injecting into these wells. Some states, like Pennsylvania, have even had gag orders prohibiting physicians who were given access to these trade secret concoctions in order to take care of their patients from disclosing this information either to other physicians or to the patients themselves! During fracking, a number of chemicals are released into the air, as well as into the water. Benzene is one, naturally occurring in the rock but toxic when vented into the air. Dr. Carol Kwiatkowskiof University of Colorado, examined air samples within a mile of shale gas wells. Her team found 61 airborne chemicals, including methylene chloride, which can cause respiratory symptoms and memory loss, and can be fatal acutely, as well as being a possible carcinogen in the longer term.The Colorado researchers also found levels of polycyclic aromatic hydrocarbons well above the threshold shown to cause lower IQs and developmental delays in prenatal exposures. Increased levels of radon, the second most common cause of lung cancer in the U.S., has been increasing in homes near unconventional (horizontal) drilling (a.k.a. fracking). Besides the chemical exposures, oil and gas drilling workers have a much higher fatality rate than average—2.5x that of the construction industry and 7x higher than industry as a whole.

 US sees no adverse impact from Alberta Clipper pipeline  (AP) — After a four-year review, the U.S. State Department on Friday said it does not believe there would be significant negative environmental impact from a Canadian company's plan to boost the capacity of an oil pipeline that crosses the U.S. border in northeastern North Dakota.Calgary, Alberta-based Enbridge Energy Partners asked the State Department in 2012 for a presidential permit to transport 800,000 barrels daily on an existing 3-mile section of pipeline on the company's Alberta Clipper pipeline that carries tar sand oil from Canada across northeastern North Dakota and northern Minnesota to Superior, Wisconsin.  The State Department's supplemental environmental impact statement announced Friday was "coincidental" to President Donald Trump's action to advance the Keystone XL and Dakota Access oil pipelines, Enbridge spokeswoman Lorraine Little said."It's been long process to get to this point," Little said. "It is what it is."Todd Leake, a Sierra Club spokesman in North Dakota, said he believes Trump's fingerprints are all over the State Department conclusion."All pipelines are politics and money," said Leake, who farms about 80 miles from where the pipeline crosses into the U.S. near Neche, North Dakota. "All recent approvals of these pipelines go right back to the Trump administration."The State Department is taking public comment on its draft environmental impact statement for 45 days, until March 27. The State Department issues presidential permits for projects that cross the U.S.-Canadian border.

The United States of oil and gas - Washington Post (maps, pictures, graphics) There are more than 900,000 active oil and gas wells in the United States, and more than 130,000 have been drilled since 2010, according to Drillinginfo, a company that provides data and analysis to the drilling industry.We’re familiar with oil-rich regions of Texas, but technological advances and new pipeline infrastructure have brought the ability to extract these resources to new parts of the country, injecting billions of dollars into local economies and spurring a modern-day gold rush. Many oil basins, the deep geologic formations that hold resources, have started to decline in production. But some, like the ever-reliable Gulf of Mexico and the Permian Basin in western Texas and eastern New Mexico, show no signs of slowing down. The Permian has produced oil since the 1920s. Companies hit production peak in the 1970s, when they drilled vertically into reservoirs and the natural pressure immediately caused the oil to flow. Over the next 30 years, production declined throughout the United States. Recently, companies have doubled down on the Permian, using a combination of sophisticated hydraulic fracturing and new horizontal drilling techniques to unlock massive untapped oil and gas resources sitting in layers of shale rock. This is commonly known as fracking.In places like Andrews, Tex., within the Permian geologic formation — already in the middle of oil country — thousands of new wells were drilled in the last 10 years. The population in Andrews County has increased by more than 30 percent since 2005. Similar booms have occurred in other areas as well.

Is The Bakken A Bust? - North Dakota has released December production data for the Bakken and for all North Dakota. They were a little shocking. Bakken production down 86,150 barrels per day 895,330 bpd. North Dakota production down 92,029 bpd to 942,455 bpd. It was noted that this the largest decline ever in North Dakota production. But it should not be overlooked that the October increase in production was also the largest ever increase in North Dakota production.  From the Director’s Cut Oil Production

  • November 31,034,520 barrels = 1,034,484 barrels/day
  • December 29,216,093 barrels = 942,455 barrels/day (preliminary)
  • (all-time high was Dec 2014 at 1,227,483 barrels/day

Producing Wells

  • November 13,520
  • December 13,337 (preliminary)
  • (all-time high was Nov 2016 at 13,520)
  • 11,449 wells or 86% are now unconventional Bakken – Three forks wells
  • 1,888 wells or 14% produce from legacy conventional pools

Rig Count

  • November 37
  • December 40
  • January 38
  • Today’s rig count is 38 (all-time high was 218 on 5/29/2012)

Judge denies tribes' request to block final link in Dakota pipeline | Reuters: A U.S. federal judge on Monday denied a request by Native American tribes seeking to halt construction of the final link in the Dakota Access Pipeline, the controversial project that has sparked months of protests by activists aimed at stopping the 1,170-mile line. At a hearing, Judge James Boasberg of the U.S. District Court in Washington, D.C., rejected the request from the Standing Rock Sioux and Cheyenne River Sioux tribes, who argued that the project would prevent them from practicing religious ceremonies at a lake they contend is surrounded by sacred ground. With this decision, legal options for the tribes continue to narrow, as construction on the final uncompleted stretch is currently proceeding. Last week, the U.S. Army Corps of Engineers granted a final easement to Energy Transfer Partners LP (ETP.N), which is building the $3.8 billion pipeline (DAPL), after President Donald Trump issued an order to advance the project days after he took office in January. Another hearing is scheduled for Feb. 27, as the tribes seek an injunction ordering the Army Corps to withdraw the easement. Lawyers for the Cheyenne River Sioux and the Standing Rock Sioux wanted Judge Boasberg to block construction with a temporary restraining order on the grounds that the pipeline would obstruct the free exercise of their religious practices. “We’re disappointed with today’s ruling denying a temporary restraining order against the Dakota Access Pipeline, but we are not surprised," Chase Iron Eyes, a member of the Standing Rock Sioux tribe, said in a statement. The company needs to build a 1,100-foot (335 meter) connection in North Dakota under Lake Oahe, part of the Missouri River system, to complete the pipeline.The line would run from oilfields in the Northern Plains of North Dakota to the Midwest, and then to refineries along the Gulf of Mexico, and could be operating by early May.

US judge denies tribes' request to halt Dakota Access oil pipeline construction -  A US district judge Monday denied an emergency request by two North Dakota tribes to halt construction of the Dakota Access Pipeline as crews rush to finish the last section of the 470,000 b/d Bakken crude outlet. The Cheyenne River Sioux Tribe and Standing Rock Sioux Tribe were seeking a temporary restraining order against the project based on new legal argument that the project violates their religious freedom. Related: Find more content about Trump's administration in our news and analysis feature. Construction restarted last week when the Army Corps of Engineers granted the project a federal easement to drill under Lake Oahe, a dammed section of the Missouri River in North Dakota that was at the center of protests for months. Judge James Boasberg of the US District Court of the District of Columbia said the tribes still have time before oil starts flowing on the system to argue for a preliminary injunction. Dakota Access estimated last week that it could start commercial service by early May in a best-case scenario. A lawyer said in court Monday that crews might be able to accelerate that timeline. Boasberg asked the company to give him an update February 21 and every Monday thereafter about when it expects to have oil flowing beneath Lake Oahe.The judge set a February 27 hearing for the tribes' preliminary injunction request. The tribes had argued that waters of the Missouri River, which they call Mni Sose, are sacred to them and "constitute the lifeblood of our religion and traditions." "The tribe's treaties and the federal statutes that govern the tribe's rights with regard to the Missouri River establish that the tribe enjoys a clear property right in the waters of the Missouri and enjoys a right to waters that are clean and suitable for drinking, agricultural use, hunting, fishing, and other rights," a lawyer for the Cheyenne River Sioux said in a court filing.

Dakota Access Pipeline 'Could Be Operational Within 30 Days' - A federal judge refused to issue a temporary injunction Monday against construction of the highly controversial Dakota Access Pipeline .  The latest setback for the First Nations fighting the pipeline means that it could be "operational in as little as 30 days," according to a lawyer for the company building it, Energy Transfer Partners.  In court Monday, lawyers for the Cheyenne River and Standing Rock Sioux tribes had argued that Lake Oahe, which the pipeline crosses, is sacred: "The Lakota people believe that the pipeline correlates with a terrible Black Snake prophesied to come into the Lakota homeland and cause destruction. The Lakota believe that the very existence of the Black Snake under their sacred waters in Lake Oahe will unbalance and desecrate the water."   They added the pipeline would "desecrate the waters upon which the Cheyenne River Sioux tribal members rely for their most important religious practices."  Cheyenne River Sioux tribe chair Harold Frazier also argued that "to put that pipeline in the ground would be irreparable harm for us in our culture."  The judge, U.S. District Judge James Boasberg rejected the claim, though. He argued that he was not ruling on whether the pipeline was "a good or bad idea," but whether construction would cause " imminent harm ."  To this end, he ruled that as long as oil actually is not flowing along the pipeline, there is no risk of imminent harm to the tribes, who had argued the pipeline poised a threat on religious grounds. The threat of harm to the tribe "comes from when the spigots are turned on and the oil flows through the pipeline," argued the judge.  Although this is a setback for the Indigenous water protectors fighting the pipeline, the judge did say he would consider the case more thoroughly on Feb. 27.

Native American tribes make new court filing to stop Dakota Access pipeline - The Standing Rock and Cheyenne River Sioux Tribes on Tuesday submitted a new filing in a District of Columbia federal court in another last-ditch effort to stop completion of the Dakota Access pipeline in North Dakota. The filing calls the actions of the Army Corps of Engineers in issuing a final easement for the oil pipeline — as well as the agency’s environmental analysis and regulatory actions — “arbitrary, capricious, and contrary to law.” It asks the court to grant a partial summary judgment and vacate that easement. Unlike the previous filing, which made an argument on religious grounds because of the sacred nature of Missouri River waters there, this one cites alleged violations of the National Environmental Policy Act, the Administrative Procedure Act and other statutes. The filing says President Trump, who within four days of his inauguration directed the Army Corps to “review and approve” pipeline permits on an expedited basis, was “perpetuating our nation’s pattern of broken promises to the Tribe.” The tribes say the draft environmental assessment submitted by Dakota Access’s owner, Energy Transfer Partners, was “deeply flawed.” The document allegedly disregarded tribal rights and opposition, failed to assess spill risks and revealed that the owners had abandoned an alternative route north of Bismarck, N.D., because of spill concerns. The filing says Energy Transfer Partners should have submitted a more rigorous environmental impact statement. The Interior Department’s solicitor had acknowledged that the Standing Rock tribe held “expansive Treaty rights in and around Lake Oahe” where the pipeline would cross, just north of the tribe’s current reservation. The lake was created by dams the Army Corps built decades ago across the Missouri River. The filing also argues that the entire pipeline dispute must be seen in the context of the Fort Laramie treaties of 1851 and 1868, which granted the tribes control of a broad area, including the land where the pipeline is being constructed and the waters of the Missouri River.

Dakota Access Pipeline Secret Documents: The U.S. ‘Trustee’ is not Trustworthy - The U.S. Army Corps of Engineers December 4, 2016, decision to undertake a full Environmental Impact Statement (EIS) for the proposed Dakota Access Pipeline (DAPL) crossing of Lake Oahe states something quite startling: Paragraph 5 in the full text states, “Because of security concerns and sensitivities, several documents supporting the [original] Environmental Assessment were marked confidential and were withheld from the public or representatives and experts of the Standing Rock Sioux Tribe. These documents include a North Dakota Lake Oahe Crossing Spill Model Discussion….” How does that square with the February 7, 2017, statement by Acting Secretary of the Army Robert Speer when he announced the Army was aborting the EIS process and withdrawing the notice of intent? Speer said, “the decision was made based on a sufficient amount of information already available which supported approval to grant the easement request.” What information? Available to whom? How sufficient? In whose judgement? What happened to the conclusion reached by the Army’s Assistant Secretary for Civil Works, Jo-Ellen Darcy, in December, when she said, “it’s clear that there’s more work to do”?  In Custer Died for Your Sins (1969), Vine Deloria Jr., wrote: “Past events have shown that the Indian people have always been fooled by the intentions of the white man. Always we have discussed irrelevant issues while he has taken our land. Never have we taken the time to examine the premises upon which he operates so that we could manipulate him as he has us.” With the Army’s secret documents and double-talk on Dakota Access Pipeline, Indian country now has yet another example of being fooled and manipulated by the white man. The federal back-and-forth on Dakota Access Pipeline offers an opportune moment to remember—and apply—the ancient adage: “Fool me once, shame on you. Fool me twice, shame on me.”  Either way you say it, the moral of the saying leaves no doubt: When the same person uses the same tactics to fool you more than once, you’ve got no one to blame but yourself.

Dakota Access protesters cause "Ecological Disaster" - In a twist of supreme irony, the radical left-wing activists who protested the construction of the Dakota Access Pipeline (DAPL) near Native American land because of its alleged environmental threat have themselves created an environmental crisis.On Wednesday, North Dakota Gov. Doug Burgum signed an emergency evacuation order for the Oceti Sakowin protest camp, close to the Standing Rock Lakota reservation. “Gov. Doug Burgum today signed an emergency evacuation order out of concern for the safety of people who are residing on U.S. Army Corps of Engineers land in southern Morton County and to avoid an ecological disaster to the Missouri River,” the governor’s office said in a statement.  “Warm temperatures have accelerated snowmelt in the area of the Oceti Sakowin protest camp … Due to these conditions, the governor’s emergency order addresses safety concerns to human life as anyone in the floodplain is at risk for possible injury or death,” said the statement. However, “the order also addresses the need to protect the Missouri River from the waste that will flow into the Cannonball River and Lake Oahe if the camp is not cleared and the cleanup expedited,” the statement read. “With the amount of people that have been out there and the amount of estimated waste and trash out there, there is a good chance it will end up in the river if it is not cleaned up,” U.S. Army Corps of Engineers spokesman Capt. Ryan Hignight told the Associated Press Wednesday. Just how much waste and trash did the environmentally conscious DAPL protesters leave? “Local and federal officials estimate there’s enough trash and debris in the camp to fill about 2,500 pickup trucks,” reported AP. “Garbage ranges from trash to building debris to human waste, according to Morton County Emergency Manager Tom Doering,” the AP report continued. In addition to rubbish and excrement, there are also a lot of abandoned cars at the site. “We’re going to have a very drastic situation trying to keep these vehicles from getting into the river — what everybody’s been trying to protect from Day One,” he said

Company Behind DAPL Reported 69 Accidents, Polluting Rivers in 4 States in Last Two Years - The energy company behind the disputed Dakota Access Pipeline (DAPL) has reported hundreds of thousands of gallons of spills from pipelines between 2015 and 2016, according to an analysis released earlier this month. According to the Feb. 6 report from the Louisiana Bucket Brigade and DisasterMap.net , Energy Transfer Partners and its subsidiary Sunoco have filed 69 accidents over the past two years to the National Response Center, the federal contact point for oil spills and industrial accidents.  That's 2.8 accidents every month, the analysis said, adding that "these are just the accidents that are reported." Dallas-based Energy Transfer Partners owns about 71,000 miles of natural gas, natural gas liquids, refined products and crude oil pipelines across the country. The report lists 42 known oil spills, 11 natural gas spills, nine gasoline spills, three propane spills, two "other" spills and two "unknown" spills. Those 69 incidents led to eight injuries, five evacuations and a total damage dollar amount of $300,000. In all, the total known amount of various substances spilled was 544,784 gallons. "Heavy rain was the explanation for some of the worst accidents. Bad weather, however, just exposes faulty equipment," the report states. "While Energy Transfer Partners and other companies portray weather related accidents as unavoidable, they are in reality a result of poor planning and neglected maintenance. For example, the largest tank fire in history happened in south Louisiana in 2001. Because it occurred during a storm, Orion Refining blamed the weather. In truth, a faulty drain on the tank sank the roof, exposed the gasoline and attracted lightening." Pipeline proponents have repeatedly touted that pipelines are much safer than tankers or trains. But as the report revealed, the majority of Energy Transfer Partners and Sunoco's reported spills (51 percent) were specifically linked to pipelines.  Those 35 pipeline-related spills released 111,559 gallons of oil and polluted rivers in four different states, the Louisiana Bucket Brigade pointed out on its Facebook page.

 What Do Louisiana Pipeline Explosion and Dakota Access Pipeline Have in Common?   Phillips 66 -  Steve Horn - The day after the U.S. Army Corps of Engineers gave the owners of the Dakota Access Pipeline (DAPL) the final permit it needed to build its line across Lake Oahe, which connects to the Missouri River, a natural gas liquids pipeline owned by one of the DAPL co-owners exploded and erupted in flames in Paradis, Louisiana.  Paradis is located 22 miles away from New Orleans. That line, the VP Pipeline/EP Pipeline, was purchased from Chevron in August 2016 by DAPL co-owner Phillips 66. One employee of Phillips 66 is presumed dead as a result of the explosion and two were injured. In a press release published by Phillips 66 announcing its purchase of VP/EP, the company stated that “approximately 200 miles of regulated pipelines that carry raw NGLs from a third-party natural gas processing plant.” A DeSmog investigation shows that the “third-party natural gas processing plant” is owned by the company Targa Resources, and that plant is fed in part by a gas pipeline owned by Enbridge, another co-owner of Dakota Access. The Targa Resources plant is also known as the VESCO facility, with VESCO shorthand for the Venice Energy Services Company, located in Venice, Louisiana.  “Through the Partnership’s 76.8% ownership interest in Venice Energy Services Company, L.L.C., [Targa] operates the Venice gas plant…and the Venice Gathering System ('VGS') that is approximately 150 miles in length,” explains Targa's 2016 U.S.Securities and Exchange Commission Annual Report. “VESCO receives unprocessed gas directly or indirectly from seven offshore pipelines and gas gathering systems including the VGS system. VGS gathers natural gas from the shallow waters of the eastern Gulf of Mexico and supplies the VESCO gas plant.” Enterprise Product Partners and ONEOK serve as co-owners of VESCO. Among the seven pipelines connected to VESCO, one is owned by Enbridge, the Mississippi Canyon Gas Line. That Line feeds gas extracted from the Gulf of Mexico via two offshore wells owned by Shell, as well as other companies, according to Enbridge's website.

Veterans at Standing Rock see police retribution after arrest and charges -- Police have filed charges against two US veterans supporting Standing Rock, holding one in jail for several days, raising concerns that law enforcement is trying to prevent them from aiding activists at the Dakota Access pipeline. Officers in North Dakota and South Dakota have pulled over and searched at least four veterans on their way to the camps at Standing Rock in recent days, charging two of them for medical cannabis. Police confiscated one veteran’s car and also seized what officials called “protester gear”, which included camping supplies. The charges against two veterans, who said they use medical cannabis to treat post-traumatic stress disorder, come days after a veterans service organization announced it would be returning to Standing Rock to provide support. Indigenous activists, known as water protectors, have been fighting the $3.7bn pipeline since last spring and have continued to live at camps near the construction site as drilling has resumed. “I’m honestly disgusted. It makes no sense to us,” said Mark Sanderson, executive director of VeteransRespond, the group coordinating the return to Standing Rock. “Why are you trying to attack a group of veterans doing nothing more than a humanitarian aid mission in North Dakota?” News of the charges adds to growing concerns that law enforcement is aggressively monitoring, arresting and prosecuting people affiliated with the anti-pipeline movement. Guardian recently reported that an FBI terrorism task force has attempted to contact at least three people tied to the demonstrations. The Morton County sheriff’s office announced the news of the arrests late Monday with a press release titled “Leader of VeteransRespond Cited for Drug Possession”, which summarized charges against a number of vets.

Why is the Joint Terrorism Task Force Questioning Water Protectors? - FBI Joint Terrorism Task Force (JTTF) agents have attempted to question a number of activists involved with the ongoing protests against the Dakota Access Pipeline (DAPL) at Standing Rock. This surprises exactly no one. According to Lauren Regan, a civil rights attorney who has helped with legal support at Standing Rock, JTTF agents visited at least three activists in recent weeks. These visits were “knock and talks,” which is when the FBI shows up, sans warrant, and tries to “voluntarily” engage the individual in a conversation. Such voluntary conversations are intimidating, and dangerous because they are fishing expeditions. The agent can  ask about almost anything and seemingly innocuous comments can be developed into “incriminating” information and an individual can be charged with lying to a federal agent. Individuals should never talk to the FBI without a lawyer present.We have documented how the FBI continuously uses its counter-terrorism authorities to investigate First Amendment activity, most recently including Black Lives Matter movement, School of the Americas Watch, and anti-Keystone Pipeline protesters.If it’s a major movement for social, economic, or racial justice, chances are the FBI is interested–for the wrong reasons. And we can only expect that the FBI and their JTTFs will be engaging in more of these visits, as well as monitoring, infiltrating, and trolling for informants at meetings, conferences, and protests in the coming years.

US veterans return to Standing Rock to form human shield to protect Dakota Access pipeline protesters | The Independent: US army veterans are returning to Standing Rock to protect Dakota Access pipeline protesters amid violent clashes with the police. Native American activists are camped near the construction site and some hope the veterans could make it harder for police to remove them. “We are prepared to put our bodies between Native elders and a privatised military force,” air force veteran Elizabeth Williams told The Guardian. “We’ve stood in the face of fire before. We feel a responsibility to use the skills we have.”

Tribe, Dakota Access developer face off at House hearing | TheHill: Representatives from the company building the Dakota Access pipeline and the tribe opposing it both told a House committee Wednesday that the government is responsible for the tense debate over the project. But the officials found time to point fingers at one another, as well. At a hearing on energy infrastructure improvements, an Energy Transfer Partners official said political appointees in the Obama administration were behind the push to slow down the project. He said it was a “political decision” to withhold an easement allowing construction at a controversial river crossing in North Dakota.But the Standing Rock Sioux tribe, which has sued to stop the pipeline, also had “no interest in discussing the project with us,” Dakota Access project director Joey Mahmoud charged. “Requests for consultation were mostly denied,” Mahmoud told the Energy and Commerce Committee. “We had some conversations with the tribal chairman, but at the same time we were not able to have meaningful consultation due to lack of engagement.” Energy Transfer Partners last week received an easement to build its pipeline under Lake Oahe on the Missouri River in North Dakota. The company hopes to begin running oil through the 1,172-mile pipeline within two months, after it was delayed for much of the past year while the Obama administration reconsidered permitting decisions for the project. “We came to realize that good-faith efforts to meet accommodation — with many different stakeholders involved — can be a fool’s errand when political motivation overrides the rule of law,” Mahmoud said. Chad Harrison, a councilman-at-large for the Standing Rock Sioux, said the company improperly “argues it is the victim here,” when it has instead benefited under the Trump administration. “Dakota Access is a multibillion-dollar pipeline company in which the president of the United States has been an investor and whose CEO has been a campaign contributor to the president,” Harrison said. “When in history has such a company been a victim of an improvised Indian tribe? The answer is never.”

Dakota Access Builder Compares Pipeline Protesters to Terrorists -- The company building the Dakota Access pipeline told Congress that protesters trying to block the project were akin to terrorists. "I fear the aggressive tactics we have seen in North Dakota will soon be the norm -- if they are not already," Joey Mahmoud, an executive vice president for the company, said in his written testimony before a panel of the House Energy and Commerce Committee. "Had these actions been undertaken by foreign nationals, they could only be described as acts of terrorism." Energy Transfer Partners largely stayed mum during the months in which supporters of the Standing Rock Sioux Tribe camped out by a section of the pipeline that was left uncompleted, stalled by the Obama administration. After President Donald Trump took office, the Army Corps of Engineers issued the final permit so the $3.8 billion, 1,172-mile crude oil pipeline could be connected beneath Lake Oahe and completed. Mahmoud said employees and their children faced death threats and activists broke into and shut down pump stations on four operational pipelines. He said the activism was part of a "well-funded effort based primarily on hostility to fossil fuels." Protesters were getting paid, he claimed.

Pope appears to back native tribes in Dakota Pipeline conflict | Reuters: Pope Francis appeared on Wednesday to back Native Americans seeking to halt part of the Dakota Access Pipeline, saying indigenous cultures have a right to defend "their ancestral relationship to the earth". The Latin American pope, who has often strongly defended indigenous rights since his election in 2013, made his comments on protection of native lands to representative of tribes attending the Indigenous Peoples Forum in Rome. While he did not name the pipeline, he used strong and clear language applicable to the conflict, saying development had to be reconciled with "the protection of the particular characteristics of indigenous peoples and their territories". Francis spoke two days after a U.S. federal judge denied a request by tribes to halt construction of the final link of the project that sparked months of protests by activists aimed at stopping the 1,170-mile line. Speaking in Spanish, Francis said the need to protect native territories was "especially clear when planning economic activities which may interfere with indigenous cultures and their ancestral relationship to the earth". The Standing Rock Sioux and Cheyenne River Sioux tribes have argued the project would prevent them from practicing religious ceremonies at a lake they say is surrounded by sacred ground. "In this regard, the right to prior and informed consent (of native peoples) should always prevail," the pope said, citing the 1997 U.N. Declaration on the Rights of Indigenous Peoples.

Governor orders evacuation of Dakota pipeline protest camp | Reuters: The governor of North Dakota ordered protesters on Wednesday to evacuate a demonstration camp near the site of the Dakota Access Pipeline in the latest move to clear the area that has served as a base for opposition to the multibillion dollar project. Republican Doug Burgum ordered demonstrators to leave the camp located on land owned by the U.S. Army Corps of Engineers by Feb. 22, citing safety concerns that have arisen due to accelerated snowmelt and rising water levels of the nearby Cannonball River. Burgum also said in his executive order that the camp poses an environmental danger to the surrounding area. His order reaffirms a Feb. 22 deadline set by the Army Corps for the demonstrators to clean up and leave. Environmentalists and Native Americans who have opposed the pipeline, saying it threatens water resources and sacred sites, have faced a series of set-backs since President Donald Trump took office in January. A federal judge on Monday denied a request by Native American tribes seeking to halt construction of the final link of the $3.8 billion pipeline after the Corps of Engineers granted a final easement to Energy Transfer Partners LP last week.

 Alaska Oil Bust Threatens Life of Few Taxes and Dividend Checks - The oil-industry rout is spurring Alaska to reconsider perks long enjoyed by its 741,894 residents: No income taxes, plus annual dividend checks drawn from the state’s investment earnings. No state relies as heavily on petroleum production as Alaska, and with the price of oil hovering at around $54 a barrel -- about half the peak in 2014 -- the government is contending with similar fiscal pressures seen in nations such as Venezuela, Saudi Arabia and Russia. With an economy in recession, Alaska has burned through $13 billion of savings over the past four years and is facing a $3 billion shortfall for the year that starts in July. An emergency fund is projected to run dry in mid-2018. And without a fix, S&P Global Ratings warns that it may downgrade the state’s bond rating again, which would raise borrowing costs for projects such as a natural-gas pipeline aimed at reviving the economy. "It’s a quantum shift in people’s thought process," said Randall Hoffbeck, the state’s revenue commissioner. "We’re at a point now, because of reduced oil and gas revenue, that we’re going to have to start looking a little a bit like everybody else if we’re going to maintain the services that people have come to expect.” Alaska, which became a state in 1959, reaped an average 84 percent of its revenue from oil production from 1980 to 2014, according to a report from the state’s Office of Management and Budget. With prices down, Alaska has slashed its budget nearly in half since 2013 and reduced public payrolls to where they were in 2002. Even so, next year’s deficit in the $4.3 billion budget equates to about $4,000 per resident.

Energy Companies Face Crude Reality: Better to Leave It in the Ground - A new era of low crude prices and stricter regulations on climate change is pushing energy companies and resource-rich governments to confront the possibility that some fossil-fuel resources are likely to be left in the ground. In a signal that the threat is growing more serious, Exxon Mobil Corp. is expected in the coming week to disclose that as much as 3.6 billion barrels of oil that it planned to produce in Canada in the next few decades is no longer profitable to extract. The acknowledgment by Exxon, after the company spent about $20 billion to put the oil sands at the center of its growth plans, highlights how dramatically expectations have changed about the future prospects of the region. Once considered a safe bet, Canada’s vast deposits are emerging as among the first and most visible reserves at risk of being stranded by a combination of high costs, low prices and tough new environmental rules. “For a lot of reasons the oil sands look like a prime candidate for eventual abandonment,” said Jim Krane, an energy fellow at Rice University’s Baker Institute. “One problem is that costs are persistently higher. The high carbon content only makes it worse.” During most of the past decade, Exxon and other giant oil companies spent billions of dollars in Canada as part of a global quest for new sources of supply, as analysts cautioned about “peak oil,” or the risk of running out of the resource. Prices surged to $140 a barrel. Companies were driven in part by the need to replenish their reserves of oil and gas, since investors have traditionally looked at such numbers as an important barometer for a resource company’s future. But now, the worry is more about “peak demand.” Amid a glut of supply that led to a price collapse in 2014 and a tepid recovery, investors and executives at some of the world’s biggest energy producers are considering the possibility that oil demand could peak and then slow in the coming decades. The shift from a preoccupation with insufficient supply to worries about demand has altered investment priorities away from high-cost opportunities in the Arctic, ultra-deep waters and the oil sands. Such projects can require billions of dollars in upfront investment and seven to 10 years, or more, to bring returns. Instead, companies are increasingly focusing on new sources of crude oil, such as shale, that don’t require the same massive investment and that can get from development to production much more quickly.

How a Russian Steel Oligarch and Putin Ally Is Profiting from the Keystone XL Pipeline – Steve Horn -  Believe it or not, there's a key connection to Russia and its president, Vladimir Putin, in the fight over North America's controversial Keystone XL pipeline.  One of President Donald Trump’s first actions in office was to sign an executive order on January 24 expediting the approval of the Keystone XL. Owned by TransCanada, this tar sands oil pipeline was halted by former President Barack Obama in November 2015. Trump signed another order on January 24, calling for steel for U.S. pipelines to be made in the U.S. to the “maximum extent possible,” and two days later TransCanada filed a newpresidential permit application for Keystone XLwith the U.S. Department of State. Critics, such as John Kemp of Reuters, pounced on the caveat language in Trump’s steel order and noted that it appears “designed to preserve lots of wiggle-room.” In fact, a DeSmog investigation reveals that much of the steel for Keystone XL has already been manufactured and is sitting in a field in rural North Dakota.  DeSmog has uncovered that 40 percent of the steel created so far was manufactured in Canada by a subsidiary of Evraz, a companypartly owned by Russian oligarch Roman Abramovich, who is a close ally of Putin and a Trump family friend. Evraz has also actively lobbied against provisions which would mandate that Keystone XL's steel be made in the U.S. Abramovich is described in the 2004 book Abramovich: The Billionaire from Nowhere as “one of the prime movers behind the establishment of the only political party that was prepared to offer its undiluted support to Putin when he fought his first presidential election in late 1999. When Putin needed a shadowy force to act against his enemies behind the scenes, it was Abramovich whom he could rely on to prove a willing co-conspirator.” Evraz describes itself as “among the top steel producers in the world based on crude steel production of 14.3 million tonnes in 2015.”

Wall Street Pouring Money Back Into Oil And Gas -- Despite the near record increase in U.S. oil inventories last week – an increase of 13.8 million barrels – oil prices traded up on February 8 and 9 as traders pinned their hopes on a surprise drawdown in gasoline stocks, which provided some evidence of stronger-than-expected demand.The abnormal crude stock increase took inventories close to 80-year record levels at 508 million barrels, and is another bit of damming evidence that should worry oil bulls. But the oil markets were not deterred. In fact, that has been a defining characteristic of the market in recent weeks – optimism even in the face of some pretty worrying signals about the trajectory of the market “adjustment” process. More signs of optimism abound. Wall Street is pouring the most money into oil and gas companies in the U.S. since at least 2000, according to Bloomberg. In January alone, drillers and oilfield service companies raised $6.64 billion in 13 different equity offerings. "The mood is absolutely different," Trey Stolz, an analyst at the investment banking firm Coker & Palmer Inc., told Bloomberg. "Go back to a year ago and the knife was still falling. But today, it feels much, much better." Moreover, the money raised for these U.S. companies represented more than two-thirds of the total $9.41 billion in new energy equity issued across the globe in January. Big Finance is ready to pour money back into the oil and gas sector and they are doing it mostly in the U.S.  The industry should see more activity this year as companies rush to conclude deals ahead of the rebound. A new report from Moody’s Investors Service predicts that M&A activity will rise substantially in 2017. “E&P acquisitions and divestitures dropped off when commodity prices collapsed in late 2014, but have significantly ticked up since mid-2016,” the Moody’s report says.

U.S. shale oil output to rise in March by 80,000 bpd: EIA | Reuters: U.S. shale oil production for March is expected to rise by the most in five months, government data showed on Monday, as energy companies boost drilling on the back of oil prices that are hovering over $50 a barrel. March oil production is forecast to rise by 79,000 barrels per day to 4.87 million bpd, according to the U.S. Energy Information Administration's drilling productivity report. That would be the biggest monthly rise since October. In the Permian shale play of West Texas and New Mexico, output is forecast to rise by more than 70,000 bpd to 2.25 million bpd, in what would be the biggest monthly rise since January 2016. Meanwhile, Eagle Ford production in Texas is expected to rise by 14,000 bpd to 1.08 million bpd, the first monthly increase since December 2015, EIA data showed. In North Dakota's Bakken field, production is forecast to fall by nearly 18,000 bpd to 976,000 bpd, the fifth consecutive month-on-month decrease.

Strategic petroleum reserve add-ons, and why they're needed.  The Shale Revolution has caused big changes in U.S. crude oil production, in domestic flows of crude via pipelines, ships and rail tankcars, and in crude import volumes. Flow changes in particular have negatively affected the Strategic Petroleum Reserve’s ability to accomplish its two primary goals: protecting U.S. refineries from the worst effects of a major crude oil supply interruption, and—when called upon by the International Energy Agency—quickly injecting large volumes of crude into global markets. A fix now in the works would add Gulf Coast marine terminals dedicated specifically to moving SPR-stockpiled crude to those who need it, both within the U.S. and overseas. Today we conclude a two-part blog series on challenges and coming changes at the SPR. Crude oil helps drive economies around the world, and the world was—and still is—chock full of risk. The U.S., like other net oil-importing members of the International Energy Agency (IEA), has two obligations under the agency’s International Energy Program (IEP), which was established in the wake of the 1973-74 OPEC oil embargo. First, the U.S. needs to maintain crude oil inventories equal to at least 90 days of its net imports. Second, if the IEA calls for a collective response by its members to an international crude oil supply crisis, the U.S. is obligated to contribute to that effort volumes of crude equal to its share of total oil consumption by IEA’s members. That share is currently ~44%, which means that if there were a 4 million barrel/day (MMb/d) interruption in supply (from, say, a war in the Middle East), the U.S. would need to inject nearly 1.8 MMb/d (4 million barrels times 0.44) to keep its promise to IEA/IEP.

February To End On A Very Bearish Tone - Natural Gas Daily - Just when we thought the February outlook couldn't get any worse, and after updating to the public that the 6-10 day outlook worsened last Friday, it worsened again over the weekend.   To put the latest forecasts into storage draw figures, the bearish developments back to back have now reduced storage forecast for 2/24 week by more than 80 Bcf. Yes, you read that correctly. On a five-year average basis, storage draws for 2/24 week will be less than half of the five-year average storage draw of -132 Bcf and less than last year's (already bearish) storage draw of -67 Bcf. To put it into context, one couldn't have asked for a more bearish finish than the latest update. As a result of the next 6-10 day forecast, meteorologists peg February 2017 as the top 3 warm February of all time.As we look ahead, weather begins to play less important of a role from March and onward, we have recently revamped our premium natural gas update content for premium subscribers to start including all of the daily flow fundamentals. From March to November this year, fundamentals will be the big driver to natural gas prices.Over the weekend, we also released our latest updated natural gas thesis to the public. A combination of higher takeaway capacity in the Marcellus and Utica and surplus storage to end April EOS resulted in us reducing our thesis that natural gas (NYSEARCA:UNG) prices needed to stay above $4/MMBtu for 8-12 months. Our new curve estimate is $3.50/MMBtu.

NYMEX March gas futures settle at $2.925/MMBtu, up 2 cents - The NYMEX March natural gas futures contract rose Wednesday after three straight sessions of declines on the eve of the release of the US Energy Information Administration's weekly natural gas storage report. The contract settled at $2.925/MMBtu, up 2 cents from Tuesday, after trading between $2.917/MMBtu and $2.994/MMBtu over the session. The EIA on Thursday is expected to estimate a 126-Bcf withdrawal of gas from storage for the reporting week ended February 10, according to a consensus of analysts surveyed by S&P Global Platts. The prompt month has fallen some 24.3 cents since it closed at $3.168/MMBtu on February 1, according to S&P Global Platts data. Compared with the prior two years, however, the 2017 March contract has so far averaged a higher daily close of $3.075/MMBtu, while the 2016 March contract averaged $1.93/MMBtu and 2015 March averaged $2.755/MMBtu. The contract's price drop this month has been due largely to shifting weather patterns, and markets could resume a downward shift given that somewhat bearish weather remains on the horizon for much of the US. The National Weather Service forecast below-normal temperatures in the western one-third of the continental US over the next six to 10 days, and above-normal temperatures for the eastern two-thirds of the country. That bearish forecast for the eastern US will put pressure on overall US demand. Platts Analytics' Bentek Energy forecast US demand to shrink almost 10 Bcf over the next seven days to 76.2 Bcf, compared with a February 15 estimate of 86 Bcf.

U.S. natural gas market tightens despite exceptionally mild winter: Kemp | Reuters: Warm weather has masked how much the underlying supply and demand picture for U.S. natural gas has tightened this winter thanks to lower production and strong exports. The winter heating season of 2016/17 has so far been even milder than that of 2015/16, which was itself the warmest winter on record. Since the start of the current season on July 1, 2016, according to the National Oceanic and Atmospheric Administration, there have been 2,454 population-weighted heating degree days - a measure of how cold the temperature was on a given day or over a period of days. Heating demand is running 3 percent below last year, when there were 2,541 population-weighted heating degree days at this point, and 17 percent below the long-term average of 2,960. With the exception of two short cold spells in early/mid-December and early January, the weather has been mostly warmer than normal since September. The unusual run of mild weather has confounded forecasters, who mostly predicted this winter would be somewhat colder than the record warm winter of 2015/16. But if temperatures have matched 2015/16, the development of the gas market could not have been more different. Working gas stocks in underground storage have fallen much more rapidly, eliminating the big surplus left at the end of winter 2015/16. Stocks are now 303 billion cubic feet below the level at the same point in the last heating season, having started the season 538 billion cubic feet above the previous year.

US gas market contango leaves questions around production, storage – Platts Snapshot video - Abnormally warm weather patterns have weighed heavily on US natural gas futures, and market participants are considering storage, production and demand changes ahead in 2017. Samer Mosis shares Platts Analytics' Bentek Energy forecast for production as well as how internal rates of return, as tracked by Platts Well Economics Analyzer, could play into those expectations.

UK LNG stocks fall at 46-month low on weak delivery schedule - The amount of natural gas equivalent held in tank in the UK's three LNG regasification terminals fell to the lowest since March 2013 over the weekend as a weak delivery schedule led to stocks running low despite poor regas rates, data from National Grid showed Tuesday. LNG stocks combined began Monday's gas day at 429 million cu m of natural gas equivalent, below the levels recorded in March/April last year and falling further towards the low seen 46 months ago. Stock levels were split between Isle of Grain, South Hook, and Dragon at 187 million cu m (32% of capacity), 171 million cu m (35%), and 71 million cu m (37%), respectively, National Grid data showed. Total LNG stock levels were less than half the 2017-to-date high of 918 million cu m from early January and over 200 million cu m shy of the five-year average of 642 million cu m. The unseasonably low stock levels have come despite regasification having been at low levels this winter, as deliveries of LNG into the UK have been much lower this winter compared with previous seasons amid higher pricing and firmer spot demand elsewhere. Between October 1 and January 31, nine LNG tankers delivered LNG into the UK, with South Hook receiving six vessels from Qatar, Isle of Grain receiving three -- two from Qatar, one from Nigeria -- and Dragon none. During the first four months of the Winter 2015-16 delivery period, South Hook received 30 vessels from Qatar alone. Isle of Grain received six -- three from Algeria and one each from Norway, Qatar, and Trinidad & Tobago -- and Dragon two Qatari deliveries. This has been countered by regas levels being well down this winter compared with previous winters.

UK gas-for-power demand hits six year high - UK gas-fired power generation hit a six-year high in January as day-ahead gas and power prices both climbed strongly, according to S&P Global Platts data. Gas-for-power demand stood at 2.21 billion cubic meters (Bcm) in January, recording increases of 6% month-on-month and 30% year-on-year. Cumulative gas-for-power demand for Winter 2016-17 to date stood at 8.43 Bcm, an increase of 56% on an annual basis and already 16% higher than total gas-for-power demand during the whole of Winter 2014-15. “Improved economics for UK gas plant have coincided with coal plant closures, accelerated by the UK Government’s Carbon Price Floor,” said Henry Edwardes-Evans, managing editor of Power in Europe, an S&P Global Platts publication. “This tax on CO2 emissions has hammered coal plant economics, to the point where Capacity Market subsidies are required to keep them open and bolster security of supply,” Edwardes-Evans said. Gas plant profits are under pressure again, however, with UK gas pricing supported by colder-than-average temperatures, a weak LNG delivery schedule, and more expensive Continental European hub pricing.

Trump holds the key to the revival of Scotland’s North Sea oil industry - Professor Alex Kemp said the chances of the North Sea fields fulfilling their remaining potential are hanging in the balance — with Donald Trump playing a pivotal role. He believes our offshore future depends on how the new US President handles a high-stakes production war with operators in Russia and the Middle East. And he fears Trump’s gung-ho approach, which has already seen him revive two controversial oil pipeline projects blocked by Barack Obama, suggests he could crank up US production again — possibly sparking another price slump and crippling North Sea output further. Prof Kemp said: “Our modelling is saying that at a price between $50 and $60 a barrel, some new investment in the North Sea might go ahead. But at $50 — not much at all.”

Record Russian natural gas flows via Nord Stream 1 fall after OPAL injunction - Platts podcast - Russia's Gazprom sent record natural gas volumes to Europe in January, making full use of its brief extra access to its OPAL pipeline in Germany to send more gas via Nord Stream 1 to meet higher demand from cold weather. But warmer weather and a legal injunction blocking future extra OPAL access until further notice saw Nord Stream 1 flows drop in February, while flows through Ukraine remained steady. S&P Global Platts editors Siobhan Hall and Lucie Roux and analyst Anise Ganbold discuss the impact of demand, Russian route choices and lawyers on the European gas market this winter, and what to look out for next. Read our related special report: US LNG vs pipeline gas: European market share war?

Nord Stream 2: The elephant in the room -- Last week the European Commission released its second ‘State of the Energy Union’. In the area of security of supply, the Commission highlighted achievements in building natural gas interconnectors, the fact that new liquid gas (LNG) terminals entered into operation and that work had begun on parts of the Southern Gas Corridor, a gas pipeline project in the Caspian region. Notwithstanding this progress, the State of the Energy Union failed to make a single mention of the biggest issue that threatens to derail much of the work: the planned Nord Stream 2 natural gas pipeline between Russia and Germany. When launched the Energy Union emphasised the need to diversify energy sources, suppliers and routes to ensure secure and resilient energy supplies. Upon closer inspection, the Nord Stream 2 pipeline in fact does the opposite. The project only contributes to route diversification for the Russian state-owed gas company Gazprom as it seeks ways to reduce its dependence on Ukraine and cements the company’s dominance in the German gas market by raising its market share to over 50 percent. More worrying perhaps, it would concentrate 80 percent of Russian gas imports into a single supply route. This could hardly have been the Energy Union’s intention when it was first presented.

Spain takes another US LNG cargo, third so far in 2017 - Another cargo of US LNG arrived at the weekend in Spain, according to cFlow, Platts trade flow software, the third delivery from the Sabine Pass terminal to Spain since the start of 2017. The cargo was delivered by the Methane Spirit into the eastern Spanish terminal of Sagunto and comes despite a plunge in Spanish gas prices since the start of February. Deliveries of flexible US LNG into the Iberian Peninsula in southwestern Europe have picked up since the start of 2017 as prices in the region surged on unusually cold weather and a month-long unplanned outage at the Skikda LNG export facility in Algeria.The latest delivery to Spain is the fourth to Iberia since mid-January following two previous cargoes to Spain and one to Sines in Portugal so far in 2017. Spain took its first US LNG cargo in the summer of 2016, but no others landed on Spanish shores until January 2017 as prices in Europe did not attract US LNG imports. But Spanish PVB gas prices soared from the end of December into late January due to rising demand amid the unexpected cold snap. Platts assessed the Spanish PVB month-ahead price at as high as Eur33/MWh -- more than $10/MMBtu -- in mid-January, a significant premium to the traditionally higher Platts Asian spot LNG JKM assessment. The high prices created an incentive for US LNG to come to Spain and Portugal, proving the price responsiveness of US LNG.

Asian gasoline crack to Brent crude hits 13-month high on strong demand - - Strong demand pushed the physical benchmark FOB Singapore 92 RON gasoline crack against front-month ICE Brent crude futures to a 13-month high of $13.14/b at the Asian close last Friday, S&P Global Platts data showed. The crack was last higher on January 27, 2016, at $13.32/b, Platts data showed. Demand is being driven mainly by Abu Dhabi Oil Refining Co.'s, or Takreer's, requirements for March-April. Production from its 840,000 b/d Ruwais refinery in the UAE had been reduced to 50% by the closure of its west refinery due to a fire January 11 at its 127,000 b/d RFCC, crimping gasoline production. To plug the shortfall, ADNOC is seeking 240,000 mt of 95 RON gasoline in nine 27,000 mt cargoes over March-April delivery in a tender valid until February 19.Demand within Asia was also buoyant, with firm buying from Indonesia and Vietnam. Indonesia's March requirements were heard to be around 10 million-11 million barrels, more than February's 8 million-9 million barrels of imports. Recently concluded tenders in Asia also reflected an uptrend in cash differentials. Taiwan's CPC sold 30,000 mt of 92 RON gasoline for March 6-22 loading from Kaohsiung at a premium of 30-40 cents/b to the Mean of Platts Singapore 92 RON gasoline assessments on an FOB basis. It had previously sold two cargoes of 92 RON gasoline for February loading at premiums of 25-30 cents/b to the MOPS 92 RON gasoline assessments, FOB. A source close to the company said there were more bids for the latest tender than for the previous month.

China's independent refiners could get regulated away –- China’s regulatory pendulum has swung from supporting independent refiners by encouraging competition and deregulation to favoring state-owned oil companies, which could have the impact of regulating many of the independents out of business. In early 2015 China’s independent refiners, or teapots, were set to soar. Beijing’s policy makers gave teapots permission to import crude and export refined products. Regulators are now reminding independents that they really are not independent. In 2017, rather than giving teapots full year import quotas, regulators will allot the quotas in several rounds, and the first round was delayed by half a month. If the allocation had been further delayed, “we would not have enough feedstock to sustain normal runs in the refinery in addition to having to pay a high demurrage,” said a source at a Shandong-based independent refiner. The government has also yet to award refined product export permits to independents, which under what is called the “processing trade route,” allows refiners to not pay taxes on the exports. Without the export permits, independents would end up paying taxes on refined products exports, forcing them on the domestic retail market, where they lack a competitive edge. Fueling stations, which supply about 80% the road transportation fuel in China, are owned by state-owned companies Sinopec and CNPC’s PetroChina. To be competitive, independents have to sell gasoline at about Yuan 1,000-Yuan 2,000/mt lower than their state-run competitors, an amount they can ill afford to charge and stay profitable.

Oman emerges as unexpected beneficiary of OPEC crude oil output cuts amid Chinese demand - The Oman crude complex has strengthened to a more than two-month high against Dubai on the back of strong demand from Chinese independent refiners, which recently received their crude import quota for 2017, traders said Wednesday. The spread between the front-month Oman cash assessment and Dubai assessment widened to 79 cents/b at Tuesday’s Asia close, the widest since November 30 when it was 80 cents/b. It was assessed at a premium of 78 cents/b to front-month cash Dubai assessment on Wednesday, S&P Global Platts data showed. For the month-to-date, Oman commanded an average premium of 58 cents/b over Dubai, more than double the average of 25 cents/b in January. Bigger cuts by most OPEC members may have pushed some buyers to take Oman crude cargoes instead, according to trade sources. A production cut of only 45,000 b/d was expected from Oman, less than 10% of that expected from Saudi Arabia. Oman crude is easier to get, a Singapore-based trader said, attributing its attractiveness to its relative abundance. “Demand for Oman [crude is] still firm, especially from the Chinese independent refineries,” another trader in Singapore said.

Non-OPEC curde oil production cut compliance at 50%: Kuwait oil minister - Oil | Platts News Article & Story: Non-OPEC producers are only complying with 50% of their agreed cuts, under the landmark OPEC/non-OPEC output deal, Kuwaiti oil minister Essam al-Marzouq said Monday in a statement. OPEC's compliance with the November 30 production cut agreement was 92% since the deal became effective in January, the minister said in a brief statement to state-run Kuna news agency. Under the agreement, OPEC pledged to cut 1.2 million b/d from its October output levels for six months starting from January 1 and freeze production at around 32.5 million b/d, including Indonesia. It was joined by 11 non-OPEC countries, led by Russia, who agreed to cut output by 558,000 b/d in the first half of 2017. Marzourk chaired the first meeting in mid-January of a five-country committee created to monitor and enforce the OPEC/non-OPEC deal. Regular monthly meetings are planned.A technical committee is due to meet again February 21-22 at OPEC's headquarters in Vienna, and a ministerial meeting will be held March 22-23, Russia's energy minister Alexander Novak said Saturday.The International Energy Agency said Friday OPEC had made a "solid start" to its six-month production cut pact, with the producer group's implementation amounting to 90%.S&P Global Platts' own estimate earlier this month put OPEC's January production at 32.16 million b/d, down 690,000 b/d from December. The 10 OPEC members obligated to reduce oil output achieved 91% of their required cuts, with their production falling 1.14 million b/d from October.The IEA said in its latest monthly oil market report, OPEC crude output had fallen 1 million b/d in January to 32.06 million b/d. It also said overall global oil output had fallen by 1.5 million b/d. But it noted that while some members, notably Saudi Arabia, had cut more than the agreed amount, others such as the UAE and Venezuela had over-produced by 90,000 b/d and 80,000 b/d respectively.

Oil Flat As OPEC Cuts Offset By Shale - Oil is flat out of the gates this week with a continued “wait-and-see” approach, as the IEA put it. OPEC compliance looks good but U.S. drilling continues to rise.  Since the ban on crude oil exports was lifted a little over a year ago, exports from the U.S have proceeded slowly. However, exports are finally beginning to pick up steam, averaging 623,000 bpd so far in 2017, up 42 percent from the same period a year earlier. U.S. crude exports could rise to 900,000 bpd at some point this year. Helping U.S. exporters is the steeper discount between WTI and Brent, making U.S. crude more competitive on the international market.  Refining production of gasoline and diesel in Asia will exceed demand by 750,000 bpd this year, according to BMI Research. The firm expects the glut to persist through 2021 at least, a staggering supply overhang that could weigh on prices. It will also weigh on the profits of refiners in Asia as margins are set to remain low for the foreseeable future. Part of the reason for the glut is the wave of refining complexes planned years ago that have come online. But the demand side of the equation is also to blame, with Chinese oil demand growth set to slow to just 1.7 percent per year for the next eight years, after growing by an average of 5 percent for the past decade. With oil prices doubling over the calendar year in 2016, the energy sector offered some of the juiciest returns for investors – energy was the best performer in the S&P 500 last year, rising by 24 percent. Now, with oil prices stagnating in the $50s, the fat returns are over. The S&P Energy sector is down 3.6 percent year-to-date. According to OPEC’s latest monthly report, Saudi Arabia says that it has cut production much deeper than it was required as part of the deal reached last November. Saudi oil production dropped to 9.748 mb/d in January, lower than the 10.06 mb/d cap that it had agreed to. The reduction of 717,600 bpd since last fall has helped the group adhere close to its target. “OPEC has done particularly well, they’ve surprised most analysts,” Spencer Welch, director of oil markets and downstream at IHS Markit, told Bloomberg. “Saudi Arabia has made a particular effort to boost compliance.” It should be noted, however, that some analysts see this as the high watermark for compliance. Saudi Arabia will be under pressure to increase production as temperatures rise in order to offset demand, and the idea of front-loading steep cuts was intentional in order to inspire confidence in the deal from the market.  The non-OPEC countries participating in the deal are posting a 50 percent compliance rate right now.

Oil Slips Most in 3 Weeks as OPEC Cuts Face Rising U.S. Output -- Oil declined in New York as OPEC’s supply cuts are tempered by a revival of shale drilling in the U.S. Futures slid 1.7 percent in New York, the biggest drop in more than three weeks. Saudi Arabia told OPEC it cut oil production by the most in eight years, while Kuwaiti Oil Minister Essam Al-Marzooq said the organization as a whole has delivered 92 percent of the output curbs it pledged. Meanwhile, U.S. oil drillers increased the rig count to the highest since October 2015, and the Energy Information Administration sees U.S. shale-oil output jumping next month to the highest level since May 2016. Oil has fluctuated above $50 a barrel since the Organization of Petroleum Exporting Countries and 11 other nations started trimming supply from Jan. 1 to help ease a global glut. The market will shift into a deficit during the first half of the year, and U.S. crude stockpiles will shrink amid a decline in imports as the curbs take effect, Goldman Sachs Group Inc. said last week. Higher crude prices have spurred drilling in the U.S., the world’s biggest oil consumer. “This is where the market takes a pause," Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London, said by telephone. "You have to balance what OPEC can achieve in the next six months versus increases in production elsewhere that dilute the effects of those cuts.” West Texas Intermediate for March delivery fell 93 cents to settle at $52.93 a barrel on the New York Mercantile Exchange. Total volume traded was about 3 percent below the 100-day average. Brent for April settlement dropped $1.11, or about 2 percent, to end the session at $55.59 a barrel on the London-based ICE Futures Europe exchange. The global benchmark closed at a premium of $2.16 to April WTI.

Oil prices pare gains as US supply concerns overshadow OPEC cuts: Oil pared gains on Tuesday as concerns about rising supply from U.S. shale output overshadowed an OPEC-led effort to cut global output, which has supported oil prices in a higher range. U.S. light crude oil ended Tuesday's session 27 cents higher at $53.20, after earlier rising to $53.72. Brent crude was 36 cents higher at $55.95 a barrel by 2:53 p.m. ET (1953 GMT) off a session peak of $56.46 a barrel. An early morning rally lost steam as the dollar strengthened after U.S. Federal Reserve Chair Janet Yellen said she expects central bankers to raise interest rates at an upcoming meeting. A stronger greenback makes dollar-denominated commodities such as crude oil more expensive to holders of other currencies.The two benchmarks fell 2 percent on Monday. They are both now in the middle of $5-per-barrel trading ranges seen since early December. "The usually fairly volatile oil price has barely budged for two months, the reason being conflicting dynamics in the market," said Hans van Cleef, senior energy economist at ABN AMRO Bank in Amsterdam. The Organization of the Petroleum Exporting Countries and other exporters including Russia have agreed to cut output by almost 1.8 million barrels per day (bpd) during the first half of 2017 in a bid to rein in a global fuel supply overhang. The market has largely priced in the production cuts that OPEC and other producers agreed to in November, leaving little room for prices to break out of the range, "It would take either a supply outage or serious cuts to move it," he said. "The first month, obviously, OPEC is going to do the best it can, but after that, let's see what the second and third month bring."

Why Sub $50 Oil Is More Likely Than $70 Oil – Berman - It is more likely that oil prices will fall below $50 per barrel than that they will continue to rise toward $70. Prices have increased beyond supply and demand fundamentals because of premature expectations about the effects of an OPEC production cut on oil inventories. Last week’s 13.8 million barrel addition to U.S. storage was the second largest in history. It moved U.S. crude oil inventories to new record high levels. Meanwhile, 130 horizontal rigs have been added to tight oil drilling since the OPEC cut was first announced in September. That means that U.S. output will surge and will continue to be a drag on higher prices.Comparative inventory analysis suggests that the current ~$53 per barrel WTI oil price is at least $6 per barrel too high. Don’t hold your breath for $70 oil prices.  Most analysts believe prices will increase steadily now that OPEC has decided to cut production. Their logic is that over-production caused lower oil prices and lower output should bring markets into production-consumption balance. The problem is that production is not the same as supply and consumption is not the same as demand. Inventories lie in-between and modulate the flows from both sides of the production-consumption equation. Inventory is clearly part of supply but is also a component of demand. Excess production goes into inventory when demand is less than supply. When consumption exceeds production, oil is withdrawn from inventory reflecting increased demand. The International Energy Agency (IEA) reported last week that global liquids markets would move to a supply deficit by the first quarter of 2017 if OPEC production cuts take place as announced (Figure 1). Yet the OECD inventories on which IEA’s forecast is based have increased and are now more than 400 million barrels above the 5-year average (Figure 2). In order for a supply deficit to develop in the first quarter of 2017, those stocks would have to be drastically reduced over the next 6 weeks. Comparative inventory analysis provides some context for the necessary magnitude of that reduction.

WTI/RBOB Tumble After Another Unexpectedly Large Inventory Build - Following last week's massive inventory build (and hope for improved gasoline demand), API reports another much bigger-than-expected build (Crude +9.94mm versus +3.5mm exp) and WTI and RBOB prices tumbled. API:

  • Crude +9.94mm (+3.5mm exp)
  • Cushing -1.27mm (+500k exp)
  • Gasoline+720k
  • Distillates +1.5mm

This will be the 6th weekly build in a row for crude (and 3rd week of major builds)...

Oil Producers Comply With OPEC Deal to Cut Output, but for How Long? -- When OPEC and other major oil exporters agreed late last year to limit production as a way to bolster teetering prices, many saw it as a shaky deal by a spent force. That perception, though, has changed. And oil prices are up 20 percent since the agreement was reached. New data published on Monday by the Organization of the Petroleum Exporting Countries shows that the cartel’s 13 members have largely complied with the production cut. “So far this is holding up way better than any previous agreement had,” said Bhushan Bahree, an OPEC analyst at the research firm IHS Markit. Still, questions remain about how such a disparate group of countries will be able to hold together, and how much clout OPEC has in a market that has changed radically in recent years. Oil prices began falling in late 2014, when OPEC decided not to cut production as a way to stabilize prices. From a high above $100 a barrel earlier that year, prices fell below $30 a barrel in early 2016 before recovering modestly. That played havoc with the government budgets of major oil producers, pushing even Saudi Arabia — OPEC’s biggest member by oil output — to borrow large sums in financial markets and to risk antagonizing its citizens by raising energy prices and cutting government salaries. What followed was a year of sometimes cliff-edge negotiations to reach the deal that was eventually announced in Vienna on Nov. 30. Had the producers not agreed, prices could have fallen further. “People got pretty close to the abyss and looked down, and it was pretty deep,” Daniel Yergin, an oil historian, said in an interview. “As a consequence they stepped back and did something.” Russia’s shift to looking for production curbs was crucial, OPEC officials say. It gave the Saudis, who had insisted they would not cut output on their own, the comfort to agree to limits.

Oil pulls back in post-settlement trade as U.S. stockpiles rise | Reuters: Oil prices pared gains after the settlement Tuesday, as evidence of surging U.S. crude oil stockpiles underscored concerns that shale production might limit the effectiveness of an OPEC-led effort to cut global output. Brent crude LCOc1 traded at $55.73 a barrel at 4:39 p.m. Eastern, off the settlement of $55.97 a barrel, which was up 38 cents but well off the session high of $56.46 a barrel. U.S. light crude CLc1 traded at $52.94 a barrel following the inventory report by a trade group, after settling up 27 cents at $53.20. After settlement, the American Petroleum Institute (API) said U.S. crude inventories rose 9.9 million barrels in the week to Feb. 10, far exceeding analysts' expectations for an increase of 3.5 million barrels. Gasoline and diesel stockpiles also rose, the API's weekly report said. The U.S. government is scheduled to release its weekly data on stockpiles Wednesday morning. On Monday, both benchmarks fell 2 percent. Both are near the middle of $5-per-barrel trading ranges seen since early December. The Organization of the Petroleum Exporting Countries and other exporters including Russia have agreed to cut crude output by almost 1.8 million barrels per day (bpd) during the first half of 2017. The market has largely priced in these production cuts OPEC and other producers agreed to in November,

WTI/RBOB Tumble As US Crude Inventory Reaches New Record High -- After API's bigger than expected crude build, DOE confirmed the data with a much-bigger-than-expected 9.5mm build pushing total US crude inventories to a new record high. Along with a large gasoline build, WTI/RBIB prices are tumbling on the print.  DOE

  • Crude +9.527mm (+3.5mm exp)
  • Cushing -702k (+400k exp)
  • Gasoline +2.846mm (+500k exp)
  • Distillates -689k (-1mm exp)

DOE confirmed API's major build - the 6th weekly build in a row. Gasoline inventories surged again.

 US crude settles down 9 cents after US stockpiles soar to record: Oil futures fell slightly on Wednesday as record high U.S. crude and gasoline inventories fed concerns about a glut. Trade was choppy and losses were limited by evidence that OPEC and other producing countries were complying with agreed-upon supply cuts. The dollar weakened, which also helped support greenback-denominated oil. U.S. crude stocks rose 9.5 million barrels last week, the U.S. Energy Information Administration (EIA) said, nearly three times more than forecast, but confirming a trade group's report late Tuesday of a larger-than-expected build. U.S. crude inventories hit a peak at 518.12 million barrels, while gasoline stocks also touched a record, rising 2.8 million barrels to 259.1 million barrels, according to the EIA. U.S. crude settled down 9 cents at $53.11. Brent crude was down 24 cents at $55.73 by 2:33 p.m. ET (1933 GMT). Gasoline prices were up 0.1 percent to $1.5485 a gallon after falling by as much as 0.8 percent. "The U.S. witnessed yet another week of higher-than-expected stock builds; nonetheless, the build was less than last week's, which helped prices recoup some of the earlier losses," said Abhishek Kumar, senior energy analyst at Interfax Energy's Global Gas Analytics in London. "A build in gasoline stock is in tandem with seasonal norms and further builds are expected in the coming weeks as demand for the fuel remains low." Gasoline inventories have surged 10 percent since the end of 2016, EIA data showed. Last week, stockpiles of the fuel swelled to a record at 259 million barrels.

Benchmark USGC, Midwest gasolines fall on selloff of winter grade - Benchmark US Gulf Coast CBOB and conventional gasoline fell Wednesday as much of the last stocks of winter grade gasoline was sold off and after federal government data showed a rise in regional gasoline stocks. The same phenomenon attributed to the slow transition to spring gasoline was seen in part of the Midwest cash trade, market sources said. Also Wednesday, line space on the gasoline-only Colonial Pipeline Line 1 from Texas to North Carolina reached positive territory for the first time in nearly a month, reflecting interest in moving cheaper fuel from the nation's refining hub eastward. CBOB at 13.5 RVP for loading February 28 on the pipeline outside Houston was assessed at the NYMEX March RBOB futures contract minus 6.25 cents/gal, down from an assessment at 5.5 cents/gal under futures Tuesday. The lesser-traded conventional gasoline at 13.5 RVP fell 45 points on the day to NYMEX March RBOB minus 1.75 cents/gal, though it was heard traded as low as futures minus 2.75 cents/gal in the early part of the day. Gasoline at 13.5 RVP was softer with the last of the winter grade expected to shipped along the pipeline in the next few weeks. S&P Global Platts will shift Gulf Coast assessments to the costlier-to-produce 11.5-RVP gasoline on Friday. "It's that time of year again: 'El dumpo,'" a US refined products source said.

 Oil rises modestly in tight trade, boosted by OPEC hopes | Reuters: Oil prices ended modestly higher on Thursday, as the market weighed swelling U.S. inventories against possible renewed efforts by major oil producers to reduce a price-sapping glut. Crude futures were initially bolstered after sources said the Organization of the Petroleum Exporting Countries (OPEC) may consider extending its oil supply-reduction pact with non-members and might even apply deeper cuts if global crude inventories failed to drop to a targeted level. Oil swayed between modest gains and losses throughout the session before rebounding late, and U.S. crude futures CLc1 settled at $53.36 a barrel, up 25 cents. Brent crude LCOc1 ended the day at $55.65 a barrel, down 10 cents. Prices have traded in a tight $5-range since OPEC and other exporters including Russia agreed last year to cut output by 1.8 million barrels per day (bpd) to reduce a price-sapping glut. The deal took effect on Jan. 1 and lasts six months. "I think that inside this little band we can expect a lot of choppy trading," said Gene McGillian, manager of market research at Tradition Energy in Stamford, Connecticut. "I still think the forward expectations (for inventory drawdown) is what the market is focused on." OPEC's supply pact could be extended by May if all major producers showed "effective cooperation", an OPEC source told Reuters.

OilPrice Intelligence Report: Oil Bulls And Bears Are At A Stalemate: Oil prices fell slightly this week as more signs emerged that the market is still oversupplied. OPEC officials said that they were considering extending the production cut deal for another six months, a move that could be interpreted as bullish in the sense that they will keep oil off of the market for longer. However, it failed to inspire confidence – an extension would come because the market is still woefully oversupplied. Oil prices reacted in a way that has become a familiar pattern in recent weeks – moving only slightly up and then down and then back to where they were beforehand.In fact, oil prices have traded between a narrow band of $4 per barrel for much of this year, pushing volatility to its lowest level in nearly three years. “We’re kind of resigned to the fact that the price is at about the right level,” Tim Evans, a Citi Futures analyst, told the WSJ. Even bearish inventory figures have not managed to move prices significantly. Evans says that to break out of this range, it might require a geopolitical crisis affecting supplies. Otherwise, it could be several more weeks of a bobbing around in the mid- to low-$50s per barrel before some new pattern emerges.   Libyan officials have said that oil production is now above 700,000 bpd, more than double the production level from last summer. More importantly, they are aiming to boost output to 1.2 million barrels per day (mb/d) by August and 1.7 mb/d by March 2018. That is a staggering amount of new supply if it comes to pass, and while there are good reasons to be suspicious of those targets given the turmoil in Libya, they are not entirely unrealistic. Eni and Total are ramping up activity and Bloomberg reports that many of the hurdles standing in their way – ISIS attacks and political infighting chief among them – have been sufficiently dealt with to allow them to resume operations. A wave of new supply from Libya is a downside risk to oil prices that needs watching.  Saudi Arabia saw its oil demand skyrocket by 77 percent in the ten years through 2015, a massive increase in demand that ate into oil exports. Now, even as the oil kingdom cuts production in order to shore up prices, the cuts are undermined by the fact that demand is also waning a bit. New natural gas production is displacing oil in the electric power sector and the government has announced large investments in solar in order to also free up more oil for export. The summer peaks are getting smaller, which should help Saudi Arabia export more.   According to the EIA’s latest Drilling Productivity Report, output from the Eagle Ford could rise by about 14,000 bpd in March, signaling a potential turnaround for the once prolific South Texas shale play.

  U.S. Rig Count Rises As Crude Inventory Levels Hit Record High - The number of active oil and gas rigs in the United States increased again on Friday by 10. Both benchmarks were trading down earlier on Friday under heavy pressure from record-high crude oil inventories (518.1 million barrels), and record-high gasoline inventories (259 million barrels).  The total number of active oil and gas rigs in the United States is now 751, according to oilfield services provider Baker Hughes, which is 237 rigs above the rig count a year ago. The number of oil rigs increased by 6, up from 591 last week to 597 this week. The number of active oil rigs in the United States is now the highest since October 09, 2015.  Oil rigs have increased by 120 since the OPEC agreement was announced on November 30, and are following a steep trajectory upwards as OPEC continues to hold its members to specified production caps. The number of gas rigs increased this week by 4 again this week, and now stand at 153, marking the fourteenth week of gas rig increases in the last 15 weeks—the highest number of gas rigs in operation since the end of 2015.  By basin, Granite Wash increased by 5 rigs and now stands at a total of 13, compared to 10 active rigs a year ago. Haynesville also saw a 3-rig gain, with the Permian, Eagle Ford, and Barnett all gaining 2 rigs each. Cana Woodford lost two rigs, and the Williston basin lost 1. At 11:32 am EST WTI was trading down 0.6% at $53.04—around $1.00 under last Friday’s pre-rig count price. The Brent crude benchmark was trading down 0.4% at $55.43—more than $1.00 under the price point last Friday. While things are looking up for US drillers, Canada lost 13 oil and 8 gas rigs this week, although both counts are up year on year.

 Permian Panic Continues As Rig Counts Rise Amid Record Glut In Crude -- With a record glut of crude and gasoline, US crude production pushed to new cycle highs this week and continues to track lagged rig counts. US crude inventories are at a new record high... And so are Gasoline inventories... And the rig ccount keeps rising with lagged oil prices... *U.S. OIL RIG COUNT UP 6 TO 597 , BAKER HUGHES SAYS :BHI US Highest since October 2015 Production keeps rising, and has a long way to go to catch up to the lagged rig count... And the oil algo idiocy from DOE data has been erased with RBOB back below $1.50... The surge in rigs has been driven almost 100% in the Permian, but as OilPrice.com's Nick Cunningham asks, how much longer that the Permian craze continue? The two great dueling forces in the world oil market, OPEC and American production, have created an atmosphere of uncertainty, as prices hover above $50. Last week the EIA reported another record inventory and an increasing rig count, while analysts point to a possible crisis as a market held aloft by buoyant predictions of OPEC cuts slowly faces up to insufficient demand. Crucial to this situation is the state of the U.S. patch, particularly the Permian Basin, which since late last year has been the focus of recovering production. The EIA data for the field is good, with new well production rising sharply and overall production of oil and gas rising sharply in 2017. While some speculate the bubble may burst, prospects for companies already invested in the Permian look positive, even if production costs are rising. The Permian has seen the highest increase in rig count of any U.S. basin. Six of the twelve rigs added last week went up in the Permian, and its total now stands at 301 rigs, up from 172 a year ago, out of a total U.S. count of 741. In total the count is up 83 percent from May 2016, though it has yet to reach the booming numbers of 2013, when over two thousand rigs were in operation. Even 2015, as the U.S. sector was being squeezed by low prices, saw the total count hovering near two-thousand, according to Baker Hughes. The increase is coming hot on the heels of the OPEC production deal, and seems to be in direct correlation with the OPEC announcement of nearly 900,000 bpd in cut production this month. For now, markets are happy, but underlying fundamentals remain as they were: cut production in Saudi Arabia and elsewhere will be made up by a resurgent American sector.

Rig count continues to creep upward -- The U.S. rig count continues to creep back up slowly, up ten Feb. 17, 2017, according to the latest Baker Hughes report. The rig count has increased for 5 straight weeks, reaching 751. The U.S. added 6 rigs exploring for oil and 4 exploring for natural gas. The current oil rig count is 597, while gas rigs number 153. One rig is still labeled as miscellaneous. Texas, again, saw the greatest jump, with 16 new rigs. Louisiana saw a decrease of three rigs, although three of the Texas rigs added were in the Haynesville basin. The Cana Woodford dropped two rigs, and the Williston Basin declined by one. Oil prices, however, are likely to end the week down due to concerns about U.S. shale overproduction in the midst of OPEC cuts. MarketWatch reports: Talk of possibly extending the [OPEC] supply cut pact come at time when U.S. production is showing a strong revival. The EIA forecasts that U.S. output to average 9 million barrels a day this year and grow another 500,000 barrels a day next year. In the short term, Bob Silvers, managing director, in charge of energy practice at SSA & Company, a New York-based management consultancy. notes that “as long as U.S. demand/consumption is stable or slightly decreasing and OPEC maintains their current production cuts, U.S. shale production, which can continue to ramp up quickly, will keep prices relatively stable.” In the long term, however, Silvers says inventories will need to drop and show a reversal of these factors in order to see a sustained upward trend in prices, reports MartketWatch.According to the U.S. Energy Information Administration (EIA), natural gas production in the Marcellus and Permain shale regions should continue to rise. The EIA’s Drilling Productivity report released February 13, 2017 estimates that U.S. natural gas production will increase across all shale regions by 524 million cubic feet per day in March.

Can Saudi Arabia Carry OPEC Through Spring? -- Faced with budget strains amid low oil prices, Saudi Arabia ditched its pump-at-will policy and brought together the diverse group of OPEC nations to agree to production cuts late last year. Now the cartel’s de facto leader and largest producer is going the extra mile in reducing output, at least in January. The Saudis pledged the biggest cut in the November 30 deal, and last month went beyond the required amount to ensure a high rate of compliance.Initial estimates by the International Energy Agency (IEA) and OPEC itself show that the cartel’s early compliance to cuts is very high: more than 90 percent. The unexpectedly high rate is almost solely courtesy of Saudi Arabia.Bloomberg estimates -- based on IEA and OPEC figures -- show that just three out of 10 OPEC members that had promised cuts managed to reduce their output to target production levels in January: Saudi Arabia, Angola and Qatar. Thanks to the Saudis, the cartel’s compliance was 93 percent, with 1.078 million bpd taken off the market compared to a target level of 1.164 million bpd.Among the 11 non-OPEC nations that have signed up to the OPEC deal, compliance is -- as expected-- low. Only Oman – a Saudi Gulf Arab ally and a member of the Gulf Cooperation Council (GCC) – brought its production within the level it had promised.Non-OPEC compliance in January was 48 percent, with output reduced by 270,000 bpd compared to a pledge for a total of 558,000 bpd, Bloomberg’s estimates show.Russia, leading the non-OPEC nations in the deal with OPEC, has pledged to “gradually” cut 300,000 bpd of its output over the first six months this year. In January, Russia reduced its output by 117,000 bpd, according to a statement by Energy Minister Alexander Novak on the homepage of Russia’s energy ministry website.

CIA honors Saudi Crown Prince for efforts against terrorism -- The Saudi Crown Prince Mohammed bin Nayef bin Abdulaziz al-Saud, Deputy Prime Minister and Minister of Interior, received a medal on Friday from the CIA for his distinct intelligence-related counter-terrorism work and his contributions to ensure international peace and security. The medal, named after George Tenet, was handed to him by CIA Director Micheal Pompeo after the Crown Prince received him in Riyadh on Friday in the presence of Deputy Crown Prince Mohammad bin Salman al-Saud, Deputy Prime Minister and Minister of Defense. The Crown Prince said in a press statement after receiving the medal that he appreciated the CIA honor, stressing that his efforts were guided by the leaders of Saudi Arabia headed by King Salman bin Abdulaziz al-Saud, as well as the efforts of the Kingdom’s security forces. With regards to terrorism in the region, the Crown Prince said all religions are separate from the beliefs and actions of extremist groups, noting that religious, political and social groups who have used religion as a tool throughout history do not reflect the absolute truths about the religion which it is affiliated to, or attributes its actions to. He said Saudi Arabia has played a key role in the fight against terrorism and condemns all forms and manifestations of terrorism. “We, God willing, continue to confront terrorism and extremism everywhere, and with thanks to God we have managed to thwart many terrorist plots from occurring,” he said.

Hundreds of thousands rally in Iran against Trump, chant Death to America - TV | Reuters: Hundreds of thousands of Iranians rallied across Iran on Friday to swear allegiance to the clerical establishment following U.S. President Donald Trump's warning that he had put the Islamic Republic "on notice", state TV reported. Carrying "Death to America" banners and effigies of Trump, Iranians in Tehran marched towards the Azadi ( Freedom) Square to commemorate the anniversary of Iran’s 1979 Islamic Revolution that toppled the U.S.-backed shah. Iran's most powerful authority Supreme Leader Ayatollah Ali Khamenei had on Tuesday called Iranians to take part in the demonstrations to show Iran was not frightened of American "threats." "America and Trump cannot do a damn thing. We are ready to sacrifice our lives for our leader Khamenei," a young Iranian man told state TV. Last week Trump put Iran "on notice" in reaction to a Jan. 29 Iranian missile test and imposed fresh sanctions on individuals and entities. Iran said it will not halt its missile programme. Pragmatist President Hassan Rouhani also called on Iranians to join the rally on Friday to "show their unbreakable ties with the Supreme Leader and the Islamic Republic." State television said millions turned out nationwide at revolution rallies in all main cities marked by the traditional anti-U.S. and anti-Israel slogans and the burning of U.S. flags.

 Goldman Warns of China Economy Risks During Year of the Rooster - China’s economy may have slipped down the global worry list, but significant risks remain, including an abrupt end to a massive credit boom or an overly aggressive policy response if inflation should speed up, according to Goldman Sachs Group Inc. While a hard landing isn’t the New York-based bank’s base case for 2017 -- it expects only a modest slowdown -- economists warn that a push to rein in cheap loans will weigh on key sectors such as housing. Officials are trying to keep a lid on frothy house prices without harming the wider economy, where growth remains heavily reliant on government spending. The scale of the lending boom was laid bare in data Tuesday showing China added more credit in January than the equivalent of Swedish or Polish economic output, fueling worries about the spree’s sustainability. Aggregate financing, the broadest measure of new credit, climbed to a record 3.74 trillion yuan ($545 billion). Despite the headline number, the growth of total credit continues to ease moderately, according to Bloomberg Intelligence. Policy makers have begun to tighten money market rates and analysts expect further measures to cool lending without choking the wider economy, especially amid important political changes with a major Communist Party leadership reshuffle set for later this year. Economic threats aren’t all home grown. External risks include a sharp drop in exports due to slowing demand or rising trade barriers -- U.S. President Donald Trump has promised tariffs on Chinese goods -- and faster-than-expected rate hikes by the Federal Reserve.

China penalty of the day - China has banned almost 7m people from taking flights and high-speed trains over the past four years as a penalty for not repaying their debts, the country’s Supreme Court has announced. The penalty system is part of efforts to build a nationwide “social credit” system that will eventually rate every Chinese citizen by collecting big data on financial, legal or social misdeeds. The debtors’ travel ban has been touted as an important first step for building the structural links needed to implement such a comprehensive monitoring programme.“We have signed a memorandum . . . [with over] 44 government departments in order to limit ‘discredited’ people on multiple levels,” Meng Xiang, head of the executive department of the Supreme Court, told state media on Wednesday.…In addition to not paying debts on time, one can also be blacklisted for lying in court, hiding one’s assets and a host of other crimes. The Supreme Court said on Tuesday it was working on adding new forms of penalties.Here is the FT story by Yuan Yang.  Keep in mind that the country does not have a real personal bankruptcy law, nor well-developed credit institution penalties, so this is viewed as one of the few options available.

From ‘Made in China’ to ‘Made by China for China’ -  China remains the biggest manufacturer on the planet, but most of what it makes stays at home and the vast majority of what it consumes is made there, too.These twin facts could confound any Donald Trump-led trade assault, according to Diana Choyleva, London-based chief economist at Enodo Economics.Of course, China remains deeply knitted into the global supply chain. "But the bulk of the value added is actually destined for China’s domestic market rather than abroad," Choyleva wrote in a recent note.  In fact, in 2011 less than a quarter of total domestic valued added by China’s manufacturing sector was bound for foreign markets, down by 5 percentage points since 2008, according to the most recent data available from the Organization for Economic Cooperation and Development. To be sure, some sectors still rely heavily on foreign demand, including electronics, textiles and apparel. But most don't.  This chart from Enodo demonstrates their point:  Meanwhile, foreign content in China-produced goods now only makes up 10 percent of final consumption in China. So while the U.S. could reduce its Chinese imports via protectionism, it is unlikely to export more to China unless it focuses on services, Choyleva said. Beijing also hopes to produce more of the components it needs to make final products, whether for the home market or overseas. Choyleva points out that under the new "Made in China 2025" program, the goal is to raise the domestic content of core components and materials to 40 percent by 2020 and 70 percent by 2025. "Beijing wants to transform “Made in China” to “Made by China” with the purpose of reducing its vulnerability to a disruption of global supply chains," she wrote.

 China Credit Surging to Record Underscores PBOC Shift to Tighten - China added more credit last month than the equivalent of Swedish or Polish economic output, revving up growth and supporting prices but also fueling concerns about the sustainability of such a spree. Aggregate financing, the broadest measure of new credit, climbed to a record 3.74 trillion yuan ($545 billion) in January, exceeding the median estimate of 3 trillion yuan in a Bloomberg survey New yuan loans rose to a one-year high of 2.03 trillion yuan, less than the 2.44 trillion yuan estimate The credit surge highlights the challenges facing Chinese policy makers as they seek to balance ensuring steady growth with curbing excess leverage in the financial system. The PBOC recently moved to tighten monetary policy by raising the interest rates it charges in open-market operations and on funds lent via its Standing Lending Facility. "China is learning what other central banks realized decades ago: trying to control monetary aggregates in a modern financial system is next to impossible," said James Laurenceson, deputy director of the Australia-China Relations Institute at the University of Technology in Sydney. "I expect the PBOC will focus more on interest rates and prudential regulation and supervision going forward." China’s major state-backed banks tend to splurge at the start of the year as they seek to maximize their profits on lending. The main categories of shadow finance all increased significantly. Bankers acceptances -- a bank-backed guarantee for future payment -- soared to 613.1 billion yuan from 158.9 billion yuan the prior month.

China Just Created A Record $540 Billion In Debt In One Month --One week ago, Deutsche Bank analysts warned that the global economic boom is about to end for one reason that has nothing to do with Trump, and everything to do with China's relentless debt injections. As DB's Oliver Harvey said, "attention has focused on President Trump, but developments on the other side of the world may prove more important. At the beginning of 2016, China embarked on its latest fiscal stimulus funded from local government land sales and a booming property market. The Chinese business cycle troughed shortly thereafter and has accelerated rapidly since." DB then showed a chart of leading indicators according to which following a blistering surge in credit creation by Beijing, the economy was on the verge of another slowdown: "That makes last week’s softer-than-expected official and Caixin PMIs a concern. Land sales, which have led ‘live’ indicators of Chinese growth such as railway freight volumes by around 6 months, have already tailed off significantly. " As DB concluded, "If China starts to slow again, the current risk-friendly environment has a short sell-by-date, particularly given rising oil prices and our view that any Trump stimulus will take at least a few quarters to work its way into US growth."Yes... but not yet, because as China reported overnight, in January Beijing injected the greatest amount of aggregate monthly credit, between bank and shadow loans, i.e.,Total Social Financing, on record, amounting to an all time high $540 billion.

The Dangerous Myth That China “Needs” $2.7 Trillion in Reserves -- Brad Setser -- $2.7 trillion is well over 3 times China’s short-term external debt (around $800 billion per the IMF). It is roughly two times China’s external debt ($1.4 trillion, counting over $200 billion in intra-company loans). It is enough to cover well over 12 months of goods and services imports (total imports in 2016 were around $2 trillion).* There are two good reasons why a country might need more reserves than it has maturing external debt. The first is that it has an ongoing current account deficit. A country arguably should hold reserves to survive one year without any external financing – the sum of the current account and short-term external debt. The other is that a country has lots of domestic foreign currency deposits. Neither applies to China. China’s runs a $200 to $300 billion current account surplus, so its one year external financing need is now around $500 billion. China has a relatively modest $250-$300 billion in foreign currency sight deposits, and just under $600 billion in domestic foreign currency deposits (to put that in context, it is about 5 percent of GDP). It would take just over a trillion in reserves to cover China’s external (short-term debt) and internal (domestic fx sight deposits) fx liquidity need. The $2.7 trillion number (or $2.6 trillion) stems from the initial application of the IMF’s new (and in my view flawed) reserve metric to China. The IMF’s metric revived M2 to reserves as an important indicator of reserve adequacy, and China is off the charts on this indicator.  In the composite indicator, emerging economies with a fixed exchange rate and an open capital account need to hold 10% of M2 in reserves. That alone is about over 20% of China’s GDP – as China’s M2 to GDP ratio is a bit over 200%. For China, the weighted contributions from short-term debt, “exports” (the IMF uses exports rather than imports) and long-term external liabilities are trivial.

Why Did China’s 2016 Current Account Surplus Fall? -- Brad Setser - Few policies are less liked than China’s 2015/2016 credit-driven stimulus. Even people like me who worried that slamming the brakes on credit, in the absence of more fundamental reforms to lower China’s savings rate, risked creating a shortfall in demand were not exactly enthusiastic supporters. China would be far better off if had used a rise in central government social expenditure to support demand, not yet another wave of off-balance sheet borrowing by local governments and state firms.But the current pick-up in growth suggests that arguments that (yet another) expansion of credit wouldn’t work were a bit overdone. There are no doubt better ways to support growth than more credit. But growth did responded to the stimulus, even if there is a real debate over just how strong the response was.*Tilton, Song, Tang, Li, and Wei of Goldman Sachs (in a report summarized here):“Chinese policy makers wrestled with challenges throughout 2016, but large and sustained policy stimulus eventually fostered recovery. … Our China Current Activity indicator bottomed out at 4.3% in early 2015, recovered to the mid-5 percent range last year, and is now running at 6.9%. Heavy industry … has seen an even more pronounced re-acceleration”And there is growing evidence, I think, that the pickup in Chinese demand also had positive spillovers for the rest of the world.  China’s current account surplus for 2016 fell more than I expected. To be sure, China’s reported current account is prone to significant revisions, and I wouldn’t be surprised if the (very low) q4 surplus is revised up.

China May Bar US Ships From Passing Through Its Waters - In a preemptive move to limit foreign naval presence in proximity to China and especially the disputed South and East China Sea islands, China's People's Daily reports the Beijing is set to revise its 1984 Maritime Traffic Safety Law, which would allow the relevant authorities to "bar some foreign" (read U.S.) ships from passing through Chinese territorial waters. The Legislative Affairs Office of the State Council announced Tuesday it is soliciting public opinions on the revisions. Think of it as an Air Defense Identification Zone, only in the water. According to the Chinese press, the draft would empower maritime authorities to prevent foreign ships from entering Chinese waters if it is decided that the ships may harm traffic safety and order.  The draft revisions would grant authorities the right to designate specific areas and temporarily bar foreign ships from passing through those areas according to their own assessment of maritime traffic safety. The revisions are based on the UN Convention on the Law of the Sea and Chinese laws on the sea, adjacent areas and exclusive economic zones, the office said. It was not clear how China would implement and enforce this bar, or what the punishment for transgressors would be.

Heat is on China after North Korean missile test - Beijing may be more willing to support additional international sanctions against Pyongyang after North Korea launched a ballistic missile into the Sea of Japan on Sunday, analysts said, though they acknowledged what China could do was limited. South Korea said the move by the North was a “show of force” designed to test US President Donald Trump, who responded by pledging “100 per cent” support for Washington’s key regional ally Japan. Reuters cited an unnamed US official as saying the Trump administration was likely to ­increase pressure on China to rein in Pyongyang. Trump has previously said Beijing was not doing enough to keep its ally in check. North Korea fires ballistic missile to ‘test response from President Trump’ Relations have thawed in recent days after Trump reaffirmed Washington’s “one-China” policy in what he described as a “very warm” telephone conversation with President Xi Jinping. There was no immediate comment on the missile launch from Beijing. But analysts said the move by the Kim Jong-un regime should not come as a surprise, and that Beijing had limited options in how to respond. “The North Korea issue has long put China in an awkward situation,” Liang Yunxiang, an international affairs expert at Peking University, said. “It is in Beijing’s interest to see the survival of [the North Korean regime], yet Pyongyang pays no heed to China,” he said. “China has no viable solution except reiterating its call ... on all parties to exert self-restraint – but in reality no parties are willing to restrain themselves.”

Brother Of North Korea's Kim Jong Un Assassinated In Malaysia -- Just two days after North Korea embarrassed both the US and Japan by test-firing a new, nuclear-capable ICBM with a 2000 mile range, with neither Trump nor Abe able to articulate a clear retaliation strategy, moments ago Yonhap news agency reported that the elder half-brother of North Korean leader Kim Jong Un has been assassinated at Kuala Lumpur airport. Kim Jong Nam, 45, who had lived outside North Korea for years, was reported to have been killed by poison needle by two women who fled the scene by taxi, the reports said. He was once considered to be the heir to late North Korean leader Kim Jong Il but he fell out of favor with his father in 2001 after he was caught trying to enter Japan on a false passport, and was arrested at Tokyo airport, apparently en route to Disneyland. Kim Jong Nam had been critical of Kim Jong Un, reportedly saying in 2012 that he “won’t last long” because of his youth and inexperience. The two brothers have different mothers, Bloomberg reports. Who is behind the murder? As BBG adds, Kim has carried out a series of executions since taking power in 2011, the most high profile of which was the 2013 killing of his uncle and one-time deputy Jang Song Thaek. If Kim Jong Nam was killed by a North Korean spy, it indicates that Kim Jong Un felt a sense of paranoia about his own future and wanted to remove any potential successors, according to Namkoong Young, who has been teaching inter-Korean politics at Hankuk University of Foreign Studies for more than 25 years. “Jong Nam has been in exile for years away from North’s politics for a long time but he is still the eldest son of Kim Jong Il,” Namkoong said. “And if there was any move or plan by some elite there to have him replace Jong Un, he probably should be removed.”

Suspect in North Korea killing 'thought she was taking part in TV prank' -- An Indonesian woman arrested for suspected involvement in the killing of the North Korean dictator Kim Jong-un’s half-brother in Malaysia was duped into thinking she was part of a comedy show prank, Indonesia’s national police chief has said, citing information received from Malaysian authorities. Tito Karnavian told reporters in Indonesia’s Aceh province that Siti Aisyah, 25, was paid to be involved in pranks . He said she and another woman performed stunts which involved convincing men to close their eyes and then spraying them with water. “Such an action was done three or four times and they were given a few dollars for it, and with the last target, Kim Jong-nam, allegedly there were dangerous materials in the sprayer,” Karnavian said. “She was not aware that it was an assassination attempt by alleged foreign agents .” Siti’s family has said they were shocked to hear of her involvement in the case, describing her as a struggling mother who had travelled to Malaysia for work. Her 26-year-old Malaysian boyfriend was also arrested by police late on Thursday. Police are hunting for other accomplices.  Authorities are investigating whether Siti and another female suspect killed the 46-year-old North Korean exile in a shopping concourse at Kuala Lumpur’s international airport on Monday.

No Laughing Matter for Kuroda With BOJ Near 40% of Bond Market -- Governor Haruhiko Kuroda once chuckled that the Bank of Japan had only gobbled up half as much in government bonds as the Bank of England once did. It soon won’t be a laughing matter. The BOJ holds more than 40 percent of Japanese government bonds, according to data compiled by Bloomberg. While its holdings of all Japanese sovereign securities -- including bonds and bills together -- are still shy of the yardstick that Kuroda mentioned with some levity in October 2014, the central bank’s stake continues to rise and rise. There are no signs of that expansion stopping or slowing anytime soon, even as the central bank’s need to control yields drives unprecedented purchases of benchmark 10-year debt, exacerbating concerns it will run out of willing sellers to supply it with bonds to buy. “The BOJ actually decreased the pace of purchases late last year, but after the market started to price in the risks they would taper, that drove the yield up to 0.15 percent, and forced the central bank to accelerate again,” Policy makers currently have a 0 percent 10-year yield target. The BOJ snapped up a record 2.1 trillion yen ($18 billion) of five- to 10-year JGBs between Feb. 3 and Feb. 8 -- buying on three out of four trading days. The haul, which included an emergency “fixed-rate” operation, was a record for that maturity band since Kuroda started his mega-stimulus in April 2013. The central bank stepped in after 10-year yields spiked to a one-year high of 0.15 percent, threatening to becoming unhinged from the BOJ’s target.  Kuroda and his colleagues had highlighted how the new framework, enacted in September, would make Japan’s monetary policy more sustainable. The new regime was also aimed at steepening the yield curve -- and it has certainly done that. The premium that 30-year notes offer over 10-year debt has widened since November at the fastest pace in more than six years, reaching 82 basis points last week. That contrasts with the 50 basis point level seen when yield-curve control was introduced.

As US, Russia eye stagnant space budgets, India ramps up investment -- As the United States' NASA and Russia's Roscosmos, the world's most accomplished space agencies, face stagnant or even reduced budgets, India is increasing its space exploration spending for 2017-18 by more than 20 percent, from about $1.1 billion to $1.4 billion. Budget documents recently released by the agency show particularly healthy increases for space technology and space science, reflecting a belief by the Indian government that investing in space exploration will benefit the country in the long term.The increases will provide initial funding for two new ambitious Indian space science missions—one to Mars and another to Venus. Although the budget documents do not provide much detail, reports in Indian newspapers suggest that the "Mars Orbiter Mission II"  may include some kind of lander, with a launch in 2021 or 2022; the "Mission to Venus" will be a more straightforward orbiter. With plans for a Martian lander, it appears that India is trying to compete with the space program of China, its regional Asian rival.  These are heady days for India's space program, which has continued to scale up its ambitions since 2014, when its small 13kg Mars Orbiter Mission reached the red planet and began sending back a stream of data and images. India has also begun flight tests of a reusable space plane, the RLV-TD, with the aim of slashing launch costs.  At the same time its budget prospects are brightening, India is gearing up for one of its highest-ever profile launches this week. The country's workhorse Polar Satellite Launch Vehicle rocket will carry a payload of more than 100 small satellites into orbit, breaking the record of most satellites deployed in a single launch. The majority of the satellites in the Feb. 15 launch will come from the US-based Planet, which is sending 88 of its "Dove" satellites to Sun-synchronous orbit at an approximate altitude of 500km. Once there, the small, 4.7kg satellites will join an existing constellation of Planet satellites to image the Earth daily.

 It’s the ‘Indian IT will be fine’ hope that kills you -- Poor Indian IT. Not only do they have to deal with the harsh reality that their labour-intensive business model is coming unstuck, they now have to deal with a more immediate threat: a wage floor hike to the the skilled visa programme they rather rely on. Here’s the FT: Of course, if it’s just the visa thing, it’s going to be painful but manageable. And as Ambit say it’s probably just the visa thing. Right? RIGHT? Ambit basically think that Trump doesn’t want to break the business model of Indian IT companies. The optimistic reasoning is that any campaign to kill Indian IT would hurt the competitiveness of American firms. (For what it’s worth, folks in Silicon Valley are equally convinced that Trump doesn’t want to break their high-skilled labour business model either.)Which is fair enough — if you increase the price or limit the supply of one source of workers, it makes sense that the price of the remaining workers goes up. In this case, the price of those who are free to work in the US would be higher.… the Trump administration is business friendly and would not want to prohibitively increase the cost of IT services suddenly for all US businesses. Hence, we expect it to provide a glide-path of increase — perhaps US$80,000 p.a. in the first year followed by US$100,000 p.a. in the second year. But maybe we should dwell, for at least a minute, on the idea that the Trump administration might actually want to kill Indian IT. We suppose it makes sense to assume he doesn’t actually want to do that but as James Crabtree recently wrote in an FP article about Steven Bannon’s war on India’s high tech economy:  “We [India] are much more vulnerable to restrictions on services,” he said. “So one has to worry quite a bit that any reversal of globalization in this atmosphere could also mean restrictions on exports of services. And that’s bad news.” So while, yes, it would be basically ok to tighten up the H1-B system it would obviously be rather less ok if Trump really does want to kill the outsourcing model. It’s not like reshoring services — or protecting American jobs from their offshore competitors — wouldn’t make for a good soundbite campaign? And there is certainly a revanchist theme emanating from around the new administration.

The Economic Vision for Precocious, Cleavaged India - India has more than 1.2 billion people, and it is has been growing rapidly and carrying out substantial policy changes, but it seems to get only a small fraction of the attention paid to China. For those looking to get up to speed on India's economy, a useful starting point is the Economic Survey 2016-2017, published in January 2017 by India's Ministry of Finance (where Arvind Subramanian is the Chief Economic Adviser). The page also has a drop-down menu with links to previous annual surveys. The title of this post is taken from the title of Chapter 2 of the report. "Precocious" refers to the facgt that India has been a democracy for so long, and that it turned to democracy started when the country was at such low level of per capita GDP. The term "cleavaged" refers to separations in India. As the report notes: At the same time, India was also a highly cleavaged society. Historians have remarked how it has many more axes of cleavage than other countries: language and scripts, religion, region, caste, gender, and class ..." Here are seven points from the report that stuck with me:

America is fast running out of patience for Pakistan - Pakistan is running out of friends in Washington. Recent publications by influential U.S. experts, Congressional testimony by officials and signs out of the Trump administration all point in the same direction: The U.S. will step up pressure on Islamabad to crack down on terrorist groups that target U.S. troops in Afghanistan and destabilize Afghanistan and India. In the decade and a half since 9/11, a generation of U.S. military and intelligence professionals has witnessed the Pakistani army’s support for terrorist groups such as the Haqqani network, the Taliban and Lashkar-e-Taiba. The 2011 discovery of Osama bin Laden a stone’s throw from Pakistan’s top military academy cemented the narrative of Islamabad’s “double game.” Pakistan ought to take this darkening mood seriously. If it acts against the terrorist groups that operate from its soil, it will begin to earn back trust in Washington. But if it persists with business as usual—distinguishing between “bad terrorists” who attack Pakistanis and “good terrorists” who attack Americans, Afghans and Indians—it should expect frostier ties with its largest export market and one of its biggest defense suppliers.

Pakistan says kills 100 'terrorists' after suicide shrine attack | Reuters: Pakistani security forces killed dozens of suspected militants on Friday, a day after Islamic State claimed a suicide bombing that killed more than 80 worshippers at a Sufi shrine, the biggest in a spate of attacks this week across the country. The bombing at the famed Lal Shahbaz Qalandar shrine in southern Sindh province was Pakistan's deadliest attack for two years, killing at least 83 people and highlighting the threat of militant groups such as the Pakistani Taliban and Islamic State. The security response was swift. "Over 100 terrorists have been killed since last night and sizeable apprehensions also made," the military said in an operations update on Friday evening. "Terrorists will be targeted ruthlessly, indiscriminately, anywhere and everywhere. No let up," an armed forces spokesman added in a tweet. With authorities facing angry criticism for failing to tighten security before the shrine bomber struck, analysts warned that the wave of violence pointed to a major escalation in Islamist militants' attempts to destabilize the region. "This is a virtual declaration of war against the state of Pakistan,"

Peru Asks Donald Trump to Deport Fugitive Ex-President -- Peru’s President Pedro Pablo Kuczynski (PPK) has spoken with US President Donald Trump to ask him to deport ex-president Alejandro Toledo, who has been accused of corruption. The Peruvian foreign ministry reported that during a telephone conversation, PPK asked his counterpart that “within the framework of the discretion that American immigration law grants to the Department of State, we request the decision to deport Alejandro Toledo to Peru, so that he can be subject to Peruvian justice.” Former Peruvian President Alejandro Toledo is accused of receiving a millions of dollars in bribes from Brazilian construction giant Odebrecht, in exchange for awarding them with lucrative contracts on two sections of the Interoceanic Highway, a massive infrastructure project designed to link Peru‘s Pacific Coast with the Brazilian border, where the Brazilian government intended to complete a much longer highway, eventually linking the Atlantic and Pacific oceans.

Brazil economic activity slides for 8th straight quarter | Reuters: (Reuters) - Economic activity in Brazil fell for the eighth straight quarter at the end of 2016, capping the second year of a severe recession, central bank data showed on Thursday. It shrank 0.36 percent in the fourth quarter from the third after seasonal adjustments following a 0.39 percent fall in the previous quarter, according to the central bank's IBC-Br index, considered an advance indicator of gross domestic product data. Activity fell 0.26 percent in December from November after an increase of 0.10 percent in the previous month. In 2016, economic activity plunged 4.55 percent following a drop of 4.07 percent in the prior year, the bank said. The IBC-Br index measures activity in agriculture, industry and services. Economists expect Brazil to begin a slow recovery in 2017 with the central bank forecast to slash interest rates. More than 12 million Brazilians are unemployed, and scores of companies have filed for bankruptcy protection, denting the popularity of President Michel Temer.

There Are 66,719 Empty Mansions In Vancouver - One year ago, when we first started discussing the Vancouver housing bubble, which as we first speculated - and was later confirmed - was the result of Chinese oligarch money-launderers parking "hot cash" in this offshore housing market (at least until a 15% property tax on foreign purchases made Seattle the new Vancouver), we said that Vancouver houses had become the de facto new Swiss bank account, and because of that the houses - once purchased - would remain a highly overprized, if vacant tribute to China's soaring capital outflows. Now, courtesy of data by urban planner Andy Yan of Simon Fraser University’s City Program, this has been confirmed because according to the latest census numbers, as of 2016 there were 25,502 unoccupied or empty housing units in the City of Vancouver. Expanding to include the entire metro area, Vancouver’s multimillion-dollar homes are not only out of reach for most Vancouverites, they are rapidly becoming a self-contained ghost town, because nothing speaks to the Canadian city’s affordability crisis more than its empty houses acquired by "hot money" laundering Chinese: as of the end of 2016, the number of Vacant or temporarily occupied houses more than doubled since 2001 to a whopping 66,719.

 Trump Expects Putin To "Return" Crimea To Ukraine - With every passing day, it appears that many of the anticipated foreign policy changes under the new administration may end up being nothing but smoke and mirrors. First, it was the middle east, where despite campaign promises of pulling back US troops, Trump is instead considering adding to US deployments to reinforce what he plans to be Syrian "safe zones." Then, during today's Sean Spicer press conference, the White House spokesman had that President Trump has been "tough" on Russia and expects Moscow to “return” the Crimea peninsula to Ukraine, the White House spokesman told reporters. Addressing the resignation of National Security Adviser Michael Flynn – hounded by the media over his contacts with Russian diplomats prior to Trump’s inauguration – Spicer pointed out that Russia “seized” Crimea under the Obama administration and that the Trump-appointed ambassador to the UN Nikki Haley has “strongly denounced the Russian occupation.”  "President Trump has made it very clear that he expects the Russian government to de-escalate violence in the Ukraine and return Crimea," Spicer said at a daily news briefing. "At the same time, he fully expects to and wants to get along with Russia."

EU gears up for WTO challenge to US border tax - The EU and other US trading partners have begun laying the groundwork for a legal challenge to a US border tax proposal in a move that could trigger the biggest case in World Trade Organisation history. The preliminary moves come as Republicans in Congress are working to convince President Donald Trump to back a major shake-up of the US corporate tax system that would include a new “border adjustment” system. It would see US imports subject to tax and export revenues exempted. Were the US to adopt the mechanism, it would represent the biggest shake-up in the global corporate tax system in almost a century, according to tax experts.Members of the WTO and trade experts warn that if the US makes the tax change, it would lead to a major challenge to the global trading system at a time when its most influential member is tilting towards protectionism under Mr Trump. Jyrki Katainen, the European Commission vice-president who oversees EU trade policy, told the Financial Times that Europe wanted to avoid a trade war with the US as that would be “disastrous” for the world economy. But he made clear the EU would be willing to act against the US whether it was related to a border tax proposal or the erection of other arbitrary trade barriers.  “If somebody is behaving against our interests or against international rules in trade then we have our own mechanisms to react,” Mr Katainen said. “We have all the legal arrangements within EU, but we are also part of global arrangements like the WTO and we want to respect the global rule base when it comes to trade.”

Europe must not bow to U.S. spending demands on NATO - EU's Juncker | Reuters: European Commission President Jean-Claude Juncker said on Thursday that Europe must not cave in to U.S demands to raise military spending, arguing that development and humanitarian aid could also count as security. U.S. President Donald Trump has raised questions about his commitment to the NATO defence alliance if European countries do not raise defence spending to 2 percent of economic output. The United States puts up 70 percent of alliance funds. U.S. Defence Secretary Jim Mattis warned North Atlantic Treaty Organization allies on Wednesday that they must honour military spending pledges to make sure the United States does not moderate its support. "It has been the American message for many, many years. I am very much against letting ourselves be pushed into this," Juncker said in a speech on the sidelines of the international Munich Security Conference. He said he knew that Germany would no longer have a budget surplus if it increased defence spending to 2 percent of GDP from 1.22 percent. "I don't like our American friends narrowing down this concept of security to the military," he said, arguing it would be sensible to look at a "modern stability policy" made up of several components. "If you look at what Europe is doing in defence, plus development aid, plus humanitarian aid, the comparison with the United States looks rather different. Modern politics cannot just be about raising defence spending," he said.;

Germany Picks Anti-Trump President as Trans-Atlantic Bonds Fray -- Frank-Walter Steinmeier, the former German foreign minister who was a vocal critic of Donald Trump during the U.S. campaign, was elected as the country’s 12th postwar president. The Social Democrat, who served two stints as foreign minister under Chancellor Angela Merkel, emerged as her governing coalition’s candidate last November as the parties sought to avoid a political spat over the appointment in an election year. With the support of Merkel’s Christian Democratic-led bloc and the Social Democrats in a special assembly on Sunday, Steinmeier was elected in the first round to the mostly ceremonial post. While Merkel steered clear of sharing her views on Trump before his election as president, her top diplomat vociferously derided what he saw as a campaign that broke taboos and threatened trans-Atlantic bonds. At one point, Steinmeier called Trump a “hate preacher.” As head of state, Steinmeier will be Trump’s counterpart according to protocol, even if the German presidency lacks the political or policymaking power held by the chancellor. The day after Trump’s surprise election victory, Merkel issued a couched warning that offered the new U.S. president German cooperation based on joint values, including democracy, respect for the rule of law and for human dignity “independent of origin, skin color, religion, gender, sexual orientation or political views.” Steinmeier was less diplomatic. “The result is not what most German would have wished,” Steinmeier said on Nov. 9. “I don’t want to sugarcoat anything. Nothing will be easier, many things will become more difficult.”

'Get out of France': Paris police tear gassing refugees and stealing blankets in freezing conditions, report reveals | The Independent: Refugees sleeping on the streets in freezing conditions in Paris are having their blankets and sleeping bags stolen by police while being “violently” forced to move on, a report has found. Research exclusively published by The Independent shows that men, women and children are being beaten and tear gassed by officers in the French capital, despite government pledges to shelter vulnerable people. Eritrean families said they were told to “get out of France” as police tore away children’s blankets, leaving them without protection as the bitter temperatures plummeted to -7C.Natalie Stanton, deputy director of the Refugee Rights Data Project, said researchers were confronted by “alarming” scenes in the La Chapelle area, where authorities have launched numerous clearance operations in recent months. “While we were there we witnessed the police taking people’s belongings – some in the night, some in the daytime – it’s quite a visible phenomenon,” she added. “The same night the government announced a plan to keep everyone warm, we witnessed police picking up blankets and putting them in a big rubbish bin on the back of a truck, then driving away.” Almost two thirds of homeless refugees interviewed said they had been woken up and forced to move, with 54 per cent describing the experience as “violent” and saying they were afraid, having been given no reason for the intervention. One 45-year-old man told researchers an officer kicked him so hard in the shoulder that he was admitted to hospital for the next 20 days for treatment, while others described being tear gassed if they did not move quickly enough.

Women and children ‘endure rape, beatings and abuse’ inside Dunkirk’s refugee camp - Children and women are being raped by traffickers inside a refugee camp in northern France, according to detailed testimony gathered ahead of fresh legal action against the UK government’s approach to the welfare of unaccompanied minors. Corroborating accounts from volunteers, medics, refugees and other officials reveal that sexual abuse is common within the large camp at Dunkirk and that children and women are forced to have sex by traffickers in return for blankets or food or the offer of passage to the UK. Legal proceedings will be issued by London-based Bindmans against the Home Office, which is accused of acting unfairly and irrationally by electing to settle only minors from the vast Calais camp that closed last October, ignoring the child refugees gathered in Dunkirk, 40 miles away along the coast. The legal action, brought on behalf of the Dunkirk Legal Support Team and funded by a crowd justice scheme, says the Home Office’s approach was arbitrary and mean-spirited. On Wednesday the government’s approach to child refugees provoked widespread indignation when the home secretary, Amber Rudd, announced the decision to end the “Dubs scheme”, having allowed just 350 children to enter the UK, 10% of the number most MPs and aid organisations had been led to believe could enter. A petition of 50,000 signatures was handed in to Theresa May on Saturday by Labour peer Alf Dubs amid growing cross-party anger at the decision. Caroline Robinson of Bindmans said: “Our clients call upon the home secretary to reconsider her position.”

France's shame -  Frances Coppola - Today, the Guardian has a report on conditions in the refugee camp at Dunkirk, just up the French coast from the infamous "jungle" at Calais that was cleared at the end of 2016. "Women and children 'endure rape, beatings and abuse' inside Dunkirk's refugee camp" proclaims the headline. This is of course the shiny new refugee camp, supposedly built to international standards, that was opened less than a year ago. It makes harrowing reading. Here is an excerpt: The witness statement from another volunteer, who could speak Arabic, describes how a 14-year-old from Morocco appeared to have been raped and could not sit down and kept repeating that he felt so “ashamed”.  Their account stated: “He didn’t want anything, he was only crying and asking for his mum. He had been badly beaten." The worker also described how a young child had been sexually assaulted on site, leaving her mother so shocked she had been rendered mute. “We have also seen in the past a woman holding a seven or eight-year-old girl by her arm next to GSF [the charity Gynaecology sans Frontières has a unit on site] and apparently this child had been raped just before, and the woman was afraid to report it to police. She was there, standing silent refusing to report it.”But hang on. Let's just look at the last two sentences in that excerpt again, shall we? "....the woman was afraid to report it to police. She was there, standing silent refusing to report it." This is in France, remember. Women and children in a refugee camp in a supposedly civilised Western country are afraid to report serious crimes to the police. Rape of a minor is a criminal offence in France, as it is in the UK. It carries a long prison sentence. But if the camps are so poorly policed that sexual assault of children goes unreported because of fear, the perpetrators will never be brought to justice. They will continue to abuse vulnerable people with impunity. Does the Guardian lead on the failure of the French authorities to ensure that women and children in the camp are protected from abuse? No. It blames the UK. "The fate of those stranded by the UK’s decision to limit taking child refugees from France," says its sub-headline.

Le Pen Lures French Farmers Angered by Worst Crisis in Decades - Every time French farmer Nicolas Menier looks at his black-and-white milk cows, he’s reminded that he loses money on each one.  Beef prices are falling too. So are grains. Menier’s small corner of Brittany is a microcosm of French farming’s deepest crisis since World War II, and that could have an impact on April’s presidential election. He blames his woes on politicians from establishment parties, saying they haven’t protected farmers from falling prices and international competition. He plans to vote for the National Front’s Marine Le Pen, whom he calls the only candidate who understands farmers and whose threats to pull France out of the European Union could bring him relief. “The left and the right have made promises and didn’t live up to them,” the 38-year-old third-generation farmer says, his boots deep in mud at his cow shed in the town of La Trinite-Porhoet. “Let’s give her a try.” Farmers and rural voters could hold the key to the election at a time when a resurgent Le Pen is leading in national polls. As her National Front gained ground in the past decade, one region --- Brittany -- and one profession -- farmers -- were impervious to its anti-immigration, anti-European Union message. They were enjoying the fruits of Breton exports of milk, pork, and vegetables all over Europe and beyond.  Now, Le Pen is expected to make major gains in what is called “la France profonde” -- deep France -- as farmers, their suppliers and rural voters incensed by the loss of public services are seduced by her claims that imports and the European Union are responsible. Even though France remains the biggest recipient of EU farm aid, other policies from the bloc-- sanctions on Russia, reforms of quota programs -- have whipsawed the farm sector. Bad weather didn’t help.

Marine Le Pen is on course to be France's next president, Leonie Hill Capital's Arun Kant says: Marine Le Pen is on course to be the next president of France, according to one fund manager's big-data analysis. Arun Kant, chief executive and chief investment officer at Singapore-based investing firm Leonie Hill Capital, told CNBC he expected the right-wing populist to prevail thanks to his firm's proprietary artificial intelligence (AI) system's analysis of troves of data. His analysis — which he said incorporates inputs such as social and traditional media discussions, polling, economics and demographics — predicts that Le Pen will "walk over" her opponents in the first electoral test and then prove most forecasters wrong and steal the lead in the second ballot, Kant said.The French vote is split into two phases, with the top two candidates from the April 23 round due to face each other in a second run-off on May 7. In the running alongside 48-year old Le Pen are former economy minister and independent candidate Emmanuel Macron, conservative ex-prime minister Francois Fillon and socialist Benoit Hamon. Kant's AI program predicts that Le Pen would take 28 percent of the vote in the first round, he said, which would best 16.4 percent for Fillon, and 19 to 20 percent for Macron. Current inputs are pointing to a Macron victory in the second round — 52.3 percent to 47.7 for Le Pen — Kant said, but he added that he expects the right-wing politician to gain considerable ground after a first round victory. "If she wins the first round, this dynamic will change," he said, noting the similarities between the populist appeal of Le Pen and President Donald Trump. And with this predicted momentum, Le Pen will likely win the presidency, Kant said.

Le Pen Tail Risk Puts Traders on Alert as Volatility Creeps Up… Investors are just about waking up to the risk of Marine Le Pen emerging victorious in the French election, some early bets in the options market show. While a Le Pen win is still seen as a tail risk and the first round of the election is still more than two months away, the unexpected outcomes of last year’s votes in the U.K. and the U.S. have raised investor awareness of political risk. The National Front candidate’s threat to take France out of the euro could call into question the fate of the common currency.  The most visible effect of any shock outcome is likely to see investors scramble for safety in bunds, with some options investors already betting that the benchmark 10-year yield may fall all the way to zero from about 30 basis points now. The implied volatility on bunds, now at around 5 percent, about half the levels seen during the so-called bund tantrum of 2015. While the chart shows that both yields and volatility are moving lockstep in positive territory, they have the potential to move in opposite directions.  Investors in the options market are just about starting to price in higher risk of a Le Pen victory, with demand for call options on bunds having picked up recently. Still, the market isn’t yet fully pricing in the risk, with the upper panel showing that demand for puts -- which capture the possibility of higher yields -- still outstripping that for calls. The lower panel shows the increase in call options relative to puts in the past few days.

French govt bond trading doubles as election jitters deepen -Trax | Reuters: The volume of French government bonds changing hands has doubled this month, as uncertainty surrounding the upcoming election has lifted the premium investors demand for holding French over German debt to its highest in four years, figures showed on Tuesday. Activity in French corporate bonds has been just as frenetic, with average daily volume so far in February on track to break January's record, according to Trax, a subsidiary of MarketAxess. Average daily trading volume for French government debt so far this month stands at 16.5 billion euros, Trax figures show. That's up 47 percent from January's average of 11.2 billion euros, and double the daily average of 8 billion euros over the past year. January's total volume was 236.1 billion euros, up 40 percent from the monthly average last year, Trax said. French bonds have underperformed Italian, Spanish and German bonds so far this year, according to Goldman Sachs analysts. The 10-year yield spread over ultra-safe German bonds nudged 80 basis points this month, the highest since November 2012. Investors are nervous that far-right leader Marine Le Pen could win this spring's election. She is running on a platform of populism and protectionism, and has pledged to take France out of the euro. Bank of America Merrill Lynch's latest survey of global fund managers published on Tuesday showed that 36 percent of those polled said euro disintegration risk from Europe's election calendar this year posed the biggest tail risk event for global markets.

Le Pen says Britain should not be 'punished for Brexit' - Britain should not be punished for 'escaping the EU prison', and France should carve out a new cross-channel relationship after Brexit, according to far-right candidate Marine Le Pen.The National Front leader is expected to win the first round of Presidential elections in April, picking up 26 per cent of the vote, according to a poll released yesterday.And she has said that if she is elected President, she will reverse incumbent Francois Hollande's belief that Britain should 'pay the price' for Brexit.Le Pen has called for the euro to be scrapped, tighter controls of borders for EU members, and the right to impose trade barriers.She also plans a clampdown on migrant workers if she becomes President, but says a French referendum to leave the European Union should be a last resort if reform efforts fail. Speaking to The Telegraph, Le Pen said her government would carve out a new bilateral relationship with post-Brexit Britain.The 48-year-old said:  'What is the point in punishing a country? It is senseless, unless you think the EU is a prison, and you are condemned if you escape.'I want to rebuild our damaged relations with the United Kingdom.'A people decides its own destiny. You cannot force a country to do something that is against its own interest, or against the democratic process.' She told the newspaper that Brexit was a 'powerful weapon' for her campaign.

Gabriel warns of Le Pen winning French presidential election  -There is a serious risk far-right politician Marine Le Pen could win the French presidential election, German Foreign Minister Sigmar Gabriel has said. France might then fall out of a sorely weakened EU, he warned. Le Pen's National Front party "has set itself the aim of destroying Europe," Gabriel said in an interview for Thursday's edition of the German daily "Frankfurter Allgemeine Zeitung." "It has become a realistic danger," said Gabriel, a center-left Social Democrat. If Le Pen does win the election, the idea of European unity would not disappear, Gabriel insisted. "But without France's engagement, Europe is certainly unimaginable in the long run," he went on. "First and foremost, the French would be the first to feel the effects of a so-called Frexit. "Because the results of such uncertainty about Europe's future would be of course capital outflow, absent investments and mass unemployment," Gabriel said.

 Euroland: Will the Netherlands Be the Next Domino To Fall? - Austerity has nurtured resentments that will likely make the populist right PVV the biggest winner in the March 17 election — but without the majority or the allies needed to govern. The Dutch go the polls on March 15, a few weeks ahead of the French vote to choose the successor to Président François Hollande and well before Bundeskanzlerin Angela Merkel seeks a fourth term in September. The Dutch vote takes on a wider European significance, however, because Dutch voters — who rebelled against a EU ‘constitution’ in 2005 and last year rejected the association treaty between the EU and Ukraine in a referendum — have in the past proved to be a good gauge of European sentiment. This time, there is a strong anti-‘politics-as-usual’ sentiment blowing across the Netherlands, which—through a voter swing to the right—may set the country on the anti-establishment path blazed by Brexit and Trump. The Dutch populist insurgency is led by the far-right anti-Islam Freedom Party (PVV) of MP Geert Wilders, who wants to scrap the euro, break up the Eurozone, and restore border checks in the EU. Wilders’ PVV is a single-member party, the only member being its leader who alone decides its program and positions, and selects the names on the party’s electoral list.  The party program, written on one side of a single sheet of paper, centers mostly on stopping migration, fighting the ‘Islamization of Europe,’ and freeing the Dutch from the shackles of the Brussels bureaucracy and the Frankfurt-based ECB. Wilders has without doubt benefited from the same factors that have buoyed populists elsewhere in recent years: the incapacity to resolve the Eurozone crisis; growing concerns about ‘mass’ migration, ‘failing’ integration and the ‘refugee crisis’; terrorist attacks; and the failure of center-left parties to deliver the outcomes to which their traditional constituencies aspire, most prominently decent and stable employment. The PVV has been leading in the polls for months and will most likely emerge as the big winner of the 2017 elections—making Wilders the prime candidate to form a (coalition) government.

Tsipras warns IMF and Germany over bailout talks - Greece’s prime minister Alexis Tsipras has warned the IMF and Germany to “stop playing with fire” at the expense of the Greek people, saying he is confident a bailout deal is within reach. Markets were hit this week by concerns that a deal might not be reached before July, when Greece is due to make a €7bn debt repayment. European negotiators are trying to seal a new agreement so Greece can release another tranche of funds from its most recent €86bn bailout to make the payment. Representatives of Greece’s lenders are set to return to Athens this week to check whether Greece has complied with a second batch of reforms agreed under the current bailout. “We will not allow our allies in Europe to play with fire on the cohesion and the future of Europe,” Mr Tsipras told a meeting of the leftwing Syriza party. “The second review will conclude and it will conclude positively,” he added. Mr Tsipras said it was unclear if the IMF, which he accused of “playing poker” with Greece, would have a central funding role. European Commission President Jean-Claude Juncker on Saturday said the bailout could yet fall apart as the IMF had not yet made up its mind whether to participate in providing more aid. “Yes, it is on a shaky ground in the sense that we don’t see how the International Monetary Fund could manage this problem,” Juncker told German radio station Deutschlandfunk in an interview to be aired on Sunday. Mr Tsipras said his country would not allow its European allies to use Greece’s plight for their own domestic agendas ahead of elections in France, Germany and the Netherlands this year. “Whoever is playing games for a two-speed eurozone, with splits and divisions, they are playing with fire.”

A failure to tell the truth imperils Greece and Europe -- Wolfgang Münchau -- Failure to tell truth to power lies beneath much of what is going wrong in Europe right now. It may not be the principal cause of the Greek debt crisis, which is now on its umpteenth iteration. But it is more than a mere contributing factor. You notice it particularly at those moments when others speak the truth, as the staff of the International Monetary Fund have done recently. In its latest survey of the Greek economy it states that “public debt has reached 179 per cent [of gross domestic product] at end-2015, and is unsustainable”. Europeans are not used to such bluntness. The Germans protested. The European Commission protested. So did the Greeks. They all want to keep up the fairy tale of Greek debt sustainability for a little while longer. They were particularly shocked that the IMF exposed the disagreement when it wrote that “some directors had different views on the fiscal path and debt sustainability”. These were the Europeans, who are now in a minority in the fund. Once the Trump administration sends its representatives to the IMF board, expect the climate to become even more hostile. My expectation is that the IMF will ultimately pull out of the Greek programme, leaving the Europeans free to mismanage the ongoing Greek crisis on their own.

Conflict Over Athens’ Surplus Needles The IMF - This week the enduring problem of Greece took a new and disturbing turn. It was revealed that the executive board of the IMF is split on the question of what fiscal surplus Greece should be required to hit — which in itself will affect whether it needs official debt relief to reach sustainable growth. [..] the fact that the fund admitted a division between its member countries is significant. European nations are over-represented on the board relative to their size in the global economy. Wielding that power to dissuade the fund from demanding debt relief from eurozone governments is a clear conflict of interest and poses a threat to the fund’s credibility and independence. [..] The fund, which over the years has come to take a more realistic view of Greece’s debt sustainability, has dug its heels in and said it will not continue to participate without further reductions in the burden. This leaves eurozone countries, particularly Germany, in a quandary. Berlin insists it will not continue with the rescue without the involvement of the IMF but it fiercely opposes the debt writedown that the fund is demanding. The point at issue is the fiscal surplus Greece is required to hit. The IMF says that reaching and maintaining a primary surplus of 1.5% of gross domestic product is sufficient; the eurozone wants an improbable 3.5%. [..] The European directors on the board, who want the IMF to agree to the higher fiscal surplus number, are undoubtedly conflicted by having an eye on the effect on their own governments having to write down debt. Forthcoming elections in the eurozone, including Germany and France, mean that the political as well as economic cost of being seen to give in to Greece is considerable.

 Is Greece Really On The Verge Of Another Financial Crisis? - Just about every adult on earth has seen this show before. Greece faces a debt repayment that it cannot meet: for this performance, €86 billion due in July. It needs fresh bailout funds from the European Union and/or the International Monetary Fund because borrowing directly on global capital markets comes at too high a cost—10 percent to replace the maturing bonds. Germany, leading the EU, states that before Greece receives a single euro it must first commit to more severe budget policies. The IMF points out that Greece cannot possibly live up to Germany’s demands, and even if it did, the country would not be able to repay its outstanding debt burden, which at last count stood at 181 percent of Greece’s gross domestic product. The IMF goes on to hint that Greece may have to leave the eurozone. Throughout this familiar point and counterpoint, few focus on Greece’s need for the fundamental economic reforms that offer the country its only hope of using its own resources to meet its obligations. Pretty much the same actors are playing the same roles as a couple of years ago, when Europe last staged this farce. Greek prime minister Alexis Tsipras has assumed his same initial tough stance toward Greece’s creditors, just as he did last time, before he caved into EU demands. German finance minister Wolfgang Schäuble insists that the EU will give no help until Greece broadens its income tax and cuts public pensions enough to create a budget surplus excluding debt service costs—known as a primary surplus—that is equal to 3.5 percent of GDP and maintain that surplus for ten years. Greece has countered by saying that it might commit to three years. The head of the IMF’s Europe department, Poul Thomsen, has argued that such goals are impossible. He has pointed out that next year Greece expects a primary budget surplus of only 1.5 percent—even after two years of severe budget constraints. The IMF has a point.  To be sure, Greece has never really lived up to its commitments in this regard, but even previous watered-down tax hikes and spending cuts have so depressed growth that progress on public finances has remained problematic. Since this crisis first emerged in 2010 and Greece first began to comply with EU budget demands, the real economy has shrunk 4.2 percent a year through 2015 (the last full year for which data is available). Unemployment has climbed to 26.2 percent of the workforce, and youth unemployment stands at 49.8 percent.

Varoufakis Accuses Creditors Of Going After Greece’s ‘Little People’ -- Former Greek finance minister Yanis Varoufakis [..] said that the country has been put on a fiscal path which makes everyday life “unsustainable” in Greece. “The German finance minister agrees that no Greek government, however reformist it might be, can sustain the current debt obligations of Greece,” he said. Earlier in the day, Wolfgang Schäuble told German broadcaster ARD that Greece must reform or quit the euro. “A country in desperate need of reform has been made unreformable by unsustainable macroeconomic policies,” Mr Varoufakis said. He said that “instead of attacking the worst cases of corruption, for six years now the creditors have been after the little people, the small pharmacists, the very poor pensioners instead of going for the oligarchies”. Greece in 2010 was given a huge loan that Mr Varoufakis said was not designed to save the bankrupt country but to “cynically transfer huge banking losses from the books of the Franco German banks onto the shoulders of the weakest taxpayers in Europe”.

Germany-IMF Staredown on Greece: The Election Calculus - Yves Smith - The next big round of extend and pretend for Greece isn’t set to take place until July, yet serious jockeying between the key actors, the IMF versus the European countries acting as lenders, is underway now. Why? The politicians and Eurocrats are keen to get a deal, at least in general terms, agreed now so as to keep Greece out of the headlines as much as possible for an upcoming series of European elections. Of course, the European view of “getting to a deal” means knuckling the IMF into joining a new round of financing. As we’ve discussed since 2015, the Fund’s staff has been in open revolt, and has leaked important internal documents to the press more than once, making clear the agency’s view that Greek debts are not sustainable (note that these leaks may have been sanctioned at a more senior level). By the Fund’s own rules, that means it cannot provide additional loans. The latest Financial Sustainability Report reached the same conclusion, although it did uncharacteristically say that some fund directors (as in board members) did not agree with that view. If the IMF does not provide more dough, the consequences are serious, as we’ve stressed and Wolfgang Munchau underscores in a comment at the Financial Times:A much overlooked part of the Greek bailout programme is that Germany made its participation conditional on IMF involvement. That gave the fund leverage. If the IMF now pulls out of Greece, one of two things will happen. Athens will either default on its debt this summer and be forced to quit the eurozone, or Berlin will accept debt relief just a few months before the elections. Either way, this is a fight in which someone ends up on the floor. Mind you, under either scenario, German voters will be outraged. If Greece defaults, Germany and all the other countries that loaned to Greece will have to recognize a loss under their budget rules, which means they will have to “pay” for it out of the current budget by increasing taxes and/or cutting spending. Given how creative the Eurocrats have been, they will presumably find a way to spread out the loss recognition, probably via financial engineering. Nevertheless, a Greek default would be front page news and debated heavily, so there would be no way to pretend that voters hadn’t been lied to for many years.

 ECB Balance Sheet Swells as Critics Take Aim at Central Bank Bond Buying - The collective balance sheet of central banks using the European single currency swelled to just under $4 trillion last year, according to data published Thursday, as pressure grows on policymakers to trim holdings of government bonds amid an uptick in inflation and improving economic prospects. The European Central Bank said its own balance sheet grew 36% last year to €349 billion ($371 billion) as it scooped-up government and agency bonds as part of its ongoing quantitative easing program. With asset purchases spread across the 19 central banks that use the single currency, the collective balance sheet of the Eurosystem swelled by a third to €3.662 trillion, the ECB said. The increase in assets also gave an historic boost to the bottom line of both the ECB and its satellites, as net profits (mostly from interest income) grew by €111 million to just under €1.2 billion. The Bank said it distributed €996 million in profit sharing to the Eurosystem central banks as of the end of January, the most on record. The gains come amid intense scrutiny of the size of central bank balance sheets around the world, including the U.S. Federal Reserve, which holds more than $4.45 trillion in government bonds and other fixed income assets. Earlier this week, Fed Chairwoman Janet Yellen said that while she and her colleagues were "committed to shrinking our balance sheet", she nonetheless told lawmakers on the Senate Banking Committee that she it was best "from the standpoint of sustaining the recovery, to do that in a gradual and orderly way."

Swiss voters reject corporate tax reforms FT - Switzerland’s attempts to overhaul its corporate tax regime have suffered a setback after voters decisively rejected reforms to bring the country’s practices in line with international standards. The government had hoped to secure approval for changes that would keep corporate tax rates globally competitive while abolishing special treatment for many multinational companies. In a referendum on Sunday, however, the plan was rejected by 59.1 per cent of voters — a much larger margin of defeat than opinion polls had suggested. Bern and the Swiss cantons must now rethink the proposals in the face of threats that important trading partners could take retaliatory action. The defeat is a blow for the business lobby in Switzerland, which fears damaging uncertainty over future corporate tax bills. The defeat meant Switzerland would no longer fulfil its promises to abolish special privileges by 2019, said Ueli Maurer, finance minister. He feared companies would quit Switzerland, or no longer move to the country as a result of the uncertainty created by Sunday’s vote.

German Wholesale Prices Soar 4%, Biggest Jump Since October 2011 -- Two weeks after Germany reported a spike in consumer prices, which jumped 1.9% from a year ago, the biggest annual increased since July 2013... ... overnight Germans got another price shock when the Federal Statistics Office reported that Wholesale Prices rose a China-like 0.8% MOM in January, and advancing 4% year-on-year in January, up from the "mere" 2.8 percent increase in December, and the fastest growth since October 2011, when prices gained 4.1%. The biggest culprit: prices of solid fuels and mineral oils surged 16.4% from a year ago, although many core products also saw a substantial increase.The surge in German inflation, at both the consumer and wholesale level since the end of last year is fast becoming a political flashpoint in the country, which faces elections in September, as savers remain burdened with near-zero deposit rates. Calls are mounting for the ECB to start talks over winding down its bond-buying program, which is scheduled to run until at least the end of this year. Last week, ECB policy makers have said they would likely not bring up the topic of further tightening or tapering until at least the middle of 2017, which means that regardless of how high prices rise, Germans willhave to bear with it.

Eurozone trade surplus jumps in December  - The eurozone’s trade surplus jumped ahead of forecasts for a second successive month in December, returning to near the all-time highs it hit earlier in the year.  Businesses in the single currency area exported €24.5bn more goods and services than they imported in January. Economists had expected the surplus to decline, but the figure was €2.5bn larger than the previous month, and the second-largest on record.  Imports rose by 4 per cent, but export growth accelerated even faster, increasing by 6 per cent. The eurozone’s annual trade surplus for 2016 came in at €273.9bn, almost 15 per cent higher than 2015. In a further sign of the area’s gradual recovery, intra-euro area trade rose by a more modest 1 per cent.

The European Central Bank is about to do something very stupid -- Back in 2012, European Central Bank President Mario Draghi declared that "the ECB is ready to do whatever it takes to preserve the euro." The ECB didn't even begin to make good on that vow until March 2015, when it kicked off a quantitative easing (QE) program worth $60 billion a month. In plain English, that means the ECB started creating a bunch of euros out of thin air and using them to buy up various financial assets. In March 2016, it kicked things up a notch, to $80 billion in purchases a month. The results have been middling, with Greece, Italy, and Spain stuck in varying degrees of depression. Greece has an astonishing 23 percent unemployment rate and a debt load that's grown in four years from 159 percent of its economy to 183 percent. Italy's unemployment rate is stuck at 12 percent, and its debt increased from 123 percent of its economy to 133 percent. Spain's unemployment rate is still a little over 18 percent. Yet Draghi and Co. seem to be looking at this situation and thinking "mission accomplished." Since at least October, there's been talk that the ECB might wind down QE. A decision is now expected in March. The Times reports that international financial markets are already getting jittery, and yields on Greek and Italian bonds in particular are rising as demand for them falls. That's the exact opposite of what the ECB should be doing. As the situations in Greece, Italy, and Spain show, the program so far has been insufficient and poorly targeted. The core issue here is not just that to reduce its debt burden, a country must grow its economy faster than its debt load. It's that in order to get its economy going again, a country must actually first increase its debt. Deficit spending injects money into the economy — through lower taxes, more generous pensions, bigger welfare state aid, public investment, and direct government employment — so that people can start buying and selling, investing, and hiring again. By contrast, tax hikes and spending cuts to shrink deficits suck money out of the economy, grinding it down and preventing a recovery.

Italy considers €5bn state bailout of regional banks - Italy is looking at a €5bn state rescue of two struggling regional banks as the eurozone’s third-largest economy takes renewed steps to shore up its troubled banking system. The rescues of Veneto Banca and Banca Popolare di Vicenza, which still require regulatory approval, would be a “precautionary recapitalisation”, according to people with direct knowledge of the discussions. This is a mechanism that allows eurozone states to pump state money into banks without infringing state aid rules Italy is already in talks with Brussels about using the same mechanism for an €8.8bn rescue of Monte dei Paschi di Siena, the world’s oldest lender. Italian lawmakers in December created a €20bn fund to recapitalise some of the country’s banks, which are considered one of the weak spots of the economy and a drag on prospects for a lasting recovery. Rome rushed to approve the fund after MPS failed to attract enough fresh private capital to satisfy regulators. Italy’s financial sector remains bogged down by a vast legacy of bad loans, which have mounted since the European sovereign debt crisis and continue to weigh on lending and profitability. Veneto Banca and Banca Popolare di Vicenza, in the north-eastern industrial Veneto region, have suffered a plunge in liquidity and capital.

EU Bad Bank to Tackle Soured-Loan Pile May Be a Long Way Off - A European Union bad bank would go a long way toward reducing the 1.2 trillion-euro ($1.3 trillion) mountain of soured loans on lenders’ books, but that relief may be a long time coming, according to the bloc’s bank regulator. Andrea Enria, chairman of the European Banking Authority, has proposed setting up a bloc-wide asset-management company to take over and manage the sell-off of the loans. The regulator’s executive director, Adam Farkas, said last week that a “realistic aim could be to move about a quarter” of all bad loans off banks’ balance sheets. That would be a boon to banks such as Banca Monte dei Paschi di Siena SpA that are drowning in nonperforming loans. Yet creating any new EU entity would be a long, hard slog, Farkas said, beginning with policy debates in Brussels. If a bloc-wide bad bank proves impracticable, a network of national companies would still be a big improvement, he said. The most ambitious option “would possibly be the most impactful for a number of reasons, but if that is not achievable, the important thing is that a step forward is made,” Farkas said in an interview in London. “What we are arguing is that action is needed. We need to move.”

Political fears spread to Europe's corporate bond market - Political fears have started to spread to Europe’s corporate bond market, with yields for similar debt issued in different euro member states diverging in recent weeks. The shift comes as traders and investors anticipate the European Central Bank easing the volume of bond purchases that sent yields to record lows, and ahead of elections across the eurozone that polls suggest will show growing support for populist and Eurosceptic parties. Bond yields for equivalent corporate bonds in Italy and Spain have moved higher compared with those in so-called “core” countries such as Germany and France, according to JPMorgan data. The difference between the average yields on peripheral corporate bonds with a triple B rating compared with core corporate bonds has widened to 15 basis points, compared with almost nothing in November. “It’s definitely started to emerge,” said Matthew Bailey, a credit strategist at JPMorgan. He pointed to the French presidential election, the possibility of an early election in Italy, and risks from the Trump presidency for Spanish companies with operations in South America as reasons for the move. In mid-2016 the ECB further fanned a rally in European corporate bonds by starting to buy them in another attempt to ignite inflation and growth in the eurozone. As of this week, the ECB has bought €63bn of corporate bonds since it began the programme. Its actions have helped counteract concerns over the specific risks in different eurozone countries. Its purchases of sovereign debt have smoothed out country-specific risk in much larger government bond markets, against which corporate bonds are typically priced.

 ECB can force hand of banks that fail to cut bad loans: Donnery | Reuters: The European Central Bank can set binding requirements if it thinks a bank is not cutting its pile of unpaid loans fast enough, the ECB official in charge of tackling non-performing loans (NPL) in the euro zone said on Wednesday. "If supervisory judgement supported by benchmarks concludes that certain NPL strategies are not sufficiently ambitious or are not appropriately implemented, we will consider additional measures on a case-by-case basis," said Sharon Donnery, chair of the ECB group setting new NPL guidelines. "We already have the legal tools available to us if necessary, for example expectations can be turned into binding requirements by implementing them as part of the Supervisory Review and Evaluation Process (SREP)."

21% of British startups plan to open a European office due to Brexit - One in every five UK startups intends to open a European office due to Brexit, according to survey results published Tuesday by Silicon Valley Bank. The technology bank's annual "Startup Outlook Survey" — based on responses from 940 startup executives — aims to gauge startup perceptions on business conditions and Brexit, as well as fundraising, hiring, and policy issues. It found that 21% of UK startups are planning to open up a new office in cities such as Berlin, Paris, and Stockholm, which are all trying to take on London's Tech City. At least five UK startups have moved to Berlin as a result of Brexit, according to an article in The Financial Times last November, which said 39 more were seriously considering the move. The survey also found that around one in 10 (11%) UK startups are thinking of moving their headquarters away from the UK to another European country after the EU referendum.  1% of respondents said they were definitely going to move their HQ to Europe as a result of Brexit, while 5% said they were now thinking of moving their HQ outside of the UK and Europe.

Brexit Big Lie: UK Could Have Reduced EU Immigration by 82% Under EU Rules - Yves here. Even though polls showed that immigration was not the biggest reasons for Leave voters making that choice, the Tory government has made the supposed need to control immigration a major reason for triggering a hard Brexit. We pointed out previously that non-EU immigration accounted for more than half of total immigration since 10 countries joined the EU in 2004. This post provides a critical fact: that the UK had ample power under EU rules to keep immigration from the EU at much lower levels than actually took place. In other words, the influx of Eastern European workers was the result of the desire to suppress wages, which worked out all too well, rather than the UK bowing to supposedly unduly permissive EU rules.  By Zsolt Darvas, Originally published at Bruegel Immigration to the UK was a key issue in the Brexit debate and has also received a great deal of attention since the referendum. According to the recent white paper from the UK Government on Brexit principles, control of immigration will be a key priority. Point 5.3 of the white paper states that “It is simply not possible to control immigration overall when there is unlimited free movement of people to the UK from the EU”, suggesting that EU mobility rules were responsible for the surge in immigration and the UK did not have a control. I find this claim potentially misleading, for two reasons:

  1. By respecting all EU rules, net immigration of non-British citizens to the UK could have been cut by a stunning 82% in 2004-11 and also rather significantly since then. It was a UK decision not to control immigration.
  2. EU rules allow unlimited free movement of people only for a duration up to three months. For longer periods, only workers, the very rich and students can stay in another EU country.

Let me elaborate on these two points and then draw lessons for future UK immigration policies.

After Brexit: the English question surfaces? - LSE -- “Will the Prime Minister provide a commitment today that no part of the great repeal bill will be subject to English votes for English laws?” This seemingly technical query – posed by the SNP’s Kirsty Blackman at PMQs the day after the Prime Minister had outlined the government’s plans for Brexit – will have reminded Theresa May that, amidst the turmoil and drama of the current political moment, a powerful English – as well as Scottish – question is now salient in British politics. To the SNP, the new system of ‘English Votes for English Laws’, in operation in the Commons since October 2015 represents a brazen attempt by an English Tory party to turn Westminster into an English Parliament. In fact, given the balance of the current House, it is likely to become an issue only if those parts of the legislation that Brexit requires, which apply to England, are supported by an English (Tory) majority, but defeated by the Commons as a whole. And that will only happen if the Conservative parliamentary party is split, and its backbenchers willing to side with other parties and face down the howls of tabloid outrage that would follow.

Initiative launched calling for UK citizens to be issued with EU passports after Brexit | The Independent: The European Commission is being asked to consider issuing EU passports to British people in danger of losing their right to free movement after Brexit. The Commission will be forced to consider the proposal if a million EU citizens from across the bloc put their names to an EU citizens’ initiative backing the proposal. European Union citizens’ initiatives were introduced by the Lisbon Treaty in 2012 to allow EU citizens to help shape the union’s policies through direct democracy.Any initiative signed by one million EU citizens is considered by the European Commission, as long as signatories come from at least a quarter of member states, subject to a quota. Several initiatives have previously resulted in the adoption of policy stances by the European Commission on subjects ranging from vivisection to water pollution. Sue Wilson, one of the campaigners who has registered the EU passports’ initiative with the Commission said: “Whatever the result of the campaign, I hope – at the very least – that it will prove to all European governments how strongly we value our EU citizenship, and the lengths to which we are prepared to go to hold onto those rights and freedoms.” Though only EU member states have the ability to confer citizenship, the European Commission has a limited ability to issue EU passports under regulation 1417/2013.

Britons living in the EU face Brexit backlash, leaked paper warns- Jeremy Corbyn has condemned Theresa May’s “Hunger Games approach to Brexit” after a document obtained by the Guardian warned that British nationals living on the continent could expect a backlash as a consequence of the government’s treatment of foreigners since the EU referendum. The leaked EU assessment of the legal impact of Britain’s withdrawal says the 1.2 million Britons living in the EU could pay a penalty for the prime minister’s failure to offer a secure future for EU nationals in the UK. The internal document drawn up by the European parliament’s legal affairs committee says it will be down to each member state to decide whether British citizens are allowed to carry on living within their respective borders after 2019, but adds: “The fact that it appears to be particularly difficult for foreign nationals, even if married to UK nationals or born in the UK, to acquire permanent residence status or British nationality may colour member states’ approach to this matter.” Corbyn said the document pointed to “the human cost of a Tory-style Brexit. Families, jobs and homes are all in the balance.” He added: “There must be an end to this Hunger Games approach to Brexit negotiations, which gives no consideration to EU nationals in our country or British nationals living abroad.” The Labour leader called on the government to make a commitment that EU nationals currently living in the UK would be free to continue to do so, saying the failure to do so amounted to “playing political games with people’s lives”.

The UK’s Brexit bill: could EU assets partially offset liabilities? - The ‘Brexit bill’, the financial settlement between the UK and remaining 27 EU member states, is already a subject of intense discussion. Commentators are trying to ascertain exactly which items (both assets and liabilities) will be included in the settlement. One key issue is whether the UK will be obliged to pay for the pensions of European officials. In this post we do not discuss the legal aspects, but instead highlight the fact that estimations of the EU’s pension liability are burdened with considerable uncertainty. Key points

  • The balance sheet of the European Union includes an estimate for the present value of pension and sickness insurance liabilities related to EU officials, which remained broadly stable at about €35 billion in 2005-11, but has almost doubled to €63.8 billion in 2011-15.
  • The number of EU officials contributing to the pension scheme increased by only 8% from 2011-15, so increased employment cannot be the main reason for the increased pension/sickness liability.
  • The main reason for the doubling of the pension/sickness liability is a large fall in the discount rate which is used to calculate the present value. The discount rate may increase in the coming years, which will lead to a fall in the present value of pension/sickness liabilities.
  • Parallel with the doubling of pension/sickness liabilities in the EU balance sheet, the contribution rate payed by EU officials from their salaries has actually fallen. While the same actuarial method is used to calculate the balance sheet liability and the employee contribution rate, the underlying assumptions differ enormously.
  • It should be a common interest to find a “reasonable” way of calculating the pension/sickness liability in the Brexit financial settlement.
  • Only two thirds of the “reasonable” value should be considered as a liability to which the UK should contribute, because one third of pension costs are paid by EU officials. If the assumptions for EU employee contributions are used for Brexit bill calculations, then the UK should pay a share of a liability of approximately €29bn.

Tony Blair calls for fight against Theresa May's Brexit plan - Tony Blair has issued a rallying cry to opponents of Brexit, urging them to fight Theresa May’s plans to take Britain out of the EU and warning the country is rushing “over the cliff’s edge”. In his first significant political intervention since last year’s referendum, the former Labour premier called on the prime minister to provide some way in which Britain can rethink its EU departure if voters decide they are unhappy with the deal that emerges from the negotiations. “Yes, the British people voted to leave Europe, and I agree the will of the people should prevail. I accept right now there is no widespread appetite to rethink,” he said. “But the people voted without knowledge of the true terms of Brexit. As these terms become clear, it is their right to change their mind. Our mission is to persuade them to do so.” Mr Blair’s speech, made to an audience of businesspeople, charity representatives and political campaigners in London, is the first by such a prominent Remain campaigner to call for an outright reversal of June’s referendum vote. Asked after the speech if he was advocating a second referendum, Mr Blair referred to the 52-48 per cent victory for Leave and said: “If a significant part of that 52 per cent show real change of mind, however you measure it, we should have the opportunity to reconsider the decision, Whether you do it through another referendum, or another method, that’s a second order question.” Most pro-EU politicians, including the Liberal Democrats, have accepted the 52 per cent vote for Brexit and instead focused on changing the terms of departure.