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

Saturday, May 27, 2017

week ending May 27

Bad Optics: the Fed's Balance Sheet Edition - David Beckworth --Despite the all Fed talk about shrinking its balance sheets, many observers are hoping the Fed keeps it large.  They want the Fed to maintain a large balance sheet for various reasons: it earns a positive return for the government; it provides a financial stability tool via provisions of safe assets; it needs to remain big and accommodative until the economy really starts roaring. There are also complications to shrinking the Fed balance sheet. Whatever you make of these arguments they all ignore an important political-economy consideration: a large Fed balance sheet makes for bad optics because of interest paid on excess reserve (IOER).  The figure below explains why. Using data from the Federal Reserve's H8 report, the figure shows the cash assets of "large domestically-chartered" banks and "foreign-related" banks.  The figure reveals the cash assets of these two bank categories combined tracks excess reserves fairly closely. They are, in other words, the main holders of excess reserves and consequently the main recipients of the IOER payment.Think about the implications: the banks that were bailed out during the crisis and the banks owned by foreigners are getting most of the IOER payment. This is a perfect storm of financial villains for both the political left and the right. That is why I agree with Ramesh Ponnuru that it politically naive to think the Fed can maintain a large balance. And note, the bad optics will only look worse if the Fed's balance sheet does not shrink as interest rates go up. For the IOER payment will go up too. Imagine Fed Chair Janet Yellen having to explain to Congress the growing dollar payments going to these banks. That is not to say it will be easy to shrink the Fed's balance sheet. There will be big challenges as I have noted elsewhere. But the bad optics do mean that it is likely the Fed will be forced to shrink its balance sheet

FOMC Minutes: More details on Balance Sheet Reduction -- From the Fed: Minutes of the Federal Open Market Committee, May 2-3, 2017. Excerpts:  Participants continued their discussion of issues related to potential changes to the Committee's policy of reinvesting principal payments from securities held in the SOMA. The staff provided a briefing that summarized a possible operational approach to reducing the System's securities holdings in a gradual and predictable manner. Under the proposed approach, the Committee would announce a set of gradually increasing caps, or limits, on the dollar amounts of Treasury and agency securities that would be allowed to run off each month, and only the amounts of securities repayments that exceeded the caps would be reinvested each month. As the caps increased, reinvestments would decline, and the monthly reductions in the Federal Reserve's securities holdings would become larger. The caps would initially be set at low levels and then be raised every three months, over a set period of time, to their fully phased-in levels. The final values of the caps would then be maintained until the size of the balance sheet was normalized. Nearly all policymakers expressed a favorable view of this general approach. Policymakers noted that preannouncing a schedule of gradually increasing caps to limit the amounts of securities that could run off in any given month was consistent with the Committee's intention to reduce the Federal Reserve's securities holdings in a gradual and predictable manner as stated in the Committee's Policy Normalization Principles and Plans.  Nearly all policymakers indicated that as long as the economy and the path of the federal funds rate evolved as currently expected, it likely would be appropriate to begin reducing the Federal Reserve's securities holdings this year. Policymakers agreed to continue in June their discussion of plans for a change to the Committee's reinvestment policy.

FOMC Minutes Signal Rate-Hike "Soon", Economic Weakness "Transitory", Fears "Asset Valuation Pressures" -- Having top-ticked US economic data with its March rate-hike, all eyes are on the May minutes to confirm the total lack of data-dependence now present at The Fed. The main focus of the minutes was on the 'normalization' of the balance sheet (since June hike odds are at 100%), which was confirmed with details of the plan revealed. Economic weakness in Q1 was shrugged off as "transitory" and tightening is appropriate "soon" signaling June is on.Fed also warns of asset valuations.  Fed warns "vulnerabilities have increased for asset valuation pressures" This overall assessment reflected the staff’s judgment that leverage as well as vulnerabilities from maturity and liquidity transformation in the financial sector were low, that leverage in the nonfinancial sector was moderate, and that asset valuation pressures in some markets were notable. Although these assessments were unchanged from January’s assessment, vulnerabilities appeared to have increased for asset valuation pressures, though not by enough to warrant raising the assessment of these vulnerabilities to elevated. Translated: the prices are too high! If The Fed somehow makes believe that the data "continues to support" normalization, then their credibility just went negative...

Fed Watch: Fed Not Ready To Change Course - The minutes of the May Federal Reserve meeting reveal central bankers remained poised to raise interest rates again in June:  With respect to the economic outlook and its implications for monetary policy, members agreed that the slowing in growth during the first quarter was likely to be transitory and continued to expect that, with gradual adjustments in the stance of monetary policy, economic activity would expand at a moderate pace, labor market conditions would strengthen somewhat further, and inflation would stabilize around 2 percent over the medium term… …Members generally judged that it would be prudent to await additional evidence indicating that the recent slowing in the pace of economic activity had been transitory before taking another step in removing accommodation. With incoming data brighter and suggesting that the first quarter slowdown was indeed temporary, a June rate hike looks more certain than not. But why are they even contemplating raising rates at all given recent inflation numbers? And how long can the Fed stick with its current rate hike trajectory with inflation persistently below their 2 percent target?The Fed finds itself stuck in a conundrum of low inflation despite low unemployment. One interpretation of this situation is that it is not a conundrum at all. The Fed’s estimates of the natural rate of unemployment are too high, and hence unemployment isn’t really all that low.The other interpretation is with unemployment low and projected to be lower, it is only a matter of time before the inflation shoe drops. As noted in the Fed minutes: Labor market conditions strengthened further in recent months. At 4.5 percent, the unemployment rate had reached or fallen below levels that participants judged likely to be normal over the longer run. Increases in nonfarm payroll employment averaged almost 180,000 per month during the first quarter, a pace that, if maintained, would be expected to result in further increases in labor utilization over time. This is the potential outcome that keeps Fed Chair Janet Yellen and her colleagues gently resting their feet on the brakes. To compare inflation-unemployment dynamics during the last three tightening cycles, I use here the estimate of the non-accelerating inflation rate of unemployment (NAIRU) produced by the Congressional Budget Office and core Personal Consumption Expenditures inflation. I assume for consistency that the Fed has a 2 percent inflation target throughout this period, but that is technically true only since 2012.

Fed Trial Balloon: JPM Warns Fed May Start Shrinking Balance Sheet In September --  It appears the Fed's balance sheet "trial balloons" using primary dealers as intermediaries have begun. After yesterday's unexpectedly explicit guidance on the future of the Fed's balance sheet, which prompted Goldman, Citi, and various other banks to suggest they may bring forward their estimates for when the Fed will announce the start of "renormalization", moments ago JPM's Michael Feroli, traditionally the analysts "closest" to the Fed, did just that when he issued a report stating that that there is now "chance of a September start" to renormalization, with the values for monthly roll-off caps and phase-in period to be "revealed at the June FOMC meeting." According to Feroli, JPM continues to look for normalization to commence at the December FOMC meeting but "there is some chance of a September start, though this would not have a material difference for our projections on a multi-year horizon. At the meeting at which normalization starts we expect the Committee to announce a set of monthly roll-off caps for the following year, which increase regularly every three months."Our best guess is that the initial caps are $4 billion a month for MBS and $8 billion a month for US Treasuries. In the preannounced schedule, these caps would be augmented each quarter by $4 billion and $8 billion, respectively,until at the end of the year they are $16 billion and $32 billion. Consistent with yesterday’s minutes, even after the normalization process is fully phased in the monthly caps will still be in place, though in most months after the full phase-in they would cease to bind."And here are the finer details which the Fed may or may not have leaked to select banks, in an attempt to prepare for what is coming, and talking down the equity bubble: The Committee has yet to communicate values for the monthly caps or the length of the phase-in period. Presumably they will do this in the minutes to the June FOMC meeting. It is less clear that the Committee will have decided on a monetary policy implementation framework by the time roll-off begins (i.e. the current ratesetting system vs reverting to the pre-2008 system) and hence whether they will have decided on an ultimate amount of excess reserves available when the balance sheet is fully normalized. We have assumed a $500 billion target for excess reserves in our projections below. The other key assumption on the liability side of the Fed’s balance sheet is currency growth, which we have penciled in at 4% per year.

Merrill: "Revising down our inflation forecasts" -- A few excerpts from a Merrill Lynch research note: Revising down our inflation forecasts  After two consecutive disappointing CPI reports, it is clear that inflation is now set for a slower finish this year. After refreshing our models, we now see core CPI inflation ending the year at 1.9% 4Q/4Q, down from our prior forecast of 2.3% and slowing from 2.2% 4Q/4Q 2016 growth. The downgrade largely reflects transitory weakness from wireless telephone services that should revert next year, allowing for core CPI to accelerate back to 2.2% by the end of 2018. We are also revising our core PCE inflation forecasts. Assuming we see a sluggish 0.1% mom reading in April, the trajectory for core PCE will be knocked lower as the % yoy clip drops to 1.5%. As a result, we take down our 4Q/4Q 2017 core PCE estimate to 1.7% yoy from 1.9%. That said, we continue to expect core PCE to hit 2% by the end of 2018, reaching the Fed’s target. The main takeaway from these forecast changes is that inflation is still set to move higher, but it is happening later.

Measuring Trend Inflation with the Underlying Inflation Gauge – NY Fed -- Core inflation measures represent the most widely used approach to estimate trend inflation. These measures are designed to remove transitory changes in inflation whose source is either associated with specific items or associated with those items displaying the largest price increases and decreases in a particular month. The former view underlies the “excluding food and energy” inflation measure, while the latter approach is identified with the weighted median and the trimmed mean inflation measures.   Core inflation measures are attractive because they are easy to construct and to understand. There are, however, limitations to core inflation measures. For example, core inflation measures only focus on price components and assume the source of transitory movements in inflation is constant over time. In addition, by excluding components that display large price changes, core inflation measures may remove early signals of a change in trend inflation.  As a complement to core inflation measures and other approaches to estimate trend inflation, we have constructed the UIG. A more extensive discussion of this measure can be found in this Economic Policy Review article, with further details provided by our New York Fed staff report “The FRBNY Staff Underlying Inflation Gauge: UIG.” Here, we highlight several key features of the UIG to help motivate and explain the methodology and model specification used in its derivation. Most importantly, the design of the UIG is based on the premise that movements in trend inflation are accompanied by related changes in the trend behavior of other economic and financial series. Consequently, we examine a large data set to identify the common component of other economic and financial series and then focus on the persistent part of the common component.

Chicago Fed "Increased Economic Growth in April" From the Chicago Fed: Chicago Fed National Activity Index Points to Increased Economic Growth in April Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) rose to +0.49 in April from +0.07 in March. Two of the four broad categories of indicators that make up the index increased from March, and only one category made a negative contribution to the index in April. The index’s three-month moving average, CFNAI-MA3, increased to +0.23 in April from a neutral reading in March. This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967.  This suggests economic activity was above the historical trend in April (using the three-month average). According to the Chicago Fed: The index is a weighted average of 85 indicators of growth in national economic activity drawn from four broad categories of data: 1) production and income; 2) employment, unemployment, and hours; 3) personal consumption and housing; and 4) sales, orders, and inventories. A zero value for the monthly index has been associated with the national economy expanding at its historical trend (average) rate of growth; negative values with below-average growth (in standard deviation units); and positive values with above-average growth.

Q1 GDP Revised up to 1.2% Annual Rate -From the BEA: Gross Domestic Product: First Quarter 2017 (Second Estimate)Real gross domestic product (GDP) increased at an annual rate of 1.2 percent in the first quarter of 2017, according to the "second" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 2.1 percent. The GDP estimate released today is based on more complete source data than were available for the "advance" estimate issued last month. In the advance estimate, the increase in real GDP was 0.7 percent. With this second estimate for the first quarter, the general picture of economic growth remains the same; increases in nonresidential fixed investment and in personal consumption expenditures (PCE) were larger and the decrease in state and local government spending was smaller than previously estimated. These revisions were partly offset by a larger decrease in private inventory investment ... Here is a Comparison of Second and Advance Estimates. PCE growth was revised up from 0.3% to 0.6%. (weak PCE). Residential investment was revised up slightly from 13.7% to +13.8%. This was above the consensus forecast.

Q1 GDP Revised To 1.2% On Stronger Spending, Capex, While Corporate Profits Tumble -- After a very disappointing first Q1 GDP print of only 0.7%, on Friday the BEA reported that its second estimate of first quarter growth showed a sizable rebound, with annualized GDP growing at 1.2%, above the 0.9% estimate. The growth rate, however, was still well below the 2.1% print from Q4 2016. The increase in real GDP was accounted for by increases in business investment, housing investment, consumer spending on services, and exports. These increases were partly offset by decreases in inventory investment, and government spending. Imports, which are a subtraction from GDP, increased. The upward revision to the second estimate of GDP growth reflected upward revisions in business investment, consumer spending in services, and state and local government spending. These upward revisions were partly offset by a downward revision to inventory investment. Of note, personal consumption contributed 0.44% to the bottom GDP line, up nearly double from the 0.23% reported one month ago. In a longer-term context, however, it was still a disappointing number. Similarly, fixed investment rose to 1.85% in the second revision, up from 1.62% reported in the first revision. Yet while the headline data showed a modest improvement, one which will likely subtract from "pent up" Q2 GDP growth, a more troubling observation was revealed in the corporate profits estimation, which decreased 1.9% at a quarterly rate in the first quarter of 2017 after increasing 0.5 percent in the fourth quarter of 2016.

  • Profits of domestic nonfinancial corporations decreased 1.4 percent after decreasing 4.9 percent.
  • Profits of domestic financial corporations decreased 5.5 percent after increasing 5.4 percent.
  • Profits from the rest of the world increased 1.4 percent after increasing 11.0 percent.
  • Y/y corp. profits grew 3.7% in 1Q after rising 9.3% prior quarter
    • Financial industry profits declined 5.5% in 1Q after rising 5.4% prior quarter
    • Federal Reserve bank profits up 2.7% in 1Q after falling 1.8% prior quarter
    • Nonfinancial sector profits fell 1.6% in 1Q after falling 4.9% prior quarter

Upward Q1 Revision to Real GDP – graphs - Today’s release of the 2nd estimate for Q1 GDP from the BEA brought a large increase, nearly double, in real GDP, compared to the advance estimate. The revised real GDP growth is 1.2% in the first quarter while it was 0.7% in the advance estimate. The positive revision has been a feature of first quarter estimates for several years and has sparked a lot of attention to the  seasonal adjustment.   There were significant revisions to final sales and some modest downward revisions to inventories. In addition, real personal consumption expenditures only grew at 0.6% (but were revised up from 0.3%), the weakest growth in over 5 years. .There were downward revision to Q4 income growth which pushed the savings rate lower. Most of the markets’ attention was focused on the April report on durable goods issued this morning as well. It was very soft and some of the details were disappointing.Both residential and non-residential fixed investment showed strong growth in the quarter, gaining 13.8% and 11.4%, respectively. At the moment, the revised estimates will not do much to change the current thinking as to the state of the economy. The revision was a bit higher than expectations by many forecasters. We are just going to have to wait a little longer to see how the economy evolves as we near mid year. The Atlanta Fed’s GDPNow has revised down its forecast for Q2, from 4.1% to 3.7% after some of the latest releases, including today’s GDP and durable goods…still, 3.7% would be a very welcome outcome!

Strong Rebound Expected For US Q2 GDP Growth - The tepid rise in first-quarter GDP growth is on track for a sharp acceleration in Q2, according to estimates from several sources.  The latest nowcast from the Atlanta Fed’s GDPNow model is especially bullish. The bank’s May 16 update calls for a robust 4.1% increase in Q2 output. If accurate, the US economy will expand at the fastest pace in almost three years. Several estimates from other sources anticipate Q2 growth in the low-2% range, although even these comparatively mild forecasts still represent an encouraging improvement over Q1’s weak 0.7% advance. The upbeat GDP projections are supported by a run of bullish economic releases lately for key indicators. Industrial production increased more than expected in April, rising 1.0% — the highest monthly gain in three years. Retail sales were up a relatively modest 0.4% last month, but the gain marks a second month of higher spending, marking the fastest rate since January. Meanwhile, the growth rate in private payrolls in April picked up, rising a solid 194,000 vs. the previous month — news that boosts expectations that March’s weak gain of just 77,000 is only a temporary setback. Note, too, that new filings for unemployment benefits fell again in last week’s release, dipping close to a multi-decade low. It’s still early in the current quarter and so bullish economic estimates should be viewed cautiously. April’s macro profile looks solid, but a lot can happen between now and July 28, when the Bureau of Economic Analysis is scheduled to publish the first official estimate for Q2 GDP. Nonetheless, with US recession risk virtually nil these days, there’s a compelling case at the moment for expecting that Q2 growth will rebound in some degree.

GDPNow's Second Quarter Forecast: Is It Too High? - Atlanta Fed's macroblog - Real gross domestic product (GDP) growth slowed from a 2 percent pace in 2016 to an annual rate of 0.7 percent in the first quarter of 2017. The Federal Open Market Committee viewed this slowdown in growth "as likely to be transitory," according to its last statement. Indeed, current quarter GDP forecasting models maintained by the Federal Reserve Banks of New York, St. Louis, and Atlanta have been pointing toward stronger second quarter growth (2.3 percent, 2.6 percent and 4.1 percent, as reported on their respective websites on May 19, 2017). The Atlanta Fed's model—GDPNow—is at the high end of this range and is also high relative to other professional forecasts. The median forecast for second quarter real GDP growth in the May Survey of Professional Forecasters (SPF) was 3.1 percent, for instance, and recent forecasts from Blue Chip Publication surveys displayed on our GDPNow page show some divergence from our model as well.   We encourage—and frequently receive—feedback on our GDPNow tool, and some users have suggested that our forecast for second quarter growth is too high. In fact, some empirical evidence supports that view. The evidence considered here correlates differences between consensus Blue Chip Economic Indicators Survey and GDPNow forecasts for growth about 80 days before the first GDP release with the GDPNow forecast errors (see the chart below).  As the chart shows, there is a positive relationship between the Blue Chip-GDPNow discrepancy and the GDPNow forecast error. A simple linear regression would predict that the GDPNow forecast of 3.7 percent growth on May 5 was too high by nearly 1.0 percentage point. Moreover, the chart suggests that there has been a bias in GDPNow forecasts since the fourth quarter of 2015 of between 0.9 and 2.0 percentage points at the time of these mid-quarter Blue Chip surveys. If you are inclined to think the GDPNow forecast for second quarter growth is a bit too high, then this evidence will not change your mind.

Q2 GDP Forecasts --From Merrill Lynch:n [T]he data [today] pushed down 2Q GDP tracking by a tenth to 2.5% qoq saar. The main drag was from the weak durables report, while revisions to 1Q GDP caused some modest shifts in the 2Q components. From the Altanta Fed: GDPNow The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2017 is 3.7 percent on May 26, down from 4.1 percent on May 16. The forecast for second-quarter real residential investment growth fell from 8.3 percent to 3.1 percent after Tuesday's housing related releases from the U.S. Census Bureau and Wednesday's existing-home sales release from the National Association of Realtors.  From the NY Fed Nowcasting Report  The New York Fed Staff Nowcast stands at 2.2% for 2017:Q2. News from this week’s data releases reduced the nowcast for 2017:Q2 by 0.1 percentage point as the positive impact from wholesale inventories data was more than offset by the negative impact from the advance durable goods report and new home sales data.

Foreign Central Banks Are Quietly Scooping Up US Treasurys --Back in February, we wrote that over half a year after we first reported last August that foreign official institutions - central banks, sovereign wealth funds and reserve managers - are liquidating US Treasurys in record amounts, a process that only accelerated into year end when official entities sold a record $405 billion in US paper in the LTM period, Bloomberg decided to catch up to the topic with "America’s Biggest Creditors Dump Treasuries in Warning to Trump."However, by then Bloomberg's report was no longer factual or accurate, because while the 2 month delayed TIC data still showed declines (mostly due to MTM changes in Treasurys amounts), the far more concurrent weekly report of Treasurys held in custody at the Fed showed a substantial rebound in foreign holdings of US Treasurys. And a quick look at the latest Fed data shows that the urgency by foreign central banks to snap up US paper has only grown in the past three months. As the latest custody data from the Fed reveals, in 2017, debt held at the Fed on behalf of foreign central banks has jumped by $61.2 billion to $2.922 trillion, the highest level since June 2016. One of the biggest buyers has, perhaps surprisingly, been China - the second largest foreign holder of US paper after Japan - which after selling $188 billion in Treasurys in 2016 has bought $29 billion YTD according to the latest TIC data. A main driver behind this mini buying spree is that the relentless Chinese reserve outflow, which started in late 2014 and continued for over 2 years, has moderated after the PBOC erected an unprecedented firewall to contain capital inside the country, and which has removed the pressure on the PBOC to liquidate US-denominated assets to offset the capital outflows.

Deficit Scare Tactics Are What Citizens Should Really Be Afraid Of – Dean Baker -- The New York Times (5/23/17) ran a column by Maya MacGuineas, the president of the Peter Peterson–backed Committee for a Responsible Federal Budget. The piece begins with the ominous announcement: President Trump entered office facing the worst ratio of debt to gross domestic product of any new president in American history except Harry Truman—an onerous 77 percent. It could have also begun with the announcement that the ratio of debt service (interest on the debt, net of payments from the Federal Reserve Board) to GDP is less than 1 percent. This contrasts with a ratio of almost 3.0 percent in the early and mid-1990s. Are you scared yet? Actually, you should be. Folks like Ms. MacGuineas have pushed austerity policies in the United States and around the world for the last decade. These policies have prevented the government from spending the amount necessary to restore the economy to full employment. This has not only kept millions of people in the United States from having jobs, it has prevented tens of millions from getting pay increases by weakening their bargaining power. Furthermore, the lower levels of output have an enduring impact on the economy. They are associated with less investment in public and private capital, and less money spent on research and development. In addition, unemployed workers don’t gain the experience they would have otherwise. Many of the long-term unemployed drop out of the labor force and may end up never working again. As a result of these effects, the Congressional Budget Office now estimates that the economy’s potential level of output for 2017 is 10 percent less than what it had projected for 2017 back in 2008, before the Great Recession really took hold. The loss in output due to this austerity tax is roughly $2 trillion a year. This is the reduction in wages and profit income as a result of the smaller size of the economy. That comes to $6,000 per person per year. This is the burden that the Peter Peterson crew have imposed on our children and grandchildren due to their scare tactics on the deficits. (Hey, remember the Reinhart-Rogoff 90 percent debt-to-GDP cliff?) And fans of logic everywhere know that it will not matter one iota to our kids’ well-being if the government were to increase taxes on each of them by $6,000, or whether its austerity policies lead them to earn $6,000 less each year.

Trump's Budget Will Slash $1.7 Trillion In Entitlements, Cut Food Stamps By 25% - More details from President Donald Trump’s first budget proposal are trickling out via a flurry of overnight reports from The Washington Post, Associated Press and Bloomberg News. Here are some of the highlights from the latest batch of trial balloons:

  • The budget will slash $1.7 trillion in spending on entitlement programs, according to Bloomberg.
  • Trump’s budget will include a massive nearly $200 billion cut to the Supplemental Nutrition Assistance Program, the modern version of food stamps, over the next 10 years– what amounts to a 25% reduction, according to The Washington Post.
  • The food stamp cuts are part of a broader $274 billion welfare-reform effort, according to a report by The Associated Press.
  • The budget calls for about $800 billion in cuts to Medicaid for fiscal year 2018, WaPo reported.
  • The budget also calls for $2.6 billion in border security spending, $1.6 billion of which will be earmarked for Trump’s proposed wall along the U.S.’s southern border.
  • The budget is also expected to propose major domestic discretionary spending cuts - an earlier version of the budget called for $54 billion in such cuts next year alone.

Predictably, Democrats are already up in arms over the proposal, even though a formal draft isn’t expected until Tuesday. In a statement cited by Bloomberg, New York Senator Senator Chuck Schumer clumsily compared Trump’s campaign rhetoric to a “Trojan Horse.” “This budget continues to reveal President Trump’s true colors: His populist campaign rhetoric was just a Trojan horse to execute long-held, hard-right policies that benefit the ultra-wealthy at the expense of the middle class,” Bloomberg noted.

The Heartless Tradeoffs in the Trump Budget – Thoma - As the bombshells continue to drop on the Trump administration, behind the scenes Trump’s first detailed budget proposal is being developed, and it has a few bombshells of its own, particularly for the poor. The budget proposal is not yet finalized, so the details could change, but according to what has leaked so far, the budget is a combination of tax cuts for the wealthy, reduced spending on social programs that serve the needy, and wishful thinking about tax cuts and economic growth.  It should be no surprise that the Trump budget includes large tax cuts for the wealthy. But the magnitude of the cuts is staggering. The cuts would result in a loss of tax revenue of more than $5 trillion over the next decade (over $500 billion per year on average). And the beneficiaries will mainly be the wealthy. According to calculations from the Center for Budget and Policy Priorities, each household in the top 1% would receive approximately $250,000 per year, and the 400 taxpayers with the highest incomes would each receive at least $15 million per year, for a total of “at least $6 billion annually.” As the CBPP points out, “$6 billion is more than the federal government spends on grants for major job training programs to assist people struggling in today’s economy,” and it is “roughly the cost of providing 600,000 low-income families with housing vouchers.”   The administration claims these tax cuts will spur economic growth and that will go a long way toward paying for the tax cuts, but the evidence from past tax cuts does not support this claim. There is evidence that tax cuts for middle and lower-income households stimulate the economy, but unfortunately, the details on how the plan will help middle and lower income households, are “fuzzy or non-existent.”   In any case, the debt will almost certainly be much larger than projected in the Trump budget.

Trump Budget Proposes Path to a New Gilded Age | Center on Budget and Policy Priorities: President Trump’s new budget should lay to rest any belief that he’s looking out for the millions of people the economy has left behind. He proposes steep cuts in basic health, nutrition, and other important assistance for tens of millions of struggling, low- and modest-income Americans, even as he calls for extremely large tax cuts for the nation’s wealthiest people and profitable corporations.This disturbing budget would turn the United States into a coarser nation, making life harder for most of those struggling to get by but more luxurious for those at the very top. Most Americans do not seek a new Gilded Age. And the budget is sharply at odds with what the President told voters he would do during his campaign. With this budget, the President betrays many voters who placed their trust in him. In fact, this stands as the most radical, Robin-Hood-in-reverse budget that any modern President has ever proposed. Consider the combined effects of the health, tax, and spending policies that he’s outlined:

  • First, he strongly supports the House bill’s approach to “repeal and replace” the Affordable Care Act (ACA) that would take health insurance away from more than 20 million people of modest means, raise out-of-pocket health costs for millions more, and substantially weaken key protections for people with pre-existing conditions, while providing very large tax cuts to those at the top.  Similar to the House-passed bill, the budget proposes $1.25 trillion over ten years in cuts from repealing and replacing the ACA; it then proposes at least $610 billion in additional Medicaid cuts. In total, this amounts to over $1.85 trillion in cuts from a combination of: the ACA’s Medicaid expansion for low-income adults; the underlying Medicaid program that serves seniors, people with disabilities, and families with children; and subsidies that help people with modest incomes afford insurance. 
  • Second, the President has proposed enormous additional tax cuts, heavily tilted to those at the top, that would likely cost several trillion dollars over the coming decade.  Among other things, the tax proposals would open the door to substantial new tax avoidance by conferring massive tax cuts on affluent individuals who organize themselves as “pass-through” entities.  The President has not proposed a plan to pay for these tax cuts, nor does the budget include specific proposals to offset their costs.
  • Third, the President proposes deep cuts in public services for millions of Americans — from education and job training to services for the elderly — and in basic support for those of limited means who face hard times, including assistance through such programs as SNAP (food stamps), Medicaid, and Supplemental Security Income for poor individuals with disabilities.

Democrats criticize Trump budget plan - President Donald Trump is sending Congress a $4.1 trillion spending plan that relies on faster economic growth and steep cuts in a range of support programs for low-income individuals to balance the government's books over the next decade. The proposed budget, for the fiscal year that begins Oct. 1, was being delivered to Congress Tuesday, setting off an extended debate in which Democrats are already attacking the administration for trying to balance the budget on the backs of the poor. Lawmakers from both parties have said major changes will be needed as the measure moves through Congress. The proposal projects that this year's deficit will rise to $603 billion, up from the actual deficit of $585 billion last year.Congressional Democrats are harshly criticizing President Donald Trump's budget for 2018, saying it contradicts many of the promises he made on the presidential campaign trail. The Democrats are particularly focused on tax cuts that would benefit the wealthiest Americans. Sen. Bernie Sanders, I-Vt., calls the budget a massive transfer of wealth from working families and the elderly to the wealthiest 1 percent. He calls it "immoral." Sen. Chuck Schumer, D-N.Y., says the budget would harm many Trump supporters, but he's optimistic it will be roundly rejected. Rep. Nancy Pelosi, D-Calif., says the budget cuts Social Security Disability Insurance and would trim the National Institutes of Health budget by nearly 20 percent. She says cuts to education are "one of the dumbest budget moves they can make." 

Trump budget proposal is a potential jobs-killer, imposing a major fiscal drag that would radically slow job growth in coming years - Today, the Trump administration published their full budget request for fiscal year 2018. The budget is basically par-for-the-course with recent Republican budgets— doubling down on the austerity policies that have been harming American households for about a decade. But besides containing cruel cuts and deeply-dodgy economic assumptions, this proposal should also dispel any last remaining hope that fiscal policy under the Trump administration would boost, rather than drag, on growth and jobs. Were this proposal enacted, it would put a large and rapidly growing drag on economic growth going forward. All else equal, job-losses stemming from this budget’s spending cuts would total 177,000 in 2018, 357,000 in 2019, and 1.4 million in 2020. While it gets increasingly hard to estimate precise numbers further into the future, the fiscal drag just increases dramatically after 2020.The economic intuition for why the Trump budget’s cuts would hinder growth is simply that they would reduce growth in economy-wide spending, or aggregate demand. It is always possible that the spending slowdown caused by the Trump budget could be neutralized by spending increases in other parts of the economy. Before the onset of the Great Recession, it was thought that this spending increase could be reliably engineered by the Federal Reserve lowering short-term interest rates. Since the Great Recession, however, the economy saw seven years of historically slow recovery even while the Fed held short-term rates at zero (and undertook other measures to boost growth). The reason for this slow growth despite expansionary monetary policy is clearly historically austere public spending. This should make clear that while the Fed certainly has the ability to curtail growth by raising interest rates, their ability to offset a negative fiscal shock by lowering rates seems severely constrained. Given that a monetary policy response should not be relied on to neutralize the negative fiscal shock of the Trump budget and the AHCA, we think these estimated job-losses should certainly inform the debate. Further, the federal funds rate (the rate the Fed lowers to offset negative demand shocks) sits at just about 1 percent today, meaning the Fed simply doesn’t have much room to boost the economy in response to contractionary fiscal policy that begins next fiscal year and then ramps up. For reference, in the past five recessions, the peak-to-trough change in the federal funds rate as the Fed aimed to stop the contraction and spur recovery was over 3.5 percent.

Policy Watch: Trump budget weakens protections for working people -- This week, the Trump administration published its full budget request for fiscal year 2018. The proposal makes it clear that President Trump has no intention of honoring his State of the Union pledge to work to create “jobs where Americans prosper and grow.” The Trump budget would impose a major drag on economic growth and lead to job-losses totaling 1.4 million in 2020. Beyond the stark job-loss numbers, the budget proposal includes severe cuts to anti-poverty programs including food stamps and children’s health insurance. Below is information on the Trump budget cuts to worker protection programs.The Trump budget reduces funding for the Department of Labor (DOL) by nearly 20 percent. Most of the cuts come from job training programs. However, the Trump budget also severely reduces funding for unemployment insurance program administration. On top of this cut, Trump’s budget would require this already stretched program to administer a new program— six weeks of paid family leave—with no new funding. Currently, only one in four jobless workers collect unemployment benefits and only 21 states have adequate reserves in the event of another recess. One agency within the DOL would receive a substantial increase in funding under the Trump budget. The Office of Labor-Management Standards (OLMS) would see its funding increase by 20 percent. OLMS is responsible for enforcement of the Landrum-Griffin Act, which requires unions to report on their finances and gives the Secretary of Labor the authority to investigate unions and audit union finances. OLMS gets the additional funding in Trump’s budget while the agency tasked with protecting workers’ rights sees its funding reduced.

 Trump’s Cuts to SNAP and Social Security Would Hit the Rust Belt Hard -- The latest 2018 federal budget circulating Washington calls for a $3.6 trillion slash in government spending over the next decade, including $38 billion less for farm supports that includes new limits on crop insurance premiums and caps for commodity payments, Reuters reports. USDA would also see significant cuts to the Supplemental Nutrition Assistance Program (SNAP) – changes that director of the Office of Management and Budget director Mick Mulvaney told reporters Monday that lawmakers would need to make in the next farm bill legislation. Additionally, the proposed budget could charge user fees totaling $660 million annually to help pay for USDA inspectors at meat and poultry plants. Several crop insurance groups – including the American Association of Crop Insurers, Crop Insurance and Reinsurance Bureau, Crop Insurance Professionals Association, Independent Insurance Agents and Brokers of America, National Association of Professional Insurance Agents and National Crop Insurance Services – issued a joint statement regarding the cuts to crop insurance premiums. “Weakening crop insurance and making it more difficult for farmers to bounce back during tough times will jeopardize rural jobs and will find little support in rural America or on Capitol Hill,” the statement reads in part. “The rural economy is already suffering through a period of low prices and a multitude of spring weather disasters. Yet, the Administration's budget proposal targets the primary tool farmers use to handle these risks.” The groups also argue that proposed cuts to crop insurance by prior administrations were unpopular and “soundly rejected” by Congress. “We fully expect that to be the case again this year, and we are hopeful to engage in meaningful dialogue about how to support America’s hardworking farmers and ranchers in difficult times like these,” the statement concludes. Commodity groups such as the American Soybean Association also expressed their displeasure at the proposed cuts to federal crop insurance and commodity supports. As the ASA notes, the federal crop insurance program would be trimmed down by $28.5 billion under the White House's proposed budget. Additionally, the budget calls for almost $9 billion in cuts to the Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) programs by reducing eligibility caps from $900,000 to $500,000.

President Trump’s budget kicks people when they’re down - The president’s budget was released today and a House budget resolution will follow in June. Though the two plans will undoubtedly differ in certain areas—the president’s budget includes infrastructure and paid family leave proposals that aren’t guaranteed to be taken up by the House—both will seek deep cuts to programs helping vulnerable citizens while calling for immense tax cuts for the wealthy. The proposed budget and tax cuts come on the heels of the House effort to repeal the Affordable Care Act (ACA) and replace it with their American Health Care Act (AHCA), which the Center on Budget and Policy Priorities noted would be “the largest transfer in modern U.S. history from low- and moderate-income people to the very wealthy,” should it become law. The White House is banking on this repeal passing, assuming $250 billion in supposed savings in the president’s budget. Voters who believed Trump’s assurances that he opposed cuts to Social Security, Medicare, and Medicaid may be surprised to learn that he wants to gut Medicaid (not just reversing the expansion embedded in the ACA, but essentially doubling the cuts in Medicaid called for in the House-passed AHCA), cut Social Security Disability Insurance, and hasten the exhaustion of the Medicare trust fund. Funding for Medicaid and the Children’s Health Insurance Program (CHIP) would be slashed by $616 billion over the 10-year budget window, as Medicaid would be transformed from a coverage guarantee for low-income families and nursing home residents who have exhausted their savings into block grants or similar programs constrained by per capita spending limits at a time when Baby Boomers are aging into their peak Alzheimer’s years. The Medicaid cuts would do nothing to restrain health cost inflation but would leave sick kids and frail seniors to fend for themselves.

Trump budget calls for $47B in retirement benefits, operational cuts at USPS - President Donald Trump has weighed in on the ongoing postal reform debate with a fiscal 2018 budget proposal that would save the U.S. Postal Service $47 billion over 10 years through cuts in retirement benefits and mail delivery costs. The majority of the cost savings outlined in Trump’s postal reform plan, as written in his May 23 budget proposal, come from retirement benefit changes that would also affect the rest of the federal workforce, but would save the Postal Service $33 billion over 10 years. The Postal Service would also save an additional $1 billion by increasing postal workers’ contributions to their health and life insurance. The president’s USPS budget plan reflects some of the provisions in a bipartisan postal reform bill that passed the House Oversight and Government Reform Committee in February, but goes further in reductions to delivery standards. The White House plan would let the Postal Service “reduce mail delivery frequency where there is a business case for doing so,” which could include the elimination of Saturday delivery, even though the idea has been rejected repeatedly by lawmakers. The Trump plan would also reduce door-to-door delivery, and allow the Postal Service to move toward centralized “cluster box” delivery. While the bill received broad support from the postal unions, the mailing industry, lawmakers and USPS management, the White House’s proposal could upset this tenuous compromise. Fredric Rolando, president of the National Association of Letter Carriers, said in a May 24 statement that the president’s plan would “threaten the long-term viability of the Postal Service.” “It is unfortunate and disappointing that the administration would so recklessly attack the livelihoods of active and retired federal retirees who have devoted their lives to our country,” Rolando said. “NALC will vigorously fight any budget proposal that attacks our members or the Postal Service.”

Trump’s budget will harm older workers by cutting Social Security disability payments - Breaking a promise not to cut Social Security, the Trump administration released a budget that would slash Social Security payments for disabled workers by shrinking many of the federal government’s disability-based programs by $72 billion over the next decade. Press coverage has emphasized that the budget avoids large cuts for programs that benefit mostly older workers, but this is inaccurate—especially for Social Security Disability Insurance (SSDI), which disproportionately benefit older Americans.It is true that the Trump administration is desperate to cut programs like food stamps that overwhelmingly benefit poor children, but it is incorrect to claim that the administration’s draconian budget reductions spare older people. In fact, the administration’s budget cuts are remarkably comprehensive in their cruelty across the age distribution. Cuts to Social Security disability payments will especially burden older Americans, as they are precisely the individuals most likely to be disabled. Do you know people with cancer advanced enough that it prevents them from working? Or how about a family member with diabetes or arthritis? These and other illnesses prevent older Americans in particular from holding steady employment.The figure below shows that the share of the population receiving disability insurance payments indeed rises rapidly with age. Nearly one-in-ten (9.9 percent) people between the ages of 50 and 65 receives SSDI, in contrast to the small shares of younger individuals receiving these payments. As a result, nearly three quarters of those receiving Social Security disability are between the ages of 50 and 65.

Here are the 66 programs eliminated in Trump's budget | TheHill: President Trump's fiscal 2018 budget proposal would completely eliminate 66 federal programs, for a savings of $26.7 billion. Some of the programs would receive funding for 2018 as part of a phasing-out plan. Here are the programs the administration wants on the chopping block.

The Myth of the Exploding Safety Net – CBPP -- President Trump’s 2018 budget reportedly includes more than $1 trillion in cuts over the next decade to “mandatory” programs that help struggling families afford basics like food and health care; assist people with disabilities and their families; or supplement the earnings of low-income working families.  With that in mind, let’s look at the facts about mandatory programs (those funded outside the annual appropriations process):  Total spending for mandatory federal low-income programs outside health care is only modestly above its average over the past 40 years, measured as a share of gross domestic product (GDP).  And it’s projected to fall as a share of GDP in the future (see graph). Programs that aren’t growing faster than the economy aren’t fueling our long-term fiscal problem. To be sure, Medicaid is slated to grow faster than GDP. But that’s due to the aging of the population, which will make more seniors (who have higher health care costs) eligible for Medicaid, and to rising costs throughout the U.S. health care system, which partly reflect medical advances that improve health and save lives but add to costs. In fact, Medicaid costs far less per beneficiary than private health insurance, and its costs are rising more slowly. Thus, Medicaid is actually the health insurance system’s most economical and efficient part. Critics often cite the spending growth in these areas over the past decade to justify large cuts, but the decade really consists of two very different periods.  Mandatory spending for low-income programs outside health care — including on SNAP (formerly food stamps) and the Earned Income Tax Credit (EITC) — rose from 1.2 percent of GDP in 2007 to 2.0 percent of GDP in 2011. This reflected increased need during the Great Recession — the worst recession since the Great Depression — and policies adopted in response. It also reflected expansions of the EITC and Child Tax Credit to help low-wage workers better provide for their families.  But as the economy has improved, this spending has dropped significantly since 2011 and is expected to equal 1.5 percent of GDP this fiscal year.  (It’s fallen in inflation-adjusted terms as well since 2011.)   As one illustration of this pattern, the number of SNAP participants has fallen by 5.5 million since peaking in December 2012.  Mandatory spending on low-income programs outside of health is projected to return to the prior 40-year average of 1.3 percent in 2020 and then to fall below the historical average in 2024.

Why Work Requirement Became a Theme of the Trump Budget – NYTimes -- The new White House budget proposal is built on a deep-rooted conservative belief: The government should help those who are willing to work, and cull from benefit rolls those who aren’t. That emphasis on work underlies deep cuts and proposed changes to food stamps, cash assistance and health benefits for the poor in a budget that boosts spending for the military and border security. Expect the poor to work in exchange for aid, the White House argues, and antipoverty programs will work better while costing the government less. If that strategy sounds as if it lacks compassion, says the budget director, Mick Mulvaney, the Trump administration is trying to balance compassion for taxpayers, too. “We need people to go to work,” Mr. Mulvaney said this week. “If you’re on food stamps, and you’re able-bodied, we need you to go to work. If you’re on disability insurance and you’re not supposed to be — if you’re not truly disabled, we need you to go back to work. We need everybody pulling in the same direction.” Mr. Mulvaney did not specify how work requirements might be phased in for food stamps — or how much it would cost to police such requirements for any of these programs — but he questioned whether everyone receiving help today truly needs it.  Food stamp rolls swelled during the recession and have declined only modestly since then as the economy has recovered. The Trump budget proposes cutting the program, used by about 44 million Americans last year, by $191 billion in the coming decade. It proposes more than $600 billion in cuts for Medicaid, a program Republicans in Congress have also been eager to target with work requirements. The economy will take off for all of us, by Mr. Mulvaney’s rationale, when each able-bodied American embraces the civic duty to hold down a job. He and other conservative proponents of work requirements say the expectation is a fair one. If you want government help, you have to help yourself, by getting a job. And over time, those jobs would theoretically enable the poor to move off government assistance, shrinking the programs in the process.

Trump's proposed budget takes aim at the government's science, health and research programs --President Donald Trump is doubling down on his plan to slash billions of dollars from the U.S. government’s top science and research programs in 2018.  After promising major cuts in a budget roadmap released in March, the White House delivered a final proposal today that cancels nearly $6 billion in funding at the National Institutes of Health, reduces spending at the National Science Foundation by more than $770 million and takes major swipes at a number of federal programs that study climate change.   This time around, Trump finds himself on a collision course even with members of his own party, who earlier this year funded the government for the rest of the 2017 fiscal year with a bill that actually sustains federal research spending, including at NIH.  Repeatedly, though, the Trump administration’s leading budget officials portrayed their cuts in the 2018 fiscal year as a necessary course correction, as the White House tried to write a budget “through the perspective of the people who are paying [for] it,” said Mick Mulvaney, the director of the Office of Management and Budget.  To that end, the proposed cuts include the Department of Energy’s innovation hub, a portion of the agency modeled after the Pentagon’s storied tech team, called DARPA. It would be eliminated entirely under Trump’s budget for the fiscal year of 2018. So too does the White House take a number of swipes in its budget at the Environmental Protection Agency while proposing to kill funds at the State Department that focus on helping other countries grapple with climate change. Meanwhile, the president targets the Centers for Disease Control with a $1.2 billion cut — a major change to the critical health agency’s funding that drew a rebuke from its former director, Dr. Tom Frieden, who said it would “increase illness, death, risks to Americans, and health care costs.” Trump budget calls for selling half of US oil reserve - The administration of President Donald Trump plans to unveil a budget proposal Tuesday that will call for selling half of the US' crude from the Strategic Petroleum Reserve, a plan it says will cut the federal deficit by $16.6 billion, according to the White House. The proposed fiscal 2018 budget, which will be delivered to the House and Senate this morning, is not expected to be approved by Congress, but is seen as a roadmap for the administration's policy goals. An outline of the budget proposal calls for reducing the SPR "by half" and claims sales over 10 years would raise $16.6 billion. As of Friday, the SPR held 687.7 million barrels of crude, including 259.8 million barrels of sweet crude and 427.9 million barrels of sour crude, according to the Department of Energy, which manages the reserve. In March, DOE sold 10 million barrels of crude from the SPR, the first of a total of 25 million barrels mandated for sale to help pay for a biomedical research bill signed into law in December. In February, DOE sold 6.4 million barrels for $344.8 million as part of a sale authorized by Congress to partially fund an effort to modernize the SPR and add marine terminal capacity. DOE plans to sell a total of $2 billion SPR crude oil to pay for modernization and new marine capacity. 

Trump Budget Would Erase $38 Billion in Farm Supports - AgWeb - In the key Rustbelt states that tipped the 2016 election to President Trump, blue-collar white voters at the core of his constituency represent a majority of those receiving benefits from the federal income-support programs he has targeted for large cutbacks in his budget, according a new analysis conducted for The Atlantic. Whites without a four-year college degree constitute most of those receiving assistance from the Supplemental Nutrition Assistance Program, Social Security’s Supplemental Security Income program, and Social Security’s disability program in each of the five Rustbelt states that flipped from Barack Obama in 2012 to Trump in 2016: Iowa, Ohio, Michigan, Pennsylvania, and Wisconsin. They also represent a majority of the programs’ beneficiaries in other heavily working-class interior states—from Arkansas and Kentucky through Missouri and Montana—that are central to GOP fortunes in upcoming elections.   Trump’s budget, released Tuesday morning, looks to protect the older whites vital to his electoral coalition by exempting both Medicare and the principal Social Security retirement program from any cuts: About 80 percent of today’s seniors are white, and Trump carried about three-fifths of white seniors in last fall’s election. In stark contrast, the budget focuses large reductions on domestic discretionary-spending programs that invest in the productivity of future generations, including scientific research, education, student loans, and the Children’s Health Insurance Program. In those ways, the budget displays a clear preference for the predominantly white senior population over the rapidly diversifying youth population: As I’ve written, it strongly favors the “gray” over the “brown.” But because Trump extends his budget cuts so deeply and broadly through income-support programs, the reductions still inevitably reach many of the lower-income and less-educated whites that have emerged as the cornerstone of the modern Republican coalition. The large number of GOP-leaning voters who rely on programs Trump would retrench underscores the difficulty his party faces in reconciling their ideological drive to shrink government spending with the material needs of their increasingly working-class and older white supporters. Not only did Trump depend on big margins among older and non-college-educated whites, but about three-fifths of House Republicans also represent districts older than the national average. And about three-fourths hold seats where more whites than the national average lack a college degree.

The Farm Bill Comes Due | The American Spectator - It’s once again time for the half-decade kabuki dance called the farm bill reauthorization. In this stylized political drama, fiscal conservatives decry the wasteful spending in existing farm programs and argue farmers, especially big agribusinesses, should be treated like almost every other business in this country and forced to compete in the free market without government support.By contrast, legislators from farming states and big-government liberals argue small family farmers need a safety net protecting them from the vagaries of the weather and the ups and downs of the business cycle. They say, as they always do, absent the enormous subsidies, Americans will be one season’s crop failure away from starvation. The result will be lip service paid to reducing the size of the program, but in the end, the spending will grow. Billion-dollar agricultural companies and relatively wealthy farmers will reap windfall gains on the backs of taxpayers and grocery shoppers — especially the poorest among us, who spend a much larger percentage of their incomes on food than upper-income households. Even if one believes in providing a “safety net” for farmers — helping the smallest, poorest farmers to weather market and climatic conditions — farmers shouldn’t get a guaranteed taxpayer-backed income, nor should large corporate farmers be getting millions of dollars in subsidies.

Trump's Budgets Will Suffer a Double Whammy Thanks to Fed - President Donald Trump won’t inherit the same windfall that the Federal Reserve handed the Obama administration each year, and his budget shows he knows it. The Fed is lifting interest rates and plans to start shrinking its $4.5 trillion balance sheet later this year, two policies that will be a drag on the U.S. federal budget. Higher rates mean that America has to pay more to borrow, and the combination of more elevated rates and a smaller balance sheet will leave the Fed with lower excess earnings, which it pays back to the Treasury. The double whammy is reflected in the president’s proposed budget and projections, released this week. Trump’s administration sees Fed remittances falling from $116 billion in fiscal year 2016 to a low of $50 billion in 2020 before rebounding. Given the administration’s proposals, the budget also projects that net interest outlays will climb from $240 billion last fiscal year to $428 billion by 2020 as rates increase. “It’s the price you pay for a good economy,” said Joseph Gagnon, a senior fellow at the Peterson Institute for International Economics in Washington and former Fed board official. The Fed lifted interest rates once in 2015, again in 2016 and most recently in March. Minutes from policy maker’s May meeting, set for release at 2 p.m. Wednesday in Washington, will probably underline that officials anticipate two more 25-basis-point increases in 2017 and plan on starting to wind down Treasury and mortgage-backed security holdings before year end. Those changes are coming thanks to a strong economy: The Fed is closing in on its goals of maximum employment and stable inflation near 2 percent. That momentum also means that the administration’s budgets will enjoy higher tax receipts than the Obama administration saw.

On the macroeconomics of Trump’s budget -- Tyler Cowen --That is the topic of my latest Bloomberg column, here is one excerpt:  What’s also striking is that, if the Trump budget can work at all, the spending cuts are probably not needed. It would suffice to cut taxes only, and allow the economy to grow out of an even-greater budget deficit. In this regard, the Trump budget reflects a deep incoherence, and it inconsistently mixes various optimistic and pessimistic scenarios. If the spending cuts are required for fiscal stability, then we probably shouldn’t be doing the tax cuts.This framework allows us to pinpoint the huge and, I would say, excessively dangerous gamble in Trump’s budget. There is no guarantee that the growth rate of the economy remains higher than the government’s borrowing rate. It is common in American history that government borrowing rates run 5 percent or higher, and the aging of the American population, or perhaps an unexpected catastrophe, such as a war, could lower the growth rate. 1 And once a government becomes addicted to borrowing, it is hard to shake the habit, as subsequent tax increases damage economies. Do read the whole thing, which focuses on g vs. r…

“Tooth Fairies and Ludicrous Supply-Side Economics” -  Menzie Chinn -- That’s how Larry Summers described the growth forecasts underpinning the Trump budget released today. And I can’t really disagree, regarding the medium to longer term forecasts.  From the article: Apparently, the budget forecasts that U.S. economic growth will rise to 3.0 percent because of the administration’s policies — largely its tax cuts and perhaps also its regulatory policies. Fair enough if you believe in tooth fairies and ludicrous supply-side economics. Then the administration asserts that it will propose revenue neutral tax cuts with the revenue neutrality coming in part because the tax cuts stimulate growth! This is an elementary double count. You can’t use the growth benefits of tax cuts once to justify an optimistic baseline and then again to claim that the tax cuts do not cost revenue. At least you cannot do so in a world of logic. The detachment from reality is shown in this figure, which is an update of a figure in this post. Notice that the White House forecast predicts substantially faster growth than the CBO does. Now, it is true that the CBO does a forecast conditional on current law, while this White House does a forecast condition upon implementation of the Administration’s budget, and supply side responses to Lafferian dream measures like massive tax cuts and deregulation. Historically, the CBO’s forecast is more accurate (according to the root mean squared error criterion), despite the conditioning on current law. Of course, there are dissenting views, including those of the ever-present Stephen Moore. Here is his tightly reasoned, quantitatively buttressed argument:  In this Trump budget the White House is predicting 3 percent plus growth over the next decade once the tax cut, deregulation, and ObamaCare repeal are enacted. ‎Liberals and the media are protesting that Trump can’t deliver 3 percent growth and that his forecast is “unrealistic” and a “rosy scenario.”  What hypocrites. Every Obama budget assumed 3 percent to 4 percent growth and I don’t recall the wailing and gnashing of teeth even though Obama’s policies failed to get us over the 3 percent low hurdle in a single year.

Take Trump's 'DOA' budget plan as a dead-serious proposition ---Jared Bernstein --The most common reaction from D.C. politicians upon the release of President Trump’s first budget was to declare it “dead on arrival.” I'm not just talking Democrats. Powerful Republicans, from Sen. John McCain to Sen. Mitch McConnell to Speaker of the House Paul Ryan, either rejected the President's budget outright or said essentially, “Thanks, but no thanks.” So, like much else coming out of crazy town — that’s today’s D.C., aka, Dysfunction Junction — you’re best off just ignoring this proposal, right? Sorry — and trust me, I wish that were correct. This budget and the concepts it embodies are not nearly as DOA as people are saying.  Consider the following, all of which are both in Trump’s budget and past House Republican budgets:

  • • Repealing the Affordable Care Act and replacing it with something that leads to health coverage losses for millions;
  • • Sharp reductions in Medicaid;
  • • Reducing SNAP and turning as much of it as they can over to states to either carry on or drop;
  • • Historically large cuts in other non-defense spending, including child care, job training, medical research, infrastructure, housing assistance and more.
  • • Taking these spending cuts and turning them over to the wealthy in the form of large, regressive tax cuts;
  • • Disguising the red ink with budget gimmicks.

In this way, what I suspect we're seeing here is less “dead on arrival” and more “Art of the Deal.” The President’s known negotiating style is to come in with an outrageous bid and then look reasonable by cutting back. But from the perspective of the uninsured, the poor, the jobless, the ill-housed and fed — and yes, even in today’s economy, there are millions of such persons — any fraction of these cuts still means a world of pain. So if you’re someone who believes the role of government is to address and offset the market failure of poverty, to invest in physical and human capital to boost growth and productivity, and not to engage in nonsense accounting in order to give the wealthy — the one group that’s been doing consistently great in recent decades — a tax cut they don’t need, then I’m sorry, but attention must be paid to this benighted budget. It’s no more dead, and no less scary, then any other zombie you’ll encounter on the streets of D.C.

$ 2.1 trillion here $ 2.1 trillion there and soon you’re talking real money -- I didn’t think they could shock me. Then I read that the Trump OMB made a $2,000,000,000,000 arithmetic mistake Jon Chait explains “One of the ways Donald Trump’s budget claims to balance the budget over a decade, without cutting defense or retirement spending, is to assume a $2 trillion increase in revenue through economic growth. This is the magic of the still-to-be-designed Trump tax cuts. But wait — if you recall, the magic of the Trump tax cuts is also supposed to pay for the Trump tax cuts. So the $2 trillion is a double-counting error.” Amazing, I thought. Also Chait is much better at snark even than Paul Krugman who made it sound boring “@paulkrugman It appears that Trump budget involves two scoops of voodoo economics: faster growth *and* tax cuts without a fall in revenue as % of GDP” But I was wrong. Chait and Krugman are discussing two different errors (3 scoops of voodoo). Mulvaney et al both counted 2.1 trillion twice *and* assumed tax cuts don’t cause any reduction in the ratio of tax revenues to GDP. Binyamin Applebaum explains.One example of the budget-ledger legerdemain: Mr. Trump has pledged to end estate taxation. His budget, however, projects that the government will collect more than $300 billion in estate taxes over the next decade. Indeed, the Trump administration projects higher estate tax revenue than the Obama administration did because it expects faster economic growth. Mr. Trump, in other words, is proposing to balance the federal budget in part by simultaneously increasing estate taxation and eliminating estate taxation. Then later and separately explains another error.The budget’s presentation of the benefits of the administration’s economic policies also raised questions. White House officials said that tax cuts and other changes, like reductions in regulation, would push annual economic growth to 3 percent by 2020, well above the 2 percent annual average since the recession. The budget projects that the increase in economic growth will produce $2.1 trillion in additional federal revenue.The Trump administration appears to be counting this windfall twice. It needs the money to offset the cost of the tax cuts, but in the budget, the $2.1 trillion is also recorded as a separate line item above and beyond the steady growth of tax revenues.They are into deep Voodoo. See also Larry Summers.

The $2T Mulvaney-Mnuchin disagreement – Hennessey - Kate Davidson and Richard Rubin have an excellent article in today’s Wall Street Journal examining what President Trump’s economic advisors are now saying about how the President wants to allocate $2 trillion in budget benefits they think will result from faster economic growth. I wrote about this question Tuesday. Trump Budget Director Mick Mulvaney testified at the House and Senate Budget Committees, while Trump Treasury Secretary Steven Mnuchin testified at the House Ways & Means and Senate Finance Committees. Director Mulvaney said President Trump was proposing that tax reform be debt-neutral without including the budget benefits that would result from faster economic growth, while Secretary Mnuchin said President Trump was proposing that tax reform be debt-neutral with including the budget benefits that would result from faster growth. These two views cannot both be true. I understood the Mnuchin position to be the Administration’s unified view before Tuesday’s budget release. The Mulvaney view is the only one consistent with the new budget documents.  President Trump now has four options:

  1. President Trump supports the position Director Mulvaney stated yesterday, consistent with the Trump budget release. Tax reform must be debt neutral, statically scored. The budget benefits of growth help the government reach balance in 2027, as presented in the just-released budget plan. Tax reform becomes dramatically more difficult to enact, since the President’s position now requires finding as much as $2 trillion* more revenue over 10 years from eliminating or scaling back tax preferences.
  2. President Trump supports the position Secretary Mnuchin stated yesterday, consistent with the April tax reform release. Tax reform must be debt neutral, including the effects of growth. Director Mulvaney cannot count those additional revenues to help him balance the budget. He has to modify his budget proposal to cut a lot more spending ($496 B in 2027 to hit balance in that year) or he has to give up on balancing the budget.
  3. President Trump splits the $2 trillion between the two goals. Mnuchin and Mulvaney each have to find more tax increases / spending cuts (respectively) to meet their stated goals of debt-neutral tax reform and a balanced budget.
  4. Do nothing, remaining ambiguous and internally inconsistent. They stick with the mutually inconsistent policies and the $2 trillion double-count, and try to duck / ignore / power through the questions that point out this logical and arithmetic contradiction. The likely outcome is that House and Senate Republicans ignore the President’s inconsistent policies and make their own policy choice on this question. I’d guess they’d lean toward the Mnuchin approach, dynamically scoring tax reform and reaching a balanced budget by cutting spending more than the President proposes.

It is unclear to me why Director Mulvaney and Secretary Mnuchin are saying opposite things here. Does this reflect a policy disagreement between the two men that still needs to be resolved by the President, and we are seeing that disagreement play out in public? Does it reflect a new policy direction (debt-neutral tax reform, statically scored) to which Secretary Mnuchin has not yet adjusted his public rhetoric? Does it reflect a coordinated intentional choice to try to have it both ways so that the President did not have to make another $2 trillion of hard policy choices? This is important. The principle of honest budgeting is amplified by the size of this hole and its impacts on core elements of the president’s economic agenda. Two trillion dollars is a lot of money, and the decisions yet to be made affect the chances for enacting tax reform and a balanced federal budget.

‘Mnuchin Rule’ Against Wealthy Tax Cuts Comes Back to Bite Him - During congressional hearings this week, Democrats pressed Mnuchin repeatedly about his late November statement that President Donald Trump’s tax plan would benefit middle-class taxpayers, not the highest earners -- an assurance that some quickly labeled “the Mnuchin Rule.” In response, he stopped short of repeating the pledge -- and wouldn’t say whether Trump would refuse to sign tax legislation that would make top earners the biggest winners. Mnuchin’s go-to response: Administration officials are working on a plan that can get through Congress. “I’m not personally guaranteeing anything at the moment,” Mnuchin said after questions from Bob Casey, a Pennsylvania Democrat, during the Senate Finance Committee hearing Thursday. “As opposed to the administration coming out with its own proposal, our intent is that we will work with the House and Senate, that we will come up with a combined proposal that will pass the House and Senate and be signed by the president.” The Treasury secretary’s deference to the legislative process contrasts with previous comments by White House officials, who have said the Trump administration would be driving the train on a tax overhaul -- unlike what happened with the health-care bill. The relentless questioning from Democrats suggests they’ll rally around possible windfalls for the wealthy as a message to try to turn public opinion against the eventual Republican tax plan. In November, Mnuchin said that any benefit that high earners would see from cutting tax rates would be offset by eliminating deductions that are currently available. But independent analysts say it’s unlikely that the one-page tax plan that Mnuchin and National Economic Council Gary Cohn unveiled last month could eliminate enough deductions to prevent a windfall for the highest income earners. While Mnuchin wouldn’t repeat his earlier statement this week, he did say Trump still intends to overhaul the tax code in a way that will benefit working-class Americans. “I guarantee you our proposal has been and will be a middle-income tax cut and that is our priority,” Mnuchin said Thursday.

 There Is One Big Problem With The Trump Budget -- On Tuesday, the White House revealed its proposed 2018 budget, which as discussed earlier, anticipates some draconian cuts to government spending amounting to a massive $3.6 trillion over the next 10 years. Broken down by department, this is who wins and loses:While one can debate the merits, philosophy and ethics of the proposed cuts, there is another, potentially more concerning observation to emerge from the budget, or rather its assumptions.As a reminder, as of May, the current expansion which started in June 2009, and which has lasted for 95 months, is already the third longest in US history.So what emerges when looking at the underlying assumptions of Trump's budget? Nothing short of assumed economic nirvana.As the following table taken from page 45 of the budget (titled "A New Foundation For American Greatness") shows, the US is expected to grow at 2.3% in 2017, 2.3% in 2018 and so on, until GDP plateaus at 3.0% in 2020 and remains there until the end of calendar 2027.What this means is that the White House is assuming there will be no deficit for the entire duration of the projected 10 year period!But that's not all, because it also means that the White House budget is based on the assumption that the expansion that started in June 2009 will last at least until December 2027, or an absolutely unprecedented 222 consecutive months of expansion. There is a problem with that: as the chart below shows, an expansion of that duration - nearly 19 years in a row - would not only be the single longest expansion in American histoy, but it would also last double the next longest duration ever recorded in the US, the expansion which began in March 1991 and ended with the dot com crash, in March 2001.

JPMorgan: US Debt Is Never Going Down Again - After yesterday Goldman mocked Trump's budget (ironic as it was Trump's ex-Goldman Chief Economic Advisor who conceived it) and said it had zero chance of being implemented, today it was JPM's turn to share some purely philosophical thoughts on the shape of future US income and spending, which as we learned yesterday could balance only if the US grows for 10 years at a 3% growth rate, something it has never done, while slashing nearly $4 trillion in in spending, something else it has never done. What caught our attention in the note by JPM's Jesse Edgerton was his discussion on the thorniest issue surrounding the US: its unprecedented debt addition, what America's debt/GDP will look like over the next 30 years, and whether there is any chance it could decline as conservatives in government hope will happen. The answer to the final point according to JPMorgan, is a very resounding no, or as the bank politely puts it, "Despite this week’s budget proposal, legislative changes that would reverse debt growth look unlikely to us." Translated: US debt is never going down again. Here's why: As the US population ages in the coming decades, federal government spending on Social Security and Medicare are set to grow as a fraction of US GDP. Meanwhile, our current tax system is expected to collect a roughly constant fraction of GDP in revenues. Thus, deficits and debt will likely grow over time. The Congressional Budget Office (CBO) currently projects that the ratio of debt to GDP would reach an  unprecedented 150% within 30 years under current law (Figure 1).Figure 1 shows the CBO's central projection for the ratio of federal debt held by the public to GDP under current law. (Debt “held by the public” excludes government trust fund holdings, includes foreign and Federal Reserve holdings, and is currently about $14.4 trillion.) The 2016 level of 77% is the highest in history outside of the World War II era. This debt ratio is projected to reach a new all-time high of 107% by 2035 and 150% by the end of the 30-year forecast horizon in 2047.

Worries mount about vacancies in Trump's State Department | TheHill: Concerns are growing about a short-staffed State Department dealing with a host of international crises. As President Trump begins his first foreign trip, seven of the nine senior State Department roles under Secretary Rex Tillerson remain vacant, including his top deputy. The only two officials in senior roles were appointed by former President Obama and have been kept on. While the Trump administration has put the blame on Senate Democrats and the slow confirmation process, others say Trump has been slow to issue nominations. There are roughly 200 positions at the State Department that require Senate confirmation, including key ambassadorships, the vast majority of which remain unfilled more than 100 days into the new administration. “It’s really grim,” said Julie Smith, a former deputy national security adviser to Vice President Biden. “Our allies are feeling this. They lack interlocutors to deal with.” The United States lacks ambassadors to NATO, the European Union, France, Germany, and Russia, Smith noted. For some of these diplomatic positions, Trump has yet to officially name nominees. “All those people need to be in positions as soon as possible,” said Smith, a senior fellow at the Center for a New American Security.

At the Pentagon, overpriced fuel sparks allegations — and denials — of a slush fund -- The Pentagon has generated almost $6 billion over the past seven years by charging the armed forces excessive prices for fuel and has used the money — called the “bishop’s fund” by some critics — to bolster mismanaged or underfunded military programs, documents show. Since 2015, the Defense Department has tapped surpluses from its fuel accounts for $80 million to train Syrian rebels, $450 million to shore up a prescription-drug program riddled with fraud and $1.4 billion to cover unanticipated expenses from the war in Afghanistan, according to military accounting records. The Pentagon has amassed the extra cash by billing the armed forces for fuel at rates often much higher — sometimes $1 per gallon or more — than what commercial airlines paid for jet fuel on the open market. Under a bureaucracy that dates to World War II, the Defense Department purchases all of its fuel centrally and then resells it at a fixed price to the Air Force, Navy, Army, Marine Corps and other customers, who pay for it out of their own budgets. The system is intended to reduce duplication and promote efficiency. The Defense Department is the largest single consumer of fuel in the world. Each year, it buys about 100 million barrels, or 4.2 billion gallons, of refined petroleum for its aircraft, warships, tanks and other machines. 

US-Saudi Arabia seal weapons deal worth nearly $110 billion as Trump begins visit: The United States sealed a multi-billion arms deal to Saudi Arabia, the White House announced on Saturday, a move that solidifies its decades-long alliance with the world's largest energy producer just as President Donald Trump begins his maiden trip abroad as leader of the free world. The agreement, which is worth $350 billion over 10 years and $110 billion that will take effect immediately, was hailed by the White House as "a significant expansion of…[the] security relationship" between the two countries. Simultaneously, Saudi Arabia is in a broad-based push for economic reform, and as part of that effort signed a flurry of deals with private U.S. companies worth tens of billions of dollars. Lockheed Martin, one of the world's largest defense contractors whose technology was part of the U.S-Saudi accord, said in a statement that the deal "will directly contribute to [Saudi Arabia's] Vision 2030 by opening the door for thousands of highly skilled jobs in new economic sectors." The arms package represents an enhancement of Saudi Arabia's military capabilities as tensions flare in the region, with the U.S. viewing the Saudis as a linchpin in efforts to check the global ambitions of Iran. The country, the hub of Islam's most revered sites, but is also a target of radical Islamic extremism."This package of defense equipment and services support the long-term security of Saudi Arabia and the Gulf region in the face of Iranian threats, while also bolstering the Kingdom's ability to contribute to counter terrorism operations across the region, reducing the burden on the U.S. military to conduct those operations," the White House said in a statement. For the Saudis, Trump's visit represents a diplomatic and public relations coup for Mohammed bin Salman, the Kingdom's 31-year old deputy crown prince. The U.S.-Saudi partnership has been fraught with controversy since the Sept. 11 attacks, which culminated last year in a Congressional vote to allow 9/11 families to sue the country for its suspected links to the attackers.

Trump Inks Largest Arms Deal in U.S. History with Country He Said Funded ISIS - There was a lot of pomp and circumstance upon Trump's arrival in Saudi Arabia. It's important to note, after 8 years of Iranian friendly Obama, the Saudis have strong motives to curry the favor of the new American President. The visit to Saudi Arabia is historic. It marks the first time in American history a President had chosen to make Saudi Arabia his first international visit. Upon landing in the oil rich gulf state, the President signed a massive arms deal -- which could swell to more than $350b over the next decade. The deal includes blackhawk helicopters, a modified version of the Freedom-variant Littoral Combat Ship, thousands of precision guided weaponry, cargo helicopters, transport helicopters, 115 M1A2s tanks, anti-ballistic missile systems (THAAD), and 'maritime assets.' The theory behind arming Saudi Arabia is that it would permit them to handle Iran in the Persian Gulf, granting us license to throw a few logs on the fire and doze off a bit while they do all the work for a change. All that sounds well and good, especially since the money will be spent with our weapons manufacturers, who employ thousands of Americans. But what about all of the stuff Trump said about Saudi Arabia during the campaign? Does that count for anything, or was it just election time shit talking? Here's Trump chastising Clinton for accepting Saudi money, a country that 'kills women' and 'treat women horribly.' Or what about the time Trump told The Morning Shill that Saudi Arabia was arming ISIS? This is the "if, then" logic I want to put on the table for you to think about. If Saudi Arabia funds radical Islam and ISIS, like Trump said, then should we be selling them advanced weaponry? One minor detail that is vexing me today. All of the conservatards are out in force, praising Melania Trump for not wearing a headscarf, which she's 100% right for doing. But Michelle Obama didn't wear one either. I don't know why people are saying she did wear one.  As a matter of fact, President Trump actually had the stones to criticize Michelle for doing so back then, calling it an insult.Many people are saying it was wonderful that Mrs. Obama refused to wear a scarf in Saudi Arabia, but they were insulted.We have enuf enemies— Donald J. Trump (@realDonaldTrump) January 29, 2015

Why is Trump rewarding Saudi war crimes with more weapons? | TheHill: Last October, the Saudi Arabia-led coalition bombed a funeral hall in Yemen’s capital, Sanaa, killing and wounding hundreds of people. “The scene was catastrophic,” one survivor told me. “Beyond what I can explain to you or describe ... There were burned bodies and dead bodies all over the hall.” Soon after that unlawful bombing, the Obama administration suspended the sale of nearly $400 million in weapons to Saudi Arabia. It was a recognition, a long time in coming, that the coalition’s military campaign in Yemen had devastated the country, killed thousands of civilians and brought it to the brink of famine.After the funeral bombing, unlawful airstrikes continued, but the decision to suspend arms sales sent an important message to the Saudis. President Trump, in his first trip abroad as president, is going to send an alternative, deeply troublesome message.  While in Riyadh this weekend, Trump reportedly plans to announce more than $100 billion in arms deals to Saudi Arabia — nearly as much as President Obama authorized during his eight years in office. The deals include Raytheon bombs, Lockheed Martin missile defense systems and BAE combat vehicles, and some of the weapons whose sales had been suspended.The scars of unlawful airstrikes can be found across Yemen, where the Saudi-led coalition has carried out scores of attacks that hit homes, schools, markets, and hospitals since March 2015, when it began its military campaign against forces loyal to the former longtime president Ali Abdullah Saleh. Human Rights Watch has documented 81 apparently unlawful coalition attacks over the last two years, many possible war crimes. In almost two dozen of these cases, including the attack on the funeral hall, we were able to identify the US weapons that were used.

Tillerson Economics and the Saudi Arm Deal -- Secretary of State Rex Tillerson discussed the latest arm’s deal with the Saudi government today. Hanna Trudo covered the joint address with Saudi Arabian Foreign Minister Adel bin Ahmed Al-Jubeir in Riyadh today:   Tillerson said Saudi Arabia's direct investment in the U.S. would bring "hundreds of thousands" of jobs to American workers. Earlier, Trump said it had been a "tremendous day; tremendous investments for the United States. Hundreds of billions of investments into the United States, and jobs jobs jobs." While this will be the headline story, note what else Tillerson said:  Tillerson also said the new defense deal — which includes upgrades to Saudi communications, missile defense, maritime, border and cyber security — lowers the demands on the U.S. military. “This huge arms sales package reduces the burden on the United States to provide the same equipment to our own military forces,” he said. “It will strengthen Saudi security forces for the future so Saudi Arabia is more capable of carrying a greater share of the burden.”  Deficit hawks may see this as good news but let’s step back for a moment. The $109 billion in arms sales is for the next decade amounting to an additional $11 billion in new exports on a per annum basis. So we are talking about only 0.06% of GDP in new exports but this only gets worse if we take Tillerson at his word that as the Saudis spend more on their own defense, we spend less. In other words, exports rise by $11 billion per year and Federal purchases fall by $11 billion per year. Good news from a deficit hawk perspective but no net increase in U.S. aggregate demand. So Trump’s “jobs, jobs, jobs” amounts to nothing but his usual political posturing.

The Saudi Arabia Arms Deal: What Weapons Did Trump Sell & Which Scumbags Profit From It? - During his vacation to the Arabian Peninsula, Donald Trump announced he was signing a $350 billion-dollar arms deal with the brutal dictators who rule the Kingdom of Saudi Arabia. When all of the transactions are complete, it will be the single largest weapons deal in all of US history — in fact, 350 billion is such an absurdly high number that it’s basically meaningless to most people, at first. This is because human brains can only recognize about 5 objects or so before we need to start counting. So, if you want to understand what 350 billion is, think about this — if you live for the average number of 71 years, you would need to spend $13.5 million dollars every single day for your entire life, from birth to death, to spend $350 billion. Let that sink in. Now that we have some idea about how much money this weapons deal is worth, let’s take a closer look at what is actually happening, here…  According to Al Masdar News, the weapons deal includes “tanks, artillery, helicopters, light close air support, intelligence-gathering aircraft, […] Patriot [missile batteries] and [Terminal High Altitude Area Defense] THAAD.Reuters reports that a $6 billion pledge by Saudi Arabia to buy & assemble 150 Lockheed Martin Blackhawk helicopters is also a part of the deal. Citing nameless White House officials, the Associated Press adds “some $750 million” in training for Saudi Air Force pilots, “Abrams tanks, combat ships, […] radar, and communications and cyber security technology” to the list of items included in Trump’s deal. Lockheed-Martin announced Saudi Arabia wants to buy over $28 billion in integrated air/missile defense, combat ships, tactical aircraft, & rotary wing technologies & programs. Raytheon — the company that makes Tomahawk cruise missiles & Patriot anti-aircraft systems — is opening a new branch, Raytheon Arabia, that will focus on increasing Saudi Arabia’s weapons capabilities. Chinook helicopters, guided-weapons systems, & P-8 reconnaissance planes are among the instruments of death that Boeing is proudly contributing to Trump’s deal and General Electric says it will provide $15 billion in digital technology to Aramco, the Saudi’s massive state-run oil company.Why are democrats are so quiet about the massive arms deal between the US & the financiers of 9/11? Aren’t they supposed to be the Resistance™?Lockheed-Martin spent $13.6 million to lobby public officials & $4.9 million to elect US representatives & Senators, while Raytheon spent $4.6 million & $3 million on the same &Boeing spent $17 million & $3.7 million. The leader of the democratic Senate, Chuck Schumer, took $123,950 from Lockheed-Martin and the leader of the house, Nancy Pelosi, took $39,800 from defense contractors, including $20,385 from Boeing & Lockheed-Martin.That’s why.

Saudi Arabia’s King Salman Knows Flattery Is the Key to Donald Trump’s | Vanity Fair -Diplomacy is never an easy business. World leaders must constantly learn the ins and out of other cultures in order to communicate effectively, and especially so that they won’t accidentally insult one another during diplomatic visits. But Saudi Arabia’s King Salman bin Abdulaziz knows exactly how to deal with Donald Trump, using a tactic that’s been employed by leaders of various countries ever since the businessman took office: flattery.King Salman greeted Trump at the airport Sunday, per Politico, in a ceremony accompanied by a military flyover, cannons, an elaborate cardamom coffee service, and the presentation of a gold medal. Though Barack Obama received the same medal when he traveled to Saudi Arabia in 2009, this level of adulation was not extended to the last American president during his visit—and is an indicator that Salman has been well schooled in the intricacies of dealing with Trump.The New York Times recently gathered a checklist of dos and don’ts that world leaders have been using during their meetings with 45. The gist: stay concise, and give him lots of compliments. Keep it short—no 30-minute monologue for a 30-second attention span. Do not assume he knows the history of the country or its major points of contention. Compliment him on his Electoral College victory. Contrast him favorably with President Barack Obama. Do not get hung up on whatever was said during the campaign. Stay in regular touch. Do not go in with a shopping list but bring some sort of deal he can call a victory. Clearly, world leaders have gotten the memo: during her January visit, British Prime Minister Theresa May called Trump’s election win “stunning.” Israel’s Prime Minister Benjamin Netanyahu name-dropped Trump’s book The Art of the Deal. Japanese Prime Minister Shinzo Abe complimented his golf swing.

Donald Trump's Saudi Speech: Full Transcript - Some analyst, such as Beacon Advsiros, expected a diplomatic scandal as a worst case scenario outcome from Trump's keynote speech at the Arab Islamic American Summit in Saudi Arabia. That did not happen, and instead Trump delivered a speech that many pundits on both sides of the aisle said was better than expected, even if in a very strict sense. Clocking in at just over 3,400 words, here is a full transcript of what Trump told Saudi Arabia and the world on Sunday afternoon.

Landslide Win for Iran’s Reformists Doesn’t Fit Trump’s Script, So He Ignores It - The hypocrisy of America’s support for unelected despots in the oil-rich Gulf states is not new, but Donald Trump’s lavish praise for them on Sunday, as allies against “Islamist extremism” and “the oppression of women,” was particularly striking, coming one day after Iranian voters danced in the streets to celebrate their reformist president’s landslide re-election.  As Iran’s moderates celebrated on Saturday night, Trump and members of his cabinet were dancing with swords in Saudi Arabia. Speaking in the Saudi capital of Riyadh on Sunday, Trump made no mention of the scenes in Iran or of President Hassan Rouhani, whose diplomatic engagement with the West over Iran’s nuclear program helped to avert the war American allies in the region, including the Gulf states and Israel, seemed to be still hoping for. Instead, the American president promised the monarchs and autocrats in the room that he would work with them “to isolate Iran.” He also promised, bizarrely, “to help our Saudi friends to get a good deal” from American arms makers. Trump: "We will be sure to help our Saudi friends to get a good deal from our great American defense companies" As Trita Parsi of the National Iranian American Council observed, Trump seemed to be in full agreement with his host, King Salman of Saudi Arabia, who called Iran’s government “the spearhead of global terrorism.” Trump is now copy pasting Saudi talking points on Iran. Everything is Iran's fault. Always.

Iran's foreign minister slams Trump’s comments | TheHill: Iranian Foreign Minister Mohammad Javad Zarif criticized President Trump’s comments about Iran on Sunday, also attacking new U.S. arms and investment deals with Saudi Arabia. Zarif took to Twitter to slam Trump, writing, “Iran—fresh from real elections—attacked by President Trump in that bastion of democracy & moderation. Foreign Policy or simply milking KSA of $480B?”The tweet included a screen shot of text from President Trump’s speech Sunday in Riyadh to leaders of the Muslim world. Iran's foreign minister suggested that the president’s flattering rhetoric toward the Saudis in the address was a result of dealmaking between the U.S. and Saudi Arabia. Trump knocked Iran in his speech Sunday, saying other nations should work to “isolate” the country. “Until the Iranian regime is willing to be a partner for peace, all nations of conscious must work together to isolate Iran, deny it funding for terrorism, and pray for the day when the Iranian people have the just and righteous government they deserve,” Trump said. Iran, a Shia Muslim nation, has long considered Saudi Arabia to be its top Sunni adversary in the Middle East.

Donald Trump’s speech to the Muslim world was filled with hypocrisy and condescension | The Independent: Despite claiming he wouldn’t give a lecture, the President did just that, displaying a blatant anti-Iran bias intended to appease the nation with whom he’d just signed a multi-billion dollar arms deal at the expense of the truth. So after inventing “fake news”, America’s crazed President on Sunday gave the world’s Muslims a fake speech. Donald Trump said he was not in Saudi Arabia to “lecture” – but then told the world’s Islamic preachers what to say, condemned “Islamist terrorism” as if violence was a solely Muslim phenomenon and then announced like an Old Testament prophet that he was in “a battle between good and evil”. There were no words of compassion, none of mercy, absolutely not a word of apology for his racist, anti-Muslim speeches of last year. Even more incredibly, he blamed Iran – rather than Isis – for “fuelling sectarian violence”, pitied the Iranian people for their “despair” a day after they had freely elected a liberal reformer as their president, and demanded the further isolation of the largest Shiite country in the Middle East. The regime responsible for “so much instability” is Iran. The Shiite Hezbollah were condemned. So were the Shiite Yemenis. Trump’s Sunni Saudi hosts glowed with warmth at such wisdom.And this was billed by CNN as a “reset” speech with the Muslim world. For “reset”, read “repair”, but Trump’s Sunday diatribe in Riyadh was in fact neither a “reset” nor a “repair”. It was the lecture he claimed he would not give.  “Every time a terrorist murders an innocent person, and falsely invokes the name of God, it should be an insult to every person of faith,” he announced, utterly ignoring – as he had to – the fact that Saudi Arabia, not Iran, is the fountainhead of the very Wahhabi Salafist extremism whose “terrorists” murder “innocent people”.

The Saudi Visit and Trump’s Unprincipled Foreign Policy - American Conservative - Administration officials always try to spin the president’s words and deeds to put them in a favorable light, but this is ridiculous: H.R. McMaster on @POTUS trip: "The entire trip is about human rights, about all civilized people coming together to fight the hatred." — Fox News (@FoxNews) May 22, 2017  No one believes this about this trip or the Trump administration’s foreign policy in general. Trump and his advisers have made closer relations with bad regional clients and combating terrorism their top priorities, and Trump made sure to say nothing at all about how the Saudis or other despotic clients treat their people or the people of neighboring countries. Trump supports the Saudi-led coalition’s atrocious war on Yemen even more eagerly than his predecessor did (and Obama practically gave them carte blanche), and any government that does that clearly isn’t concerned about defending human rights or alleviating humanitarian disasters. If we judge the U.S. by its actions under both Obama and Trump, we have to conclude that our government is much more interested in keeping despotic clients happy and “on side” than it is in opposing their indiscriminate killing of civilians and their creation of a man-made famine.  These are the wrong policies for the U.S. for all the reasons I have stated for over two years, but it is telling that they cannot be openly defended by members of the administration. So we are treated to the fantasy that the “entire trip is about human rights” when so far it has been a show of indifference to the suffering of innocent people, especially those in Yemen that are being killed and starved to death by the president’s recent hosts and their allies.

What Explains Trump’s Sharp About-Face on Saudi Arabia? - On his first overseas trip as president, Donald Trump traveled not to Canada, or to Mexico, or to Britain, or to France, but to Saudi Arabia, where he was, to his obvious delight, greeted like a king. According to a New York Times report from Riyadh, “The Saudis treated him like royalty, with red carpets, lavish meals and American flags flying everywhere.” During his two-day visit to the Wahhabi Kingdom, Trump was awarded a gold medal, danced along with Saudi swordsmen, and made time to sign a series of agreements with Saudi King Salman, which included a new arms deal totaling $460 billion over 10 years. What a long way Trump has come since last year’s campaign, when, during the final presidential debate, he declared that “our country cannot afford to defend Saudi Arabia…and many other places.” During that debate, Trump also criticized the Clinton Foundation (“a criminal enterprise”) for accepting $25 million in Saudi money, because “these are people that push gays…off buildings. These are people that kill women and treat women horribly and yet you take their money.”  But once in office, Trump’s criticisms were quickly muted. By February, CIA director Mike Pompeo had traveled to Riyadh to bestow the George Tenet Award upon the kingdom’s interior minister, Crown Prince Muhammad bin Nayef. And soon enough, reports were emerging of a Pentagon plan that would increase US support for the Saudis’ grotesque war against Iranian-backed Houthi rebels in Yemen.  So what explains the turnaround? The ease with which Trump abandons previously held positions is by now well known. But another factor that explains the turnaround is the power and skill of the Saudi lobby in reinforcing the already deeply entrenched view that US national interests are best served by an alliance with Riyadh in order to check Iranian influence in the region. From its earliest days, the Trump administration wasted little time in signaling that it would soon be turning President Obama’s Middle East policy, which could be characterized by a wariness of the Saudis and a willingness to negotiate with the Iranians, on its head.

Here are some videos of Trump and his cabinet members awkwardly dancing with swords in Saudi Arabia

Iran’s Rouhani denounces US’ Middle East ignorance - Iranian President Hassan Rouhani said on Monday stability could not be achieved in the Middle East without Tehran's help, responding to criticism from US President Donald Trump who is visiting the region.Trump called for a US alliance with Muslim countries aimed at fighting "terrorism", singling out Iran as a major source of funding and support for armed groups in the Arab world.Rouhani, a pragmatist who won last week's presidential election, hit back hard by dismissing the summit as a "ceremonial [event] that had no political value and will bear no results"."Who can say regional stability can be restored without Iran? Who can say the region will experience total stability without Iran?" he said at a news conference. At a weekend summit in Riyadh, Trump accused Iran of funding and arming "terrorists, militias and other extremist groups" in Iraq, Yemen, Lebanon and backing President Bashar al-Assad in Syria's civil war.Rouhani, who fronted Tehran's deal with six major powers in 2015 to curb Iran's nuclear programme in return for the lifting of sanctions, said the US administration lacked knowledge about the Middle East.  "Americans resorted to many different methods against Iran but failed in all... We are waiting for the new US administration to find stability and continuity in its policies," Rouhani said."The problem is that the Americans do not know our region and those who advise US officials are misleading them."Rouhani said Iran was the vital force behind the fight against the Islamic State of Iraq and the Levant (ISIL) and repeated Iran's official stance that the United States and Saudi Arabia are funding "terrorism" in the Middle East. "Who fought against the terrorists? It was Iran, Syria, Hezbollah and Russia. But who funded the terrorists? Those who fund terrorists cannot claim they are fighting against them," he said.

It’s Time to Get Rid of Donald Trump - DER SPIEGEL Editorial - Donald Trump has transformed the United States into a laughing stock and he is a danger to the world. He must be removed from the White House before things get even worse.  Donald Trump is not fit to be president of the United States. He does not possess the requisite intellect and does not understand the significance of the office he holds nor the tasks associated with it. He doesn't read. He doesn't bother to peruse important files and intelligence reports and knows little about the issues that he has identified as his priorities. His decisions are capricious and they are delivered in the form of tyrannical decrees.He is a man free of morals. As has been demonstrated hundreds of times, he is a liar, a racist and a cheat. I feel ashamed to use these words, as sharp and loud as they are. But if they apply to anyone, they apply to Trump. And one of the media's tasks is to continue telling things as they are: Trump has to be removed from the White House. Quickly. He is a danger to the world.Trump is a miserable politician. He fired the FBI director simply because he could. James Comey had gotten under his skin with his investigation into Trump's confidants. Comey had also refused to swear loyalty and fealty to Trump and to abandon the investigation. He had to go. Trump is also a miserable boss. His people invent excuses for him and lie on his behalf because they have to, but then Trump wakes up and posts tweets that contradict what they have said. He doesn't care that his spokesman, his secretary of state and his national security adviser had just denied that the president had handed Russia (of all countries) sensitive intelligence gleaned from Israel (of all countries). Trump tweeted: Yes, yes, I did, because I can. I'm president after all.

Rand Paul To Force Vote On Massive Saudi Arms Deal, Warns Sales Would Drag US Into Yemen War -- Sen. Rand Paul (R – KY) intends to force a vote in the Senate on the record US arms sales to Saudi Arabia, a deal which the Trump Administration has estimated will be worth some $350 billion over the decade.  Paul was expected to introduce the bill on Wednesday. The Arms Export Control Act gives senators 10 days to bring up opposition to arms sales, and Paul will have to act particularly fast this time because the Senate is leaving Friday for the Memorial Day holiday, during which they take an entire week off.  Sen. Paul argued that increasing US armament of the Saudis would mean deeper US involvement in the Saudi invasion of Yemen. That of course is something many in the Trump Administration want at any rate, so for them that is seen as a bonus, if anything. Sen. Paul has been supported in the past in trying to rein in Saudi arms sales by some Democrats, particularly Sen. Chris Murphy (D – CT). It is unclear at this point if he has much support, though the arms industry’s eagerness to secure this lucrative deal is likely to have them lobbying against his efforts.

Trump warns of Iranian nuclear threat on visit to Israel - US President Donald Trump has begun a visit to Israel by warning of the threat posed by Iran if it acquires nuclear weapons."Iran must never be allowed to possess a nuclear weapon," he told reporters in Jerusalem, speaking beside Israeli President Reuven Rivlin.He flew in from Saudi Arabia, a key US ally, where he gave a speech to Arab and Muslim leaders at a summit.Mr Trump is holding separate talks with both Israeli and Palestinian leaders.He has called an Israeli-Palestinian peace agreement "the ultimate deal" but has been vague about what form it should take, saying he prefers to leave it to both sides to decide between them in direct talks.  It must also "cease its deadly funding, training and equipping of terrorists and militias", Mr Trump said at President Rivlin's residence. In a deal with world powers in 2015, Iran accepted curbs on its nuclear programme in return for tangible economic benefits, and the White House confirmed last month that the deal was still holding.However, US Secretary of State Rex Tillerson has underlined that his country's policy towards Iran is under full-scale review. Israel, meanwhile, considers Iran a mortal threat.Speaking later to Israeli Prime Minister Benjamin Netanyahu in Jerusalem, Mr Trump pledged Iran would never get nuclear weapons.Iranian President Hassan Rouhani, who was re-elected for a second term last week, championed the 2015 deal but on Monday he appeared to sweep aside international concern about Iran's missile programme. "The Iranian nation has decided to be powerful," he said on state TV. "Our missiles are for peace and for defence... American officials should know that whenever we need to technically test a missile, we will do so and will not wait for their permission."

Trump’s Messy, Mostly Successful Israel Visit  - President Trump’s plane hadn’t cleared Israeli airspace Tuesday before writers in the Middle East and at home began trying to figure out what the visit had meant. This was made harder because Israelis, true to the stereotype — two Israelis, three opinions — didn’t agree. Prime Minister Netanyahu and many legislators professed themselves delighted. But a key center-left figure called the visit “a missed opportunity of historic proportions.” The Israeli intelligence community was less tactful, using words like “horrifying” to describe an American president who shared Israel’s most sensitive intelligence findings with Russia. And that was before Trump brushed Netanyahu aside to tell the media that it was all okay because he never said the word “Israel” to the Russians — thus marking the first time a U.S. official had suggested in public that the sensitive material released came from Israel. As usual with all things Trump, who is right depends on how you frame the question. Trump and his hosts will reasonably claim it as a big win. But there are reasons to worry that the foundation of the U.S.-Israel alliance is getting shakier, and this visit did nothing to change that.

US On Track To Kill More Syrian Civilians Than Russia For 5th Straight Month -- Coalition-led airstrikes in Syria killed a total of 225 civilians between April 23 and May 23, the highest 30-day death toll for U.S.-led forces since the campaign began, Agence France-Presse reported. That's nearly double the number of intended targets: The U.S.-led strikes killed 122 ISIS fighters and eight fighters loyal to the Syrian government, the report said. The rising tide of civilian deaths attributable to coalition forces suggest that May could be the fifth straight month that civilian deaths from coalition-led strikes outpace the civilian death toll from Russian forces, according to the AFP report and an analysis of data from the 225 civilian deaths, reported to AFP by the Syrian Observatory for Human Rights, 44 were children and 36 were women.The civilian death toll from Russian strikes has declined since it peaked in January. Meanwhile, deaths from U.S.-led strikes have risen dramatically.“There has been a very big escalation,” Observatory head Rami Abdel Rahman told AFP. The previous deadliest 30-day period for U.S.-led forces was between February 23 and March 23 this year, when 220 civilians were killed, Abdel Rahman told AFP.

If Kushner has a Mideast peace plan, it's a secret so far | Reuters: If Jared Kushner has a plan to solve the Arab-Israeli conflict, so far he's giving little away. In the four months since President Donald Trump took office and gave his 36-year-old son-in-law the job of forging peace between Israel and the Palestinians, Kushner has kept his plans under wraps for a conflict that is nearly twice as old as he is. The assignment would pose daunting challenges for the most seasoned diplomat, much less a novice. Peace talks have been stalled for years, most recently breaking down in 2014 following disagreements over Israeli settlement-building and a Palestinian move to reconcile with the Islamist group Hamas. By making the Arab-Israeli conflict the centerpiece of his first trip abroad, and putting such a high-profile figure in charge of it, Trump has jumped headlong in without the usual caution and discretion shown by his predecessors. Dating back decades, presidents have typically waited until later in their administrations to engage publicly on one of the world's most intractable diplomatic issues. The initiatives that won Nobel Peace Prizes, the Camp David accords in 1978 and the Oslo agreement in 1993, arose from talks begun in secret. But although Kushner has been given the task with a higher profile and at an earlier stage in his father-in-law's presidency than usual, he has so far brought an understated style to the role, which veterans of Middle East diplomacy say could work in his favor. "At this stage of an administration, keeping your cards close to your vest is probably not a bad thing," said Dennis Ross, who served as a Middle East peace envoy under President George H.W. Bush and President Bill Clinton."To be revealing too much before you know what you can achieve and when you can achieve it ... is probably the best way to undermine your ability to get anything done soon,” he said. 

 Trump’s “China deal” is only a good deal for China -- Larry Summers - The events of the last week have crowded out reflection on economic policy.  But things have been happening. Commerce Secretary Wilbur Ross described the trade deal reached with China earlier this month as “pretty much a herculean accomplishment….This is more than has been done in the history of U.S.-China relations on trade.” Past a certain point, exaggeration and hype become dishonesty and deception. In economic policy, as in almost everything else, the Trump Administration is way past that point. On agriculture, China reiterated a promise that it has broken in the past to let in more beef. Previously, we, as reciprocity, had been withholding publication of a permissive rule on Chinese poultry, but we have now relented. Advantage China. Nothing else we “achieved” has any meaningful nexus with U.S. jobs. China will review product applications for 8 biotech products. It promises to offer increased scope for U.S. credit rating agencies, and electronic payment platforms. But it is far from clear that U.S. firms will in fact be able to compete in China — and it is clear that if they do, it will be by hiring Chinese workers in China, not American workers in America.  What did we give up?  First, we agreed to allow exports of liquefied natural gas from the US to China. To at least a small extent that would mean higher heating costs for U.S. consumers and higher energy costs for U.S. producers. Second, in the context of a trade negotiation, we made concessions regarding how U.S. commodities regulators would view derivatives traded in Shanghai and how U.S. bank regulators would treat Chinese banks doing business in the U.S. While I suspect the concessions were not major, this is reinforcing the valid concern that trade agreements may undercut the ability of regulators to protect American financial stability and more generally challenge regulatory sovereignty. Third, we agreed to embrace — by sending high level representatives – China’s One Belt One Road initiative. It is almost certainly better to be in than out of this tent, but we should be getting something in return for the legitimacy we are conferring. Now it is true that a ludicrously hyped squib of a deal is much better than a trade war. So perhaps we should be pleased that the President and his commerce secretary are so easily manipulated. Perhaps our officials know how bad a deal they got and are just hyping for political reasons.

Trump Called Duterte to Congratulate Him on His Murderous Drug War: “You Are Doing an Amazing Job” --In a phone call from the White House late last month, U.S. President Donald Trump heaped praise on Philippine President Rodrigo Duterte, one of the world’s most murderous heads of state, for doing what Trump called an “unbelievable job” in his war on drugs. Trump offered an unqualified endorsement of Duterte’s bloody extermination campaign against suspected drug dealers and users, which has included open calls for extrajudicial murders and promises of pardons and immunity for the killers. “You are a good man,” Trump told Duterte, according to an official transcript of the April 29 call produced by the Philippine Department of Foreign Affairs and obtained by The Intercept. “Keep up the good work,” Trump told Duterte. “You are doing an amazing job.” Trump began the call by telling Duterte, “You don’t sleep much, you’re just like me,” before quickly pivoting to the strongman’s drug war. “I just wanted to congratulate you because I am hearing of the unbelievable job on the drug problem,” Trump told Duterte at the beginning of their call, according to the document. “Many countries have the problem, we have a problem, but what a great job you are doing and I just wanted to call and tell you that.” “Thank you Mr. President,” replied Duterte. “This is the scourge of my nation now and I have to do something to preserve the Filipino nation.”

Trump revealed submarine locations to Philippines president | TheHill: A call transcript between President Trump and Philippine President Rodrigo Duterte reveals that Trump boasted about two U.S. nuclear submarines near North Korea. Trump, who spoke by phone with Duterte on April 29, addressed the possibility of a strike on North Korea using the submarines. A transcript of the conversation was published by The Intercept. “We have a lot of firepower over there,” Trump said in the transcript, an official document of the Philippine Department of Foreign Affairs. “We have two submarines — the best in the world — we have two nuclear submarines — not that we want to use them at all,” Trump continues. “I’ve never seen anything like they are but we don’t have to use this but he could be crazy so we will see what happens.” The Defense Department historically does not reveal the locations of its submarines, since keeping the vessels’ movements secret is key to their missions.

U.S. and Pacific Rim countries at odds in heated trade meeting | Reuters: Japan and other members of the Trans-Pacific Partnership agreed on Sunday to pursue their trade deal without the United States as the Trump administration's “America First” policy created tension at a meeting of Asia-Pacific countries. Turmoil over global trade negotiations was laid bare at a meeting of the Asia-Pacific Economic Cooperation (APEC) forum, which failed to agree on its usual joint statement after U.S. opposition to wording on fighting protectionism. The meeting in Hanoi, Vietnam, was the biggest trade gathering since U.S. President Donald Trump upended the old order, arguing that multilateral free-trade agreements were costing American jobs and that he wanted to cut new deals. On the sidelines of the meeting, the 11 remaining countries of the TPP agreed to explore how they could move ahead without erstwhile leader the United States, partly in the hope that Washington would reconsider leaving. New U.S. Trade Representative Robert Lighthizer said there was no way back and he believed there would be a series of bilateral agreements with countries in the region. A statement from Lighthizer said that free trade required the tackling of "trade-distorting measures" that have led to "massive U.S. trade imbalances" in the region -- a possible reference to China's trade surplus, which was nearly $350 billion in 2016. "I look forward to working with our trade partners to expand U.S. export market access and address persistent unfair trade practices," the 69-year-old Reagan-era trade negotiator said. Although the TPP members kept the trade agreement alive, they fell short of a wholehearted commitment to advance immediately with a deal that members also see as a way to contain an increasingly dominant China.

As Trump Prepared to Meet Pope, Bernie Sanders Calls His Budget “Immoral” -- Pam Martens - It became clear yesterday why President Donald Trump needed thousands of miles between himself and Washington D.C. when his administration dropped its budget proposal on the American people. It immediately drew sharply negative reactions from both sides of the aisle and outright ridicule from mainstream media.Max Ehrenfreund, writing for the Washington Post, said the promise that the Trump budget would balance federal finances in a decade was based on “vague savings and unspecified sources of new revenue” consisting of over $2 trillion in “mystery money.”Jonathan Chait at New York Magazine said Trump’s budget assumptions contain a “$2 trillion basic arithmetic error” that is just downright “embarrassing.”  Anger among Democratic leaders over the budget’s attack on Americans that are least able to sustain more financial pain boiled over on Capitol Hill yesterday. Senator Bernie Sanders, the Ranking Member of the Senate Budget Committee and two of his colleagues on the Committee, Senators Debbie Stabenow and Jeff Merkley, joined with Senate Minority Leader Chuck Schumer at a press conference to assail the brutal cuts to programs for rural America, the middle class and working poor. Just hours before President Trump was to meet with the Pope at the Vatican, Senator Sanders called Trump’s budget “immoral.” Sanders said: “What this budget amounts to is an unprecedented transfer of the United States from the middle class and working families to the very, very wealthiest people in this country. Listen to this: by repealing the estate tax, the Walton family worth $130 billion will get up to a $53 billion tax break at the same time that this budget will drive children off of the children’s health insurance program; deny millions of people the health care they desperately need; make it harder for working class kids to go to college; slash environmental protections.“So what we are seeing is unprecedented tax breaks for the people who don’t need it and devastating cuts for programs that the middle class, working families and lower income people do need. “This is a budget that is bad economics, it is immoral, it is a budget that the American people will reject. And it is a budget that must not see the light of day in Congress.”

Trump Shames NATO Leaders on Defense Spending -- U.S. President Donald Trump hectored NATO leaders to pay their “fair share” on defense to help counter the terrorist threat, in a public shaming that risked souring a ceremony intended to mark the alliance’s unity.  Citing this week’s attack in the English city of Manchester, Trump told fellow alliance leaders including German Chancellor Angela Merkel that NATO should focus its efforts on combating terrorism. Yet of the 28 member nations, 23 “are still not paying what they should be paying and what they’re supposed to be paying for their defense,” he said.“That is not fair to the people and taxpayers of the United States,” Trump said at the event in Brussels on Thursday to mark the opening of the North Atlantic Treaty Organization’s new headquarters. “Many of these nations owe massive amounts of money from past years and not paying in those past years.”Trump’s rebuke of mainly European allies for not spending the recommended 2 percent of GDP on defense came during a ceremony marking the Sept. 11, 2001, terrorist attacks on the U.S., when NATO invoked for the first and only time its mutual-defense clause. Trump said that NATO would have had $119 billion more if NATO members had lived up to their obligations. “Two percent is the bare minimum for confronting today’s very real and very vicious threats,” he said. Trump’s comments may disappoint some officials in Europe who had hoped that the U.S. president would offer a public endorsement of NATO’s mutual-defense doctrine at the ceremony that honored Article 5, as the provision is known. Trump referred to it only in the context of 9/11, never returning to the topic to state directly that he supports the clause beyond saying that he stood with his NATO allies.

Trump directly scolds NATO allies, says they owe 'massive' sums | Reuters: U.S. President Donald Trump on Thursday intensified his accusations that NATO allies were not spending enough on defense and warned of more attacks like this week's Manchester bombing unless the alliance did more to stop militants. In unexpectedly abrupt remarks as NATO leaders stood alongside him, Trump said certain member countries owed "massive amounts of money" to the United States and NATO -- even though allied contributions are voluntary, with multiple budgets. His scripted comments contrasted with NATO's choreographed efforts to play up the West's unity by inviting Trump to unveil a memorial to the Sept. 11, 2001, attacks on the United States at the new NATO headquarters building in Brussels. "Terrorism must be stopped in its tracks, or the horror you saw in Manchester and so many other places will continue forever," Trump said, referring to Monday's suicide bombing in the English city that killed 22 people, including children. "These grave security concerns are the same reason that I have been very, very direct ... in saying that NATO members must finally contribute their fair share," Trump said. NATO Secretary-General Jens Stoltenberg defended Trump, saying that although he was "blunt" he had "a very plain and clear message on the expectations" of allies. But one senior diplomat said Trump, who left the leaders' dinner before it ended to fly to Italy for Friday's Group of Seven summit, said the remarks did not go down well at all. "This was not the right place or time," the diplomat said of the very public harangue

Trump pushes around NATO; lecture seen as unsettling alliance (CNN) When President Donald Trump lectured NATO members on their contributions to the trans-Atlantic alliance, he demonstrated a lack of understanding about how the group works and potentially alienated the US' closest allies, analysts said. The speech comes at a time when Washington's longstanding partnerships with the UK and Israel have endured friction over intelligence gaffes by the new administration. "Diplomatically, the speech was inept at best and deliberately insulting at worst," said Jeff Rathke, deputy director of the Europe Program at the Center for Strategic and International Studies. Trump's remarks Thursday, alongside his continued misrepresentation of how the alliance works and his failure to reaffirm US commitment to the group, is likely to further unsettle US allies, sowing doubt about US leadership and possibly making it harder for NATO leaders to convince their people of the need to spend more on defense. Ivo Daalder, a former US ambassador to NATO, said that "this was a perfectly scripted event to deliver a very simple message that every president of the United States has delivered at the first possible opportunity, which is that the United States stands firmly behind its commitment to the defense of NATO." "We signed a treaty, we uphold it. It was really easy," Daalder said. "And the fact that he didn't do it was disturbing and will take a long time to overcome in Europe." Trump's full speech at NATO 9/11 memorial Trump was making his first visit to the alliance in Brussels, where leaders had carefully scripted his visit, unveiling a memorial to the September 11, 2001, terrorist attacks to mark the only time NATO has invoked Article 5, which holds that all members will defend any one of them that's attacked. 

German Chancellor Merkel and President Trump Remarks - C-SPAN - President Trump delivered remarks at the beginning of the NATO Summit in Brussels at the unveiling of a Berlin Wall and September 11, 2001, Memorial in the new headquarters. In his speech, he called out the 23 of the 28 nations he stated were still not paying their fair share and meeting their financial obligations to the alliance. German Chancellor Angela Merkel and NATO Secretary-General Jens Stoltenberg also made remarks at the ceremony.

Trump has done what Obama didn’t: Scare NATO into closer tracking of defense spending - President Donald Trump sent shock waves across Europe when he railed against the NATO alliance during his campaign and threatened not to defend those nations that hadn’t paid their share of defense expenses. He wasn’t the first to raise concerns: President Barack Obama had frequently lamented NATO members’ failure to spend enough on defense. But it was Trump’s undiplomatic rhetoric that got the issue to the top of the group’s agenda this week, when NATO’s members are expected to accept the idea of public report cards to make sure everyone’s meeting the requirements of the alliance. Obama complained three years ago at a gathering of European Union leaders that defense couldn’t be left just to the United States and Great Britain. Citing Russia’s annexation of Ukraine’s Crimea region, Obama said the situation “reminds us that our freedom isn’t free.” Six years ago, then-Defense Secretary Robert Gates went further, warning NATO leaders that younger U.S. politicians – “those for whom the Cold War was not the formative experience that it was for me” – might abandon the six-decade-old defense alliance if allies didn’t carry a greater portion of the load.

Trump Slams "Very Bad" Germans For Selling Millions Of Cars In US: "We Will Stop This" -- A day after Trump stunned his fellow NATO leaders, shoving one of them out of the way for a photo-op and demanding that they "must do more" to offset defense costs which are mostly borne by the US, Trump lobbed another bomb at the European center-right consensus by renewing his attacks on the German auto industry during a closed door meeting with two high-ranking European Union officials, according to a report in German magazine Der Spiegel, that was picked up by Bloomberg and CNBC. Citing unidentified attendees, Spiegel quoted Trump as saying that “the Germans are bad, very bad” and adding “look at the millions of cars that they sell in the U.S. Terrible. We’re going to stop that.” The comments were said to have been made during a closed-door meeting with the EU President Jean-Claude Juncker and the European Council President Donald Tusk, who reportedly both stood up for Germany, according to CNBC. Trump administration officials immediately went into damage-control mode, even as Juncker said the reports of the comment in question had been exaggerated. National Economic Council Director and former Goldman Sachs President Gary Cohn clarified that the US has concerns with the US-German trade balance, not with Germany itself. "He said they’re very bad on trade, but he doesn’t have a problem with Germany.He said his dad is from Germany. He said, ‘I don’t have a problem Germany, I have a problem with German trade'," according to Bloomberg.The German trade surplus rose to a record 235 billion euros ($284 billion) last year, while the US trade deficit widened in January to its highest level since March 2012, Bloomberg reported.  Excluding the EU, Germany is the third largest exporter in the world, after China and the US. Shares of German automakers were down slightly in Frankfurt trading following Trump’s comments, which apparently reminded investors of his January threat to slap BMW AG with a 35% tariff.

‘You tiny little man’: watch Trump’s bizarre body-language battles in Brussels -- Diplomacy can be a white-knuckle ride at times, and that is never truer than when Donald Trump is involved. In a series of strange incidents in Brussels, Trump engaged in a hand-crunching standoff with French President Emmanuel Macron, shoved aside the Prime Minister of Montenegro in his enthusiasm to put himself front and centre for a photo opportunity, and then resumed his arm-wrenching duel with Macron.By that stage, the situation was drawing open laughter from the likes of German Chancellor Angela Merkel and Nato chief Jens Stoltenberg. The body-language battles began when French President Macron refused to be shaken when he found himself in a handshake battle with Trump Thursday.Former reality TV star Trump is known to make visitors flinch with a strong handshake that he often combines with a wrench of the arm to leave his victim off balance. Victims have included the likes of Japanese Prime Minister Shinzo Abe, whose eye-rolling reaction to Trump’s excruciating 19-second death grip went viral in February.But Macron, France’s 39-year-old political wunderkind, appeared to be ready for him when they met for lunch at the US embassy in Brussels ahead of a NATO summit. As the world cameras watched, Macron held on tight to Trump’s notorious power grip as the two men sat next to each other, the Frenchman’s mouth clenched and eyes firmly fixed at the tycoon’s squinted stare. Macron eventually appeared to get the better of Trump, even squishing the US President’s fingers straight as he appeared to refuse to let Trump withdraw his hand. Their knuckles appeared to turn white with their jaws clenching and faces tightening. The moment - finally, and to the relief of all - broke off, and the men left the scene to enjoy a quick meal of veal fillet with Belgian chocolate mousse for dessert. But the two presidents were not finished.Later at Nato headquarters Macron was the last to turn up for the opening of the alliance’s new headquarters and found himself again shaking hands.Cue laughs from leaders including German Chancellor Angela Merkel and NATO chief Jens Stoltenberg as Macron found his arm wrenched about by a smiling Trump. Thursday’s family portrait at NATO was also notable for Trump pushing aside the prime minister of Montenegro, Dusko Markovic, in order to get in the front row.Among Trump’s critics was British author J.K. Rowling - the creator of Harry Potter. “You tiny, tiny, tiny little man,” she tweeted, providing a GIF of the strange incident.  Trump then stood near Markovic and spoke to Lithuanian President Dalia Grybauskaite. Video of the incident spread on social networks in multiple languages.

May to confront Trump on Manchester bomb intel leaks -  British security officials investigating the Manchester terror attack are considering withholding sensitive information from Washington after a series of damaging leaks they fear are endangering British lives.   In a sign of the extent of UK concern, Theresa May will raise the issue of US leaks when she meets Donald Trump at a Nato summit in Brussels on Thursday. The growing controversy over the secrecy of investigators’ work is threatening to sour relations with the UK’s closest ally as British authorities fearing a potential second terror attack race to gather intelligence on the Manchester bomber.  On Wednesday evening, the rift widened after the New York Times published detailed photographs taken from the Manchester bomb scene by British forensic investigators.

Trump Responds To UK Accusations Of Suicide Bombing Leaks --  Overnight saw one of the closest intelligence-sharing partnerships tested as never before in the fight against global terrorism, as Prime Minister Theresa May confronted President Donald Trump over U.S. media leaks from the Manchester bombing probe. As Bloomberg reports, police investigating the suicide bombing that killed 22 people at a pop concert in the city in northern England have suspended sharing information with the U.S., according to a report by the security correspondent of the BBC. "I will make clear to President Trump that the information shared between our law-enforcement agencies must remain secure," May told reporters. U.K. police said late Wednesday that leaks to American media amounted to a breach of trust and undermined their investigation into the attack, stepping up criticism earlier from Home Secretary Amber Rudd.The BBC reported that U.K. officials were furious about a story in the New York Times on Wednesday that included photos of the crime scene. The story didn’t cite a source, and neither the U.K. government nor police commented on the piece.  A senior White House official said that the leaks only underscored the president’s assertion that U.S. authorities should investigate the intelligence community to see who is doing the leaking. The source pointed out that the BBC report specified that the U.S. law officials were the source of the leaks -- not the White House.   Trump was also clearly angered also and made a statement this morning regarding the leaks..The alleged leaks coming out of government agencies are deeply troubling.These leaks have been going on for a long time and my Administration will get to the bottom of this. The leaks of sensitive information pose a grave threat to our national security.I am asking the Department of Justice and other relevant agencies to launch a complete review of this matter, and if appropriate, the culprit should be prosecuted to the fullest extent of the law.

Flurry of leaks alarms US allies | TheHill: Current and former senior American officials are growing concerned that a deluge of leaks from the U.S. government will imperil some of the nation’s most important intelligence-sharing relationships. The exposure of sensitive forensic information from the U.K.’s investigation into the Manchester bombing is unprecedented, some national security experts say — and Britain is right to be furious. “They need to find out how this type of information got out. I think it does damage to our capability of sharing intelligence on issues that we have to share intelligence on,” former Secretary of State Madeleine Albright told The Hill.Prime Minister Theresa May raised the issue at the NATO gathering in Brussels on Thursday evening, vowing beforehand that she would “make clear to President Trump that intelligence that is shared between our law enforcement agencies must remain secure.” But the outrage over the Manchester investigation disclosures is only part of a growing international distrust with the U.S.'s ability to safeguard the secrets of its allies, intelligence experts say. The Manchester incident comes after Trump apparently exposed highly classified information that came from Israel to two senior Russian officials during a meeting at the White House — without permission from Israel. And Trump’s fledgling administration has been plagued by a string of press leaks — though most of them have been related to the president’s conduct, not national security secrets. “I have yet to see the smoking gun that definitively connects [both of the two major Manchester leaks] to the United States government,” said Phillip Lohaus, a former Defense Department analyst who now specializes in U.S. and foreign intelligence at the conservative think tank AEI. But, he said, “leaks have been such a problem for this administration, people are willing to make that assumption.” 

Trump advisers weigh privatizing some public assets to build new infrastructure - The Trump administration, determined to overhaul and modernize the nation’s infrastructure, is drafting plans to privatize some public assets such as airports, bridges, highway rest stops and other facilities, according to top officials and advisers.In his proposed budget released Tuesday, President Trump called for spending $200 billion over 10 years to “incentivize” private, state and local spending on infrastructure.Trump advisers said that to entice state and local governments to sell some of their assets, the administration is considering paying them a bonus. The proceeds of the sales would then go to other infrastructure projects.  Chicago Mayor Rahm Emanuel (D) explored privatizing Midway International Airport several years ago but dropped the idea in 2013, after a key bidder backed away. Transportation Secretary Elaine Chao says such projects should be encouraged.  “You take the proceeds from the airport, from the sale of a government asset, and put it into financing infrastructure,” Chao said. St. Louis is working with federal officials to try to privatize Lambert International Airport, she said.Officials are crafting Trump’s initiative, and he has yet to decide which ideas will make the final cut. But two driving themes are clear: Government practices are stalling the nation’s progress; and private companies should fund, build and run more of the basic infrastructure of American life.A far-reaching proposal from the Trump administration earlier this year to take the nation’s air-traffic control system out of government hands was fueled, in part, by frustration at sluggish efforts to modernize technology.To speed up infrastructure projects, officials are preparing to overhaul the federal environmental review and permitting system, which t hey blame for costly delays. Trump asked advisers whether they could collapse that process, which he said takes at least 10 years, down to four months. “But we’ll be satisfied with a year,” Trump said. “It won’t be more than a year.”

Warren Demands Trump Aide Gary Cohn Recusal From White House Proposal That Could Benefit Goldman Sachs - Sen. Elizabeth Warren on Friday demanded that President Donald Trump’s top economic adviser recuse himself from working on the White House’s infrastructure privatization initiative because the initiative could enrich his former Wall Street employer.  Warren’s criticism of the privatization initiative was echoed by Maryland Sen. Chris Van Hollen and Ohio Sen. Sherrod Brown. The Democrats' comments followed an International Business Times report showing how Trump’s aide, former Goldman Sachs president Gary Cohn, is spearheading a White House plan to privatize the kind of public assets that Goldman Sachs says it aims to buy up. “Big banks like Goldman Sachs are salivating at the prospect of privatizing America’s roads and bridges and taking a big cut for themselves,” Warren said in a statement to IBT.  “Gary Cohn must recuse himself – he promised to recuse himself from any matter directly related to Goldman, and it’s clear that this issue could be worth a fortune to Goldman.” The White House did not respond to IBT’s questions for this story or the earlier reporting on the potential conflicts of interest. Goldman Sachs did not respond to IBT's request for comment.

Pass-Through Corporations (Which Don't Pay Corporate Income Tax) When most people think of corporations and corporate taxes, they think of a company with shareholders, and buying and selling stock. But that's only one form of corporation, called a C-corporation in tax law. There are also corporations that don't issue shares of stock to the public. This category includes sole proprietorships, partnerships, and what are called S-corporations. These are "pass-through" corporations, in which the income earned by the corporation goes straight to the owners, and thus is taxed under the personal income tax rather than the corporate income tax. The pass-through sector of the economy is growing, as  Aaron Krupkin and Adam Looney review the evidence in "9 facts about pass-through businesses" (Brookings). As they explain, "Of the 26 million businesses in 2014, 95 percent were pass-throughs, while only 5 percent were C-corporations." But most businesses are very small: for example, 41% of those 26 million businesses were sole proprietorships. Moreover, 99% of all companies and 95% of C-corporations had receipts of less than $10 million.  The share of total business income in C-corporations is falling, and share in partnerships and S-corporations is rising, to the point where pass-through corporations now receive more than half of all business income. The tax rules are different in a variety of ways across these corporate forms. For example, if you receive a payment from a company for your labor, you owe Social Security and Medicare payroll taxes on that amount, but if you receive a share of profits, then then you don't owe those payroll taxes. The decision about what is a payment for labor and what is a share of profits contains a large element of discretion.  Thus, substantial time and energy goes into finagling the legal structure of the corporation, in part to take advantage of tax differences.For example, the shares of C-corporations are "closely held" by a small number of investors, which can make them similar in some ways to S-corporations.  Conversely, it is increasingly common for large firms to organize themselves as partnerships and S-corporations: indeed, there are now even hybrid forms like partnerships which issue stock that is publicly traded.

This congressional accounting trick is part of the reason Washington is so divided : One of the major unanswered questions regarding President Trump's tax-reform proposal is: How much will it cost? In theory the government has a way to answer that, but surprisingly there's no standard methodology and politicians can tweak the results to suit their agendas. It's called dynamic scoring. It's the practice of projecting the financial effects that a policy will have on the budget while taking into account different factors such as business and consumer behavior. Dynamic scoring can be used for relatively simple calculations, such as how raising the sales tax on a particular item will affect its sales. But it gets more complex when trying to project the cost of, say, cutting federal taxes. On its face, cutting federal taxes leaves the government with less money in its pockets. But it's possible that if US businesses keep that money thanks to a lower tax burden, more Americans may end up with jobs. And if more Americans have jobs, the government's tax base grows, potentially making up for the lost revenue from the tax cut. Dynamic scoring is the practice of projecting out those events and factoring them into budget analysis, aka budget scoring. The Congressional Budget Office began using dynamic scoring in 2015 to project cost estimates for things like the president's budget or the annual long-term budget outlook. But some people think establishing a standard methodology is crucial for dynamic scoring to work. "If 'dynamic scoring' means that Congress can use any macroeconomic model it wants, then we are thrown back 100 or 150 years in terms of the rigor of our thinking," writes Simon Johnson in a post for the Tax Policy Center. Johnson formerly served on the CBO's panel of economic analysis but was not involved in budget scoring. Having no standard methodology for this type of budget scoring also means that think tanks and other partisan groups can tinker with their projections until they are left with an outcome they want. 

Exclusive: McConnell frets about healthcare, hopeful on tax overhaul | Reuters: U.S. Senate Majority Leader Mitch McConnell said on Wednesday he does not yet know how Republicans will amass the votes needed to pass legislation now being crafted to dismantle Obamacare, but expressed some optimism on another top priority, overhauling the tax code. In an exclusive interview with Reuters, McConnell said healthcare and taxes still top the Republican legislative agenda, and he added that he will not reach out to the minority Democrats on either one because differences between the two parties are too stark. McConnell also said he has not asked the White House for input as the Senate devises its own healthcare legislation after the Republican-led House of Representatives passed its version on May 4, but may do so in the future. Excluding Democratic involvement will leave McConnell, a conservative 75-year-old Kentuckian with a reputation as a dealmaker, a narrow path to win passage of these ambitious goals, which are also at the head of Republican President Donald Trump's policy agenda. A repeal of Obamacare was one of Trump's leading campaign promises last year. Asked about behind-the-scenes work among Senate Republicans on hammering out the provisions of a healthcare bill, McConnell said, "I don't know how we get to 50 (votes) at the moment. But that's the goal. And exactly what the composition of that (bill) is I'm not going to speculate about because it serves no purpose," McConnell said.Republicans hold a 52-48 Senate majority. In the event of a 50-50 tie, Republican Vice President Mike Pence would be called upon to cast a tie-breaking vote. 

Boehner Bashes Trump: "Everything He's Done Is A Complete Disaster" --Trump's massive tax reform plan is "just a bunch of happy talk" exclaimed former Speaker of the House John Boehner during a keynote address at an energy conference today adding that "everything else he’s done (in office) has been a complete disaster."As The Hill reports, Boehner gave a keynote address at KPMG’s annual Global Energy Conference, where he said his faith in the passage of a tax code overhaul is fading.“I was a little more optimistic about it early in the year; now my odds are 60/40,” the Ohio Republican said, according to energy-sector news publication RigZone.“The border adjustment tax is deader than a doornail. Tax reform is just a bunch of happy talk.”“Everything else he’s done (in office) has been a complete disaster,” the Ohio Republican said, according to the publication.“He’s still learning how to be president.”Additionally, Boehner said that while Republicans would fix some problems of Obama’s law, repeal and replacement is “not going to happen.”He added, “Republicans never ever agree on health care.” Boehner said he’s been friends with Trump for 15 years, but still has a hard time envisioning him as president. He also said Trump shouldn’t be allowed to Tweet overnight.

Don’t send me back to a high-risk pool, Obamacare enrollees say -- After she was diagnosed with ovarian cancer in 2006, Nancy Jackson had to pay thousands of dollars for her treatment. Her insurer wouldn't cover the $5,000 scan that discovered her tumor. Her premiums were as high as $850 a month, plus there was no cap on what she'd have to pay out of pocket.  Now covered under Obamacare, she pays $550 a month for a plan that covers much more, including preventative screenings.  The Republicans' efforts to repeal and replace Obamacare has left Jackson worried that her big medical bills will return.  "As someone with a pre-existing condition, I'll be charged twice as much as I am now or I'll be thrown in this high-risk pool," she said of the GOP plan.  High-risk pools are playing a central role in the Republican health care strategy. The House GOP plan would likely lower premiums for healthy people, but could leave many folks with pre-existing conditions on the hook for higher premiums and out-of-pocket costs.  nancy jackson high risk pools new The bill would weaken Obamacare's protections for those with pre-existing conditions, giving states the power to decide whether to let insurers charge higher premiums to sick consumers who let their coverage lapse and to offer less comprehensive coverage. Paired with this provision would be a so-called State Stability Fund, which would provide $138 billion through 2026 to help states and insurers deal with high-cost patients. States can use part of the funding to create high-risk pools, which would provide coverage for those with expensive conditions, such as cancer, diabetes and heart failure.  High-risk pools have a very mixed track record, experts say. Some 35 states ran these pools prior to Obamacare. A few states successfully insured their sick residents through these pools, but most programs charged higher premiums, had caps on how much they would cover and limited their enrollment.

Taking the Nuclear Option Off the Table -- Last Thursday, fifteen states and the District of Columbia moved to intervene in House v. Price, the case about the ACA’s cost-sharing reductions. At the same time, they asked the court to hear the case promptly. This is a bigger deal than it may seem, and could offer some comfort to insurers that are in desperate need of it. Apologies for the long post, but the law here is complex and uncertain. When the House of Representatives sued the Obama administration a few years back, it argued that Congress never appropriated the money to make cost-sharing payments. The district court sided with the House and entered an injunction prohibiting the payments. The court, however, puts its injunction on hold to allow for an appeal.  The Trump administration has now inherited the lawsuit, and the health-care industry is waiting on tenterhooks to see what it will do. For now, the case has been put on hold. But if Trump drops the appeal, which he has threatened to do, the injunction would spring into effect and the cost-sharing payments would cease immediately, destabilizing insurance markets across the country. It’s the nuclear option.If the states are allowed to intervene, however, they could pursue the appeal even if Trump decides to drop it. With the appeal in place, the injunction couldn’t take effect until the case is heard and decided.What’s more, the states are very likely to prevail. Not on the merits: as I’ve written before, the House is right that there’s no appropriation to make the cost-sharing payments. But the D.C. Circuit is likely to be skeptical of the district court’s conclusion that the House of Representatives has standing to sue. That’s why the states want to court to decide the case quickly: they hope to get rid of the lawsuit once and for all.Allowing the states to intervene would not eliminate uncertainty. The D.C. Circuit could always surprise us and affirm the district court’s decision. Premiums for 2018 would still have to rise in response to the risk that payments might stop sometime next year. And even if the House loses, the Trump administration might be tempted to stop making the payments anyhow—although it’s not clear that it has the legal authority to do so without going through the cumbersome process of withdrawing an Obama-era rule. Still, insurers could breathe a bit easier. If the states are allowed to intervene, Trump couldn’t blow up the individual markets in a fit of pique.

Republicans fearing for their safety as anger, threats mount | TheHill: A growing number of House Republicans are facing physical threats from angry constituents in their districts, leading many to fear for their safety. In the last few weeks alone, the FBI arrested a man threatening Rep. Martha McSally's (R-Ariz.) life, a woman pursued Rep. David Kustoff (R-Tenn.) in her car, and Rep. Tom Garrett (R-Va.) heightened security at a town hall event in response to death threats. Other Republicans still holding town halls say they haven't felt physically threatened by protesters, but they worry about the depth of anger from some constituents in the polarized environment and what it means for political civility.Scores of GOP lawmakers have experienced going viral this year with videos of constituents shouting their disagreement on support for President Trump and policies such as the GOP’s healthcare bill. Lately, though, Republicans have observed some furious constituents who appear to be going even further. Rep. Dave Brat (R-Va.) described attendees at a town hall in his district last week who booed him down after he said people’s rights are God-given. “They booed God. They booed the pastor. They booed the prayer. They booed the name of the church. They booed when I said rights come from God,” Brat recounted to The Hill just off the House floor. “That’s a fundamental tenet of western civilization. I mean, I didn’t think that was partisan.” 

Trump Saves Obamacare Again... For Now -- The Trump administration and the House have officially asked for another 90 days to work out a lawsuit over subsidies that help poorer people afford to use their Obamacare insurance plans, further delaying a long-running legal fight that’s already destabilizing the health law.   As Axios notes, the key point is - "The parties continue to discuss measures that would obviate the need for judicial determination of this appeal, including potential legislative action." Full motion below...    Bloomberg continues... Without the payments, insurers have threatened to drop out of Obamacare or substantially raise premiums, and customers could face thousands of dollars in unexpected costs. The Trump administration could still choose to drop the appeal, though other parties are attempting to take up defense of the payments.State officials, the health industry and Democrats in Congress have pushed for the payments to continue, saying that ending them would upend the insurance market and cost millions of people their health insurance.“We need swift action and long-term certainty on this critical program,” Cathryn Donaldson, a spokeswoman for America’s Health Insurance Plans, said in an email. “It is the single most destabilizing factor in the individual market, and millions of Americans could soon feel the impact of fewer choices, higher costs, and reduced access to care.”

Where Both the ACA and AHCA Fall Short, and What the Health Insurance Market Really Needs -- The question of whether the United States will have functioning markets where individuals can buy health care insurance lies at the heart of the current debate about repealing and replacing the Affordable Care Act (ACA). Since about 20 million Americans depend on these markets for insurance — and thus access to health care — their functioning is also essential to the future of the U.S. health care system. To understand the ongoing battles about the individual, or non-group, markets and their reform, three points should be kept in mind. First, these insurance markets were distressed before the enactment of the Affordable Care Act. Second, the ACA improved their functioning but was not sufficient as passed and implemented to stabilize all of them. Neither, however, is the American Health Care Act (AHCA), the repeal and replacement legislation proposed by House Republicans and embraced by President Trump. Third, the reforms that will improve individual markets, which we discuss below, are known. They include greater balance between premium subsidies and penalties for not taking up coverage, using proven mechanisms for stabilizing risks such as reinsurance, and accelerating efforts to control the costs of health care services. To date, the United States has just lacked the political will to adopt them.

It’s Time to Worry about Health Care in the Senate -  While the rest of the country has been transfixed by Trumpian chaos, members of the Senate have spent the last two weeks talking about taking health insurance from millions of Americans.There is an alarmingly large chance that they’ll decide to do so. But if they do, they will almost certainly rely on a political sleight of hand to disguise their bill’s damage. Understanding that sleight of hand — and calling attention to it — offers the best hope for defeating the bill.The effort to take health insurance from the middle class and poor and funnel the savings into tax cuts for the rich is a little like mold. It grows best in the dark.That’s why Republican leaders in the House handled their bill as they did. They did not hold a single hearing, because they knew that attention would have been devastating.  Just imagine a hearing featuring the leaders of these groups, every one of which opposes the House bill: the American Medical Association, American Nurses Association, American Hospital Association, American Academy of Pediatrics, American Cancer Society, American Heart Association, American Diabetes Association, American Lung Association, March of Dimes and AARP.The House also passed its final bill without waiting for the Congressional Budget Office to estimate how many Americans would lose insurance. The C.B.O. will release that analysis tomorrow afternoon. There is no precedent, outside of wartime, for passing a bill this important in such haste.After the House did, many observers assumed the bill was too flawed to have much chance in the Senate. Republican senators, aware of the bill’s unpopularity, were careful to say publicly that they would start fresh. But the early signs suggest that Mitch McConnell and his Republican caucus are actually mimicking the House approach. It starts with avoiding public discussion. As Politico reported: “McConnell’s strategy is to keep the debate within his conference for as long as possible. There will be no public hearings as a bill is drafted, according to several Republican senators and aides, and he’s imploring senators not to leak.”

McConnell: 'I don't know how we get to 50' votes on ObamaCare repeal | TheHill: Senate Majority Leader Mitch McConnell(R-Ky.) says he doesn't know how Senate Republicans are going to get enough votes to pass an ObamaCare replacement bill. "I don't know how we get to 50 [votes] at the moment. But that's the goal,” McConnell told Reuters in an interview Wednesday. Senate Republicans have been meeting multiple times a week for most of this month to try to find a path forward on healthcare after the House passed the American Health Care Act three weeks ago.But McConnell opened the interview by saying “There's not a whole lot of news to be made on healthcare." The majority leader expressed more optimism about tax reform, calling chances for passage “pretty good” and saying it is “not in my view quite as challenging as healthcare." Senate Republicans say they are going to vote on an ObamaCare replacement bill at some point, but it might not pass. No Democrats are expected to vote to repeal former President Obama's signature healthcare insurance law. Republicans have a 52-vote majority in the Senate, so they can only lose two GOP votes and still have the 50 votes needed to pass a bill. Senate Republicans, though, are facing divisions on a range of issues, perhaps most prominently how deeply to cut Medicaid and how to unwind ObamaCare’s expansion of the program. 

Dumb Things Politicians Say About Health Care Policy -- There have been multiple legislative attempts at major health care reform in the US.  Typically, such attempts feature considerable public debate, including speeches, congressional committee hearings, sometimes progressing to debates by the House and Senate.  However, the proceedings up to the passage of the American Health Care Act seemed somewhat different.  There were no public committee hearings or debates.  Per a Los Angeles Times article in April, 2017 (via the Chicago Tribune): senior House Republicans and White House officials have almost completely shut out doctors, hospitals, patient advocates and others who work in the healthcare system, industry officials say, despite pleas from many healthcare leaders to seek an alternative path that doesn’t threaten protections for tens of millions of Americans. ‘To think you are going to revamp the entire American healthcare system without involving any of the people who actually deliver healthcare is insanity,’ said Sister Carol Keehan, president of the Catholic Health Assn., whose members include many of the nation’s largest medical systems. While the experts have been shut out, some of its supporters of the AHCA in the US House of Representatives have been free with their explanations of their actions.  Some have been rather alternative, so to speak.   Some recent examples, in chronologic order,

  • Rep Roger Marshall (R-Kansas): the Poor “Just Don’t Want Health Care” As reported by the Washington Post, March 9, 2017 ‘Just like Jesus said, ‘The poor will always be with us,’ ‘ Marshall said in response to a question about Medicaid, which expanded under Obamacare to more than 30 states. ‘There is a group of people that just don’t want health care and aren’t going to take care of themselves.’ He added that ‘morally, spiritually, socially,’ the poor, including the homeless, ‘just don’t want health care.’  The implication appears to be that Marshal is treating and promoting an ideological or religious opinion as if it were derived from epidemiology.
  • House Speaker Paul Ryan (R-Wisconsin) The Problem with “Obamacare” is “the People Who Are Healthy Pay for the People Who Are Sick.” As reported by MSNBC, March 9, 2017   ‘The fatal conceit of Obamacare is that we’re just gonna make everybody buy our health insurance at the federal-government level, young and healthy people are going to go into the market and pay for the older, sicker people. So, the young healthy person is going to be made to buy health care, and they’re going to pay for the person, you know, gets breast cancer in her 40s or who gets heart disease in his 50s. […]’ ‘The whole idea of Obamacare is … the people who are healthy pay for the people who are sick. It’s not working, and that’s why it’s in a death spiral.’ As MSNBC reported, the problem is with that is that Ryan doesn’t seem to understand what “insurance” means. The whole idea of health insurance is to establish a system in which the people who are healthy pay for the people who are sick.

H.R. 1628, American Health Care Act of 2017 – CBO - CBO and the staff of the Joint Committee on Taxation (JCT) have completed an estimate of the direct spending and revenue effects of H.R. 1628, the American Health Care Act of 2017, as passed by the House of Representatives. CBO and JCT estimate that enacting that version of H.R. 1628 would reduce the cumulative federal deficit over the 2017-2026 period by $119 billion. That amount is $32 billion less than the estimated net savings for the version of H.R. 1628 that was posted on the website of the House Committee on Rules on March 22, 2017, incorporating manager’s amendments 4, 5, 24, and 25. (CBO issued a cost estimate for that earlier version of the legislation on March 23, 2017.)  The largest savings would come from reductions in outlays for Medicaid and from the replacement of the Affordable Care Act’s (ACA’s) subsidies for nongroup health insurance with new tax credits for nongroup health insurance (see figure below). Those savings would be partially offset by other changes in coverage provisions—spending for a new Patient and State Stability Fund, designed to reduce premiums, and a reduction in revenues from repealing penalties on employers who do not offer insurance and on people who do not purchase insurance. The largest increases in the deficit would come from repealing or modifying tax provisions in the ACA that are not directly related to health insurance coverage—such as repealing a surtax on net investment income, repealing annual fees imposed on health insurers, and reducing the income threshold for determining the tax deduction for medical expenses. CBO and JCT estimate that, in 2018, 14 million more people would be uninsured under H.R. 1628 than under current law. The increase in the number of uninsured people relative to the number projected under current law would reach 19 million in 2020 and 23 million in 2026. In 2026, an estimated 51 million people under age 65 would be uninsured, compared with 28 million who would lack insurance that year under current law. Under the legislation, a few million of those people would use tax credits to purchase policies that would not cover major medical risks.

CBO Projects Obamacare Repeal Will Cut Deficit By $119 Billion, Leave 23MM Fewer People With Insurance --The CBO has finally scored the House-passed healthcare bill, H.R.1628 (which as a reminder remains DOA in the Senate), and finds modest improvement relative to its last scoring of the proposed Healthcare bill as of March 23. Here are the apples to apples comparisons with the last proposed version of the bill:

  • Under the House-passed Bill, the US budget deficit would be reduced by $119 billion between 2017 and 2026. This is $31 billion less than the proposed March bill, which would have lowered the deficit by $150 billion.
  • Offsetting the smaller benefit on the deficit, the CBO found that the number of Americans expected to lose their health coverage would rise to 23 million in 2026, which is 1 million fewer than the 24 million forecast in March, or roughly $31 billion in spending over 10 years to provide 1 million Americans with insurance over the same time period.
  • The CBO concludes that in 2026, an estimated 51 million people under age 65 would be uninsured, compared with 28 million who would lack insurance that year under current law. Under the last CBO estimate, the number of Americans wihtout insurance in 2026 was 52 million of Americans under 65, so an improvement of 1 million as expected.

Below is the "bridge" of the budget deficit reduction from the CBO:   The key details from the official score:

  • CBO and JCT estimate that, over the 2017-2026 period, enacting H.R. 1628 would reduce direct spending by $1,111 billion and reduce revenues by $992 billion, for a net reduction of $119 billion in the deficit over that period (see Table 1, at the end of this document). The provisions dealing with health insurance coverage would reduce the deficit, on net, by $783 billion; the noncoverage provisions would increase the deficit by $664 billion, mostly by reducing revenues.
  • CBO and JCT estimate that, in 2018, 14 million more people would be uninsured under H.R. 1628 than under current law. The increase in the number of uninsured people relative to the number projected under current law would reach 19 million in 2020 and 23 million in 2026.
  • In 2026, an estimated 51 million people under age 65 would be uninsured, compared with 28 million who would lack insurance that year under current law. Under the legislation, a few million of those people would use tax credits to purchase policies that would not cover major medical risks.

GOP Obamacare Repeal Effort Hits Latest Obstacle With CBO Score -- Changes Republicans made to their health bill to help pass it through the House would undermine insurance markets and result in millions more people without insurance, the Congressional Budget Office said, an assessment that will likely complicate the GOP’s effort to repeal Obamacare. The CBO, which acts as Congress’s actuarial arm, said Wednesday that the legislation would increase the number of uninsured by 23 million. The changes also mean that in some states, older or sicker people might not be able to afford health insurance plans. And women might be forced to pay $1,000 a month to buy coverage for maternity care. The GOP bill, formally known as the American Health Care Act, passed the House earlier this month without a score from the CBO. The agency’s harsh assessment is likely to dampen the bill’s already grim prospects in the Senate, where GOP lawmakers possess only a slim majority. “It’s informative to know the estimated impact of the House health-care bill -- but the Senate is writing its own,” said Senator Lamar Alexander, a Tennessee Republican.   Republicans in the House made several last-minute amendments to their bill to win over conservatives. The changes would allow states to apply for waivers to Obamacare’s rules on what benefits must be covered by plans, and how much insurers can charge based on people’s age.While those changes helped gain votes, the CBO said the alterations would undermine protections for the sick and destabilize insurance markets for about a sixth of the U.S. population. The changes could also lead to healthy people buying cheaper policies and sicker people being shunted into more expensive plans or unable to afford coverage, according to the report.

Coverage Implications of the Revised AHCA - Menzie Chinn  --From today’s CBO score of the AHCA, bottom line, 14 million more uninsured next year, and 23 million more by 2026. CBO and JCT broadly define private health insurance coverage as consisting of a comprehensive major medical policy that, at a minimum, covers high-cost medical events and various services, including those provided by physicians and hospitals. The agencies ground their coverage estimates on that widely accepted definition, which encompasses most private health insurance plans currently offered in the group and nongroup markets. The definition excludes policies with limited insurance benefits (known as mini-med plans); “dread disease” policies that cover only specific diseases; supplemental plans that pay for medical expenses that another policy does not cover; fixed-dollar indemnity plans that pay a certain amount per day for illness or hospitalization; and single-service plans, such as dental-only or vision-only policies. In this estimate, people who have only such policies are described as uninsured because they do not have financial protection from major medical risks. CBO and JCT estimate that, in 2018, 14 million more people would be uninsured under H.R. 1628 than under current law. The increase in the number of uninsured people relative to the number projected under current law would reach 19 million in 2020 and 23 million in 2026. In 2026, an estimated 51 million people under age 65 would be uninsured, compared with 28 million who would lack insurance that year under current law. Under the legislation, a few million of those people would use tax credits to purchase policies that would not cover major medical risks.  Here are a couple of salient graphs, on (1) impact on coverage, and (2) Medicaid coverage.And about pre-existing conditions coverage? …over time, less healthy individuals (including those with preexisting or newly acquired medical conditions) would be unable to purchase comprehensive coverage with premiums close to those under current law and might not be able to purchase coverage at all.  I see there are pre-emptive attacks on the CBO’s assessment from the usual suspects; see this post for a discussion. For a discussion of CBO’s macroforecasting record (as compared to say the Administration or Blue Chip), see this post.

Trumpcare Is Russian Roulette for People with Pre-Existing Conditions - In their desperation to salvage the American Health Care Act, House Republicans adopted a provision that would allow states to waive Affordable Care Act rules prohibiting insurers from price-gouging sick people and selling plans that don’t cover basic benefits like hospitalization, doctor’s visits, and maternity care.By addressing the objections of its most conservative members, they solved a political problem within the House GOP conference but created a new political problem with the broader public, which overwhelmingly believes insurance companies shouldn’t be allowed to discriminate against people with pre-existing conditions.House Republicans have tried to address this political problem, in turn, by lying about it outright. “People will be better off, with pre-existing conditions, under our plan,” House Speaker Paul Ryan insisted last month. President Donald Trump said these protections would be “guaranteed.”  Republicans knew this was untrue when they passed the bill, and we know they knew it was untrue, because they hustled it to a floor vote before the nonpartisan Congressional Budget Office had a chance to publish an analysis of its impact on health insurance coverage.That impact analysis arrived on Wednesday. On a top-line level, it finds the effects of the updated AHCA would be broadly similar to the original draft of the legislation—14 million would lose their insurance right away and, relative to the Obamacare baseline, 23 million fewer people would be insured after 10 years. But now the CBO notes that many of those uninsured would be sick people driven out of the markets by price discrimination. Fully one-sixth of the population, CBO analysts conclude, live in states that would likely waive essential health benefits and pre-existing protection rules. In these states, they believe healthy people would voluntarily opt in to underwritten plans, which take into account a patient’s medical history, leaving the pooled-risk market filled with high-risk consumers, and thus unstable.

The Senate Can’t Pass Health Care Without This Man –  Bill Cassidy, the first-term Republican senator from Louisiana, thinks the House’s Obamacare repeal bill failed to consider the impact it will have on one crucial constituency: patients. A medical doctor whose political life was forged in the aftermath of Hurricane Katrina and during decades working in a charity hospital, Cassidy wants a more robust replacement for Obamacare, one that lives up to Donald Trump’s campaign promise to replace it with a law that covers more people at a lower cost. That might sound like wishful thinking, yet if Senate Republicans want to do anything on health care, they have no choice but to listen to Cassidy. Although he wasn’t included in the 13-member working group tasked with crafting a Senate bill, Cassidy has emerged as perhaps the most critical vote—the elusive Republican who can make or break Trump’s top legislative priority. With 52 seats in the Senate, the GOP can afford to lose just two of its own and still pass a bill without Democratic support. Given conservative insistence on defunding Planned Parenthood as part of the effort, Republicans could, for instance, lose the support of moderates Susan Collins of Maine and Lisa Murkowski of Alaska. That would set up a scenario where Cassidy becomes the decisive vote and Vice President Mike Pence casts a tiebreaking 51st vote, with Democrats powerless to filibuster under special budget reconciliation rules. Cassidy wants a bill that lowers premiums and expands coverage, and says the American Health Care Act passed by the House fails to deliver. The Congressional Budget Office estimates the House bill would lead to much higher premiums for poorer seniors; 23 million fewer people would have insurance by 2026. “If they come up with a solution that makes that person who’s struggling with premiums now struggle even more, I’m on her side,” Cassidy says. “And I will fight for her. And that’s where my loyalty lies.” 

Trump Loses In Court Again After Appeals Court Upholds Block Of Travel Ban -Trump may be traveling, but the bad news for the president never stops, and while we await tonight's daily "Russia collusion blockbusters" from the WaPo and the NYTimes, the president got some even more bad news after NBC reported that a Federal Appeals court has upheld the ban on Trump's travel plan.As NBC explains, a Richmond, VA-based federal appeals court on Thursday refused to reinstate President Trump’s ban on nationals from six majority-Muslim countries from entering the U.S., delivering a major blow to the Trump administration.BREAKING: 4th Circuit largely affirms nationwide injunction blocking Trump travel ban— Zoe Tillman (@ZoeTillman) May 25, 2017The Fourth Circuit Court of Appeals said in its ruling that Trump’s executive order "speaks with vague words of national security, but in context drips with religious intolerance, animus and discrimination" and noted that the President's power to deny entry to immigrants is "broad" but "not absolute."The ruling upholds a lower court's decision to halt core portions of the executive order indefinitely.The new ban was announced in March, but was never effected because federal courts blocked it just hours before it was set to go into effect. It would have banned people from Iran, Libya, Somalia, Sudan, Syria, and Yemen from entering the US for 90 days and all refugees for 120 days.

Trump Will Appeal Travel Ban To Supreme Court - Well, Trump did warn he would appeal the travel ban all the way to the Supreme Court if he had to, and that's precisely what he plans on doing.On Thursday afternoon, shortly after the 4th U.S. Circuit Court of Appeals, in a 10-3 vote that Trump's travel ban likely violates the constitution and ruled against the executive order,Attorney General Jeff Sessions said the Justice Department will ask the Supreme Court to review the appeals court ruling. The 4th Circuit (based in Richmond, Va) is the first appeals court to rule on the revised travel ban unveiled in March. A second appeals court, the 9th U.S. Circuit based in San Francisco, is also weighing the revised travel ban after a federal judge in Hawaii blocked it.The first travel ban issued Jan. 27 was aimed at seven countries and triggered chaos and protests across the country as travelers were stopped from boarding international flights and detained at airports for hours. Trump tweaked the order after the 9th U.S. Circuit Court of Appeals refused to reinstate the ban. Following the revision, Trump's administration had hoped it would avoid the legal problems that the first version from January encountered, but it was not meant to be.  The new version made it clear the 90-day ban covering those six countries doesn't apply to those who already have valid visas. It got rid of language that would give priority to religious minorities and removed Iraq from the list of banned countries. But critics said the changes don't erase the legal problems with the ban. As described previously, a core question in the case before the 4th Circuit was whether courts should consider Trump's public statements about wanting to bar Muslims from entering the country as evidence that the policy was primarily motivated by the religion. Trump's administration argued the court should not look beyond the text of the executive order, which doesn't mention religion. The countries were not chosen because they are predominantly Muslim but because they present terrorism risks, the administration said. But Chief Judge Roger L. Gregory wrote that the government's "asserted national security interest ... appears to be a post hoc, secondary justification for an executive action rooted in religious animus and intended to bar Muslims from this country." President Donald Trump's revised travel ban "speaks with vague words of national security, but in context drips with religious intolerance, animus and discrimination," the appeals court also said Thursday in ruling against the executive order.

Travel To US Has Tumbled 16% Since Trump Took Office, Foursquare Says –- Social-media company Foursquare has crunched the data generated by its 50 million active monthly users and determined that America’s share of the international tourism market has fallen sharply since October. According to data published on the company’s blog, visits by foreigners to the U.S.  started to decline in October, when they fell by 6% year-over-year. The decline has continued through March 2017, the latest month for which Foursquare has data, when visits declined by an astounding 16%. One quick point of clarification: These data don’t measure the absolute number of visitors to the U.S., but rather America’s “market share” – its popularity as a destination for travelers relative to the rest of the world. Official data published by the National Travel and Tourism Office also suggest that the number of foreign visitors to the U.S. declined last year from the record highs reached in 2015, but the NTTO has only supplied data through August. Foursquare categorized each traveler as either “business” or “leisure” depending on the types of locations they visited. By breaking down the totals for each subgroup, Foursquare found thatleisure travel has experienced the largest decline, having fallen nearly 20% in March on a year-over-year basis, while business travel during the same period was essentially flat.

DHS chief: If you knew what I knew about terror, you’d ‘never leave the house’ | TheHill: Homeland Security Secretary John Kelly on Friday said the terror threat is worse than most realize, saying some people would "never leave the house" if they knew the truth. “I was telling [Fox host] Steve [Doocy] on the way in here, if he knew what I knew about terrorism, he’d never leave the house in the morning,” Kelly said on “Fox & Friends.” He noted there were four major terror attacks in the last week — in England, Egypt, the Philippines and Indonesia — "by generally the same groups." “It’s everywhere. It’s constant. It’s nonstop. The good news for us in America is we have amazing people protecting us every day. But it can happen here almost anytime.” Masked gunmen opened fire on a group of Coptic Christians driving to a monastery in southern Egypt on Friday, killing 26 and injuring 25 more. Egyptian President Abdel Fattah al-Sisi reportedly called an emergency meeting after the attack in Minya Province. The Islamic State in Iraq and Syria claimed responsibility for a Monday bombing after an Ariana Grande concert in Manchester, England, that killed 22 and injured more than 100.

GOP talks of narrowing ‘blue-slip’ rule for judges | TheHill: GOP senators are talking about changing an obscure Senate tradition to make it more difficult for Democrats to block certain judges from advancing to a confirmation hearing. The change to the “blue-slip rule” would involve preventing individual senators from blocking nominees to circuit courts that have jurisdiction over several states. If the rule change were made, it would make it easier for President Trump to win confirmation for his circuit court picks. Trump currently has 20 vacancies on the lower courts of appeals to fill. GOP members on the Senate Judiciary Committee say this would leave the tradition in place for district court vacancies, meaning a single senator could still hold up a nomination to those courts. “I want to separate it,” said Sen. Jeff Flake (R-Ariz.). “Blue slips for district court judges has been time honored and I think needs to stay,” he said. “There is a question now does it apply to circuit court judges. That history is a little more mixed and I don’t think myself it ought to apply there.” Sen. John Cornyn (Texas), the No. 2 Republican in the Senate, seemed to agree. “I think there’s a difference between the blue-slip application at the district court level where the court is contained wholly within a state as opposed to a circuit court, which covers multiple states,” he said. “The idea that an individual senator could veto in effect a nominee at the circuit court level is really unprecedented and I think needs to be carefully looked at.” 

Joe Lieberman atop FBI would be a First Amendment disaster - Columbia Journalism Review - Former Senator Joe Lieberman is reportedly President Trump’s leading choice to replace the recently-fired James Comey as FBI director. If you’re a person who values free speech and press freedom rights, it’s hard to imagine a worse pick for FBI director than Lieberman.It was only a week ago we learned that Trump allegedly urged Comey in a private meeting to prosecute reporters for publishing classified information. So one of the most vital issues for any confirmation hearing will be whether the next FBI director will respect journalists’ right to report on the government. You don’t have to look far to understand how dangerous an FBI Director Lieberman would be to the journalism profession. In 2010, when WikiLeaks, in conjunction with The New York Times, The Guardian, and other papers, started publishing secret State Department cables, then-Senator Lieberman was Congress’s leading advocate for prosecuting the publishers of the cables—First Amendment be damned. At the time, he loudly called for the prosecution of WikiLeaks, saying, “I don’t understand why that hasn’t happened yet. … I think it’s the most serious violation of the Espionage Act in our history, and the consequences globally that have occurred.” As for The New York Times, he said they also should be investigated and suggested they should be prosecuted. “To me,” he said, “New York Times has committed at least an act of bad citizenship. And whether they’ve committed a crime, I think that bears very intensive inquiry by the Justice Department,” adding it’s “a serious legal question that has to be answered.” While Lieberman didn’t get his wish, he did use his power as a member of Congress to pressure Amazon to stop hosting WikiLeaks on its servers. After Amazon complied, Lieberman went on television and called for other US companies to do the same. Visa, Mastercard, and PayPal followed suit, financially censoring WikiLeaks despite no court proceeding or official government action of any kind against WikiLeaks.

Special Counsel Investigation of Trump Team Hits Headwinds -- Pam Martens -- Robert Mueller, the former FBI Director who has been appointed as Special Counsel to oversee the investigation of ties between the Trump campaign and Russia during the 2016 Presidential election may find out quickly that there is an obstacle course of roadblocks preventing him from doing his job. (Mueller served from September 4, 2001 to September 4, 2013 as FBI Director, under both Presidents George W. Bush and Obama. He is widely respected by both Congressional Democrats and Republicans in Washington.) On January 28, President Trump quietly and with little fanfare signed an Executive Order that bars an Executive Branch employee from participating “in any particular matter involving specific parties that is directly and substantially related to my former employer or former clients, including regulations and contracts.”  This concept is further defined in the Executive Order to mean “matters in which the appointee’s former employer or a former client is a party or represents a party.”  Since 2014, Mueller has worked for the sprawling international law firm, WilmerHale. With approximately 1,000 lawyers working in twelve major cities around the globe, its conflicts are infinite as well as specific. According to Reuters’ wire service on Friday, the Trump administration is already looking at this ethics rule “to undermine the special counsel investigation into ties between President Donald Trump’s campaign team and Russia, two people familiar with White House thinking said on Friday.” Finding conflicted client relationships at WilmerHale won’t be hard. Politico reported in March that a partner at WilmerHale, Jamie Gorelick, represents Trump’s daughter Ivanka and son-in-law Jared Kushner. According to the report, Gorelick also represented former Exxon CEO Rex Tillerson in the confirmation process to become Secretary of State under Trump. Adding to the intrigue, Gorelick had been active in Hillary Clinton’s 2016 campaign for President.

Trump or Congress can still block Robert Mueller. I know. I wrote the rules. WaPo -- Neal Katyal - President Trump is calling it a "witch hunt," lawmakers are applauding it and the Justice Department says it's in the "public interest," but what can the newly appointed special prosecutor really do? Here are four things to know. (Jenny Starrs/The Washington Post) Appointing special counsel Robert Mueller to probe Russian meddling in the 2016 election (and any possible ties to President Trump’s campaign) was the only choice the Justice Department had. This is the best way to deal with the conflicts and potential conflicts of interest these matters posed. In fact, the special-counsel regulations under which Mueller was appointed were written precisely to address a situation like this one. I would know; I wrote them, in 1999. Though our regulations were written nearly 20 years ago, they eerily anticipate the Russia investigation. Their very first lines refer to cases in which the attorney general is recused, as Jeff Sessions is now. They require the special counsel to be “a lawyer with a reputation for integrity and impartial decisionmaking,” which Mueller certainly is. They provide for the counsel to “not be subject to the day-to-day supervision of any official of the Department.” And they say that the acting attorney general (for the purposes of the Russia investigation, Deputy Attorney General Rod Rosenstein) can stop the special counsel “for any investigative or prosecutorial step” that is “so inappropriate or unwarranted under established Departmental practices that it should not be pursued.” If, however, Rosenstein invokes that authority, the regulations require him to notify the House and Senate Judiciary Committees. (In yet another foreshadowing of the present day, we assumed that the majority in Congress, if of the same party as the president, might be spineless and fail to investigate any interference by the Justice Department or the White House, and so we required the report to be given to the ranking minority member of each committee as well.)

Comey now believes Trump was trying to influence him, source says - Former FBI Director James Comey now believes that President Donald Trump was trying to influence his judgment about the Russia probe, a person familiar with his thinking says, but whether that influence amounts to obstruction of justice remains an open question.   "You have to have intent in order to obstruct justice in the criminal sense," the source said, adding that "intent is hard to prove."    Comey will testify publicly before the Senate intelligence committee after Memorial Day, the panel's leaders announced Friday. The central question at that blockbuster hearing will be whether Comey believed the President was trying to interfere with his investigation. At a news conference Thursday, Trump angrily denied that he had asked Comey to end the investigation, which is now in the hands of new special counsel Robert Mueller. The President blasted the probe into Russia's involvement in the 2016 election and possible collusion with his campaign as a "witch hunt." Comey's view of Trump's intent in their conversations is nuanced, sources say. He initially believed that he could school the new President and White House in what was appropriate during their communications. But after his firing, the question of Trump's intent could become more problematic, one source said.  Sources say Comey had reached no conclusion about the President's intent before he was fired. But Comey did immediately recognize that the new President was not following normal protocols during their interactions. As The New York Times has reported, after numerous encounters with the administration, Comey felt he had to set the parameters of appropriate protocol very clearly. After the President asked Comey to let it be known publicly he was not under investigation, Comey told the President that if he wanted to know details about the bureau's work he should ask the White House counsel to communicate with the the Justice Department, according to the Times.

Trump asked intelligence chiefs to push back against FBI collusion probe after Comey revealed its existence – WaPo - President Trump asked two of the nation’s top intelligence officials in March to help him push back against an FBI investigation into possible coordination between his campaign and the Russian government, according to current and former officials. Trump made separate appeals to the director of national intelligence, Daniel Coats, and to Adm. Michael S. Rogers, the director of the National Security Agency, urging them to publicly deny the existence of any evidence of collusion during the 2016 election.Coats and Rogers refused to comply with the requests, which they both deemed to be inappropriate, according to two current and two former officials, who spoke on the condition of anonymity to discuss private communications with the president.Trump sought the assistance of Coats and Rogers after FBI Director James B. Comey told the House Intelligence Committee on March 20 that the FBI was investigating “the nature of any links between individuals associated with the Trump campaign and the Russian government and whether there was any coordination between the campaign and Russia’s efforts.” Trump’s conversation with Rogers was documented contemporaneously in an internal memo written by a senior NSA official, according to the officials. It is unclear if a similar memo was prepared by the Office of the Director of National Intelligence to document Trump’s conversation with Coats. Officials said such memos could be made available to both the special counsel now overseeing the Russia investigation and congressional investigators, who might explore whether Trump sought to impede the FBI’s work.

‘Morning Joe’ Panel Identifies the Most Likely Targets of the FBI’s Russia Probe - Only two White House officials fit the description of the “significant person of interest” targeted in the ongoing Russia probe, according to panelists on MSNBC’s “Morning Joe.” The Washington Post reported Friday that the law enforcement investigation had reached “the highest levels of government” to include a current White House official who is close to the president. “There are some facts that emerged weeks ago that I think are going to get more attention,” said David Ignatius, a columnist for the Post. “Jared Kushner, now senior adviser to the president, we know, met with (Russian) ambassador (Sergey) Kislyak, accompanied by Mike Flynn, back during the transition period.”  Kushner, who is President Donald Trump’s son-in-law, met in December with Kislyak and Sergey Gorkov, a graduate of Russia’s spy school who now heads Vnesheconombank, but failed to disclose the meeting on his security clearance forms.  “Those events, whether they have anything to do with this latest investigation, will be part of where this goes,” Ignatius said. “Kushner offered to testify, voluntarily, before the Senate Intelligence Committee many weeks ago about the facts I just described.” Host Joe Scarborough pointed to comments by the White House chief strategist that may have taken on new significance, and he also pointed out that the White House counsel also fit the description of the official under investigation. “One of his rivals, Steve Bannon, was telling reporters he didn’t have to worry about Kushner because Russia would take care of him,” Scarborough said. “That’s there. Also you have to look at — since we said Jared’s name, we might as well — the other person, Don McGahn has been in the middle of everything from the very — I’m not suggesting that he is one of those, but if you were narrowing it down to one (or) two.”

 It’s becoming increasingly clear that Jared Kushner is part of Trump’s Russia problem -- As the Trump administration’s been sent into a death spiral over the firing of FBI Director James Comey last week — a failed move to curtail the Justice Department investigation into contact between his campaign and the Russian government — Kushner hasn’t been the “adult in the room” urging caution and scrupulousness. To the contrary, he’s been urging aggression and retaliation.  And the White House’s reaction to the appointment of Robert Mueller as a special counsel in the Russia inquiry, including a possible attempt to use ethics rules to limit the scope of his investigation, shows that somebody in the White House is deeply worried about what might happen if Kushner were included in the probe. It was surprising enough, to people who had bought into the narrative that Kushner (and wife Ivanka Trump) were steadying influences on the president, that he hadn’t warned Trump not to fire FBI director James Comey — a move that anyone could have predicted would blow up in the administration’s face. (In fact, Kushner appears to have been “generally supportive” of the firing, according to the New York Times.)  By now, though, it’s clear that Kushner (at least sometimes) is the person who wants to lash out at the investigators. Here’s what happened (according to reports from the New York Times) when the Trump administration found out that Deputy Attorney General Rod Rosenstein had appointed Mueller as a special counsel to lead the Trump/Russia probe: Most of those gathered recommended that the president adopt a conciliatory stance and release a statement accepting Mr. Rosenstein’s decision and embracing a swift investigation that would clear the cloud of suspicion hovering over the West Wing. Mr. Kushner — who had urged Mr. Trump to fire Mr. Comey — was one of the few dissenting voices, urging the president to counterattack, according to two senior administration officials. After a brief discussion, however, calmer heads prevailed, and Mr. Trump’s staff huddled over a computer just outside the Oval Office to draft the statement that was ultimately released, asserting the president’s innocence and determination to move on.   It’s also interesting that, according to Reuters’ Julia Edwards Ainsley, the White House is considering trying to hobble Mueller — using a regulation barring Mueller from investigating anyone his former law firm had represented. In practice, that would be Kushner and former campaign head Paul Manafort.

Bill Black: FBI Investigations Are Conducted at the Discretion of its Director - naked capitalism - Jerri-Lynn here: Many of the expected usual suspects are weighing in on prospects for Trump surviving the investigations now swirling around his administration (something I expect to discuss at greater length in a future post). This Real News Network interview with Bill Black discusses the history and dynamics of FBI investigations, which are neither as unstoppable nor as unimpeachable as is sometimes claimed. As probes continue, it’s important to understand relevant history and precedents. (video and transcript)

Comey Hearing Delayed: Chaffetz Postpones Hearing So Comey Can Speak With Special Counsel --Last week, in a frenzied attempt to get to the bottom of the 'Comey memos' fiasco, Jason Chaffetz scheduled a hearing for the former FBI Director to appear before the House Oversight Committee this Wednesday at 9:30AM.  That said, per the tweet below, Chaffetz apparently scheduled the hearing before even tracking down Comey's latest cell phone number. Officially noticed a hearing for next Wed at 9:30am ET with former FBI Dir Comey. But I still need to speak with him...evidently has a new # — Jason Chaffetz (@jasoninthehouse) May 17, 2017 Now, it appears that Chaffetz was finally able to track down Comey's new cell number but it only resulted in the meeting being postponed due to Comey's desire to speak with Special Counsel Mueller before giving public testimony.Spoke with Comey. He wants to speak with Special Counsel prior to public testimony. Hearing Wed postponed. @GOPoversight  — Jason Chaffetz (@jasoninthehouse) May 22, 2017   Of course, Comey has also agreed to a hearing before the Senate Intelligence Committeethough that meeting won't be scheduled until after Memorial Day.  So is Comey getting cold feet or does he just need to get his story straight with the Special Counsel before speaking publicly...bit of both?

Melania scours media to protect Trump – POLITICO - Melania Trump’s spent her first few months as first lady in New York, only rarely appearing in Washington or speaking at events. Yet friends and aides say she’s keeping a close watch from her gilded apartment in Trump Tower on how her husband is portrayed in the press — and that she’s growing increasingly worried about the anonymous sniping from West Wing staff. Like President Donald Trump, these people said, Melania Trump is an avid consumer of cable news. She often tracks the news of the day and will alert her husband to stories she thinks make him look bad. She has raised concerns that some on his communications and press team aren’t doing enough to defend him, according to aides and sources close to the president. She’s been especially troubled by background quotes in which West Wing aides criticize the president, and she’s called the president to discuss it. Her quiet role as private watchdog is at odds with her public persona. Melania Trump has been seen as generally aloof and removed from her husband's political operation since he announced his campaign in 2015, but as his administration has been consumed by infighting and outside investigations, she's grown increasingly vocal about the perceived shortcomings of staff surrounding the president.

Michael Flynn To Plead The Fifth, Will Decline Senate Subpoena -- Confirming last week's report that Michael Flynn will not comply with requests to testify before the Senate Intel Committee, moments ago AP reported that Flynn has indeed declined the subpoena and plans to officially invoke the Fifth Amendment sometime on Monday.BREAKING: AP Source: Michael Flynn to decline Senate Intel committee subpoena, invoke 5th Amendment later today.— The Associated Press (@AP) May 22, 2017Last week, Senate Intelligence Committee Chairman Richard Burr said last week that Flynn had not yet complied with the Senate’s subpoena, and added that he didn’t expect Flynn to agree to testify under oath.As a reminder, last week CNN reported that the FBI had also issued subpoenas relating to Flynn's business records, so the ousted National Security Adviser is now at at the center of both investigations and at least for the time being, he is refusing to comply with the Congressional probe.  Developing

 Russians Are Laughing at the U.S., Not Just at Trump --President Donald Trump was only half wrong when he tweeted last week that "Russia must be laughing up their sleeves watching as the U.S. tears itself apart." Russian officials are laughing quite openly.  Foreign Minister Sergei Lavrov's trolling of FBI Director James Comey's firing was relatively benign; ostensibly, Lavrov's mock surprise at being told of the firing could be taken for a diplomat's polite refusal to discuss the host country's domestic politics. This week, however, the Russian jokes at the expense of the U.S. got positively unpleasant. First, President Vladimir Putin offered to provide the U.S. Congress with a recording of Lavrov's conversation with Trump, in which the U.S. president allegedly revealed highly classified information (the word Putin used, zapis, cannot really be translated as "transcript", as the Kremlin later claimed). The suggestion, of course, was sheer mockery -- it's impossible to imagine the Congress making such a request of Putin, and U.S. legislators tried to answer Putin in kind, Senator Marco Rubio suggesting that if Putin sent the information by email, he "wouldn't click on the attachment."Then, on Thursday, the Russian foreign ministry posted a short clip from Lavrov's meeting with Thorbjorn Jagland, secretary general of the Council of Europe. As the two sat for photographers, the Norwegian politician quipped, "These pictures won't cause any problems for you?" To this clear reference to the U.S. uproar following the Russian publication of pictures showing Trump and Lavrov acting friendly, the Russian foreign minister replies: "Depends on what kind of secrets you pass on to me." There's general laughter around the table: Clearly, this is the kind of Russian humor that travels well in Europe.  It's clear why Putin and his underlings are amused. The mess of intersecting investigations, leaks, pained howls and invective from pro-Trump and anti-Trump politicians is, to Putin and Lavrov, something right out of 1990's Moscow, in which President Boris Yeltsin -- a big, clumsy populist not unlike Trump -- battled the Soviet "deep state" as his family lined its pockets and tried to influence his decisions. Yeltsin, by the way, was nearly impeached for alleged "crimes" that included the Soviet Union's breakup.

How Did Russiagate Start? - Matt Taibbi - Amid the chaos of James Comey's firing, new questions about the timeline of his fateful investigation Former Director of National Intelligence James Clapper appeared on This Week Sunday, and said some head-scratching things.  Clapper back in March told Meet the Press that when he issued a January 6th multiagency intelligence community assessment about Russian interference in the election, the report didn't include evidence of collusion between the Trump campaign and Russia, essentially saying he hadn't been aware of any such evidence up through January 20th, his last day in office.  On Sunday, he said that didn't necessarily mean there was no such evidence, because sometimes he left it up to agency chiefs like former FBI Director James Comey to inform him about certain things.  "I left it to the judgment [of] Director Comey," Clapper said, "to decide whether, when and what to tell me about counterintelligence investigations."  Clapper said something similar when he testified before the Senate Judiciary Committee last Monday. In prepared remarks, he essentially said that there was nothing odd about his not being informed about the existence of an FBI counterintelligence investigation involving Donald Trump's campaign.  Speaking generally, Clapper seemed to imply that the Trump-Russia-collusion scandal, the thing colloquially known as #Russiagate all over the world now, may have originated in information gleaned by the intelligence community, who in turn may have tipped off the FBI.  "When the intelligence community obtains information suggesting that a U.S. person is acting on behalf of a foreign power," he said, "the standard procedure is to share that information with the lead investigatory body, which of course is the FBI."  He went on, explaining that in such a situation, it wouldn't be unusual for the DNI to not be informed about an FBI counterintelligence investigation.  In his Senate testimony, Clapper went out of his way to say this didn't contradict his earlier statements. But if he's not contradicting himself, he's certainly added a layer of confusion to what is already the most confusing political scandal ever.

Ex-CIA Chief Says Was Aware Of "Contacts And Interactions" Between Trump Associates And Russia --Director of National Intelligence Dan Coats is pushing back against a Washington Post report that President Donald Trump sought his help in stymieing a probe into his former National Security Advisor Mike Flynn. In an appearance before the Senate Armed Services Committee, Coats refused to comment on the anonymously sourced allegations, saying that any “political shaping” of intelligence would be improper.The Hill has a video. Here’s Coats:“I’d need to spend a significant amount of time with the president discussing national security interest and intelligence as it relates to those interest."“I have always believed that given the nature of my position and the information which we share, it’s not appropriate for me to comment publicly on any of that. On this topic, or any topics, I don’t feel it’s appropriate to characterize conversations with the president.”WaPo reported Monday that President Donald Trump approached DNI Dan Coats and NSA Head Mike Rogers about enlisting their help in pushing back against the investigation, about a week after the New York Times reported that Trump had made a similar  equest to former FBI Director James Comey.Meanwhile, during an appearance before the House Intelligence Committee Tuesday, former CIA Director John Brennan testified before Congress on Tuesday that he warned the head of the FSB, the Russia domestic security service about meddling in the U.S. election, as ABC News reports.

Five takeaways from a busy day of Russia hearings | TheHill: Three senior intelligence officials testified Tuesday before different panels concerned with swirling controversies surrounding Russia’s actions in the 2016 presidential election. Former CIA Director John Brennan’s remarks about contacts between people in President Trump’s circle and Russia made the biggest headlines, but there were enough developments throughout the day that it was hard to keep up. Here are five takeaways from a busy day on Capitol Hill.

  • Brennan was concerned about contacts between Russia, Trump campaign associates Brennan told lawmakers that he had seen intelligence showing that people involved in Trump’s campaign had interactions with Russian officials that “concerned” him.
  • Intelligence head isn’t talking about Trump requests Testimony by Director of National Intelligence Dan Coats was shadowed by a news story published in The Washington Post the previous day that said he and National Security Agency Director Mike Rogers refused requests from the president that they deny the existence of any evidence of collusion in the election. Coats wouldn’t take the bait.
  • Republicans make debate about lack of evidence for collusion. Rep. Trey Gowdy (R-S.C.) pressed Brennan repeatedly on what evidence he had of any collusion between Russian officials and Trump campaign officials. Republican after Republican ceded their time back to the former prosecutor during the meeting, hinting at a new GOP focus.
  • Senate Intelligence Committee goes after Flynn. The leaders of the Senate Intelligence Committee on Tuesday announced that they were issuing two additional subpoenas for businesses associated with former national security adviser Michael Flynn. The subpoenas — focused on a pair of businesses associated with Flynn located in Alexandria, Va. — were among the panel’s first slate of responses to Flynn’s refusal to respond to a subpoena for documents related to the committee’s probe into Russian election meddling.
  • Scrutiny on leaks grows, Democrats have criticized the GOP focus on leaks as a partisan attempt to shield the president — but the issue received a serious response from both current and former administration officials on Tuesday.Brennan offered a stinging criticism of the leaks to the media that exposed Trump’s conversation with Russian Ambassador Sergey Kislyak and Russian Foreign Minister Sergey Lavrov.“These leaks continue to be very, very damaging leaks, and I find them appalling and they need to be tracked down,” Brennan said.

House Democrats Ask Deutsche Bank If Trump Accounts Have Russia Ties -- In the aftermath of prior media reports that in the past Deutsche Bank provided hundreds of millions in loans to Trump, today Democratic lawmakers - looking for a smoking gun- asked Germany's largest bank to hand over its findings on "two politically charged matters", demand details whether Trump accounts have Russia ties, and if Deutsche Bank loans to Trump were backed by Russia. From the letter:We write seeking information relating to two internal reviews reportedly conducted by Deutsche Bank ("Bank"): one regarding its 2011 Russian mirror trading scandal and the other regarding its review of the personal accounts of President Donald Trump and his family members held at the Bank. What is troubling is that the Bank to our knowledge has thus far refused to disclose or publicly comment on the results of either of its internal reviews. As a result, there is no transparency regarding who participated in, or benefited from, the Russian mirror trading scheme that allowed $10 billion to flow out of Russia.  Likewise, Congress remains in the dark on whether loans Deutsche Bank made to President Trump were guaranteed by the Russian Government, or were in any way connected to Russia. It is critical that you provide this Committee with the information necessary to assess the scope, findings and conclusions of your internal reviews.Along with the internal review of the Russian stock-trading scheme, Democrats are seeking any internal correspondence and communications related to loans extended to Trump and his immediate family members. The bank has made more than $300 million in loans to Trump, for the Doral golf resort in Florida, a Washington, D.C., hotel and a Chicago tower.“Deutsche Bank’s pattern of involvement in money laundering schemes with primarily Russian participation, its unconventional relationship with the President, and its repeated violations of U.S. banking laws over the past several years, all raise serious questions about whether the Bank’s reported reviews of the mirror trading scheme and Trump’s financial ties to Russia were sufficiently robust,” the lawmakers wrote in the letter.The letter, which asks Deutsche Bank to respond by June 2, also asks whether the bank’s loans to Trump, made years before the New York developer ran for president, “were guaranteed by the Russian government, or were in any way connected to Russia.”

Jared Kushner under FBI scrutiny in Russia probe: reports | TheHill: President Trump's son-in-law and senior adviser Jared Kushner has reportedly come under scrutiny in the FBI's investigation into possible collusion between the Trump campaign and Russia. The FBI's focus on Kushner does not necessarily mean he is suspected of a crime, nor is he considered a subject of the bureau's wider Russia probe, like former national security adviser Michael Flynn, NBC News reported. Instead, investigators are looking into meetings that Kushner had with Russian Ambassador Sergey Kislyak and a Russian banking executive late last year during the presidential transition, The Washington Post reported.The Post reported last week that the law enforcement investigation into Russian election meddling had identified a current White House official as a person of interest, though the identity of that person was not revealed at the time. Kushner is among Trump's most influential aides in the White House and has been tasked by the president with a sweeping agenda in his administration. The revelation that Kushner is being looked at as part of the Russia investigation comes little more than two weeks after Trump abruptly fired FBI Director James Comey, who was charged with overseeing the probe, at the time. Deputy Attorney General Rod Rosenstein last week appointed former FBI Director Robert Mueller as special counsel to oversee the investigation. Separately, at least four congressional committees are conducting their own probes into the matter. While the FBI, so far, has focused on figures like Flynn and former Trump campaign manager Paul Manafort, Kushner is the first known current White House official to fall under scrutiny.

DNC calls for suspension of Kushner's security clearance amid FBI scrutiny | TheHill: The Democratic National Committee (DNC) is calling for the suspension of Jared Kushner’s security clearance while the senior White House adviser is under FBI scrutiny. “The FBI’s Russia investigation reached Trump’s backyard, and now it’s in his house,” DNC deputy communications director Adrienne Watson said in a statement Thursday. “Kushner’s security clearance should be suspended until the FBI’s findings are complete.” NBC News on Thursday reported that Kushner has come under scrutiny in the FBI’s investigation of possible collusion between Russia and Trump’s 2016 presidential campaign. The FBI’s focus on Kushner does not mean he is suspected of a crime, nor that he is considered a subject of the bureau’s wider probe of Russian election meddling last year. Kushner’s attorney on Thursday said that top Trump administration official would cooperate on any probes of his past meetings with Russians. “Mr. Kushner previously volunteered with Congress what he knows about these meetings,” Jamie Gorelick said in a statement. “He will do the same if he is contacted in connection with any other inquiry” The Washington Post on Thursday reported that investigators are instead examining Kushner’s meetings with Russian Ambassador Sergey Kislyak and a Russian banking executive late last year. The report comes a week after reports that the law enforcement investigation of Russian election intrusions had identified a current White House official as a person of interest, though the person’s identity was not revealed. Kushner ranks among Trump’s closest confidantes as he is married to the president’s daughter Ivanka and oversees a vast agenda in his administration. 

FBI Withholds Russia Probe Docs Requested By House Intel Committee --House Oversight Committee Chairman Jason Chaffetz said today that the FBI had decided to withhold documents, including memos, notes, summaries, and recordings, requestedby his committee in regards to the ongoing Russia probe. This was revealed in a letter sent by Chaffetz to the FBI responding to the agency’s decision to withhold documents requested by the Committee on May 16, 2017. The FBI's denial to cooperate is presented below: […] According to a statement by the Oversight Committee, "Chaffetz requested memos, notes, summaries, and recordings to assist in the Committee’s investigation of the FBI’s independence, and which are outside the scope of the Special Counsel’s investigation."The documents are due June 8, 2017, but that may not happen as it appears the FBI is suddenly unwilling to cooperate.  As Chaffetz elaborates, after a New York Times report that former Federal Bureau of  Investigation Director James Corney memorialized the content of phone calls and meetings with the President in a series of memoranda, he requested those memoranda and any related notes, summaries, and recordings. The FBI is withholding those documents, citing to the appointment of Robert Mueller as Special Prosecutor. According to a letter from your staff: "In light of this development and other considerations [the Bureau] is undertaking appropriate consultation to ensure all relevant interest implicated by your request are properly evaluated.

 Trump-Russia Inquiry Looks at Potential for Wall Street Bank Money Laundering -- Pam Martens -- The majority of American citizens have never heard of the U.S. Treasury agency known as FinCEN – short for Financial Crimes Enforcement Network. But for those who work for Wall Street brokerage firms or the mega Wall Street banks like JPMorgan Chase, Citigroup or German banking giant Deutsche Bank, just the mere mention of FinCEN can quickly produce beads of sweat dripping onto those expensive Canali suits. That’s because FinCEN is the Federal agency where suspicious financial activity that might turn out to be money laundering gets reported. All three banks, and numerous others, have had their share of scandalous run ins with money laundering. In recent weeks, the U.S. Senate Banking Committee, Senate Intelligence Committee and the House of Representatives Financial Services Committee have all shown an interest in what FinCEN might have in its database that would shed sunshine on involvement of the Trump business empire or Trump campaign and Russian money inflows.  Senator Sherrod Brown, the Ranking Member of the Senate Banking Committee, sent a letter on March 2 to U.S. Treasury Secretary Steven Mnuchin, asking for documents and explaining his rationale as follows: “…Russia has been subjected to a number of international and US sanctions, as have many prominent Russian leaders and business people. Investors from Russia have, in the past, played a significant role in the Trump organization. example, President Trump’s son Donald Trump Jr. stated at a conference in 2008 that President Trump’s businesses involved substantial Russian investments. He reportedly said: ‘And in terms of high-end product influx into the US, Russians make up a pretty disproportionate cross-section of a lot of our assets; say in Dubai, and certainly with our project in SoHo and anywhere in New York. We see a lot of money pouring in from Russia.’ “Such statements raise important questions about whether any Trump firms, including those now controlled by his children, retain ownership interests in Russian entities, or have business ties or projects elsewhere that include Russian investors. If so, what is the nature of those ownership or investment arrangements?  Might they provide opportunities for economic leverage over the President or any of his family members or associates?  Do they put the President or his family in danger of violating U.S. statutes, regulations, or simply prudent standards of conduct for the leader of our nation?” The Senate Intelligence Committee made its requests for records from FinCEN in April but earlier this week the Ranking Democrat on that Committee, Senator Mark Warner, complained that the request has not been fully complied with by the administration.

Russian ambassador told Moscow that Kushner wanted secret communications channel with Kremlin -- Jared Kushner and Russia’s ambassador to Washington discussed the possibility of setting up a secret and secure communications channel between Trump’s transition team and the Kremlin, using Russian diplomatic facilities in an apparent move to shield their pre-inauguration discussions from monitoring, according to U.S. officials briefed on intelligence reports. Ambassador Sergey Kislyak reported to his superiors in Moscow that Kushner, son-in-law and confidant to then-President-elect Trump, made the proposal during a meeting on Dec. 1 or 2 at Trump Tower, according to intercepts of Russian communications that were reviewed by U.S. officials. Kislyak said Kushner suggested using Russian diplomatic facilities in the United States for the communications. The meeting also was attended by Michael Flynn, Trump’s first national security adviser.  The White House disclosed the meeting only in March, playing down its significance. But people familiar with the matter say the FBI now considers the encounter, as well as another meeting Kushner had with a Russian banker, to be of investigative interest.  Kislyak reportedly was taken aback by the suggestion of allowing an American to use Russian communications gear at its embassy or consulate — a proposal that would have carried security risks for Moscow as well as the Trump team.

Exclusive: Trump son-in-law had undisclosed contacts with Russian envoy – sources -- U.S. President Donald Trump’s son-in-law and close adviser, Jared Kushner, had at least three previously undisclosed contacts with the Russian ambassador to the United States during and after the 2016 presidential campaign, seven current and former U.S. officials told Reuters. Those contacts included two phone calls between April and November last year, two of the sources said. By early this year, Kushner had become a focus of the FBI investigation into whether there was any collusion between the Trump campaign and the Kremlin, said two other sources - one current and one former law enforcement official. Kushner initially had come to the attention of FBI investigators last year as they began scrutinizing former national security adviser Michael Flynn’s connections with Russian officials, the two sources said. While the FBI is investigating Kushner’s contacts with Russia, he is not currently a target of that investigation, the current law enforcement official said. The new information about the two calls as well as other details uncovered by Reuters shed light on when and why Kushner first attracted FBI attention and show that his contacts with Russian envoy Sergei Kislyak were more extensive than the White House has acknowledged. NBC News reported on Thursday that Kushner was under scrutiny by the FBI, in the first sign that the investigation, which began last July, has reached the president’s inner circle. The FBI declined to comment, while the Russian embassy said it was policy not to comment on individual diplomatic contacts. The White House did not respond to a request for comment.  Kushner's attorney, Jamie Gorelick, said Kushner did not remember any calls with Kislyak between April and November. "Mr Kushner participated in thousands of calls in this time period. He has no recollection of the calls as described. We have asked (Reuters) for the dates of such alleged calls so we may look into it and respond, but we have not received such information," she said. 

WaPo Reports Kushner Sought "Secret" Back-Channel With Moscow, Admits It's Normal Practice --Looks like we spoke too soon. The holiday-weekend Trump bombshell has arrived courtesy of The Washington Post. This time, the paper is reporting that Jared Kushner, the president’s son-in-law and one of his closest advisors, discussed the possibility of setting up a secure communications channel between the Trump transition team and the Kremlin with Russian Ambassador Sergei Kislyak.The scene was set earlier in the week when NBC reported on Thursday that Kushner is now “under FBI scrutiny” before explaining that he’s not an official target in the investigation.  And now, WaPo reports, according to the anonymous US officials, sensitive information 'incriminating Kushner' was intercepted by US intelligence agencies when Kislyak relayed the details of the discussion to his superiors in Moscow.  At first brush, the report appears damning: If accurate, WaPo has unearthed actual evidence of collusion between a senior Trump associated and the Russians, one might think. But it’s important to keep in mind two crucial facts that WaPo decided to bury further in their "reporting." First, this alleged discussion occurred during a meeting at Trump Tower in early December, nearly a month after Trump’s upset victory over Hillary Clinton.  The investigations being led by Special Counsel Robert Mueller, the House and the Senate are focused on uncovering evidence of collusion between Trump associates and the Russian government during the campaign. And second, if it weren’t for the implications (that this is evidence of collusion between a close Trump associated and Moscow), this would be a non-story, as WaPo readily admits, 16 paragraphs deep: “It is common for senior advisers of a newly elected president to be in contact with foreign leaders and officials. But new administrations are generally cautious in their handling of interactions with Moscow, which U.S. intelligence agencies have accused of waging an unprecedented campaign to interfere in last year’s presidential race and help elect Trump.”

Dem: Kushner 'should be prosecuted for lying' on security form | TheHill: Democratic Rep. Ted Lieu (Calif.) is calling for President Trump's senior adviser and son-in-law Jared Kushner to be prosecuted after reports emerged that he didn't disclose at least three contacts with Russia's envoy to the U.S. during and after the 2016 campaign. "Certification for my SF86 security clearance form," Lieu tweeted alongside a picture of the form. "Which says false statement punishable by imprisonment. Jared Kushner lied on his form." Certification for my SF86 security clearance form, which says false statement punishable by imprisonment. Jared Kushner lied on his form.— Ted Lieu (@tedlieu) May 27, 2017"  If this is true, #Kushner needs to resign. He should also be prosecuted for lying on his security clearance form, a federal crime," Lieu, a frequent critic of Trump, wrote in a tweet about reports of Kushner's previously undisclosed contacts with the Russian envoy. Kushner's attorney said in a statement that he doesn't recall the conversations with Russian Ambassador Sergey Kislyak, and has requested information from the news service Reuters, which originally broke the story on Friday."Mr Kushner participated in thousands of calls in this time period. He has no recollection of the calls as described. We have asked (Reuters) for the dates of such alleged calls so we may look into it and respond, but we have not received such information," Kushner's attorney Jamie Gorelick said. Kushner's conversations with the Russian envoy before the election were related to fighting terrorism and improving economic relations with Russia, sources told Reuters, which reported on two calls between Kushner and Kislyak between April and November last year.

FISA Court Blasted "FBI's Apparent Disregard For Rules"; Illegally Shared Spy Data With "Private Contractors" --Earlier this week we highlighted sections of a recently unclassified FISA Court order which found that the Obama administration routinely conducted "widespread" illegal searches of American citizens, an issue which the court described as a "serious fourth amendment issue" (see "FISA Court Finds "Serious Fourth Amendment Issue" In Obama's "Widespread" Illegal Searches Of American Citizens").  Today, as highlighted by Circa, we find the that FBI, led by James Comey, was one of the biggest offenders when it came to improper usage of foreign-sourced intelligence on American citizens.  Per the FISA court order (which can be found here), the DOJ conducted a review of the FBI's handling of so-called "Section 702-acquired information" beginning on March 9, 2016 and what that review found was fairly disturbing.   Among other things, the DOJ found that the FBI routinely shared "raw FISA information" on American citizens with "private contractors" paraphrase, the FBI took illegally sourced intelligence on American citizens (no warrants required) and shared it with random private citizens working at non-government firms.

 Congressional Aides Fear Suspects In IT Breach Are Blackmailing Members With Their Own Data --  Congressional technology aides are baffled that data-theft allegations against four former House IT workers — who were banned from the congressional network — have largely been ignored, and they fear the integrity of sensitive high-level information. Imran Awan and three relatives were colleagues until police banned them from computer networks at the House of Representatives after suspicion the brothers accessed congressional computers without permission. Five Capitol Hill technology aides told The Daily Caller News Foundation’s Investigative Group that members of Congress have displayed an inexplicable and intense loyalty towards the suspects who police say victimized them. The baffled aides wonder if the suspects are blackmailing representatives based on the contents of their emails and files, to which they had full access.“I don’t know what they have, but they have something on someone. It’s been months at this point” with no arrests, said Pat Sowers, who has managed IT for several House offices for 12 years. “Something is rotten in Denmark.”A manager at a tech-services company that works with Democratic House offices said he approached congressional offices, offering their services at one-fourth the price of Awan and his Pakistani brothers, but the members declined. At the time, he couldn’t understand why his offers were rejected but now he suspects the Awans exerted some type of leverage over members.“There’s no question about it: If I was accused of a tenth of what these guys are accused of, they’d take me out in handcuffs that same day, and I’d never work again,” he said.

How a dubious Russian document influenced the FBI’s handling of the Clinton probe - WaPo  -  secret document that officials say played a key role in then-FBI Director James B. Comey’s handling of the Hillary Clinton email investigation has long been viewed within the FBI as unreliable and possibly a fake, according to people familiar with its contents. In the midst of the 2016 presidential primary season, the FBI received what was described as a Russian intelligence document claiming a tacit understanding between the Clinton campaign and the Justice Department over the inquiry into whether she intentionally revealed classified information through her use of a private email server. The Russian document cited a supposed email describing how then-Attorney General Loretta E. Lynch had privately assured someone in the Clinton campaign that the email investigation would not push too deeply into the matter. If true, the revelation of such an understanding would have undermined the integrity of the FBI’s investigation. Current and former officials have said that Comey relied on the document in making his July decision to announce on his own, without Justice Department involvement, that the investigation was over. That public announcement — in which he criticized Clinton and made extensive comments about the evidence — set in motion a chain of other FBI moves that Democrats now say helped Trump win the presidential election. But according to the FBI’s own assessment, the document was bad intelligence — and according to people familiar with its contents, possibly even a fake sent to confuse the bureau. The Americans mentioned in the Russian document insist they do not know each other, do not speak to each other and never had any conversations remotely like the ones described in the document. Investigators have long doubted its veracity, and by August the FBI had concluded it was unreliable. 

CIA Malware for all versions of Windows -- Today, May 19th 2017, WikiLeaks publishes documents from the "Athena" project of the CIA. "Athena" - like the related "Hera" system - provides remote beacon and loader capabilities on target computers running the Microsoft Windows operating system (from Windows XP to Windows 10). Once installed, the malware provides a beaconing capability (including configuration and task handling), the memory loading/unloading of malicious payloads for specific tasks and the delivery and retrieval of files to/from a specified directory on the target system. It allows the operator to configure settings during runtime (while the implant is on target) to customize it to an operation.According to the documentation (see Athena Technology Overview), the malware was developed by the CIA in cooperation with Siege Technologies, a self-proclaimed cyber security company based in New Hampshire, US. On their website, Siege Technologies states that the company "... focuses on leveraging offensive cyberwar technologies and methodologies to develop predictive cyber security solutions for insurance, government and other targeted markets.". On November 15th, 2016 Nehemiah Security announced the acquisition of Siege Technologies. In an email from HackingTeam (published by WikiLeaks here), Jason Syversen, founder of Siege Technologies with a background in cryptography and hacking, "... said he set out to create the equivalent of the military’s so-called probability of kill metric, a statistical analysis of whether an attack is likely to succeed. 'I feel more comfortable working on electronic warfare,' he said. 'It’s a little different than bombs and nuclear weapons -- that’s a morally complex field to be in. Now instead of bombing things and having collateral damage, you can really reduce civilian casualties, which is a win for everybody.'"

Seth Rich Plot Thickens: "DC Insider" Speaks Of "Complete Panic" At Highest Levels Of DNC -- Last week, Fox News dropped a bombshell report officially confirming, via anonymous FBI sources, what many had suspected for quite some time, that murdered DNC staffer Seth Rich was the WikiLeaks source for leaks which proved that the DNC was intentionally undermining the campaign of Bernie Sanders. In addition to exposing the utter corruption of the DNC, the leaks cost Debbie Wasserman Shcultz her job as Chairwoman.Of course, if it's true that WikiLeaks' emails came from a DNC insider it would destroy the "Russian hacking" narrative that has been perpetuated by Democrats and the mainstream media for the past several months.  Moreover, it would corroborate the one confirmation that Julian Assange has offered regarding his source, namely that it was "not a state actor." Meanwhile, the plot thickened a little more over the weekend when Kim Dotcom confirmed via Twitter that he was working with Seth Rich to get leaked emails to WikiLeaks.I knew Seth Rich. I know he was the @Wikileaks source. I was involved.— Kim Dotcom (@KimDotcom) May 20, 2017 Which was followed up by the following posts on 4Chan’s /pol/ subgroup that high-ranking current and former Democratic Party officials are terrified of the Seth Rich murder investigation. The post went on to claim that a "smoking gun in this case is out of the hands of the conspirators" which has resulted in near "open panic" in DC circles.

Fox News retracted a controversial story on DNC staffer Seth Rich — here's what's behind the controversy - The killing of a Democratic National Committee staff member captured the conservative media zeitgeist anew this month, thanks in part to news coverage from a Washington, DC, Fox affiliate and a heavy rotation on Fox News by way of host Sean Hannity.  Critics have excoriated Hannity over his multiday cable-news deliberation on the killing of the staff member, Seth Rich, which he continued despite calls for him to retract the story. Until late Tuesday, Hannity persisted, even after the network had issued its own retraction.  Here's what's behind the controversy:  On July 22, nearly two weeks after Rich's death, WikiLeaks dumped thousands of internal emails it said came from the DNC. Following the release, some right-wing media personalities and outlets, including Breitbart News and the Drudge Report, touted a theory that Rich had been in contact with WikiLeaks before he was killed and that he was murdered as part of a cover-up. Rod Wheeler, a private investigator associated with Rich's family, told a Fox News affiliate in Washington that there was evidence that proved the alleged contact between Rich and WikiLeaks. Wheeler also suggested that the Metropolitan Police Department tried to cover up the nature of Rich's death on behalf of the DNC, an allegation the police department denied. Fox News ran Wheeler's story, which also referred to a "federal source" who claimed the FBI had examined Rich's computer and found the emails from WikiLeaks. Other Fox News personalities helped promote the baseless theory, including Fox News contributor Geraldo Rivera, who tweeted, "1) #SethRich shot in back(2)worked for #DNC which, (3)screwed @BernieSanders 4)#WIKILEAKS screwed DNC(5)Did #sethrich leak?(6)is it related?"  Kim Dotcom, a multimillionaire internet mogul who is subject to extradition to the US on charges of copyright infringement, money laundering, and wire fraud, dedicated a large section of his website to the conspiracy. He called Rich a "hero" and appealed to Robert Mueller, the former FBI director who was named special counsel to lead the FBI investigation into whether the Trump campaign colluded with Russia to meddle in the 2016 election, to guarantee "safe passage from New Zealand to the United States and back," in exchange for evidence he claims to have on the Rich conspiracy. Members of Rich's family conveyed frustration over what they described as Wheeler's "unsubstantiated claims." The family said the claims were "no facts" and they had seen "no evidence" Rich was communicating with WikiLeaks.  Brad Bauman, a representative for the Rich family, rebuked those he said were seeking to politicize Rich's killing.  Fox News on Tuesday removed an article it had published nearly a week earlier on Rich, saying "the article was not initially subjected to the high degree of editorial scrutiny."

Federal prosecutor found dead in water on Hollywood beach | Miami Herald: A federal prosecutor who worked at the U.S. attorney’s office in Miami has been identified as the man found dead along Hollywood beach this week in a case being investigated as a crime. Hollywood police confirmed that the deceased man is Beranton J. Whisenant Jr., 37, of Miramar. A police spokeswoman said he may have suffered a head wound caused by a possible gunshot or other type of trauma. “The investigation is still very preliminary,” Hollywood Police Department spokeswoman Miranda Grossman said, adding that detectives and the Broward medical examiner are “still looking at it.” The FBI’s Miami office said it was aware of Whisenant’s death but referred questions to Hollywood police. Normally, if the death of a federal prosecutor or agent were retaliatory in nature or related to a criminal case, both the FBI and U.S. attorney’s office would be sounding the alarm and pursuing an aggressive investigation.

Report: Girl in Weiner sexting case lied to damage Clinton | TheHill: The teenage girl who had exchanged sexually explicit text messages with former Rep. Anthony Weiner (D-N.Y.) lied about her age and political motivations to harm Democratic presidential nominee Hillary, according to a report by the investigative news site WhoWhatWhy. In a report published Monday, the website said the girl who exchanged the messages with Weiner was closer to 17 and not 15, as initial reports said. That also puts her above the age of consent in North Carolina, which is 16. In addition, she and her family were also not Clinton supporters, as the girl claimed in a letter published by BuzzFeed, according to social media posts unearthed by the website. The report also says the girl initiated the contact with Weiner and then sought advice from a GOP figure behind "prior efforts to harm Weiner and other Democrats." The website suggests this could mean that Weiner was the target of a politically motivated plot. “Seeing that Weiner is both a repeat offender — his sexting addiction cost him his job in Congress as well as a shot at becoming mayor of New York — and associated with one of the most important people in Clinton’s inner circle, it is conceivable that this was a set-up from the beginning, with the objective of embarrassing the Clinton campaign,” the WhoWhatWhy report reads.

All the President’s Guests  -- POLITICO’s UNAUTHORIZED White House Visitor Logs stand in for the official record, which the administration has decided not to release publicly.To build a better, completely public visitor log, we compiled not just visits to the White House, but interactions that include in-person meetings with the president at Mar-a-Lago and other venues, appearances at events and documented phone calls with foreign leaders and other politicians.We welcome your tips as we continue to grow the log. Send any names we may have missed to us at Here’s what we know so far (Read the story!): Our log includes 1,777 individual interactions with the president by 1,272members of the public, politicians, foreign leaders and others. Those interactions include large public events; White House photo ops, like the Patriots’ Super Bowl celebration; one-on-one meetings with Cabinet secretaries; and documented phone calls, like between Trump and Russian President Vladimir Putin. Explore the full log below:

The White House Flouts Ethics Rules -- “The White House just used a brazen back door move to bypass the Senate”… read the headlines of a recent Vanity Fair article regarding the appointment of Keith A. Noreika as the Acting Comptroller of the Currency, which makes Mr. Norieka the administrator of the federal banking system and acting head of the Office of the Comptroller of the Currency (OCC). The OCC supervises more than 1,400 national banks and federal savings associations and about 50 federal branches and agencies of foreign banks in the United States; which comprises nearly two-thirds of the assets of the commercial banking system. A very strong and powerful position to hold. Mr. Noreika, formerly with the prominent law firm of Simpson, Thatcher & Bartlett, LLP, where he advised a wide range of domestic and international financial institutions, will now be in charge of regulating the banks he once protected.  Not only is Mr. Noreika now regulating the banking industry heretofore he has defended and protected, his appointment is on an acting basis as a ”special government employee” at a position of 130 days. Because of the length of time and that it is designated as acting comptroller this appointment does not require a Senate confirmation.  This loophole means he does not have to sign the President’s ethics pledge, which allows him fewer restrictions on lobbying when he returns to his former work at the law firm. And, here’s another loophole… apparently, government requirements to date mean an acting head of the federal agency has worked at that agency for 90 days. In Mr. Noreika’s case, he was made “first deputy” at the OCC which assured he would get the top position should it become available. Mr. Norieka worked at the agency only a few hours before former Comptroller of the Currency, Thomas was conveniently ousted and yes, the position became available!  I’m not making this up! Remember, President Trump promised his banking industry buddies that he would gut financial regulations. Well, he’s on that path for sure.  So it appears that President Trump and his sidekick, Treasury Secretary Steven Mnuchin, ride again, gaining another ally in their continued push to undo financial regulations, following the revolving door pattern which exists in government and on Wall Street, where the industry sends key individuals to government; they serve in the Department of Justice, the Treasury, the Securities and Exchange Commission (SEC)  knowing that their real reward is coming full circle – they come back home to Wall Street or serving Wall Street via the law firms which pander to them and reap huge financial rewards.

GOP plan to scrap agency guidance takes step forward -- The Government Accountability Office has agreed to determine whether Congress can easily reject guidance issued by the independent financial regulators. Using the Congressional Review Act, which gives Congress 60 legislative days to reject a regulation with a majority vote, Republicans have nullified 14 rules promulgated in the waning days of the Obama administration. They are now looking at guidance and bulletins that they believe have the effect of a regulation, but which were never sent to Congress.

Trump budget calls for Wall Street regulators to face restructuring - Two Wall Street financial regulators would face cuts or major structural changes under President Donald Trump's fiscal 2018 budget proposal According to an Office of Management and Budget document on Monday, the U.S. Consumer Financial Protection Bureau, which was created by the 2010 Dodd-Frank reform law to protect borrowers from predatory lending, would undergo a "restructure." This would reduce the federal deficit by $145 million in the 2018 fiscal year, it said. The Securities and Exchange Commission, which polices securities markets, would have its reserve fund, established under Dodd-Frank, used to supplement its budget. In recent years, the fund has been used to overhaul the SEC's information technology, including upgrades to the filing system for public companies and initiatives to help police fraud and track equities trading patterns. The White House document said the elimination of the fund would reduce the deficit by $50 million a year, which is the maximum amount the SEC is allowed to deposit annually. Currently, both the SEC and CFPB budgets do not impact the federal deficit. The CFPB's $605.9 million budget is funded by the Federal Reserve, which is not subject to congressional appropriations. Congress does decide the SEC's $1.6 billion budget, but it is deficit neutral because the fees it collects from Wall Street firms are matched by the amount Congress sets aside.The reserve fund, which is separate from the rest of the SEC's general budget, is funded through registration fees. An OMB spokeswoman did not respond to requests for comment about how a restructuring of the CFPB or the elimination of the SEC's reserve fund would reduce the federal deficit. 

It's Official: The Trump Administration Won't Break Up Big Banks - Treasury Secretary Steven Mnuchin has clarified the Trump administration's approach to Wall Street by making clear one thing it does not support: breaking up the big banks."We do not support a separation of banks from investment banks, we think that would have a very significant problem on the financial markets, on the economy and liquidity," Mnuchin said at a Senate hearing today. "We do not support a separation of banks and investment banks." Mnuchin's words settled a long-running ambiguity about exactly what the Trump administration meant when it said it supported a "21st Century Glass-Steagall."This is a reference to the Banking Act of 1933, sponsored by Carter Glass and Henry Steagall, which forced traditional banks — those that take deposits from the public and make loans — to be separated from those that trade stocks and bonds or issue securities.Those rules were eliminated by the Clinton administration, and led to the supersized financial institutions like JPMorgan Chase and Bank of America that dominate Wall Street today — and which many labeled as prime culprits in the lead-up to the financial crisis. Trump called for a 21st-Century version of the rules during his presidential campaign, leaving some wondering if his administration was open to a break-up of the big banks.Mnuchin's statement put those questions to bed — and drew the ire of Democratic Senator Elizabeth Warren, who argued that anything called "Glass-Steagall" needed to include separating risky trading activities from old-fashioned banking.Mnuchin said he had not reversed himself or the administration's position, instead saying that a "21st Century Glass-Steagall" was always going to be different from the original rules, introduced in the wake of the Great Depression."I'm well aware of what Glass-Steagall was," Mnuchin told Warren. "If we had supported a full Glass-Steagall, we would have said at the time that we had believed in Glass-Steagall, not a '21st Century Glass-Steagall.'" Towards the end of a typically contentious interaction with Warren, Mnuchin said it would be a "huge mistake" to break up big banks.

 Hensarling to Drop Durbin Amendment Repeal as Part of Dodd-Frank - House Republicans are retooling an anti-Dodd-Frank bill to drop a provision that would eliminate a cap on how much banks can charge retailers in debit card swipe fees. The move has been touted by retailers as a win for merchants and consumers in the face of big-name financial institutions after months of lobbying and opposition. "The decision ends the big banks' effort to kill reform and return to the days when they could fix prices without competition or limitation," the Merchants Payments Coalition, a group of retailers that opposed the cap-lifting proposal, said in a statement Thursday.At the heart of the issue was the so-called Durbin amendment – named for Sen. Dick Durbin, D-Ill. – that was approved along with the broader post-recession Dodd-Frank Wall Street Reform and Consumer Protection Act back in 2010. The rule tasked the Federal Reserve with limiting fees charged to retailers for debit card transactions. But bankers and those in opposition to the Durbin amendment have argued that financial institutions have suffered as a result of the limits, with retailers getting a break while the measure inappropriately extended the government's reach into the private sector. With those complaints in mind, a repeal of the Durbin amendment was included as part of Texas Republican and House Financial Services Committee Chairman Jeb Hensarling's Dodd-Frank kryptonite: the Financial Choice Act, which is circulating around Capitol Hill and garnering strong GOP support. But faced with pressure from retailers and opposition from Democrats and even some Republicans, Hensarling indicated this week he intends to drop the measure to give the Financial Choice Act a better shot at passing.

Dodd-Frank overhaul bill advances closer to House vote — A bill to overhaul the Dodd-Frank Act could get a vote in the full House as early as June 7.   The broad bill, sponsored by House Financial Services Committee Chairman Jeb Hensarling, R-Tex., would provide an “off-ramp” for banks that agree to hold a leverage ratio of at least 10% and would gut the Consumer Financial Protection Bureau, among other provisions.

These rules could stop the next big financial crisis.  Don't get rid of them - Sheila Bair and Paul Volcker - In reconsidering our post-crisis financial reforms today, we have real opportunities for both responsible simplification and for significant missteps. One serious misstep would be eliminating the regulatory tools, such as resolution planning and orderly liquidation authority, that are necessary to end bailouts and fight too-big-to-fail. During the financial crisis of 2008, it became clear that policymakers lacked the tools to handle the failure of a systemic financial firm without destabilizing the entire financial system. The normal bankruptcy process — and the firms themselves — were ill-equipped to manage such a failure. Lehman Brothers’ bankruptcy was so disruptive that policymakers immediately had to act by providing massive support for AIG — the world’s largest insurance company — and money-market mutual funds to avoid complete financial collapse. The Troubled Asset Relief Program (TARP), and a host of other government support programs designed to maintain essential market functions, followed shortly behind.  After the crisis, as part of the financial regulatory law known as Dodd-Frank, Congress took two specific steps forward to make sure a big failing institution would not need to be “bailed out.” First, to make bankruptcy more workable, it established the “living will” process, which requires that a number of potentially systemic financial firms periodically provide — and improve — resolution plans that describe how the institution could proceed through the traditional bankruptcy process without generating systemic risk. The living-will process has real teeth, helping to ensure that firms make structural changes that would facilitate reorganization and a prompt sale of valuable businesses in the event of imminent failure.  However, in the case of sudden failure, it may not be possible for large financial institutions to use traditional bankruptcy approaches. A resolution will be necessary in a matter of days — preferably over a weekend — to head off a destructive market impact, as was the case with the Lehman failure. To its credit, Congress created a backstop called orderly liquidation authority (OLA), which enables the treasury secretary, in consultation with the president, to call on the Federal Deposit Insurance Corp. to wind down and liquidate a financial firm in situations when traditional bankruptcy procedures could not be effective.

Five suggestions for avoiding another banking collapse - Larry Summers --Several weeks ago I gave a talk based on my Brookings paper with Natasha Sarin at the Atlanta Fed’s annual research conference. Here are the video and slides.  I continue to be puzzled by gap between what is widely believed and my reading of market evidence. I began by highlighting three facts that seem to me to be in substantial tension with the widespread view that banks are far safer now than they used to be because they are far better capitalized. Mark Carney’s statement that “The capital requirements of our largest banks are now ten times higher than before the crisis. . . . This substantial capital and huge liquidity give banks the flexibility they need to continue to lend…even during challenging times” is typical. First, there is distressingly little evidence in favor of the proposition that banks that are measured as better capitalized by their regulators are less likely to fail than other banks.  Andrew Haldane suggests the absence of a relationship looking across banks before the 2008 crisis.  Second, financial logic embodied in the celebrated Modigliani Miller theorem and suggested by common sense holds that substantial reductions in leverage, if achieved, should be associated with reduced volatility, reduced sensitivity to shocks and lower risk premiums.   Third, the ratio of the market value of bank’s common equity to its risk weighted assets provides a market based measure of its leverage.  Of course, the market value of equity overstates true capital because of limited liability: if assets rise in value there is no limit to how much shareholders can ultimately receive; but there is a zero lower bound on what shareholders receive. Still, as Haldane and others have documented, this market measure has historically proven useful in predicting bank distress. The data suggest that on a market value of equity basis, major financial institutions are no less levered than they were over the period before the crisis—even excluding the couple of years before the crisis when there was plausibly a bubble element in market pricing. I am more confident that these observations need to be reckoned with in thinking about financial stability than I am in any particular set of explanations much less policy conclusions.  Here though are some observations suggested by our findings.

Few big banks would benefit from key part of House reg reform bill: CBO  — Very few large banks would opt to comply with a higher leverage ratio in return for substantial regulatory relief, according to the Congressional Budget Office. In the report on House Financial Services Committee Chairman Jeb Hensarling's Financial Choice Act, the CBO estimated that "most of the financial institutions that chose to maintain a 10% leverage ratio would be those with assets below $10 billion,” primarily because those institutions already hold leverage ratios in excess of 10%.

If banks wait for APIs to be mandated, it will be too late - When I talk to most bank CEOs in the U.S. about the European Union regulation that requires financial institutions to make consumer data available via application programming interfaces, I hear fear. Many executives believe the U.S. will get a similar PSD2 mandate, and they fear that the U.S. version of the regulation will force them to give up unilateral ownership of a treasure trove of data and cause further erosion to their bank’s bottom line. To them, designing, building, securing and maintaining an API for consumers, fintechs and others to use is a scary, losing proposition. The reality, however, is that the data-sharing model is essential for customer retention. Instead of fearing potential regulation, banks should embrace the open banking model now. I will point to two examples of past business innovation to illustrate the necessity of embracing an open banking concept. First, with the flood of technological change hitting financial services, there are compelling reasons APIs will soon emerge as a truly transformational innovation that makes consumers want to stay with their bank. In banking, these types of innovations do not come along that often. The last one arguably was electronic bill payment. It not only rewrote the book on making things convenient for customers, but it also strengthened bank-user ties; a customer would have to invest in re-entering bill payment data at another institution. APIs will have the same effect on retention while improving the consumer’s experience to a larger degree; they make managing their financial lives easier. If a customer can get that convenience through his/her bank, it will be an even greater incentive to stay with that bank. The second example relates to the steps Facebook took to emerge past social media competitors. 

Scrap screen scraping? Europe's finding it's not that simple  - Right now, hundreds of apps across the globe are asking for bank credentials so that consumers can quickly get a mortgage, make a travel budget across multiple bank accounts or pay a friend’s bar bill. The apps are not bank owned and their request for bank logins makes the guardians of the assets feel about as calm as a novice tightrope walker.  In Europe, banks and fintechs are squabbling over the future of this specific method, known as screen scraping as the deadline for PSD2 (a revised Payments Services Directive) nears and the technicalities for data-sharing are still getting hammered out. The fight offers a window on what's in store as the U.S. catches up to the way data will likely be shared as consumer habits change. The European Banking Federation argues that screen scraping must die under PSD2, which demands banks invest in more modern data-sharing methods, for the sake of security. Fintechs argue the practice, which they call direct access, must survive to keep banks’ control of data in check. Both sides see innovation imperiled if things don’t go their way.  The European Commission, which manages the day-to-day operations of the European Union, is essentially in the middle. It is urging the banking authority to let companies use screen scraping as a backup option to other methods, like application programming interfaces.  The decision, which is expected to hit within weeks and manifest in the PSD2 Regulatory Technical Standards, is nothing short of determining how digital banking will work in the future.

How banks can cut security risks posed by email hoaxes --The recent news that two high-ranking banking executives were tricked into having inappropriate email conversations with a prankster who then posted them on Twitter was amusing — and surely embarrassing for the executives. It was also a lesson for anyone who is casual about using email and for any IT or security department that is not doing its utmost to ward off mischief and worse. For those who may have missed it, Jes Staley, CEO of Barclays, fell for an email that looked like it came from Chairman John McFarlane. (The email address was The note spoke of McFarlane’s efforts to defend Staley against an activist shareholder who had called for Staley to resign at the bank’s annual meeting that day. Staley replied with fawning gratitude. “You have a sense of what is right, and you have a sense of theatre,” he wrote. “You mix humour with grit. Thank you, John. Never underestimate my recognition of your support. And my respect for your guile. … Someday I want to see an ad lib guitar run. You have all the fearlessness of Clapton.”   The true author of the email turned out to be an anonymous 38-year-old web designer from Manchester, England, according to the Financial Times. He uses the Twitter handle @Sinon_Reborn, a nod to the Greek character in the Aeneid who, as a Trojan captive, convinced the Trojans that the giant wooden horse the Greeks had left behind was intended as a gift.  This week, Mark Carney, governor of the Bank of England, received an email that appeared to be from another bank official, Anthony Hapgood. (The email address was The two had an exchange in which Carney joked about the drinking habits of one of his predecessors, Eddie George.  The emailer turned out to be the same prankster from Manchester. On Twitter, he said his motive was to test the central bank’s security.  In these cases, no laws were broken, and nothing was stolen. But the incidents made the executives and their organizations look foolish and raised questions about the quality of their security and controls.

Regtech startup's mission: Find real terrorists, avoid false alarms - When examiners from the Office of the Comptroller of the Currency turned up anti-money-laundering deficiencies at Citigroup during a compliance audit, the bank bought an anti-laundering system with all the bells and whistles from an enterprise software vendor. While the new system was necessary, it wasn’t exactly effective, says Hans Morris, then Citi’s chief financial officer for markets and banking. “I felt the return on our effort and investment was terrible,” recalled Morris, who is now managing director of the venture capital firm Nyca Partners. “It was a massive investment, but the main result was a large increase in false positives. I remember asking how many terrorists we were detecting, and the answer was that there was not much of a difference.”Such false alarms — and more importantly the money banks are spending to fix them — have attracted the attention of fintech executives who believe artificial intelligence can help turn thousands of possibly misleading red flags into a handful of meaningful alerts.  On Wednesday morning, Konrad Alt, a former regulator and chief operating officer of Promontory Financial Group, and artificial intelligence expert Bradford Cross are launching a startup called Merlon Intelligence that they say can do this.

Citigroup Agrees to $97.4 Million Settlement in Money Laundering Inquiry - For years, Citigroup employees feared that millions of dollars the bank was moving to Mexico might be suspicious. Yet in many cases, the bank did not alert regulators or step up its monitoring for money laundering, federal prosecutors said Monday.Even as the Citigroup unit Banamex USA was growing to dominate remittances from the United States to Mexico, the bank did not properly safeguard its systems from being infiltrated by drug money and other illicit funds, prosecutors said.On Monday, Citigroup agreed to pay $97.4 million in a settlement after a long federal investigation into Banamex USA. In exchange, the Justice Department will not file criminal charges against the bank in connection with inadequate oversight of Banamex USA, which is based in California.As part of the agreement, Banamex USA “admitted to criminal violations by willfully failing to maintain an effective anti-money-laundering” compliance program, the Justice Department said.The deal represents the first such agreement between a major bank and the Justice Department under Attorney General Jeff Sessions. It also resolves some of Citigroup’s most serious regulatory issues related to its profitable, but risky, business in Mexico. From 2007 to 2012, Banamex USA g enerated about 18,000 internal alerts of suspicious transactions among the 30 million Mexico remittances it processed, prosecutors said. Yet the bank conducted fewer than 10 investigations and filed only six suspicious activity reports with regulators.

Trump’s Justice Department Goes Easy on Citigroup Unit for Criminal Money Laundering -  Pam Martens -  Citigroup, the Wall Street mega bank that taxpayers were forced to prop up in the largest bailout of a financial institution in U.S. history from 2008 to 2010, is also a recidivist lawbreaker that the U.S. Justice Department fails to tame regardless of who occupies the Oval Office. Under the Obama administration, Citigroup was repeatedly fined by its Federal regulators for serious abuses of the law and its customers but only once was a felony count leveled against the bank. On May 20, 2015, Citicorp, a unit of Citigroup, pleaded guilty to a felony charge in connection with the rigging of foreign currency trading. Trump’s Justice Department is now raising eyebrows for handing another unit of Citigroup a non-prosecution agreement yesterday for egregious money laundering violations. The Justice Department’s Acting Assistant Attorney General, Kenneth A. Blanco, announced yesterday that Banamex USA, a unit of Citigroup, was being given a non-prosecution agreement and forfeiting $97.44 million. Banamex USA agreed to admit to criminal violations for “willfully failing to file Suspicious Activity Reports (SARs).” SARs are one of the most basic procedures that U.S. banks employ to guard against money laundering. And yet, the Justice Department found the following at Banamex USA:“According to admissions contained in the NPA [non-prosecution agreement] and the accompanying statement of facts, from at least 2007 until at least 2012, BUSA [Banamex USA] processed more than 30 million remittance transactions to Mexico with a total value of more than $8.8 billion. During the same period, BUSA’s monitoring system issued more than 18,000 alerts involving more than $142 million in potentially suspicious remittance transactions. BUSA, however, conducted fewer than 10 investigations and filed only nine SARs in connection with these 18,000-plus alerts, filing no SARs on remittance transactions between 2010 and 2012.” Equally disturbing about the Justice Department’s non-prosecution agreement is the fact that Citigroup and Banamex USA are only required to cooperate with the Justice Department on violations of federal money laundering statutes for a period of one year, or to report any evidence it has of money laundering for just one year.

'A needle in a stack of needles': Using AI to detect money-laundering (podcast)  David McLaughlin, founder and CEO of QuantaVerse, discusses how artificial intelligence can improve anti-money-laundering compliance; the problems of de-risking and "defensive filing" of suspicious activity reports; the Clearing House's proposal to reduce banks' AML costs; and more.

Banks pour $107M into blockchain consortium R3 -- R3, the bank consortium that’s building a distributed ledger specifically for financial institutions, received its first wave of funding Tuesday morning — a cool $107 million from 40 of its backers.  The money should give a boost to R3, which has suffered several defections in recent months. JPMorgan Chase, Goldman Sachs, Banco Santander, Morgan Stanley and National Australia Bank have pulled out of the group. “I think it’s a massive vote of confidence,” said Charley Cooper, managing director at R3. “It’s a lot of money. And unlike venture capitalist firms that sprinkle money around various places and hope that something hits, bank investment committees and investor groups are far more diligent and exacting in the type of review they do before they’re willing to cut a check.”  Although R3 has lost some major names, it has added members, too. The group currently has 84 members, most of which are financial institutions. The members involved in the raise include Bank of America Merrill Lynch, Wells Fargo, Citigroup, TD Bank, BBVA, Bank of New York Mellon, Northern Trust, HSBC, Barclays, UBS, Intel and Temasek.

Nasdaq, Citi using blockchain for securities payments - Nasdaq Inc. and Citi Treasury and Trade Solutions are partnering to utilize blockchain technology to expand and improve cross-border and private company securities payments on Citigroup's business services platform. Using distributed ledger technology from Chain Inc., Citigroup will now link business payments to Nasdaq's Linq blockchain for activities such as buying and selling shares of private companies. The arrangement establishes direct access for the parties to global payments from Nasdaq's Linq by using CitiConnect for Blockchain, and WorldLink Payment Services, which operates as Citi's cross-border, multicurrency service. The Nasdaq-Citi collaboration comes at a time when the financial services industry is closely studying the use of distributed ledger technology and what type of partnerships or agreements can best speed up its adoption. Blockchain is a distributed ledger system originally developed for use with bitcoin. The companies say this integration allows businesses to address the challenges of liquidity in private securities by streamlining transactions among multiple parties. It also increases operational efficiency and provides easier reconciliation, as well as real-time visibility of payment transaction activity on the blockchain ledger, according to Nasdaq and Citi."This new payment capability marks a milestone in the global financial sector and represents an important moment in the commercial application of blockchain technology," Nasdaq CEO Adena Friedman said in a May 22 press release. "Through this effective integration of blockchain technology and global financial systems, we can realize greater operational transparency and ease of reconciliation, which can have profound implications for outdated administrative functions in the capital markets." 

 Fidelity Is Mining Bitcoin, CEO Abigail Johnson Admits - In what bitcoin geeks undoubtedly interpreted as a sign of bitcoin’s renewed relevance now that its price is at all-time highs, Fidelity CEO Abigail Johnson told CoinDesk’s Consensus conference that her company is now in the business of mining bitcoin. Per the FT:“Ms Johnson noted that Fidelity has also set up a bank of computers built by 21 Inc that can crunch complex algorithms to be rewarded with bitcoin.“My…computer has mined over 200,000 satoshis,” she said, using the name for the smallest unit of bitcoin.  Her remarks coincide with an astounding rally in virtual currencies like bitcoin. As DoubleLine’s Jeffrey Gundlach noted on Tuesday, bitcoin is up 100% in under two months, implying that the turmoil in Chinese markets was driving more locals into bitcoin.One coin was trading at $2,275 Tuesday according to Coinbase, the latest in a series of all-time highs as global uncertainty rises...Johnson also added that Fidelity now allows employee to pay for lunch with bitcoin at the cafeteria in its Boston headquarters. She noted that fewer than 100 employees have paid with bitcoin, demonstrating an unnatural-sounding mastery of industry slang. “I guess we have a lot of hodlers,” she said, using the slang for bitcoin users who avoid selling the currency when it jumps in value. And Fidelity's CEO also revealed information about her company's partners on its journey, naming blockchain startup Axoni, investment firm Boost VC and university initiatives based out of MIT, University College London and Cornell. To date, Johnson explained that Fidelity Labs, its internal R&D division has also set up experiments for bitcoin micropayments and even run bitcoin and ethereum mining operations in the spirit of learning more about the technology. Further, she revealed that Fidelity will be taking some conservative steps to expose Fidelity's customers more to the industry, announcing that customers will soon be able to see Coinbase holdings on Already, she said, this feature is available to employees who own digital currencies available through the startup's services.

This is how financial services chatbots are going to evolve - The first generation of chatbots in financial services has yet to win over the majority of consumers. But as the technology improves, banks and payments companies foresee a variety of roles and abilities for these virtual assistants. Today’s simple question-and-answer programs will evolve, experts say, to become sophisticated conversational agents, which will help customers transact and may even be capable of understanding emotional cues. As that happens, banks expect more and more consumers will turn to chat platforms, such as Facebook Messenger and WhatsApp, to conduct their financial affairs. When they do, the bots will be waiting for them—helpful digital representatives of companies that are betting on conversational finance as the next frontier. "A decade ago we had the first big leap, and that was web to mobile," said Edrizio de la Cruz, co-founder and CEO of Regalii, a startup whose application programming interfaces are used by dozens of financial services providers to build their chatbots. "Now the next one is mobile to conversational." The development of sophisticated chatbots and their mass adoption by consumers may take a couple of years, says de la Cruz. But once it happens, he says, the idea of handling your finances without a bot will be like trying to picture your life without a smartphone.  Banks and payments companies are experimenting both with bots that live in their mobile apps and ones that exist on Facebook Messenger. Going with the former give a bank more control over the functions of the bot, while the latter allows the bank to reach its customers where they already are. But experts say that in either case the guts of the technology are essentially the same.

Close loopholes for online lenders, N.Y. regulator urge -- Online lenders are evading New York regulations by claiming their loans are “made” by federally chartered or out-of-state partner banks, the state’s top financial regulator told lawmakers in Albany Monday. Maria Vullo, superintendent of the New York State Department of Financial Services, urged legislators to clarify the statutory definition of “making loans” to include a wider range of companies. 

 How OCC can help banks disrupt the payday loan industry -- Unlike payday loans that force borrowers to repay credit in a lump sum, installment loans have extended payment terms, making them more affordable to lower-income borrowers. Pew has advocated for streamlined underwriting guidelines on bank-issued installment loans that allow monthly installment payments of up to 5% of monthly income. We are still hopeful that the CFPB will endorse this approach, which has the support of the banking industry, in their small-dollar lending rules. But the OCC, the prudential regulator for the largest banks that would make these loans, can step in to encourage action on safer installment lending. The agency has the authority to promote safety and soundness, and establishing streamlined underwriting guidelines to enable banks to offer small loans profitably is a way to do that. Such guidelines would also promote consumer-friendly financial inclusion in the process. This is similar to the authority the OCC exercised in 2013, when it issued guidance discouraging deposit advance products — which are also single-payment loans — citing safety and soundness concerns such as credit, reputational and operational risks.  Now, the agency, as well as the other prudential regulators, could encourage much safer small installment loans based on this 5% payment standard. The OCC could endorse its banks using this standard even if the CFPB does not go in that direction.

CFPB vs. PHH: Two-Year Battle Coming to a Head -- The highly anticipated hearing for the Consumer Financial Protection Bureau (CFPB) and PHH Corporation took place Wednesday in front of the Court of Appeals for the District of Columbia Circuit. The Court of Appeals agreed to revisit their October decision that the structure of leadership in CFPB is unconstitutional brought by PHH.In October, the three-judge panel for the U.S. Court of Appeals decided the agency was not organized under checks and balances and therefore had to strike “for cause” language out of the leadership structure originally obtained from the Dodd-Frank Act. CFPB challenged this verdict and successfully appealed for an “en banc” review, meaning all the judges on the Appeals Court would be in attendance for the rehearing.The broadest issue in the case, according to Brian Marshall, Policy Counsel for the Americans for Financial Reform, is whether CFPB is able to remain an independent agency headed by a single director. PHH, which is accused of overcharging its mortgage customers, is arguing that the CFPB cannot be independent and that it has to report directly to the president. The CFPB argued that Congress is able to structure independent agencies as it has with financial regulators for quite a long time and they maintain their independence by keeping their heads in place across administrations. “We think that [the case] is very similar to the Federal Trade Commission case that the Supreme Court ruled on over 80 years ago, and it's very promising that the full court questioned the panel decision and is willing to take up the case,” Marshall said. Michael Barr, Faculty Advisor at the University of Michigan Law School, said the thought that the CFPB should not be able to operate as an executive branch agency or as a multi-member commission is missing the point.“I think the Constitution requires agencies to be accountable but there are lots of ways to achieve that,” Barr said. “The CFPB, in my judgment, is an accountable and effective agency and one that is also independent, and I think that it should be affirmed.”

The Case That Could Doom Elizabeth Warren’s Wall Street Watchdog - Since the day it was created, Democrats loved it, Republicans hated it and Wall Street, at best, tolerated it. The fate of the Consumer Financial Protection Bureau and its chief, Richard Cordray, is in the hands of a Washington appeals court that will hear arguments Wednesday. The CFPB asked the court to reconsider its 2016 decision involving the agency’s punishment of New Jersey mortgage company PHH Corp. The outcome could take months. It’s expected to provide ammunition for one side or the other in the years-long tug of war over the agency’s existence. Democrats defend the CFPB, the brainchild of Massachusetts Senator Elizabeth Warren, as a Wall Street watchdog necessary to advocate for ordinary Americans in the aftermath of the worst economic downturn in 75 years. They say it’s returned nearly $12 billion to customers who’ve been shortchanged. Republicans condemn the CFPB for snuffing economic activity by burdening lenders with red tape, and they’ve intensified their attacks since the election of President Donald Trump. They say that Cordray’s power is unconstitutional -- he can be fired only by the president and only for cause -- and the agency oversteps its mandate. Last year, the appeals court agreed, while at the same time rejecting calls to dismantle the agency. “The CFPB has the weaker hand right now,’’ said Adam White, who studies financial regulation and law at the Hoover Institution, a conservative think tank. “If they lose any aspect of this case, Cordray is really in trouble. And no matter what, this case will continue to energize Congress.’’ The judges could go so far as to call on the CFPB to be disbanded. The Trump administration has said that it wants the ability to dismiss Cordray at any time for any reason, but that the agency shouldn’t be shut down entirely. The CFPB has been at the center of some of the ugliest partisan bickering in Congress over the 2010 Dodd-Frank banking law. The Trump administration’s budget, announced today, calls for moving oversight of the CFPB to Congress from the Federal Reserve, which would save the federal government $6.8 billion over a decade. The banking industry says it would prefer a bipartisan commission rather than a single director. In congressional hearings over the years, Republicans called Cordray a dictator and a “sad, sick joke.” 

Battleground state voters favor CFPB commission, poll finds — Voters in battleground states overwhelmingly favor keeping the Consumer Financial Protection Bureau around, but they would also like to see some changes to its structure. Roughly 58% of 6,000 voters in Indiana, Maine, Michigan, Missouri, Montana, North Dakota, Ohio and West Virginia said they would support moving the bureau from a single director to a bipartisan commission, according to a poll released Monday by three industry groups. The poll was conducted from May 3 to May 16.

U.S. regulator may have edge in court arguments on its structure - A divided U.S. appeals court on Wednesday appeared to tilt slightly in favor of the Consumer Financial Protection Bureau's arguments that its structure does not violate the Constitution, in one of two cases that could weigh on the policing of Wall Street. A crowded courtroom at the U.S. Court of Appeals for the District of Columbia Circuit heard a number of judges on the 11 member panel vigorously question Theodore Olson, an attorney whose mortgage company client PHH Corporation (PHH.N) brought the case against the regulator after the CFPB sued the company on allegations it was involved in an illegal kickback scheme. Six judges on the panel were appointed by Democratic presidents and five were appointed by Republican presidents. The harshest questioning came from Democratically-appointed judges, though Republican-appointed Judge Thomas Griffith also at times raised concerns on whether Olson's arguments run counter to Supreme Court precedent. The case hinges on whether the court should reconsider a ruling last October by a three-judge panel that found the powers of the bureau's director Richard Cordray were unconstitutional because he can only be fired by the president for cause, and not at will. The hearing featured an added layer of drama after Justice Department attorney Hashim Mooppan also stood up to argue against the regulator and in favor of PHH - an unusual about-face that occurred after President Donald Trump, a Republican, took office in January.The bureau's own attorneys represented the regulator, which was established by the 2010 Dodd-Frank law under President Barack Obama, a Democrat. The agency's creation was in response to the 2008 financial crisis to protect people from predatory lending. If the CFPB prevails, it could take the wind out of the sails of Republican-led efforts in the White House and in Congress to rein in the bureau and fire Cordray before his term expires in 2018. 

Would Wells scandal have come to light with a defanged CFPB? - House Financial Services Committee Chairman Jeb Hensarling, R-Texas, is a proponent of the free market. He and other free-market advocates believe that consumers discipline wayward companies — better than does the government — by eschewing their offerings.This view has an empirical basis. Not so long ago, many consumers carried BlackBerrys. Now, few do — because consumers prefer other smartphones. Markets can indeed be powerful.  But consumer willingness to switch to more attractive products is different from saying consumers will punish malefactors, and here the free-market approach leaves much to be desired. Wells Fargo’s opening of millions of phony accounts using the names of its customers was perhaps the most significant bank scandal to come to light since the financial crisis. But Hensarling’s Financial Choice Act, which passed the House Financial Services Committee, would have weakened federal regulators’ ability to publicize the scandal and punish Wells. The Consumer Financial Protection Bureau, which joined the Office of the Comptroller of the Currency and Los Angeles city attorney in forcing the bank to refund customer fees and pay $185 million in fines, would have the power it used against Wells stripped by the House bill.Hensarling’s bill would rename the CFPB as the Consumer Law Enforcement Agency, remove much of its independence and eliminate its authority both to supervise large banks and penalize institutions for “unfair, deceptive, and abusive acts and practices,” among other restrictions. Its rulemakings would be subject to congressional approval. If the bill had been enacted — and the consumer bureau were just a shell of the agency it is today — it is a fair question to ask whether Wells Fargo would have been held accountable for its actions.  According to a recent OCC report, the national bank regulator knew of the Wells problems as early as 2010 and didn’t follow up. That is consistent with the OCC’s history of protecting banks from consumers more than consumers from banks — such as it did in the years before the subprime crisis when it said that state laws barring predatory lending did not apply to national banks.

CFPB seen as likely to win constitutional case --- A federal appeals court appears to be leaning toward a ruling in favor of the Consumer Financial Protection Bureau, with several judges arguing that a single director is more accountable to the president than a multimember commission, according to lawyers familiar with the case.  While justices questioned both sides in oral arguments Wednesday during a review by an 11-judge panel in the PHH v. CFPB case, observers said the questions tilted toward supporting the CFPB.

Give credit unions carve-out from CFPB? NCUA says ‘yes’ -- J. Mark McWatters, the acting chairman of the National Credit Union Administration, urged the Consumer Financial Protection Bureau on Wednesday to exempt credit unions from two regulatory requirements that have long plagued financial institutions. McWatters, who was appointed in January by President Trump, sent a letter to CFPB Director Richard Cordray asking for credit unions to be exempt from some of the expanded Home Mortgage Disclosure Act requirements. He also asked for regulatory relief from unfair, deceptive and abuse acts or practices, known as UDAAP. 

The Fees and the Darkness -- The fiduciary rule is coming!  The Department of Labor announced on Monday that its much-anticipated fiduciary rule -- or at least the lion’s share of its provisions -- would go into effect on June 9. In a nutshell, the rule prohibits brokers from taking money from mutual funds they recommend to clients unless they disclose those payments to their clients.Brokerage firms have been arguing that the rule is pointless and potentially harmful to investors. But on the same day that the department made its announcement, the California Public Employees’ Retirement System, or Calpers, reminded everyone why the fiduciary rule was necessary -- if not inevitable -- albeit in a different context.  Calpers is the nation’s largest pension plan. It has 380 people overseeing its $320 billion in assets. And yet despite its size and resources, Calpers didn’t know until recently how much it paid its private equity managers in performance fees.   Obviously, that’s not good. Performance fees can dwarf management fees in a private equity fund. Investors must therefore consider those performance fees when deciding whether to invest or remain invested in a fund. That’s more important now than ever. There’s a growing awareness that high fees devastate returns over time, and fees charged by private equity funds are notoriously high. There’s also widespread concern that the $2.5 trillion invested in those funds has stretched private equity valuations and thereby compromised future returns. If there was ever a time to blindly throw money at private equity, now isn’t it. Private equity managers would no doubt point out that investors pay a performance fee only if they make money. In many cases, managers don’t receive a performance fee unless they beat a hurdle rate -- 8 percent is common. And if the fund manages to beat the agreed-on hurdle, it shouldn’t matter how much the manager collects in performance fees.

Dubious Corporate Practices Get a Rubber Stamp From Big Investors - NYT -- Institutional asset managers, overseeing trillions of other peoples’ investment dollars, carry enormous clout across corporate America. They can use the power and weight of their clients’ shares in public companies to vote for change on crucial matters, like outsize executive pay and anti-investor antics in the boardroom. Too bad, then, that so many of these managers choose instead to support the status quo, even when investors are ill served. Take, for example, Arconic, the industrial metals company that spun off Alcoa in November. Some of its directors are facing a proxy challenge to be decided Thursday at the company’s annual meeting. Mounted by Elliott Management, the giant hedge fund, the battle follows years of declining sales, rising losses and a subpar stock performance at Alcoa. Another problem: The structure of Arconic’s board — and Alcoa’s before it — is investor-unfriendly. It is what’s known as a classified board, in which directors’ terms are staggered, protecting them from being voted out en masse. Nevertheless, two of the company’s largest shareholders, BlackRock and Vanguard, voted their clients’ shares in support of Alcoa’s management and board last year. And they rejected a proposal urging the company install an independent chairperson. At the time, Klaus Kleinfeld, Alcoa’s longtime chief executive, was also its chairman. Had BlackRock and Vanguard favored the proposal for an independent chairperson, Mr. Kleinfeld might have been subject to greater oversight. This may have been a good idea, given the bizarre sequence of events that forced Mr. Kleinfeld from his posts at Arconic last month. But we’ll return to that later. BlackRock and Vanguard control a combined $9 trillion in assets, so how they vote their investors’ shares could not be more important. Their votes can hold boards and company executives accountable for their actions.  Or not, as in the Arconic case. 

Shocking Admission From NY Bankruptcy Judge: "Chapter 11, 15 Filings Have Exploded" A stunning soundbite was captured by a Bloomberg reporter during last week's event at the American Bankruptcy Institute. According to judges speaking at an ABI conference Thursday in Manhattan, the U.S. Bankruptcy Court for the Southern District of New York is seeing a sharp rise in cases this year, with Chapter 11 and Chapter 15 filings outpacing national averages."Chapter 11s and Chapter 15s have exploded" said U.S. Bankruptcy Judge Shelley Chapman, speaking at American Bankruptcy Institute event, cited by Bloomberg reporter Tiffany Kary.The numbers for the bankruptcy court which serves Manhattan are, frankly, horrifying:Chapter 11s have tripled in the first quarter of the year, while Chapter 15s for companies seeking U.S. aid for a reorganization in a foreign court have increased sevenfold, Chapman added.What makes New York data so dramatic is that the region's bankruptcy filings contrast with national data, that show Chapter 11 filings are down slightly, Judge Carla Craig from Eastern District of New York said.New York is not alone it seems: As Bloomberg adds, Judge Brendan Shannon from Delaware said he has also seen an uptick in Chapter 11s and Chapter 15s, though not as marked as in New York. Shannon also sees trend in retail and energy sector bankruptcies continuing, based on current cases . The culprit? Take one guess: “The report is that for at least a lot of retailers, it is certainly a difficult, if not flat out impossible environment to operate in,” Shannon said. “We do see more of those cases likely on the horizon.”

Net Income Of Community Banks Rise to $5.6 Billion In 1Q17: Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported aggregate net income of $44 billion in the first quarter of 2017, up $5 billion (12.7 percent) from a year earlier. The increase in earnings was mainly attributable to an $8.8 billion (7.8 percent) increase in net interest income and a $2.1 billion (3.4 percent) increase in noninterest income. Financial results for the first quarter of 2017 are included in the FDIC’s latest Quarterly Banking Profile released today. Of the 5,856 insured institutions reporting first quarter financial results, 57 percent reported year-over-year growth in quarterly earnings. The proportion of banks that were unprofitable in the first quarter fell to 4.1 percent from 5.1 percent a year earlier.Quarterly earnings were 12.7 percent higher than in the first quarter of 2016 due to growth in net operating revenue. Net operating revenue – the sum of net interest income and total noninterest income – was $183.6 billion, an increase of $10.9 billion (6.3 percent) from a year earlier. Loan-loss provisions totaled $12 billion, a decline of $541 million (4.3 percent) compared to first quarter 2016. Noninterest expenses of $109.2 billion were $4.5 billion (4.3 percent) higher than a year earlier, as a 2 percent year-over-year increase in employment was reflected in higher payroll expenses. The improvement in revenue also caused the average return on assets to rise to 1.04 percent from 0.97 percent a year earlier. The 5,401 insured institutions identified as community banks reported a $522.9 million (10.4 percent) increase in net income in the first quarter. Net operating revenue was $1.5 billion (7 percent) higher, as net interest income was up $1.2 billion (7.1 percent), and noninterest income rose by $304.4 million (6.8 percent). Loan-loss provisions increased by $32.7 million (5.2 percent), while noninterest expenses were $721.9 million (5 percent) higher. 

What the Fed giveth, the Fed taketh away – BankThink - Since the financial crisis, easy access to liquidity for banks of all sizes — but particularly regional and community banks — has had a lot to do with the Federal Reserve’s monetary policy. Between 2009 and 2014, the Fed injected excess reserves of $2.5 trillion into the banking system to encourage lending and help jump-start the economy. Meanwhile, the long period of historically low interest rates restricted competition for deposits in the industry. A high-rate environment usually leads to banks jockeying for customers based on deposit yields — a contest typically won by the biggest banks. But more recently, the Fed has been upfront about its plans to slowly raise rates and unwind excess reserves. In March, the Fed raised its benchmark interest rate for the second time in three months. The central bank left rates unchanged in May. But Fed Chair Janet Yellen's comments earlier this year to members of Congress were telling when she said that waiting too long to raise rates would be “unwise.” A report in May from JPMorgan Chase, according to news coverage of it, estimates that $1.5 trillion could be sucked out of the system over the next five years if the Fed follows through with recent guidance moving ahead with reversal its “quantitative easing” measures. The Fed’s post-crisis accommodative policies led to a lower cost of funds for banks that in turn saw their deposit balances grow. But a concern is that a suddenly higher cost of funds will lead to deposit declines. Without a sudden growth in retail deposits, community and regional banks will be forced to reduce assets or seek alternative funding. The ability of community and regional banks to win deposits with slightly higher rates than larger competitors has also been complicated by the ability of retail depositors to shop for rates online. Higher yields on customer deposits could benefit the largest banks, which can afford to more aggressively market higher yields in a bid to grow their deposits.

Banks Aren't Worried That More Credit-Card Loans Are Souring - “Generally, if the consumer has income, they pay their debts,” Kevin St. Pierre, an analyst at Sanford C. Bernstein, said in a note to clients last week. “Consumer credit losses are driven predominantly by unemployment.” With investors skittish over the potential for higher defaults on auto and student loans, St. Pierre is one of many industry analysts and banking executives who’ve sought to allay similar concerns over rising credit-card write-offs.Card balances eclipsed $1 trillion in February, the most since the 2008 financial crisis, Federal Reserve data show. Card issuers including Capital One Financial Corp., Citigroup Inc., Synchrony Financial and Discover Financial Services all reported higher card write-offs in the first quarter.  Still, executives and analysts see one data point as key to the health of the credit-card industry: jobs. U.S. unemployment is near an all-time low, and as long as it stays there, consumers should be able to handle their card debt.  “We’re not losing any sleep that we can’t manage the credit situation we’re confronted with right now,” Discover Chief Financial Officer Mark Graf told analysts in April. “While charge-off rates have risen, they remain quite low by historical standards.”  Six of the biggest U.S. card lenders -- JPMorgan Chase & Co., Bank of America Corp., Citigroup, American Express Co., Capital One and Discover -- reported that loans at least 30 days overdue, a harbinger of future write-offs, fell in April. Synchrony, signaling confidence in its own prospects, announced a dividend increase and new $1.6 billion stock repurchase program last week. Shares of the private-label card issuer have tumbled 26 percent this year, the worst performance in the S&P 500 Financials Index.

Commodities Bust Hits Farm Lenders, Delinquencies Surge 225% -- Just as the deflating Farmland bubble leaves its marks.When it comes to agricultural debt, the numbers aren’t huge enough to take down the global financial system. But this shows how much pain the commodities rout is producing in the farm belt just when the farmland asset bubble that took three decades to create is deflating, and what specialized lenders and the agricultural enterprises they serve – some of them quite large – are currently struggling with in terms of delinquencies.This is what delinquencies on loans for agricultural production – not including loans for farmland, which we’ll get to in a moment – look like:From Q4 2014 to Q1 2017, delinquencies have soared by 225% to $1.4 billion, according to the Board of Governors of the Federal Reserve, which just released its report on delinquencies and charge-offs at all banks. This is the highest amount since Q1 2011, as delinquencies were falling after the Financial Crisis. That amount was first breached in Q4 2009.The delinquency rate rose to 1.5%, the highest since Q3 2012. On the way up, going into the Financial Crisis, delinquencies breached that rate in Q1 2009. These were the loans associated with agricultural production. In terms of loans associated with farmland, delinquencies have soared by 80% from Q3 2015 to Q1 2017, reaching 2.15 billion: Farmland values have surged for three decades but are now in decline in many parts of the US. This chart from the Chicago Fed’s AgLetter shows farmland prices in its district in two forms, adjusted for inflation (green line) and not adjusted for inflation (blue line):

Why banks should take notice of retailers’ problems - This is a good time for bank risk managers and bank regulatory examiners to evaluate the effects of a deepening retail crisis on the financial services sector. Last year, with online shopping growing ever more dominant, 4,000 stores closed, and this year is looking far worse. Some sell-side analysts predict that the number of closings could double. Just in the first quarter of 2017, 3,000 stores have closed. S&P Global Ratings expects defaults by retailers on their bonds this year to surpass those in 2008-2009, when the U.S. was in the depths of the financial crisis.  Banks are exposed to retail woes, because they lend to retailers, invest in shopping centers and other real estate where retailers are housed, and to employees of both sectors. Big banks are particularly exposed to the retail sector because they often invest in securities that are backed by retail-related commercial real estate. According to The Economist, data from Bloomberg, the Mortgage Bankers Association and TreppAnalytics “suggests that the combined debt of retailing companies and retailing property is roughly $1 [trillion].”  Kohl’s was among large retailers last week that announced disappointing sales, earnings and, in some cases, both. Banks and regulators should be mindful of financial institutions’ exposure to retailers’ woes. Bloomberg NewsAccording to Fitch Ratings, retailer loan delinquencies have been edging up. Presently, Fitch has a default rate forecast of 9% year-end for the retail sector compared with 1% in 2016. Not only should professionals at banks and bank examiners pay attention to retail loan delinquencies, but they should also look at market signals that are much more dynamic than credit rating forecasts. Just last week, big retailers Dillard’s, J.C. Penney, Kohl’s, Macy’s and Nordstrom announced disappointing sales, earnings and, in some cases, both. With the earnings calls, retailers’ stocks declined, affecting the overall market on May 11 and 12.

FHFA sounds alarm on Home Loan Bank funding, advances -- Concerns about credit concentrations at the Federal Home Loan banks are opening the door to a wider conversation about — and likely rulemakings on — stricter regulation of these government-sponsored enterprises.  Federal Housing Finance Agency Director Mel Watt sketched a regulatory vision this week that included greater scrutiny of large exposures to single borrowers and of funding mechanisms used by the 11 banks, as well as serious consideration of new risk-based capital and liquidity rules.

U.S. Residential Loan Origination Dollar Volume Drops to Three-Year Low in Q1 2017: -- ATTOM Data Solutions, curator of the nation’s largest multi-sourced property database, on May 25 released its Q1 2017 U.S. Residential Property Loan Origination Report, which shows that more than 1.4 million (1,415,847) loans were originated on U.S. residential properties (1 to 4 units) in the first quarter of 2017, down 30 percent from the previous quarter and down 21 percent from a year ago. The total dollar volume of loan originations in the first quarter was also down 21 percent from a year ago to $347.9 billion, the lowest since Q1 2014 — a three-year low, according to Realtytrac. The loan origination report is derived from publicly recorded mortgages and deeds of trust collected by ATTOM Data Solutions in more than 950 counties accounting for more than 80 percent of the U.S. population. “Rising mortgage rates made qualifying for a home purchase more difficult and refinancing an existing home loan less attractive in the first quarter,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “Refinance originations in particular fell off a cliff in the first quarter to the lowest level in more than 10 years after posting double-digit percentage increases in the third and fourth quarters of 2016, indicating that some refinance demand was pulled forward late last year in anticipation of rising interest rates.“Despite the sharp drop in purchase originations, there were some encouraging signs in the data that a larger share of first-time homebuyers participated in the housing market in the first quarter: the share of FHA buyers increased from the previous quarter after two consecutive quarters down, and the median down payment decreased following three consecutive quarters of increases,” Blomquist added. “However, the data also indicates more homebuyers needed help to qualify for a home purchase in the first quarter. Nearly 22 percent of all single family purchase originations had multiple, non-married co-borrowers on the loan, up from 20 percent a year ago.” 

CFPB unfairly targeting Ocwen, analyst claims - Federal and state regulators have unfairly targeted Ocwen Financial Corp. with the goal of forcing it to sell its mortgage servicing portfolio to investors that would foreclose on troubled borrowers, claims a prominent mortgage finance analyst. The Consumer Financial Protection Bureau "has been overly harsh in its treatment of Ocwen, both measured by the amount of fines and penalties imposed and also because of the impressive record that the company has amassed in terms of helping consumers via loan modifications and permanent principal forgiveness," Christopher Whalen wrote in a paper published last week. The paper, titled "Abuse of Power: The CFPB and Ocwen Financial Corp.," is posted on the Social Science Research Network website. 

Crowd protests eviction of father, son from foreclosed home - Dozens stood out in the rain Thursday morning to protest the foreclosure eviction of an elderly man and his son from their Sixteen Acres home in Springfield, Mass. What the anti-eviction group Springfield No One Leaves initially billed as an eviction blockade turned into a full-throated protest when members of the Hampden County Sheriff's Department and city police ordered the group off the property at 2163 Wilbraham Road and across the street. Sammie Smith, 68, who has lived in the home with his family for over 21 years, said he has been suffering from ill health and wished he had more time to work out a way to stay. "I don't like it. It's not right," said Smith as he waited inside his kitchen for sheriff's deputies to enter his home and evict him. "They didn't give me enough time to try to get myself together or anything. But that is just the way it is." Smith's son, Kevin Smith, had to work Thursday morning and was not present for the eviction, according to Springfield No One Leaves. Sammie Smith fell behind on his mortgage payments when his wife, Cinda Smith, died, according to a press release issued by the organization. Before her death, Smith's wife told him not to worry about the mortgage because she had purchased insurance that would pay off the house if anything happened to her or him. She did not realize, however, that when she refinanced the house in 2006, that insurance policy became void. "Sammie, having limited education, did not understand the communications that (U.S. Bank Trust) and their debt collectors were sending him as he thought the insurance company had taken care of the home like his wife had told him would happen," the press release states. Smith and his son, according to Springfield No One Leaves, were willing to pay rent in order to stay. Such evictions, according to Springfield No One Leaves, are characterized as "no-fault evictions" because there is a viable alternative to eviction and families are willing to pay. Legislation was again introduced at the Statehouse in January to outlaw these types of evictions and require lenders to rent to families after foreclosure.  

Foreclosures dry up and a hot Wall Street trade gets new look - It was a rare lucrative business for Wall Street in the aftermath of the financial crisis: snapping up properties in foreclosure and renting them out. So good, in fact, that now, as the distressed pool dries up, some investors are refusing to let the rental-model fizzle. They’re building more and more of the houses themselves. American Homes 4 Rent, a five-year-old real estate investment trust and the biggest of the publicly traded landlords, is buying lots and houses around the U.S. No. 2 Colony Starwood Homes plans to purchase at least 600 just-erected properties over the next year from more than a dozen builders. Privately held AHV Communities is plotting whole neighborhoods for those who want — without the bother of ownership — single-family residences with some apartment-complex bells and whistles, such as fitness centers and bocce-ball courts. Residents don’t even have to mow their lawns. The bet behind the build-to-rent boom is that there are enough people who dream of the detached-house life but can’t afford to buy into it. With tight mortgage standards and rising prices, and millennials putting off marriage and loaded up with student debt, that might not be a long shot. As it is, the homeownership rate in the U.S. has been hovering for a while near a 51-year low, according to U.S. Census data, though that could be changing: The number of owner-occupied homes rose faster than the number of renting households for the first time since 2006 in the first three months of the year. But the REITs probably aren’t taking too much of a gamble considering many Americans’ feeble efforts to stash money away, said Bruce McNeilage, co-founder of Nashville, Tenn.-based Kinloch Partners, an investment firm that has experience buying brand-new rental homes and selling them to companies including Progress Residential and Main Street Renewal. “People have good intentions, but they’ve never been able to save for a down payment,” McNeilage said. Many tenants ask for short leases, saying they plan to buy, but they rarely do, he said. About one third of the 42 Nashville homes Kinloch sold to American Homes 4 Rent in 2014 were leased by people who had been on month-to-month arrangements for about seven years. For the landlord companies, it typically costs more, of course, to purchase a freshly constructed property than it does to acquire and refurbish an already lived-in model. But they’re getting discounts from builders. They also have to put less into maintenance and repairs, especially early on. 

Freddie Mac: Mortgage Serious Delinquency rate unchanged in April -Freddie Mac reported that the Single-Family serious delinquency rate in April was at 0.92%, unchanged from 0.92% in March.  Freddie's rate is down from 1.15% in April 2016. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.This matches last month as the lowest serious delinquency rate since May 2008. These are mortgage loans that are "three monthly payments or more past due or in foreclosure".  Although the rate is still declining, the rate of decline has slowed. Maybe the rate will decline another 0.2 to 0.4 percentage points or so to a cycle bottom, but this is pretty close to normal.

Black Knight: Mortgage Delinquencies Increased in April - From Black Knight: Black Knight Financial Services’ First Look at April 2017 Mortgage Data

• First-lien mortgage delinquencies rose by 13 percent, the largest monthly increase since November 2008
• Month-over-month, the number of borrowers past due on mortgage payments increased by 241,000
• April’s delinquency rate increase was primarily calendar-driven (due to both the month ending on a Sunday and March being the typical calendar-year low) and largely isolated to early-stage delinquencies
• The inventory of loans in active foreclosure continues to decline, hitting a 10-year low in April
• At just 52,800, April saw the fewest monthly foreclosure starts since January 2005
According to Black Knight's First Look report for April, the percent of loans delinquent increased 12.9% in April compared to March, and declined 3.6% year-over-year.
The percent of loans in the foreclosure process declined 3.5% in April and were down 27.3% over the last year.  Black Knight reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) was 4.08% in April, up from 3.62% in March. The percent of loans in the foreclosure process declined in April to 0.85%. The number of delinquent properties, but not in foreclosure, is down 74,000 properties year-over-year, and the number of properties in the foreclosure process is down 162,000 properties year-over-year.

MBA: Mortgage Applications Increase in Latest Weekly Survey --From the MBA: Refis Apps Up, Purchase Apps Slightly Down in Latest MBA Weekly Survey Mortgage applications increased 4.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 19, 2017.... The Refinance Index increased 11 percent from the previous week to its highest level since March 2017. The seasonally adjusted Purchase Index decreased 1 percent from one week earlier. The unadjusted Purchase Index decreased 2 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 its lowest level since November 2016, 4.17 percent, from 4.23 percent, with points increasing to 0.39 from 0.37 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

FHFA House Price Index: The Rise Continues - The Federal Housing Finance Agency (FHFA) has released its U.S. House Price Index (HPI) for Q1 and the most recent month. Here is the opening of the report:U.S. house prices rose 1.4 percent in the first quarter of 2017 according to the Federal Housing Finance Agency (FHFA) House Price Index (HPI). House prices rose 6.0 percent from the first quarter of 2016 to the first quarter of 2017. FHFA's seasonally adjusted monthly index for March was up 0.6 percent from February [Link to report]  The chart below illustrates the monthly HPI series, which is not adjusted for inflation, along with a real (inflation-adjusted) series using the Consumer Price Index: All Items Less Shelter.

Existing-Home Sales: April Headline Number Down 2.3% Month-over-Month  -- This morning's release of the April Existing-Home Sales declined from the previous month to a seasonally adjusted annual rate of 5.57 million units. The March count was downwardly revised from 5.71 million to 5.70 million. The consensus was for 5.65 million. The latest number represents a 2.3% decrease from the previous month and a 1.6% increase year-over-year.Here is an excerpt from today's report from the National Association of Realtors. Lawrence Yun, NAR chief economist, says every major region except for the Midwest saw a retreat in existing sales in April. "Last month's dip in closings was somewhat expected given that there was such a strong sales increase in March at 4.2 percent, and new and existing inventory is not keeping up with the fast pace homes are coming off the market," he said. "Demand is easily outstripping supply in most of the country and it's stymieing many prospective buyers from finding a home to purchase." [Full Report] For a longer-term perspective, here is a snapshot of the data series, which comes from the National Association of Realtors. The data since January 1999 was previously available in the St. Louis Fed's FRED repository and is now only available from January 2013. It can be found here.

NAR: "Existing-Home Sales Slip 2.3 Percent in April" --From the NAR: Existing-Home Sales Slip 2.3 Percent in April; Days on Market Falls to Under a Month Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, dipped 2.3 percent to a seasonally adjusted annual rate of 5.57 million in April from a downwardly revised 5.70 million in March. Despite last month's decline, sales are still 1.6 percent above a year ago and at the fourth highest pace over the past year. ...Total housing inventory at the end of April climbed 7.2 percent to 1.93 million existing homes available for sale, but is still 9.0 percent lower than a year ago (2.12 million) and has fallen year-over-year for 23 consecutive months. Unsold inventory is at a 4.2-month supply at the current sales pace, which is down from 4.6 months a year ago.This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.Sales in April (5.57 million SAAR) were 2.3% lower than last month, and were 1.6% above the April 2016 rate.The second graph shows nationwide inventory for existing homes. According to the NAR, inventory increased to 1.93 million in April from 1.80 million in March.   Headline inventory is not seasonally adjusted, and inventory usually decreases to the seasonal lows in December and January, and peaks in mid-to-late summer.
The last graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Existing Home Sales Slump As Prices Soar To Record Highs -- Following yesterday's collapse in new home sales, NAR reports that existing home sales in April also disappointed - dropping 2.3% (and March revised lower). This drop happens as median home prices spiked 6.0% YoY to record highs as sales declines are blamed once again on a lack of supply (forget affordability?).Highlights include:

  • Existing-home sales at 5.57m, vs est. of 5.65m
  • March at 5.7m; revised from 5.71m
  • Existing-home sales fell 2.3% after rising 4.2% prior month
  • 4.2 months supply in April vs. 3.8 in March
  • Inventory rose 7.2% to 1.93m homes
  • 1st-time buyers 34% of total sales; all cash 21%; investors 15%
  • Distressed sales 5% of total sales

Don't be too surprised... The median existing-home price for all housing types in April was $244,800, up 6.0 percent from April 2016 ($230,900). April's price increase marks the 62nd straight month of year-over-year gains. Total housing inventory at the end of April climbed 7.2 percent to 1.93 million existing homes available for sale, but is still 9.0 percent lower than a year ago (2.12 million) and has fallen year-over-year for 23 consecutive months. Unsold inventory is at a 4.2-month supply at the current sales pace, which is down from 4.6 months a year ago.  Lawrence Yun, NAR chief economist, says every major region except for the Midwest saw a retreat in existing sales in April."Last month's dip in closings was somewhat expected given that there was such a strong sales increase in March at 4.2 percent, and new and existing inventory is not keeping up with the fast pace homes are coming off the market," he said."Demand is easily outstripping supply in most of the country and it's stymieing many prospective buyers from finding a home to purchase." As a reminder, the May University of Michigan Consumer Sentiment survey showed a six-year low among those who think it’s a good time to buy a house and a 12-year high among those who say it’s a good time to sell. Disparities of this breadth tend tocoincide with break points and that’s just where we’ve landed in the cycle.

A Few Comments on April Existing Home Sales --Two key points:  1) As usual, housing economist Tom Lawler's forecast was closer to the NAR report than the consensus.  The NAR reported sales of  5.57 million SAAR, Lawler projected 5.56 million SAAR, and the consensus was 5.67 million SAAR.  See: Lawler: Early Read on Existing Home Sales in April"I project that US existing home sales as estimated by the National Association of Realtors ran at a seasonally adjusted annual rate of 5.56 million in April, down 2.6% from March’s preliminary pace and up 1.5% from last April’s seasonally adjusted pace." 2) Inventory is still very low and falling year-over-year (down 9.0% year-over-year in April). More inventory would probably mean smaller price increases, and less inventory somewhat larger price increases.  I started the year expecting inventory would be increasing year-over-year by the end of 2017. That still seems possible, but inventory will have to start increasing a little pretty soon.  The following graph shows existing home sales Not Seasonally Adjusted (NSA). Sales NSA in April (red column) were below April 2016. (NSA).Note that sales NSA are now in the seasonally strong period (March through September).And here is another update to the "distressing gap" graph that I first started posting a number of years ago to show the emerging gap caused by distressed sales.  Now I'm looking for the gap to close over the next several years.

New Home Sales decrease to 569,000 Annual Rate in April -- The Census Bureau reports New Home Sales in April were at a seasonally adjusted annual rate (SAAR) of 569 thousand. The previous three months combined were revised up significantly. "Sales of new single-family houses in April 2017 were at a seasonally adjusted annual rate of 569,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 11.4 percent below the revised March rate of 642,000, but is 0.5 percent above the April 2016 estimate of 566,000."The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate. Even with the increase in sales over the last several years, new home sales are still fairly low historically. The second graph shows New Home Months of Supply. The months of supply increased in April to 5.7 months. The all time record was 12.1 months of supply in January 2009. This is now in the normal range (less than 6 months supply is normal). "The seasonally-adjusted estimate of new houses for sale at the end of April was 268,000. This represents a supply of 5.7 months at the current sales rate." Starting in 1973 the Census Bureau broke inventory down into three categories: Not Started, Under Construction, and Completed. The third graph shows the three categories of inventory starting in 1973.  The last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate).

April New Home Sales Come in Below Expectations --This morning's release of the April New Home Sales from the Census Bureau came in at 569K, down 8.4% month-over-month from a revised 642K in March. Seasonally adjusted estimates for December and January were also revised. The forecast was for 610K. Today's release included monthly revisions back to January 2015.Here is the opening from the report:Sales of new single-family houses in April 2017 were at a seasonally adjusted annual rate of 569,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 11.4 percent (±10.5 percent) below the revised March rate of 642,000, but is 0.5 percent (±11.3 percent)* above the April 2016 estimate of 566,000.The median sales price of new houses sold in April 2017 was $309,200. The average sales price was $368,300. [Full Report] For a longer-term perspective, here is a snapshot of the data series, which is produced in conjunction with the Department of Housing and Urban Development. The data since January 1963 is available in the St. Louis Fed's FRED repository here. We've included a six-month moving average to highlight the trend in this highly volatile series.

New Home Sales Collapse In April -- If you're surprised by the collapse in new home sales in April, then you're not paying attention. The 11.4% MoM plunge in new home sales in April was 5 standard deviations below expectations and the biggest since March 2015. Year-over-year, new home sales have tumbled back to unchanged... As the surge in mortgage rates (and tumble in affordability) filters through to actual sales (just as it did in 2013's taper tantrum)... New home sales fell 73k in April, with the Median new home price falling 3.8% y/y to $309,200 12% of new homes sold in April cost more than $500,000, down from 18% last month. Months’ supply at 5.7 in April compared to 4.9 in March. And the biggest driver of new home sales collapse was in The West - which saw a 26.3% collapse - the most since Oct 2010... 

A few Comments on April New Home Sales - New home sales for April were reported at 569,000 on a seasonally adjusted annual rate basis (SAAR).  This was well below the consensus forecast, however the three previous months combined were revised up significantly. Overall this was a decent report. Sales were only up 0.5% year-over-year in April.This graph shows new home sales for 2016 and 2017 by month (Seasonally Adjusted Annual Rate).  Sales were up 0.5% year-over-year in April.For the first four months of 2017, new home sales are up 11.3% compared to the same period in 2016. This was a strong year-over-year increase through April, however sales were weak in Q1 2016, so this was also an easy comparison.

Housing’s Weak Start For Q2 Is Probably Noise - April was a rough month for housing. For the first time in a year, housing starts and sales of new and existing homes declined for the monthly comparison. The weakness weighed on the year-over-year change, which slumped to an 18-month low. Given housing’s critical role for growth, the slowdown would be worrisome if other corners of the economy weren’t showing signs of strength. Nonetheless, a soft housing market isn’t easily dismissed for business-cycle analysis.
The optimistic spin is that the latest downturn is only a temporary setback, in part due to an unusually wet April that kept would-be buyers away. Inventory issues are reportedly a factor depressing sales too. “Last month’s dip in closings [of existing home sales] was somewhat expected given that there was such a strong sales increase in March at 4.2 percent, and new and existing inventory is not keeping up with the fast pace homes are coming off the market,” says Lawrence Yun, chief economist at the National Association of Realtors. “Demand is easily outstripping supply in most of the country and it’s stymieing many prospective buyers from finding a home to purchase.”Sales of newly built homes also fell in April, probably due to the payback effect — transactions in March were unusually strong. Whatever the reason, sales tumbled more than 11% in April vs. the previous month, the biggest monthly setback in two years. Meanwhile, new residential construction fell last month… again. Housing starts slumped for a second month in a row, dropping 2.6% vs. the total for March. So far this year, starts have fallen in three out of four months. Monthly comparisons can be noisy and so it’s useful to review the annual pace for a clearer measure of the trend. But the numbers also show a clear stumble on this front, based on the average year-over-year percentage change for starts and sales of existing and new homes. The average change for the three indicators decelerated sharply in April to a weak 1.0% rise, the softest increase in 18 months.

70% Of Millennials Have Less Than $1,000 Saved For Buying A House --One of the frequent reasons cited for the failure of the US housing sector to rebound to its pre-recession levels, is the lack of household formation among young American adults and specifically the unwillingness, or inability, of Millennials, which last year overtook Baby Boomers as America's largest generation.... to move out of their parents' basement, or stop renting, and purchase their own home. Now, a new study from Apartment List confirms the underlying problem: nearly 70% of young American adults, those aged 18 to 34 years old, said they have saved less than $1,000 for a down payment. This is similar to what a recent GoBanking Survey found last year, according to which 72% of "young millennials"- those between 18 and 24 years old - had $1,000 in their savings accounts and 31% have $0; a sliver (8%) have over $10,000 saved. Of the "older millennials", those between 25 and 34, 67% had less than $1,000 in their savings accounts, 33% have nothing at all, and 15% have over $10,000.As the WSJ frames it, with most millennials having saved virtually nothing for a down payment on a home "many will face steep obstacles to homeownership in the years ahead." It also means that the US housing market, traditionally the bedrock of middle-class American wealth, may never recover to levels seen during the prior economic cycle which incidentally peaked as the housing bubble burst, scarring an entire generation with the vivid memories of what happens when millions of Americans rush to overpay for homes. Which is not to say that US housing is languishing, on the contrary. As we showed earlier this week, in the first quarter of 2017, the number of California homes that sold for $1 million or more totaled 10,562 up 11.7% year over year and the highest on record for a first quarter.

AIA: Architecture Billings Index positive in April --Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.  From the AIA: Design billings increasing entering height of construction seasonAfter beginning the year with a marginal decline, the Architecture Billings Index has posted three consecutive months of growth in design revenue at architecture firms. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the April ABI score was 50.9, down from a score of 54.3 in the previous month. This score still reflects an increase in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 60.2, up from a reading of 59.8 the previous month, while the new design contracts index increased from 52.3 to 53.2.  “Probably even better news for the construction outlook is that new project work coming into architecture firms has seen exceptionally strong growth so far this year,” . “In fact, new project activity has pushed up project backlogs at architecture firm to their highest level since the design market began its recovery earlier this decade.”
• Regional averages: South (55.3), Midwest (53.3), West (50.9), Northeast (50.7)
• Sector index breakdown: institutional (54.0), mixed practice (53.4), commercial / industrial (52.4), multi-family residential (49.9)

The surprising debts that are holding many Americans back - Credit Sesame, a site consumers can use to check a version of their credit score, analyzed more than 5,000 accounts of users who opened their accounts in the last 30 days and found they had significant amounts of debt from medical expenses and bills for cellphone service and utilities. Customers whose medical debt had gone into collections had an average of three accounts, amounting to a combined total of $3,670 in collections. Those who had current medical debt owed an average of $30. When individuals owe money and do not pay it by a due date, agencies or lawyers who collect debts attempt to obtain money from them, in a process called “collections.” The average balance for customers who had cellular phone accounts in collections was $887 per account. Cellular phone companies don’t typically report bill payment history to credit bureaus, the study said, until they go into collections.And customers whose utility bills fell into collections owe $368 on average per account, the study concluded. Utility companies are more likely than cellular phone companies to report bill-paying data, it found, even when they are current and paid fully. Those whose credit card accounts were in collections owed an average of $1,831 per person, and those whose student loans were in collections owed an average of $9,290 per person. Of course, having bills in collections also hurt those consumers’ credit scores. (They may also have had low scores to begin with.) The average credit score for someone whose medical debt is in collections is 552. Those who owe for their cellphone accounts have average scores of 550. And those who owe their utility companies have a score of 542. 

A Quarter Of American Adults Can't Pay All Their Monthly Bills; 44% Have Less Than $400 In Cash --There was some good news and some not so good news in the Fed's latest annual Report on the Economic Well-Being of U.S. Households.First the good news. The report, based on the Board's fourth annual Survey of Household Economics and Decisionmaking conducted in October 2016, presents a "picture of improving financial well-being among Americans", at least according to the report (read on to see if this is merited). Overall, 70% of the more than 6,600 respondents said they were either "living comfortably" or "doing okay," up 1% from 2015 and up 8% from the first survey results in 2013.Not surprisingly, the highest percentage, or 92%, of those who responded they were "living comfortably" was among the group with more than $100,000 in family income. For Americans making less than $40,000 the breakdown was almost evenly split with 49% saying they are "just getting by."  According to the same study, 28% of respondents said that their income in the last 12 months was less than $25,000, and 40% report that their income was less than the key $40,000 cutoff, which suggests that roughly 4 in 10 Americans are "finding it difficult to get by." The improvements in well-being as reported by the survey respondents were concentrated among high-income adults, with at least some college education, and prompted the WSJ to write that "U.S Household financial health improved in recent years." Even so, most of the changes reported in the survey were relatively modest, "reflecting a slowly improving economy and an unemployment level at or below 5% throughout 2016."Now, the not so good news.Nearly eight years into an economic recovery, nearly half of Americans didn’t have enough cash available to cover a $400 emergency. Specifically, the survey found that, in line with what the Fed had disclosed in previous years, 44% of respondents said they wouldn’t be able to cover an unexpected $400 expense like a car repair or medical bill, or would have to borrow money or sell something to meet it. Troubling as this statistic remains, the overall share of adults who would struggle to come up with $400 in a pinch has declined by 2% from the last survey conducted in 2015, and down 6% since 2013.Of the group that could not pay in cash, 45% said they would go further in debt and use a credit card to pay off the expense over time. while a quarter would borrow from friends of family, and another 27% just couldn’t pay the expense. Others would turn to selling items or using a payday loan.

Vehicle Sales Forecast: Sales below 17 Million SAAR in May - The automakers will report May vehicle sales on Thursday, June 1st. Note: There were 25 selling days in May 2017, up from 24 in May 2016. From Reuters: U.S. auto sales seen up 0.5 percent in May: JD Power and LMCU.S. auto sales in May will edge up 0.5 percent from a year earlier, despite consumer discounts remaining at record levels, industry consultants J.D. Power and LMC Automotive said on Thursday... The seasonally adjusted annual rate for the month will be 16.9 million vehicles, down from 17.3 million last year. ...The consultancies cut new vehicle sales forecast for 2017 to 17.2 million units from 17.5 million units. U.S. sales of new cars and trucks hit a record high of 17.55 million units in 2016. But as the market has begun to saturate, automakers have been hiking incentives to entice consumers to buy. Overall sales are mostly moving sideways (and down a little from the record in 2016).

Fuel economy improvements are projected to reduce future gasoline use – EIA - Anticipated changes in energy consumption by light-duty vehicles in the United States are based on two factors: the amount of travel and the fuel economy of the vehicles used. The Annual Energy Outlook 2017 (AEO2017) Reference case projects a decline in light-duty vehicle energy use between 2018 and 2040 as improvements in fuel economy more than offset increases in light-duty vehicle miles.  The number of vehicle-miles traveled in the United States by light-duty vehicles set a record at 2.84 trillion miles in 2016. As the number of miles driven per vehicle has remained relatively steady at about 12,000 miles per vehicle, the recent increase in vehicle-miles traveled is more attributable to an increase in the number of vehicles in use. Light-duty vehicle-miles traveled per year are expected to continue to increase, ultimately reaching 3.33 trillion miles traveled in 2040.  The fuel economy of the light-duty vehicle stock is also expected to increase because of market developments and increases in fuel economy standards for new vehicles. Although sales of new vehicles make up a relatively small portion of the total light-duty vehicle fleet in any year and existing vehicles can remain on the road for many years, fuel economy standards for new vehicles and the mix of vehicles purchased have long-term implications for fuel consumption.  For model year 2015, the required fuel economy standards averaged about 35 miles per gallon (mpg) for passenger cars and about 27 mpg for light trucks after taking into account the footprint mix of vehicles sold within each category. The standards for each category are currently required to increase over time so that the standards for model year 2025 vehicles are expected to reach about 53 mpg and 38 mpg, respectively. Because compliance fuel economy is based on a specific test procedure that applies certain credits, compliance fuel economy generally exceeds on-road fuel economy. On-road fuel economy is more relevant for estimating and forecasting energy consumption because it reflects how the vehicle is actually used. For model year 2015, new vehicle on-road fuel economies averaged about 31 mpg for passenger cars and about 21 mpg for light trucks.

Merchandise Trade Gap, Inventories May Weigh on U.S. Growth   --The second-widest U.S. merchandise trade deficit in two years and an April drop in inventories at wholesalers and retailers may weigh on the economy this quarter, according to preliminary figures Thursday from the Commerce Department in Washington.  A wider gap in merchandise trade that persists would limit any rebound in economic growth this quarter after a slowdown at the start of 2017. Exports declined in April, while imports rose. What’s more, March gains in wholesale and retail inventories were less than previously reported.  Economists look to the advance report on trade and inventories -- the two most volatile parts of the calculation for gross domestic product -- to gin up forecasts for quarterly growth. Stephen Stanley, chief economist at Amherst Pierpont Securities, shaved his second-quarter GDP tracking estimate to 3.4 percent from 3.7 percent after the figures.  Trade contributed little to first-quarter growth after subtracting 1.82 percentage points in the final three months of 2016, according to the government’s figures on gross domestic product. Inventories subtracted 0.93 percentage point in the first quarter.  Other Details:

  • Exports of goods fell 0.9 percent in April from the previous month; imports rose 0.7 percent
  • Outbound shipments were depressed by a 7.5 percent slump in motor vehicles and a 4.1 percent drop in consumer goods
  • Imports of consumer merchandise, food and capital goods increased in April
  • Inventories at motor vehicles and parts dealers fell 0.5 percent; excluding autos, retail stockpiles were down 0.2 percent
  • Wholesale inventories of durable goods fell 0.2 percent; stocks of nondurable goods declined 0.6 percent
  • Exports and imports of goods accounted for about three-fourths of America’s total trade in 2016; the U.S. typically runs a deficit in merchandise trade and a surplus in services

Chemical Activity Barometer increases in May --Note: This appears to be a leading indicator for industrial production. From the American Chemistry Council: Chemical Activity Barometer Remains Strong but Hints at Slowing Pace of Economic Growth and Business Activity Into 2018 The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), rose 0.4 percent in May, following a downward revision of 0.1 percent for April. Compared to a year earlier, the CAB is up 5.0 percent year-over-year, a modest slowing that still suggests continued growth through year-end 2017. All data is measured on a three-month moving average (3MMA)...Applying the CAB back to 1912, it has been shown to provide a lead of two to fourteen months, with an average lead of eight months at cycle peaks as determined by the National Bureau of Economic Research. The median lead was also eight months. At business cycle troughs, the CAB leads by one to seven months, with an average lead of four months. The median lead was three months. The CAB is rebased to the average lead (in months) of an average 100 in the base year (the year 2012 was used) of a reference time series. The latter is the Federal Reserve’s Industrial Production Index.

Orders for durable goods fall to 5-month low -  Orders for long-lasting goods such as planes and appliances fell in April for the first time in five months, suggesting that a resurgent U.S. manufacturing industry is still expanding but at a somewhat slower pace. Durable-goods orders dropped 0.7% last month amid weakness in most key segments of heavy industry, the government reported Friday. Economists polled by MarketWatch had forecast a 1% decline in orders. The decline follows four straight increases, including a revised 2.3% bump in March.Bookings for large commercial aircraft sank 9.2% after a double-digit percentage gain in March. Orders for new autos, however, edged up 0.3% after sharp decline in the prior month.If airplanes and autos are stripped out, orders minus transportation fell 0.4%, the Commerce Department said.Demand for machines and metals used in a variety of heavy-duty goods both declined, partly offset by higher bookings for computers and networking gear.A key measure of business investment, known as core capital-goods orders, meanwhile, was flat for the second month in a row.Investment has picked up late last year after a prolonged slump, but the momentum might be flagging. Although the economy is growing steadily, grand plans by the Trump administration to boost business face a long slog in Washington, dampening the initial enthusiasm of investors and executives. “Surveys suggest that businesses are ecstatic about the change in tone in Washington and are prepared to unleash a flurry of pent-up investment, but they are holding off until there is more clarity on corporate tax reform and other elements of the new administration’s fiscal agenda,” said Stephen Stanley, chief economist at Amherst Pierpont Securities. Shipments of core-capital goods, a category used to help determine gross domestic product, dipped 0.1% in April. That’s a minus for GDP.

Core Durable Goods New Orders Plunge In April -- Headline durable goods orders tumbled 0.7% MoM (the worst of the year), but beat expectations of a 1.5% drop. However, Core Durable Goods New Orders fell 0.4% (dramatically worse than the +0.4% expectation) for the worst performance since June 2016.

  • Non-Defense ex-Aircraft new orders were unchanged in April (huge miss) - weakest in 2017
  • Shipments Ex-Aircraft fell 0.1% in April (huge miss) - weakest in 2017

Worst still, Headline New Orders are unchanged year-over-year... Q2 GDP is starting to get in trouble with Durable Goods piling on after inventories weakness yesterday.  We have one question - when does this revert?  Durable Goods Orders are unchanged since May 2013.. The Dow is up 5000 points since then.

 Richmond Fed Manufacturing: May Composite Index Takes a Dive --Today the Richmond Fed Manufacturing Composite Index plunged 19 points to 1from last month's had forecast 15. Because of the highly volatile nature of this index, we include a 3-month moving average to facilitate the identification of trends, now at 14.3, indicates expansion. The complete data series behind today's Richmond Fed manufacturing report, which dates from November 1993, is available here. Here is a snapshot of the complete Richmond Fed Manufacturing Composite series.

Richmond Fed: Regional Manufacturing Activity Mostly Unchanged in May -- Earlier from the Richmond Fed: Manufacturing Firms were Somewhat Less Upbeat about Activity in May Compared to Prior Months Manufacturers in the Fifth District were somewhat less upbeat in May than in the prior three months, according to the latest survey by the Federal Reserve Bank of Richmond. The index for shipments and the index for new orders decreased notably, with the shipments index falling to slightly below 0. The index for employment was relatively flat, but the decline in the other two indexes resulted in a decline in the composite index from 20 in April to 1 in May. The majority of firms continued to report higher wages, but more firms reported a decline in the average workweek than reported an increase. ... Based on the regional surveys released so far, it appears manufacturing growth slowed in May. The ISM index will probably show slower growth this month.

Kansas City Fed: Regional Manufacturing Activity "Expanded Modestly" in May -- From the Kansas City Fed: Tenth District Manufacturing Activity Expanded Modestly: The Federal Reserve Bank of Kansas City released the May Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity expanded moderately with strong expectations for future activity. “After slowing from a rapid rate of growth in February and March, we’ve seen more moderate growth the past two months,” said Wilkerson.  “But firms are about as optimistic about future growth as they’ve ever been.”  The month-over-month composite index was 8 in May, up from 7 in April but down from 20 in March.  The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes.  Activity at durable manufacturing plants eased slightly but remained positive, while nondurable activity improved, particularly for plastics and chemicals.  Month-over-month indexes were mixed with little change overall.  The production and shipments indexes edged slightly lower, while the employment and order backlog indexes inched higher.  The new orders and new orders for exports indexes were both basically unchanged.  The finished goods inventory index fell from 8 to 0, while the raw materials inventory index was stable.

  "Somewhat Underwhelming" US Manufacturing Slumps To 8-Month Lows As Services Rebound Amid Soaring Costs --Weak Chinese PMIs and 'steady' European PMIs were trump by German IFO exuberance overnight ahead of US PMIs. Having tumbled to their lowest level since September, May preliminary US PMIs were mixed with Manufacturing slumping to 8-month lows and Services rebounding to 4-month highs.The overall compoosite PMI rose modestly but the divergence betwen manufacturing and services is widening once again (and remember that has never ended well for services) Measured overall, average cost burdens increased at a robust pace during May. This was driven by the steepest rise in service sector input prices since June 2015.Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:“Growth of US business activity gained a little momentum for a second successive month in May, but the upturn still looks somewhat underwhelming.“Historical comparisons of the PMI against GDP indicates that the PMI is running at a level broadly consistent with the economy growing at a 0.4% quarterly rate (1.5% annualized). Actual second quarter GDP numbers are likely to be considerably stronger, in part reflecting seasonality in the official data and the weak first quarter.“May saw an encouraging upturn in service sector growth to the fastest so far this year, buoyed by rising domestic demand. Manufacturers, on the other hand, reported the smallest rise in production since last September amid lacklustre export sales.“There were mixed signals for the outlook. Optimism about the year ahead fell slightly, but hiring remained reassuringly solid, thanks to a stepup in service sector recruitment. The survey is indicative of non-farm payroll growth of approximately 160,000.“Average prices charged for goods and services meanwhile showed one of the largest rises in the past two years. The strengthening of business activity growth and rise in prices will add to expectations of the Fed hiking interest rates again in June.”

Apple Spends Big to Thwart Right to Repair in New York and Elsewhere -- naked capitalism by Jerri-lynn Scofield - Motherboard ran an interesting piece this week, Apple Is Lobbying Against Your Right to Repair iPhones, New York State Records Confirm,  reporting on the money Apple, Verizon, and other tech trade associations are spending to thwart right to repair legislation pending in nearly a dozen states, including New York. I first wrote about some these initiatives in January of this year, in this post, Waste Not, Want Not: Right to Repair Laws on Agenda in Some States, which discusses New York efforts as well as other initiatives to reject the throwaway culture, not only for electronics but also for other items. Motherboard has been following this topic closely. From the latest account: The bill, called the “Fair Repair Act,” would require electronics companies to sell replacement parts and tools to the general public, would prohibit “software locks” that restrict repairs, and in many cases would require companies to make repair guides available to the public. Apple and other tech giants have been suspected of opposing the legislation in many of the 11 states where similar bills have been introduced, but New York’s robust lobbying disclosure laws have made information about which companies are hiring lobbyists and what bills they’re spending money on public record. Apple’s not the only company seeking to kill the New York legislation, and a motley crew of others seek the same general objective, as Motherboard reports: According to New York State’s Joint Commission on Public Ethics, Apple, Verizon, Toyota, the printer company Lexmark, heavy machinery company Caterpillar, phone insurance company Asurion, and medical device company Medtronic have spent money lobbying against the Fair Repair Act this year. The Consumer Technology Association, which represents thousands of electronics manufacturers, is also lobbying against the bill.

Weekly Initial Unemployment Claims increase to 234,000 - The DOL reported:In the week ending May 20, the advance figure for seasonally adjusted initial claims was 234,000, an increase of 1,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 232,000 to 233,000. The 4-week moving average was 235,250, a decrease of 5,750 from the previous week's revised average. This is the lowest level for this average since April 14, 1973 when it was 232,750. The previous week's average was revised up by 250 from 240,750 to 241,000.  The previous week was revised up by 1,000. The following graph shows the 4-week moving average of weekly claims since 1971.

Employment: Pick a Number, Any Number -- Many economic statistics are notoriously unreliable, and the reason often has to do with what’s included in the measurement and what’s left out. Gross domestic product offers a good example of a measure that leaves out key environmental externalities, such as soil erosion, biodiversity loss, and effects of climate change.Measuring unemployment is also an exercise in exclusion. Casual consumers of U.S. economic news are familiar with only the official figure, which put the country’s total unemployment at 4.8 percent at the beginning of 2017. But that is just one of six alternatives used by the U.S. Bureau of Labor Statistics to quantify “labor underutilization.”  Here they are, in ascending order (with rates, again, for January 2017). People unemployed 15 weeks or longer as a share of the total (civilian) labor force: 1.9 percent. People who lost jobs and who completed temporary jobs: 2.3 percent. Total unemployment (the official rate): 4.8 percent. All unemployed people plus discouraged workers, as a share of total and discouraged labor force: 5.1 percent. The previous category enlarged by all people only “marginally attached” to the labor force: 5.8 percent. And finally, the last category plus those who work only part time for economic reasons (that is, they would prefer to work full time): 9.4 percent. These six measures present quite a spread of values: The official unemployment rate (U-3) was only about half of the most encompassing rate (U-6), which was nearly five times as high as the narrowest measure (U-1). If you lose your job you count as unemployed only if you keep looking for a new one; otherwise, you never get counted again. That is why when trying to get closer to the “real” unemployment rate you must look at the labor force participation rate, which has recently been in decline. In early 2007, the U.S. labor force participation rate for people 16 years and over was 66.4 percent; by the end of 2008, a few months into the world’s largest economic downturn since World War II, it was still at 65.8 percent. Its subsequent slide bottomed out in September 2015 at 62.4 percent, and by early 2017 the rate was marginally higher, at 62.9 percent. Nearly 95 million U.S. citizens above the age of 16 were not part of the labor force—a historic record.

Unemployment Is Really Low. So Why Can’t These People Find Jobs? -- Nathan Bonds’ breaking point came after 19 months of unemployment, 23 interviews, and 200 applications.  By the time a friend offered him a $10-an-hour delivery gig, he could barely afford rent—much less the fees needed to update his license. So he didn’t get that job either. Bonds, a former quality manager at a manufacturing plant, is a highly skilled worker in an industry in need of highly skilled workers. His long bout of unemployment, and his struggle to find work even at minimum wage, flies in the face of the stellar jobs reports that have dominated headlines over the past several years.It’s also not that uncommon.  As of April 2017, 1.6 million unemployed Americans have been out of work for six months or longer, according to data from the Bureau of Labor Statistics. Nearly a million have been jobless for over a year. “Long-term unemployment,” as it’s called, isn’t a new phenomenon. In 2010, it peaked at 6.8 million and has been trending downward in the wake of the recession. But those numbers offer little comfort to the 22.6% of jobless Americans who fall into that category today—a ratio that remains stubbornly high compared to pre-crisis levels.  Ever since economists started tracking this figure in 1948, the share of long-term unemployed to total unemployed has topped 20% only at the height of a recession or in its direct aftermath. If the official unemployment rate included the millions of people working part-time because they can’t find full-time work, or those who want to work but haven’t looked for a job in at least four weeks, the ranks of long-term unemployed would be even higher. Now experts worry that a large percentage of long-term job seekers have been pushed out of the market completely — and that the new presidential administration is ill-equipped to rope them back in.

Philly Fed: State Coincident Indexes increased in 41 states in April -- From the Philly FedThe Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for April 2017. Over the past three months, the indexes increased in 46 states and decreased in four, for a three-month diffusion index of 84. In the past month, the indexes increased in 41 states and decreased in nine, for a one-month diffusion index of 64.  Note: These are coincident indexes constructed from state employment data. An explanation from the Philly Fed:  The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.

Real aggregate wage growth finally overtakes Reagan expansion --In my opinion the best measure of how average Americans’ situations have improved during an economic expansion is real aggregate wage growth.  This is calculated as follows:

  • average wages per hour for nonsupervisory workers
  • times aggregate hours worked in the economy
  • deflated by the consumer price index

This tells us how much more money average Americans are taking home compared with the worst point in the last recession. Let me give you a few examples why I believe that this is the best measure of labor market progress: […]With that introduction, here is an updated graph of real aggregate wages for the entire past 53 years:  So how does the current expansion compare with past ones?  Here is a chart I created several years ago showing the real aggregate wage growth in every prior economic expansion beginning with 1964:And here is the graph showing the Reagan-Bush economy of th 1980s. As indicated above, at their peak nearly 7 years after the expansion in wages started, they peaked at growth of +21.6%. The present expansion is now only behind the 1960s and 1990s for the best recovery in real aggregate wages in the last half century. Where this expansion has lagged has been the velocity of wage growth. Even with the recent spurt, the monthly average real aggregate wage growth has only been 0.25%, slightly behind the Reagan era’s 0.26%, and only ahead of George W. Bush’s 0.20%.

American workers lose $1.2 billion in 2017 due to delay in update of overtime rules -- One year ago, the U.S. Department of Labor issued a final rule to update the Fair Labor Standards Act’s overtime rules. The old rules—written by the Bush administration in 2004—have a loophole that leaves millions of salaried employees without the right to overtime pay (and even without the right to be paid the minimum wage). An employer may legally require salaried employees earning as little as $23,660 a year to work 70 or 80 hours a week with no additional pay. If an employer determines that a salaried employee works in an “executive, professional, or administrative capacity” the employee’s effective hourly pay could fall below $6.00 an hour.If the new rule had taken effect on December 1, 2016, as planned, 4 million employees would have become entitled to overtime pay and another 9 million would have had their right to overtime pay strengthened and clarified. In 2017 alone, workers would have gotten $1.2 billion in extra pay.  But Republican politicians and big business groups sued to block the rule, and a U.S. District Court judge in Texas blocked the rule from taking effect, not just in Texas, but nationwide. Obama’s Department of Labor appealed the case, but the Trump administration has repeatedly delayed the appeal while it figures out whether to side with the employees or with big business.

Free Money: Mark Zuckerberg Suggests That All Americans Should Get A 'Universal Basic Income' --Should everyone in America receive a “basic income” directly from the federal government? Considering the fact that we are already 20 trillion dollars in debt, such a concept may sound quite foolish to many of you, but this is an idea that is really starting to gain traction in leftist circles.  In fact, Facebook CEO Mark Zuckerberg suggested that this was something that we should “explore” during the commencement speech that he just delivered at Harvard.  For quite a while it has been obvious that Zuckerberg is very strongly considering a run for the presidency in 2020, but up until just recently we haven’t had many clues about where he would stand on particular issues.  If he is serious about proposing a universal basic income for all Americans, that would make Zuckerberg very appealing to the far left voters that flocked to the Bernie Sanders campaign. Yesterday, I discussed the fact that the number of Americans that are receiving money from the government each month has reached an all-time high, but Zuckerberg would take things much farther.  According to Zuckerberg, society would be far better off if everyone got an income from the government“Every generation expands its definition of equality. Now it’s time for our generation to define a new social contract,” Zuckerberg said during his speech.“We should have a society that measures progress not by economic metrics like GDP but by how many of us have a role we find meaningful. We should explore ideas like universal basic income to make sure everyone has a cushion to try new ideas.” Zuckerberg said that, because he knew he had a safety net if projects like Facebook had failed, he was confident enough to continue on without fear of failing. Others, he said, such as children who need to support households instead of poking away on computers learning how to code, don’t have the foundation Zuckerberg had. Universal basic income would provide that sort of cushion, Zuckerberg argued.

Supreme Court strikes down NC districts as illegally based on race | TheHill: The Supreme Court ruled Monday that North Carolina illegally packed black voters into two voting districts. In a 5-3 ruling, the justices affirmed the decision of a lower court. That ruling said North Carolina officials used race as the predominant factor in drawing district lines without a compelling reason when they created two districts — the 1st District and the 12th District — with majority-black voting-age populations. Both of those districts are represented by Democrats; Rep. G.K. Butterfield represents the 1st District, while Rep. Alma Adams represents the 12th District. “Although States enjoy leeway to take race-based actions reasonably judged necessary under a proper interpretation of the Voting Rights Act, that latitude cannot rescue District 1," Justice Elena Kagan said in delivering the opinion of the court. “We by no means ‘insist that a state legislature, when redistricting, determine precisely what percent minority population demands.’ But neither will we approve a racial gerrymander whose necessity is supported by no evidence and whose raison d’être is a legal mistake.” As for the 12th District, the court said the evidence offered at trial, including live witness testimony, adequately supports the conclusion that race, not politics, accounted for the district’s reconfiguration. In a rare move, Justice Clarence Thomas, a member of the court's conservative wing, sided with Kagan and the court’s more liberal members — Justices Ruth Bader Ginsburg, Stephen Breyer and Sonia Sotomayor. 

American Prosperity Depends on a Nonwhite Future - Noah Smith - If the U.S. economy is going to prosper, it needs to keep taking in immigrants. Fertility is below replacement levels, and no country has discovered a way to raise native birthrates. That means that immigration is necessary for the survival of the Social Security system and the solvency of pension funds. Immigrants will allow small cities to grow and expand their tax bases, instead of shriveling into ghost towns. Immigrants support the housing market and the stock market. They take care of elderly Americans and provide invaluable skills for U.S. corporations. Without continued robust immigration, the U.S. population will shrink and gray, and the country will start having the same problems as aging societies like Japan, South Korea, and East Europe. But in order to keep immigration going, the country needs to accept that most new immigrants won’t be white. And that means that the U.S. is now being forced to face up to the issue of increasing diversity for the first time since the immigrant wave of the early 20th century. Today, the old racial dichotomy of white and black is gone, as Asians and Hispanics join the mix. Some on the right fear this change, and worry that it will lead to ethnic balkanization, or a breakdown in the social fabric. But a steady drumbeat of new data should reassure people that this isn’t happening -- instead, the U.S. is handling diversity better than many seem to think.

California to Investigate Racial Discrimination in Auto Insurance Premiums - ProPublica - The California Department of Insurance has launched an investigation into whether eight auto insurers in the state discriminate against drivers in minority neighborhoods.The investigation was prompted by an April 5 article, co-published by ProPublica and Consumer Reports, which found that the eight California insurers were charging more for auto premiums in minority neighborhoods, on average, than in non-minority areas with similar accident costs. California law prohibits insurers from charging rates that are excessive or unfairly discriminatory.“We have taken these pricing allegations very seriously,” Deputy Commissioner Ken Allen wrote on April 28 to an attorney at Consumers Union, the policy and action arm of Consumer Reports. “… All necessary information to complete a thorough analysis on a file-by-file basis has already been or will be obtained from the eight insurers. The Department’s analysis will determine if there are inequities with respect to the pricing and treatment of any ZIP codes by these insurers.” At the time our article was published, the California insurance department disputed ProPublica’s analysis. “The study’s flawed methodology results in a flawed conclusion,” the regulatory agency said in a statement.But after hearing from groups including Consumers Union, Public Advocates and Consumer Watchdog, the department decided to initiate its own investigation. It will make the results of the review public, Allen told Consumers Union.It’s not clear what data and methodology the department will use in its review, or whether it has the necessary data in-house. Allen wrote that the department will ask the eight insurers to submit “filings of their auto class plans and rating methodologies for review of discriminatory rating practices,” but the department regularly collects much of this information anyway.The eight companies under scrutiny are subsidiaries of three major national insurers: Nationwide, USAA and Liberty Mutual.

Illinois Democrats In Senate Pass 33% Hike Of Personal And Corporate Income Taxes -- Senate Democrats in Illinois, with a final vote of 32-26, have just passed a new budget proposal that includes a massive personal and corporate income tax hike and an expansion of the state's sales tax, after saying they are no longer willing to wait for a broader deal with Republicans. As the Chicago Tribune noted earlier this morning, the Democrats' budget proposal includes a ~33% hike in both the the personal and corporate income tax rates and an expansion of the state's share of sales tax revenue.  In all, the package would cost Illinois taxpayers an incremental $5 billion.Democrats spent the weekend tweaking the spending plan, and unveiled an updated proposal late Monday. It calls for spending $37.3 billion after raising about $5 billion through the tax hikes; a floor vote is expected Tuesday, said Sen. Heather Steans, a Chicago Democrat and key budget negotiator.The blueprint relies on the passage of companion legislation that would raise the personal income tax rate from 3.75 percent to 4.95 percent, which is just below the 5 percent rate in place before Rauner took office. The corporate income tax rate would be hiked from 5.25 percent to 7 percent.Meanwhile, the state's share of the 6.25 percent sales tax would be extended to various services not currently covered, such as dry cleaning. The proposal also calls for ending three corporate tax breaks, including requiring companies that drill on the outer continental shelf and do business in Illinois to pay income taxes.Of course, the Senate bill passed by Democrats is unlikely to become law as Illinois' Republican Governor Bruce Rauner, presumably along with a fairly substantial percentage of Illinois residents, oppose such massive tax hikes.

Governor Bruce Rauner’s Private Equity Funds Have Been a Very Bad Deal for Illinois –Yves Smith - Reader DO sent us a link on how badly the funds managed by the Governor of Illinois’ private equity firm, GTCR, have done for his state. It’s important to note that the state invested in these two dogs before Rauner became governor in 2014. Golder Thoma Cressy Rauner Fund IV was launched in 1994 and GTCR Fund IX, in 2006 Rauner retired from GTCR in 2012. Keep in mind that private equity fee structures presuppose that a fund will have completed its purchases of companies in five years, although the crisis pushed out that time frame. Nevertheless, even for the later fund, a substantial portion of its investments would have occurred on Rauner’s watch. So how badly did these funds do? Bear in mind that both funds are mature enough that there is no reason to expect any recovery. If anything, any remaining assets are likely to be valued charitably. In fact, it’s odd that the 1994 fund is still listed on Illinois’ books, since industry sites list it as “liquidated”. If the fund has not been wound up, that means Illinois is still paying its share of the annual legal and audit fees for keeping the entity alive. We’ve seen that at CalPERS with a very few funds, like some 1990s vintage Hellman & Friedman funds in recent years, although they appear to have finally been wound up. Here are the details from Real GOP Illinois (emphasis original):In the case of the two Golder Thoma Cressey Rauner (GTCR) funds listed below, the total COST to buy into these funds was $30,112,538.   These are private placement private equity deals – not just anyone can buy into them.They are now worth an abysmal $3,774,696.So for every $10 put into the deal, it’s now worth around $1. This is not winning…. The combined investments in two GTCR funds are down over 87%.  

Puerto Rico pension, highway agency join government in bankruptcy - NY Daily News: (Reuters) - Puerto Rico's federal oversight board has sought bankruptcy protection for the island's highway authority and largest public pension, making them the latest commonwealth entities to turn to a court to work out debt. The board filed the cases late on Sunday in U.S. District Court in San Juan, under a process akin to U.S. bankruptcy, known as Title III, that was created by the U.S Congress last year. Puerto Rico's central government, as well as its COFINA sales tax authority, are already in Title III bankruptcy, and a lawyer for the oversight board said last week other agencies would follow "soon." The latest filings could set the stage for an unconventional fight between retirees and the very lenders whose money was supposed to sustain them, an indication of just how complex Puerto Rico's debt structure is. The island has $70 billion in public debt, a 45 percent poverty rate and unemployment more than twice the U.S. average. Its pensions owe another $50 billion to retirees who may face benefit cuts as part of Puerto Rico's restructuring. The pension in Title III bankruptcy, known as ERS, is unique in that it also owes $3.1 billion in bond debt, the result of an ill-fated financing effort in 2008 that was meant to plug its growing funding gap. The structure of the bonds, which gives holders a lien on employer pension contributions, is exceedingly rare, and means bondholders may be battling with retirees for recoveries.

Puerto Rico's Tax Dodgers Hide in Plain Sight on Every Corner - On Avenida Borinquen in San Juan, you can buy a DVD of “La La Land” or “Moonlight” for just $2. Cash only.That’s the deal, too, at nearby lunch counters in Barrio Obrero, a gritty district in the Puerto Rican capital. Ask if you can pay for your mofongo with a credit card and you get the same answer: There’s an ATM down the street. The no-plastic enterprises that pepper this part of the city represent some of the biggest problems for the debt-swamped U.S. territory, and some of the biggest opportunities. From the fruit stands to the bakeries to the barbershops, there’s little love for the tax authorities -- and apparently little interest in transactions they can track.Estimates are that about a third of Puerto Rico’s gross national product -- as much as $21 billion -- is produced off the books. The government, seeking protection from creditors in the largest municipal bankruptcy in U.S. history, loses out on sales and income taxes as millions operate in an underground economy that grew as the official one atrophied. “It’s a huge contributing factor to why they’re in the debt crisis,” said Andrew Trahan, a country-risk analyst for BMI Research in New York.Measuring the phenomenon exactly is almost impossible, though reasons for it are in government data. More than 45 percent of people live below the poverty level. The unemployment rate is over 11 percent. There aren’t an abundance of above-board opportunities for many who stitch livings together with what’s called chiripeando, slang for receiving small under-the-table incomes from multiple sources. One more statistic: The 11.5 percent sales tax is the steepest in the U.S. Ducking it with cash-only trades is routine for businesses of all sizes, said Miguel Santiago, 80, who owns a commercial building in San Juan’s Santurce neighborhood and whose renters over the years have included a bar, a roofing-supply company and an auto mechanic. “What they can evade,” he said, “they will evade.”

Texas teachers give ‘most likely to become a terrorist’ award to 13-year-old - Seventh-grader Lizeth Villanueva has been in her school’s academic honors program for two years. She gets good grades and has never been a discipline problem. Yet on Tuesday, her teacher gave her a “most likely to become a terrorist” award.It was supposed to be a joke, part of a mock end-of-the-year awards ceremony at Anthony Aguirre Junior High in Channelview, Tex., near Houston, where a group of teachers hand certificates to students. Lizeth, 13, said her teacher “just laughed” when she signed and handed her the certificate, just one day after the Manchester arena terrorist attack in Britain.But Lizeth’s mother Ena Hernandez didn’t find the award funny at all.“I was upset and very mad when I saw the award,” Hernandez told The Washington Post. “I was surprised because my daughter has been doing well in the honors program.”Lizeth, who is Salvadoran American, wasn’t laughing either. Her emotion was one of shock, she said.She said two honors classes were brought together for the fake ceremony. Other awards included “most likely to cry for every little thing” that was given to a girl and “most likely to become homeless” that was presented to a boy. The three other teachers in the room laughed when the awards were handed out, according to Lizeth.

Chicago school board to consider up to $500 million more long-term borrowing --- Chicago Public Schools said on Monday it plans to add up to $500 million in debt to its load of long-term obligations, an announcement that comes just days after Mayor Rahm Emanuel said the district would use a short-term loan to settle bills, including a massive pension contribution. The half-billion dollars of bond debt would be used in the district's coming budget year, which begins July 1, to bring cash into the system and modify the terms of some of the district's existing bond debts, a district spokeswoman said."The bonds will refund outstanding bonds and reimburse the Board for prior obligations," CPS spokeswoman Emily Bittner said in an email. The Chicago Board of Education is set to vote on the plan Wednesday, along with a separate measure to finance a loan of up to $389 million to cover the remaining weeks of the school year. That loan would be backed by future state grant fund payments to CPS. Both the short- and long-term debt must still be sold to investors.   The stated use for the bond money hints CPS will employ a similar strategy to one used last year, when the district used almost half of $725 million it borrowed through high-interest bonds to reimburse itself for capital projects it had paid for out of its operating budget in recent years.

Major changes could come to L.A. schools after charter school movement's big win -  Supporters of charter schools appeared to win control of the Los Angeles school board Tuesday, a watershed moment with huge implications for how students are taught in America’s second-largest school district. The charter school movement has long been a major force in Los Angeles school circles. But the victory Tuesday night by pro-charter forces — who dramatically outspent rivals in what was the most expensive election in school board history — gives them the opportunity to reshape the district. The election marks a defeat for teacher union forces, who have long been a power center in L.A. school politics. With their new majority, charter school backers can press their campaign to expand such schools across the city. Charter forces have long been critical of how the LAUSD is run. Now they will have to show they can steer the massive, often frustrating, bureaucracy better. Some key takeaways:

  • L.A. Unified has more charters and more charter students than any other school system, but they still account for only about 16% of enrollment. With a majority on the board, charter forces could significatly increase those numbers.
  • With faster charter growth, L.A. Unified would find itself under increasing financial strain, because of such enormous fixed costs as lawsuit settlements, building maintenance, pension debt and retiree health benefits. District officials said they are worried about maintaining programs, including those for students who are more expensive to educate, such as those with moderate to severe disabilities or serious behavioral issues.
  • Teachers unions have long been a dominant force in school politics. But this time, charter forces significantly outspent the unions. Campaign spending was expected to top $15 million, making this the most expensive school board election ever.
  • Supt. Michelle King took office about 14 months ago. New boards frequently want to pick new leadership because the ultimate job of a board is to select and evaluate the superintendent.

California Teachers Struggle As School Administrators Get Generous Pensions  — As California public schools face layoffs and budget cuts, some school administrators are retiring with huge pensions. School districts across the state are struggling to pay for the rapidly rising cost of pensions. Both teachers and administrators pay into the same fund. But when the time comes to retire, it’s not a level playing field. From coaching Little League to teaching English, David Pickett’s daily duties keep growing. The problem is his paycheck keeps shrinking. “Between health insurance to cover our family, then pension, plus taxes, I think everything just kind of adds up,” he said. The San Mateo middle school teacher’s pension costs alone are up 53 percent from two years ago. It’s all part of a plan to salvage the California State Teachers’ Retirement System (CalSTRS), that’s currently facing a $97 billion unfunded liability. Everyone’s paying the price, including taxpayers. But we found the benefits of the bailout are not being shared equally. That’s because school administrators’ salaries are set by school boards that can approve big pay raises in the last three years or even just the last year of service, the years that determine the pension amount. Teachers’ salaries on the other hand, are limited by collective bargaining agreements. “No one’s pension should be based on the last 12 months of a 30-year career,” said Joe Nation, professor of the practice of public policy at Stanford University.

A Boston non-profit will pay active gang members to go to college - If college is a key to improving one’s life, one Boston-based nonprofit organization is hoping it’s a key to improving an entire community. College Bound Dorchester, an organization that works with at-risk youth to encourage them to pursue college, on Thursday announced a new program called Boston Uncornered, which will pay active gang members to go to community college. "It’s really college that is the key to transforming these guys’ individual lives, and when you transform individual lives you have the potential to unlock communities that have been trapped in poverty and violence for far too long," said Mark Culliton, chief executive officer of College Bound Dorchester. "By going to the least likely [people] to succeed and committing to them, you have this outsize impact on the community and open up a college-going culture." The Boston Uncornered program works off the theory that gang members are "core influencers" in neighborhoods that are the most affected by gang violence. College Bound Dorchester works with former gang members who can go into those communities to recruit active gang members they’re familiar with and encourage them to leave behind that lifestyle to pursue college. The connections could create a domino effect, to the point where whole gangs no longer exist because the members have pursued college and careers, Culliton said. According to the organization, Boston has about 2,600 gang members. Boston Uncornered hires former gang members to work as mentors, recruiters and college-readiness advisers. Most of the young people they approach range in age from 17 to 23.

An Underground College For Undocumented Immigrants - Ashley and Melissa didn’t know it, but the year before, the Georgia Board of Regents, which oversees the university system, had instituted a policy barring undocumented students from the state’s top five public schools. Georgia had thirty-five public colleges, serving about three hundred and ten thousand students, of whom some five hundred were undocumented; only twenty-nine undocumented students were enrolled at the top five schools. Nevertheless, the state legislature wanted the Board of Regents to send a message. As a state senator’s spokesman said, “We can’t afford to have illegal immigrants taking a taxpayer-subsidized spot in our colleges.” Two other states—South Carolina and Alabama—ban undocumented students from public universities. Around that time, Verónica saw a post on a friend’s Facebook page that mentioned Freedom University, in Athens, minutes away from the University of Georgia. It was a school for undocumented students who had been shut out of the public universities, offering free college-level instruction once a week. The school’s exact location was secret, because Ku Klux Klansmen had threatened to break up classes and alert immigration authorities. The school’s scrappy unconventionality attracted Ashley and Melissa; their friends were preparing for college, and the twins were restless to get on with their own educations. They filled out applications on the school’s Web site and submitted short personal statements about why they wanted to attend. Soon afterward, they were accepted, and received e-mails with the address and their class schedules. One Sunday morning in August, Verónica drove Melissa and Ashley an hour east for their first day at Freedom University. In the car, they chatted nervously about what awaited them. “Who gets undocumented students all together?” Melissa remembered thinking. “This almost sounds like a setup.”

Notre Dame students walk out on Pence commencement speech | TheHill: A large group of graduating students walked out during Vice President Mike PenceMike (Michael) Richard PenceNotre Dame students walk out on Pence commencement speech Minnesota's Dayton takes a hopeful stand against Wisconsin's Walker Baldwin's Trump sings 'Hallelujah' with White House advisers for 'SNL' season finale MORE's commencement speech at the University of Notre Dame on Sunday, according to local reports. "It's deeply humbling for me to participate in the 172nd commencement in Notre Dame's 175th year," Pence said to applause and boos, according to WNDU. Students had earlier announced plans to walk out in opposition opposed to the Trump administration's policies.The vice president touted President Trump's recent executive order on religious freedom in his address to the Catholic university, as well as Trump's remarks on religion in Saudi Arabia.   Pence also took aim at political correctness on college campuses, saying it was "wholly outside of the American tradition."Prior to Pence's address, valedictorian C.J. Pine gave a politically charged address in which he called for equal rights and religious freedom for Muslims and all faiths. "Our generation must stand against the scapegoating of Muslims," he said. Pine also appeared to take aim at Trump's plan to build a wall along the U.S.-Mexico border.  “If we are going to build walls between American students and international students, then I am skewered on the fence," Pine said.

Discoverer Of DNA's Double-Helix Banned From U of I For "Failing Test Of Decency" -- The University of Illinois has capitulated to faculty complaints and rescinded a speaking invitation to Nobel Laureate James Watson, who has ruffled feathers with past comments about race. Watson is famous for co-discovering the double-helix structure of DNA, but even a preemptive email stating that he would be giving a "narrowly focused scientific talk" failed to assuage faculty concerns. The issue is that outside of the research lab, Watson isn't the same admirable figure: He has made all manner of offensive and racist comments. In a 2007 interview he said he was "gloomy about the prospect of Africa" because "our social policies are based on the fact that their intelligence is the same as ours — whereas all the testing says not really." He also said he hopes everyone is equal but "people who have to deal with black employees find this not true." He apologized but has made other tasteless, sexist comments that call into question his character and judgment — but not his scientific expertise. As's Adam Sabes reports, Watson is known primarily for co-discovering the double-helix structure of DNA along with Francis Crick, but had offered to give a “narrowly focused scientific talk” at the school’s Institute for Genomic Biology about his recent cancer research, Institute Director Gene Robinson told The News-Gazette of Champaign-Urbana, adding that he considered the offer “carefully” before deciding to accept.Robinson said he had anticipated potential objections to Watson’s lecture, and attempted to head them off with an email making explicitly clear that the invitation was not an endorsement of Watson’s past comments.

Women Hold Nearly Two-Thirds Of America's Student Loan Debt - According to a depressing new report released this week by the American Association of University Women, women hold nearly two-thirds of this country’s student debt ― or a whopping $833 billion in outstanding loans. (And that’s probably a low-ball estimate, because the report doesn’t capture women who enroll and take on a whole lot of debt but don’t graduate.) Oh, and female graduates also have a significantly harder time paying those loans off ― making it clear that the student loan crisis is now most definitely a women’s issue.“Time spent in college now sometimes means unmanageable student debt that drags down those seeking greater opportunity, especially low-income women, women of color, and women who drop out before completing a degree or credential,” Patricia Fae Hoe, board chair of the AAUW ― an advocacy and research group ― wrote in a forward to the report. So why are women hit hardest by student loan debt? First, it’s because women are simply more likely to go to college. In 2016, 56 percent of people enrolled in colleges and universities were women. But women also tend to take on larger loans to finance that education. “In a given year about 44 percent of women enrolled in undergraduate programs take out loans compared to 39 percent of men,” the report says. “Women enrolled in undergraduate programs take on an average of about $3,100 in student loans per year—about $400 more than the average man. By graduation the typical woman receiving a bachelor’s degree in 2011-12 had an average of about $21,000 in student loans, $1,500 more than the typical man.”The reasons behind that are complex. Men are more likely to attend public institutions, which cost less, so that’s definitely one factor. But even when women attend public schools, they still tend to take on larger loans. And that is in part because the gender pay gap is already working its evil magic. Male and female students are just as likely to work while they’re in college, but women generally earn about $1,500 less per year ― a difference that is not totally explained by a difference in the number of hours they work, the report argues.  Unfortunately, black women are hit particularly hard by all of this. Roughly a third of black women who got a bachelor’s degree in 2011-2012 left with more than $40,000 in student loan debt, versus just 16 percent of Latina women, 10 percent of white women and 8 percent of Asian-American women. 

Bill Introduced Allowing Cancellation Of Over $1 Trillion In Student Debt Through Bankruptcy -- Courtesy of Sov Man's Simon Black, here are several of the most bizarre legal anecdotes to take place in the US and around the globe over the past week, staring with an bill currently in Congress which is seeking to wipe out over $1 trillion in student loans. What happened: Bankruptcy is like the ultimate get out of jail free card. You just get to wipe the slate clean, and even though your credit score and ability to borrow might suffer, you are free from all your previous obligations. But student loans have long been exempted from being erased by bankruptcy.If this bill passes Congress however, hundreds of billions of currently delinquent student loans, potentially as much as $1.4 trillion worth of student loan debt....... would be eligible to be wiped out by declaring bankruptcy.As the number of those defaulting on their student loans grows, this provision could be widely used by those seeking to escape their college debt.What this means:The government has helped raise the costs of college and basically scam people into accepting their loans, so it is easy to be sympathetic towards those with student loans. But still, it is messed up to allow people to discharge debts they agreed to pay.There might be a little piece in most of us that doesn’t mind seeing what we consider a predatory lender get screwed and be left with the bill.But apart from the overall immorality of failing to pay your debts, since the government owns most of the student loans, it would basically be the taxpayers getting screwed over once again. What a surprise.Basically if massive amounts of debt were erased, it would be another bubble bursting, which would send the U.S. into a fresh round of economic instability.The economy would spiral downward in relation to how many people took advantage of their get out of jail free card.

Republicans Can Seize a Political Opportunity by Backing Student Loan Reform -  In a rare display of political courage and bipartisanship last week, Rep. John Katko (R-NY) filed the Discharge Student Loans in Bankruptcy Act with Rep. John Delaney (D-MD). This bill will return standard bankruptcy protections to all federal and private student loans. Katko is well ahead of the conservative curve on this issue and has a unique opportunity to revitalize the Republican Party in the current session by stepping up to lead the fight on this issue.President Obama federalized the student loan system during his eight years in office and the nation’s student debt tab increased by $1 trillion. From these student loans, the federal government profits well over $50 billion annually from the student loan program, and also makes a profit on defaulted student loans. This is something no other lender of any loan in this country can claim. In fact, this is a defining hallmark of a predatory lending system. During the same time period, the price of college rose far faster than any other commodity, including healthcare, and this trend is continuing to accelerate today.The student loan program is a structurally predatory lending system and Uncle Sam sits atop the hornet’s nest. What has caused this hyper-inflationary lending behemoth and its consequences is the fact that the Department of Education is not constrained by standard free-market protections like bankruptcy rights, statutes of limitations, and other standard protections existing for every other type of loan. Congress stripped these protections from student loans and in the end greatly destabilized the entire loan system. Make no mistake: The Department of Education loves this freedom from free-market protections and fights tooth and nail behind the scenes to keep bankruptcy gone from its source of income. Since Trump was elected, the student loan swamp of unelected bureaucrats in and around the Department of Education have made bold moves to make this lending system harsher and more profitable.

Student Debt Rising Worldwide - Higher education contributes to unprecedented student loan debt challenges in both developed and developing countries. College costs are rapidly rising, and student loan debts have reached disquieting record levels for both graduates and governments. Most recent college graduates are burdened with heavy loan debt for years with many delinquent on repayment. In the United States, for example, some 7 million borrowers, or14 percent, are in default, having gone at least a year without a payment on their federal student loans. One in four European Union citizens who earn diplomas in Britain return home countries without paying back their student loans. Economies will struggle under the growing mound of student debt as young adults delay marriage, home purchases and childbirth and have less money to spend on housing, food, clothes or entertainment. As a consequence, governments can expect to confront a dilemma concerning increasing defaults on government-sponsored student loans: enforced repayment versus measured forgiveness. Likewise, students especially those with limited resources, struggle over whether to borrow, delay or forgo higher education. British college graduates, for example, are estimated to have an average loan debt of $55,000, compared with an average of $20,000 five years earlier. Total student loan debt in the United Kingdom has reached nearly $100 billion. The average 2016 American college graduate has $37,000 in student loan debt, up 6 percent from the previous year, and total federal student loan debt now stands at $1.3 trillion, triple the level a decade ago. Similar student debt conditions are encountered in Australia, Canada, Norway and Sweden.In some 40 countries, of which more than half are members of the Organization for Economic Co-operation and Development, public colleges charge no tuition. Elsewhere, average annual tuition costs vary considerably from several hundred dollars in countries like Belgium, Columbia and France to thousands of dollars in Japan, the United Kingdom and the United States.

Betsy DeVos hits hard reset on student loan servicing contracts - The Education Department said Friday that it will select one company to collect student debt payments on its behalf, rather than the nine contractors that currently handle the federal government’s $1.2 trillion portfolio of education loans.The decision, which would take effect once the existing contracts expire in 2019, reverses years of policy implemented by the Obama administration and would revive a servicing model that had an equal number of benefits and problems.“We can better monitor the performance of one servicer and one platform,” James Manning, acting undersecretary of education, said on a call with reporters Friday. Education officials are in the middle of issuing new contracts to student loan servicing companies responsible for placing borrowers in affordable repayment plans and keeping them from defaulting on their loans. The previous administration included contract requirements to shore up the quality of servicing in response to consumer complaints over poor communication, mismanaged paperwork and delays in processing payments. But servicing companies said the demands would be unnecessarily time-consuming, not to mention expensive. In April, Education Secretary Betsy DeVos withdrew a series of policy memos issued by the Obama administration to strengthen consumer protections for student loan borrowers. She rescinded three memos that, among other things, called for the creation of financial incentives for targeted outreach to people at great risk of defaulting on their loans, a baseline level of service for all borrowers and a contract flexible enough to penalize servicers for poor service. That decision drew backlash from consumer groups and state attorneys general, who complained that DeVos was abdicating her duty to protect borrowers. At the time, DeVos said the bid process had been “subjected to a myriad of moving deadlines, changing requirements and a lack of consistent objectives.” She said the department “must promptly address not only these shortcomings but also any other issues that may impede our ability to ensure borrowers do not experience deficiencies in service.”

Pension debt yielding a grim outlook for local governments nationwide | TheHill: With breaking news emanating out of Washington, D.C., on what feels like an hourly basis, it’s understandable that lower-profile issues go unnoticed, and since public pensions aren’t exactly the most captivating of issues, they’re almost without an audience. However, as mundane as they may be, public pensions have been the cause of the downfall of many entities, like Detroit and Orange County, Calif., as growing unfunded liabilities crowd out budgets, tank credit ratings and relentlessly choke taxpayers to the point that they see no other option but to move. All told, municipalities and states owe a combined $3.85 trillion in unfunded pension liabilities, or pension costs for current and retired public workers, but you would never be able to tell by looking at their budgets or financial reports. A large part of that debt is what Hoover Institution professor Joshua D. Rauh refers to as “hidden debt” in a newly released report. If you look at municipal and state government books, as reported by them, there is about $1.38 trillion of debt accounted for. Government accounting tricks and sleights-of-hand conceal much of what they owe. This also misleads credit rating agencies and creditors who often rely on the information provided by the government themselves, needless to say, the entities want to paint a rosy picture to lenders. Rauh’s report notes that while states and municipalities claim to have balanced budgets, no budget that he studied was actually balanced, meaning they didn’t account for the ongoing pension schemes.

Six Terrifying Graphs That Summarize America's Public Pension Crisis --A new report from the Hoover Institution written by Senior Fellow Joshua Rauh and entitled "Hidden Debt, Hidden Deficits: How Pension Promises Are Consuming State And Local Budgets," does a masterful job illustrating the true severity of America's public pension crisis, a topic to which we've dedicated a substantial amount of time over the past couple of years.  As part of the study, Rauh reviewed, in detail, 649 state, county and local pension systems in the United States and ranked them based on funding status and impact on local budgets.  Rauh argues that that $3.8 trillion taxpayer obligation is actually much larger if you apply some "common sense" math as opposed to "pension math." we calculate using market valuation techniques that the true unfunded liability owed to workers based on their current service and salaries is $3.846 trillion. These calculations reflect the fact that accrued pension promises are a form of government debt with strong rights. These unfunded liabilities represent an increase of $434 billion over 2014, as realized asset returns fell far short of their targets.  Governmental accounting standards for pensions underwent some changes in 2014 and 2015 with the implementation of Governmental Accounting Standards Board (GASB) statements 67 and 68, procedures which require state and local governments to report on the assets and liabilities of their systems with a greater degree of harmonization. However, these standards still preserved the basic flaw in governmental pension accounting: the fallacy that liabilities can be measured by choosing an expected return on plan assets. Specifically, the liability-weighted average expected return chosen by systems in 2015 was 7.6 percent. A 7.6 percent expected return implies that state and city governments are expecting the value of the money they invest today to double approximately every 9.5 years. That means that a typical government would view a promise to make a worker a $100,000 payment in 2026 as “fully funded” even if it had set aside less than $50,000 in assets in 2016; a similar payment in 2036 would be viewed as “fully funded” with less than $25,000 in assets in 2016

Fees Add Up - James Kwak - Public pension funds are having a tough time. On the one hand, the average funding ratio (assets as a percentage of the present value of future obligations) is below 80% because of inadequate contributions by sponsors (states and municipalities) and poor investment returns since the collapse of the technology bubble in 2000. On the other hand, because pensions responded to low returns by shifting more of their money into hedge funds and private equity funds, a larger proportion of their assets is siphoned off as investment fees each year. Unlike some people, I am not against hedge funds and private equity funds in principle. I think it’s highly likely that there are people who can beat the market on a sustained basis—particularly if they are people who are especially good with computers—both for theoretical reasons (someone has to be the first person to discover each relevant piece of information or actionable pattern) and empirical reasons (see Fama and French 2010, for example). Hedge funds have lagged the stock market in recent years, but what critics sometimes overlook is that they are supposed to trail the market in boom periods, because many target a beta of around 0.5. But I am mystified by the fact that, in what is supposed to be a highly competitive and innovative industry, the price of investing in a hedge fund has stayed virtually fixed at 2-and-20 (2% of assets, plus 20% of investment returns) for decades. The consequences of these high prices are added up in The Big Squeeze, a new report sponsored by the American Federation of Teachers. Because true investment fees are usually not disclosed—fund managers insist that they are confidential and require investors not to divulge them—the report simply quantifies the potential savings from reducing fees from 1.8-and-18 to 0.9-and-9. This may seem arbitrary, but I know anecdotally that some funds, even big ones, are charging something like 1-and-10 even to ordinary investors. Since state pension funds are some of the biggest investors that exist, you would think they would be able to negotiate even lower fees.

Another Insurer Quits Obamacare Leaving 25 Counties In Missouri With No Healthcare Options - Blue Cross Blue Shield of Kansas City (Blue KC) has just joined the growing ranks of insurers across the country that have decided they've lost just about enough money on Obamacare.  According to a press release issued earlier today, Blue KC's CEO said the company has lost $100 million on the Obamacare exchanges since 2014, a fact that prompted their decision to exit their 32-county service area. Blue Cross and Blue Shield of Kansas City (Blue KC) today announced the company’s decision to not offer or renew individual Affordable Care Act (ACA) plans in the company’s 32-county service area in Kansas and Missouri for 2018. This decision will affect Blue KC members with both on- and off- exchange individual plans but does not affect individual plans that were purchased on or prior to October 1, 2013. “Since 2014, we’ve expended significant resources to offer individual ACA plans to increase access to quality healthcare coverage for the Kansas City community,” said Danette Wilson, President and CEO of Blue KC. “Like many other health insurers across the country, we have been faced with challenges in this market. Through 2016, we have lost more than $100 million. This is unsustainable for our company. We have a responsibility to our members and the greater community to remain stable and secure, and the uncertain direction of this market is a barrier to our continued participation.”“This decision is necessary at this time, but we’ll continue to work with federal and state legislators to identify solutions that will stabilize the individual market and bring costs down for our members, the community and Blue KC,” said Wilson. The move will leave residents in 25 Missouri counties, or roughly 19,000 Obamacare enrollees, with no healthcare options in 2018.

The price tag on California’s universal health care is in, and it’s huge -- The price tag is in: It would cost $400 billion to remake California’s health insurance marketplace and create a publicly funded universal health care system, according to a state financial analysis released Monday.California would have to find an additional $200 billion per year, including in new tax revenues, to create a so-called “single-payer” system, the analysis by the Senate Appropriations Committee found. The estimate assumes the state would retain the existing $200 billion in local, state and federal funding it currently receives to offset the total $400 billion price tag. The cost analysis is seen as the biggest hurdle to creating a universal system, proposed by Sens. Ricardo Lara, D-Bell Gardens, and Toni Atkins, D-San Diego.It remains a long-shot bid. Steep projected costs have derailed efforts over the past two decades to establish such a health care system in California. The cost is higher than the $180 billion in proposed general fund and special fund spending for the budget year beginning July 1.Employers currently spend between $100 billion to $150 billion per year, which could be available to help offset total costs, according to the analysis. Under that scenario, total new spending to implement the system would be between $50 billion and $100 billion per year. “Health care spending is growing faster than the overall economy ... yet we do not have better health outcomes and we cover fewer people,” Lara said at Monday’s appropriations hearing. “Given this picture of increasing costs, health care inefficiencies and the uncertainty created by Congress, it is critical that California chart our own path.”

Tab For Single-Payer Proposal In California Could Run $400 Billion  - A proposed single-payer health system in California would cost about $400 billion annually, with up to half of that money coming from a new payroll tax on workers and employers, according to a state analysis. The report by the state Senate Appropriations Committee, issued Monday, put a price tag for the first time on legislation that would make the state responsible for providing health coverage to all 39 million Californians. The state-run system would supplant existing employer health insurance in California, as well as coverage through public programs such as Medicaid and Medicare. One of the chief obstacles to the legislation, Senate Bill 562, is the prospect of higher taxes. It also has exposed deep divisions among Democrats over whether now is the time to pursue single-payer — just as the Affordable Care Act comes under attack from Republicans in Washington. At a hearing Monday, one Democratic legislator questioned whether the state can effectively manage a universal health care system. The legislative analysis estimates a total annual cost of $400 billion to enact the Healthy California program for all residents, regardless of their immigration status. To put that in perspective, about $367 billion was spent on health care last year statewide, including public and private spending by employers and consumers, according to the UCLA Center for Health Policy Research.

UnitedHealth fudged Medicare claims, overbilled by $1 billion, feds say - The Justice Department has accused insurance giant UnitedHealth Group of overcharging the federal government by more than $1 billion through its Medicare Advantage plans. In a 79-page lawsuit filed late Tuesday in Los Angeles, the Justice Department alleged that the insurer made patients appear sicker than they actually were in order to collect higher Medicare payments than the company deserved. The government said it had “conservatively estimated” that the company “knowingly and improperly avoided repaying Medicare” for more than a billion dollars over the course of the alleged decade-long scheme. “To ensure that the program remains viable for all beneficiaries, the Justice Department remains tireless in its pursuit of Medicare fraud perpetrated by health care providers and insurers,” said acting U.S. Attorney Sandra R. Brown for the Central District of California, in a statement announcing the suit. “The primary goal of publicly funded healthcare programs like Medicare is to provide high-quality medical services to those in need — not to line the pockets of participants willing to abuse the system.” UnitedHealth denied the allegations. UnitedHealth is the nation’s biggest operator of Medicare Advantage plans, covering about 3.6 million patients in 2016, when Medicare paid the company $56 billion, according to the complaint.

Nearly 700 vacancies at CDC because of Trump administration’s hiring freeze -- Nearly 700 positions are vacant at the Centers for Disease Control and Prevention because of a continuing freeze on hiring that officials and researchers say affects programs supporting local and state public health emergency readiness, infectious disease control and chronic disease prevention.  The same restriction remains in place throughout the Health and Human Services Department despite the lifting of a government-wide hiring freeze last month. At the National Institutes of Health, staff say clinical work, patient care and recruitment are suffering. Like HHS, the State Department and the Environmental Protection Agency have maintained the freeze as a way of reducing their workforces and reshaping organizational structures after a directive last month from the Office of Management and Budget that said all federal agencies must submit a plan by June 30 to shrink their civilian workforces. HHS, State and EPA also face significant cuts in the Trump administration’s budget proposal for the fiscal year starting Oct. 1. The administration, which unveiled a “skinny budget” for fiscal 2018 in March, is scheduled to release its full budget next week. A senior CDC official said unfilled positions include dozens of budget analysts and public health policy analysts, scientists and advisers who provide key administrative support. Their duties include tracking federal contracts awarded to state and local health departments and ensuring that lab scientists have the equipment they need. Though HHS has exempted many positions from the freeze, including physicians and personnel who respond to cybersecurity and public health emergencies, many support personnel who often play critical roles have been affected.

 Feds probing psychiatric hospitals for locking in patients to boost profits - At least three US federal agencies are now investigating Universal Health Services over allegations that its psychiatric hospitals keep patients longer than needed in order to milk insurance companies, Buzzfeed News reports.  According to several sources, the UHS' chain of psychiatric facilities—the largest in the country—will delay patients' discharge dates until the day insurance coverage runs out, regardless of the need of the patient. Because the hospitals are reimbursed per day, the practice extracts the maximum amount of money from insurance companies. It also can be devastating to patients, who are needlessly kept from returning to their jobs and families. To cover up the scheme, medical notes are sometimes altered and doctors come up with excuses, such as medication changes, sources allege. Employees say they repeatedly hear the phrase: “don’t leave days on the table.” The Department of Health and Human Services has been investigating UHS for several years, as Buzzfeed has previously reported. UHS, a $12 billion company, gets a third of its revenue from government insurance providers. In 2013, HHS issued subpoenas to 10 UHS psychiatric hospitals. But now it seems the Department of Defense and the FBI have also gotten involved. They are said to be investigating billing to Tricare, an insurance plan for active military families. Some of the UHS psychiatric hospitals have units catering to military personnel, providing treatment for post-traumatic stress disorder and other combat-related issues.

Pennsylvania Coroner Says Dying Addicts Keep Morgue Full "Most Nights" - The coroner’s office in Montgomery County, Pennsylvania is literally running out of room for all the bodies that are piling up because of America’s worsening synthetic opioid epidemic,according to As the story notes, heroin isn’t responsible for these deaths; rather, Synthetic opioids like fentanyl, carfentanil and their many analogues are the chief culprit. As Triblive reports:“Lab-created, designer opioids have far outpaced heroin as a killer of addicts, and they've kept the coroner's office full on most nights.”"If this pace continues, I'm not really sure what we're going to do," said Montgomery County, Ohio, coroner Dr. Kent Harshbarger. "We had 13 (bodies) yesterday, and 12 of them were overdoses."The county’s coroner had to expand his cooler last month because its 36-body capacity wasn’t enough. It now has room for 42 bodies, and the country still occasionally runs out of space. “It’s full every night.” In Allegheny County, health officials, instances of fentanyl-related overdoses surpassed those of heroin for the first time in 2016. Six hundred people overdosed and died in the county last year – most from opioids, said Dr. Karen Hacker, director of the Allegheny County Health Department.

A Vital Drug Runs Low, Though Its Base Ingredient Is in Many Kitchens -- Hospitals around the country are scrambling to stockpile vials of a critical drug — even postponing operations or putting off chemotherapy treatments — because the country’s only two suppliers have run out.The medicine? Sodium bicarbonate solution. Yes, baking soda.Sodium bicarbonate is the simplest of drugs — its base ingredient, after all, is found in most kitchen cabinets — but it is vitally important for all kinds of patients whose blood has become too acidic. It is found on emergency crash carts and is used in open-heart surgery and as an antidote to certain poisons. Patients whose organs are failing are given the drug, and it is used in some types of chemotherapy. A little sodium bicarbonate can even take the sting out of getting stitches.“As I talk to colleagues around the country, this is really a problem we’re all struggling with right now,” said Mark Sullivan, the head of pharmacy operations at Vanderbilt University Hospital and Clinics in Nashville.Hospitals have been struggling with a dwindling supply of the medicine for months — one of the suppliers, Pfizer, has said that it had a problem with an outside supplier but that the situation worsened a few weeks ago. Pfizer and the other manufacturer, Amphastar, have said they don’t know precisely when the problem will be fixed, but it will not be before June for some forms of the drug, and in August or later for other formulations. The shortage of sodium bicarbonate solution is only the latest example of an inexpensive hospital staple’s supply dwindling to a critical level. In recent years, hundreds of generic injectable drugs have become scarce, vexing hospital administrators and government officials, who have called on the manufacturers to give better notice when they are about to run short.

Why is the world suffering from a penicillin shortage? - "At the start of 2015 we experienced shortages of benzathine penicillin G. We then switched to using ampicillin, but then we ran out of ampicillin as well," says Mark Sonderup, vice-chairman of the South African Medical Association (SAMA). Intramuscular antibiotic benzathine penicillin G is critical to control rheumatic heart disease, an illness that kills thousands of people every year and from 33 million worldwide suffer. Patients can develop the illness from a simple strep throat infection. Strep throat can be easily cured with a single injection of penicillin, but if left untreated, the bacteria causing the infection can infect other parts of the body, including the heart, damaging the valves and changing the lives of patients forever. Shortages of penicillin make treatment for this preventable disease harder. "Clearly, stock outs are a problem. It means there is limited access to treatment and that is why rheumatic heart disease still persists," explains Bongani Mayosi, president of the Pan-African Society of Cardiology (PASCAR). South Africa isn't alone in its struggle. At least 18 countries, including the US, Canada, Portugal, France and Brazil, have faced shortages of benzathine penicillin G over the past three years, according to the World Health Organization. In the US, a year-long shortage of benzathine penicillin G has made treating syphilis - a disease that is growing in prevalence - more difficult. In Brazil, a three-year shortage of benzathine penicillin G came amid an outbreak of syphilis, a disease linked to severe malformation in babies. The antibiotic is the only drug that can kill the syphilis bacteria in the fetus.  Just four companies produce the active ingredient for penicillin - a drug that changed modern medicine 76 years ago - and because the medicine offers little profit, those companies keep production levels low. As penicillin has been used to treat diseases, such as syphilis and rheumatic heart disease, which disproportionately affect poorer countries, the extent of the demand for the drug also isn't always clearly captured."There is a market failure in the penicillin sector: there is a demand, but it comes from the poor,"  India has the highest number of deaths caused by rheumatic heart disease, with 111,000 fatal cases in 2015, according to WHO Global Health Estimates. But, despite the number of people affected, the supply of penicillin, the drug that can stop the disease, has been irregular in the country for the past 15 years.

“Thousands’ of known bugs found in pacemaker code -BBC - Pacemakers, insulin pumps and other devices in hospitals harbour security problems that leave them vulnerable to attack, two separate studies warn. One study solely on pacemakers found more than 8,000 known vulnerabilities in code inside the cardiac devices. The other study of the broader device market found only 17% of manufacturers had taken steps to secure gadgets. The reports come soon after more than 60 health organisations in the UK fell victim to a cyber-attack. The report on pacemakers looked at a range of implantable devices from four manufacturers as well as the "ecosystem" of other equipment used to monitor and manage them. Researcher Billy Rios and Dr Jonathan Butts from security company Whitescope said their study showed the "serious challenges" pacemaker manufacturers faced in trying to keep devices patched and free from bugs that attackers could exploit. They found that few of the manufacturers encrypted or otherwise protected data on a device or when it was being transferred to monitoring systems. Also, none was protected with the most basic login name and password systems or checked that devices they were connecting to were authentic.

WHO spends more on travel than some major health initiatives, internal documents show - The World Health Organization routinely spends about US$200 million a year on travel – far more than what it doles out to fight some of the biggest problems in public health including Aids, tuberculosis or malaria, according to documents obtained by The Associated Press.As the cash-strapped UN health agency has pleaded for more money to fund its responses to health crises worldwide, it has also been struggling to get its own travel costs under control.Despite introducing new rules to try to curb its expansive travel budget, senior officials have complained internally that employees are breaking the rules by booking perks like business class aeroplane tickets and rooms in five-star hotels.  The US$201 million annual average that the WHO spends on travel far outstrips what it reserves for some of its top programmes, although those budgets sometimes include certain travel costs. Last year, WHO spent about US$71 million on Aids and hepatitis. On malaria, it spent US$61 million. And to slow tuberculosis, WHO invested US$59 million.Still, some health programmes do get exceptional funding – the agency spends about US$450 million trying to wipe out polio every year.On a recent trip to Guinea where WHO director-general Dr Margaret Chan praised health workers in West Africa for triumphing over Ebola, she stayed in the biggest presidential suite at the Palm Camayenne hotel in Conakry. The suite has an advertised price of €900 (US$1,008) a night. The agency declined to say who picked up the tab, noting only that her hotels are sometimes paid for by the host country. But some say that sends the wrong message to the rest of the agency’s 7,000 staff.

Increased cancer rate in US linked to bad environment -- Improving the worst environments in the US could prevent 39 in every 100,000 cancer deaths. That’s according to the first study to address the impact of cumulative exposure to environmental hazards on cancer incidence in the US, which found strong links between poor environmental quality and increased rates of cancer.The environment we live in can influence biological processes such as hormone function and gene expression, or cause DNA damage – all of which can alter the risk of developing certain cancers. For instance, lung cancer incidence can increase due to chronic exposure to certain pesticides, diesel exhaust and the radioactive gas radon. Social factors also take their toll – poverty is linked to liver cancer, for example, due to increased alcohol consumption. Jyotsna Jagai at the University of Illinois and her colleagues investigated these links by comparing data from the Environmental Quality Index – a measure of cumulative environmental exposures between the years of 2000 and 2005 – with cancer incidence across the US from 2006 to 2010. The results showed increases in cancer incidence with decreasing environmental quality. The link was clearest with prostate and breast cancer. “There is a tension in the field as to whether to focus on individual or cumulative environmental exposures,” says Scarlett Gomez of the Cancer Prevention Institute of California in an accompanying editorial. She says that although identifying individual exposures can allow them to be addressed in a targeted way, pinpointing them can be difficult because many potential cancer factors are linked together. For example, people of low socioeconomic status tend to live in areas that score poorly for multiple environmental factors.

Ebola Spreading: Infections Up 800% In Last Week, Officials Race To Track Down 400 Possible Contacts --Last week three suspected Ebola infections were detected in a remote region of the Congo. Since then, World Health Organization officials have been scrambling to contain the virus. Their efforts appear to have failed.The contagion continues to spread, and though it’s nowhere near the 11,000 people who were infected during the outbreak in 2014, the infection rate has spiked over 800% in just the last seven days, with at least nine new cases reported in the last 24 hours:The number of suspected cases of Ebola has risen to 29 from nine in less than a week in an isolated part of Democratic Republic of Congo, where three people have died from the disease since April 22, the World Health Organization said on Thursday. The risk from the outbreak is “high at the national level,” the W.H.O. said, because the disease was so severe and was spreading in a remote area in northeastern Congo with “suboptimal surveillance” and limited access to health care.“Risk at the regional level is moderate due to the proximity of international borders and the recent influx of refugees from Central African Republic,” the organization said, but it nonetheless described the global risk as low because the area is so remote. (NY Times) The 2014 outbreak likewise started in a remote region of Africa, but containment efforts were ineffective and the virus eventually spread to the United States and Europe. According to W.H.O., about 400 people have come into contact with the 29 people infected and officials are attempting to track them down for monitoring. Protective gear has been dispatched to health workers and a mobile lab is being constructed and then deployed to the area. Immediate repairs to air strips and telecommunications are also being carried out. The first six months of the operation are expected to cost $10 million…

Ticks: Lyme Disease Carrier Could See Record Numbers  - Ticks are roaming American forests in greater numbers this year than any in recent memory leaving thousands of humans at risk for lyme disease, say public health officials. And things could get much worse through the summer if weather conditions remain humid, spelling trouble for the people who roam in their habitat.The prevalence of ticks—and the diseases they carry—has been on the rise in recent decades as reforestation and climate change expanded the range of the eight-legged bacterial vectors. Public health officials have attributed the pervasiveness of ticks so far this year to warm winter conditions that allowed an unusually large number of rodents and mammals to survive and act as hosts to ticks.The growth in tick numbers—both this year and in recent decades has caught the attention of public health officials in the affected states and at the highest levels of government. "Millions of Americans seek care for a tick bites each year in the United States and despite that very few of us are equipped to answer the questions," said Anne Schuchat of the CDC in a presentation earlier this year. "The reported cases of tick borne diseases are increasing. The range of ticks that can carry diseases is expanding. The number of tick borne diseases that we're aware of is increasing."  The high tick populations translates into increased risk for humans, who can be infected by bacteria and viruses carried by the arachnids. Lyme disease, the most common ailment passed through ticks, affected more than 25,000 people in 2015 primarily in the Northeast and northern Midwest. That's up from just over 10,000 two decades prior, according to numbers from the CDC.  The disease, which causes fever, headaches and fatigue, can spread infections to the heart and nervous system if not treated properly. A slew of less-understood diseases transmitted through ticks are also affecting a growing number of humans, scientists say. The CDC reports an increase in cases of the Powassan virus, which directly causes neurological damage, among other diseases spread through ticks.

 Will New York Become the First State to Allow Genetically Engineered Moths? - New York is one step closer to becoming the first state to have genetically modified , non-sterile insects released outside without cages. Last week, the Animal and Plant Health Inspection Service of the United States Department of Agriculture (USDA-APHIS ) ended the public comment period for its most recent environmental assessment of the proposed field release of a genetically engineered (GE) diamondback moth, an insect that causes serious damage to cruciferous crops such as broccoli and cauliflower. The release would be the first open-air trial in the U.S. of a GE agricultural pest created with a technology that doesn't use sterility as a way to control population. Although the comment period occurred in the middle of planting season, the USDA did not honor a request by Northeast Organic Farming Association of New York and Food & Water Watch for a 30-day extension to allow interested parties to properly assess the complex report. If the permit is approved, Cornell will be able to release up to 30,000 GE moths per week for three to four months for up to two years. The modified moths are imported from Oxitec, Ltd. , the same British company that engineers the Aedes aegypti mosquitoes, which is at the center of a fierce controversy in the Florida Keys. Oxitec's designer moth uses the same technology employed with their modified mosquitoes that have already been released in Brazil, Panama and the Cayman Islands. As in those programs, the male GE moth is not sterile but instead carries an engineered trait designed to kill most of its female offspring. However, although approximately 99 percent of the females will not survive to adulthood, many will die on the target crop, which raises concerns about ingestion of the tiny GE larvae by livestock, wildlife and humans if the process is eventually put into widespread use. In addition to this obvious ick factor, watchdog organizations have also questioned the use of tetracycline as the agent that switches off the lethality gene in the laboratory, citing antibiotic resistance among other issues.

Monsanto’s Round Up and Aluminum Now Linked to Autism, Alzheimers, Gut Dysbiosis and Pineal Gland Calcification: An Important Article Review --Round Up’s main ingredient is glyphosate, which works synergistically with aluminum, which is often percent in certain foods, water, and vaccines, to induce neurological damage. If you ask Monsanto, they will tell you that in vivo studies showed Round Up to be nontoxic to animals. However, there are two large problems with this assumption. Firstly, the studies were too short as they were only performed for 3 months on average. Secondly these absolutely skewed studies were only performed using pure glyphosate but left out the combination of adjuvants/fillers that have always been contained in the herbicide that is sold on shelves. These adjuvants include polyethoxylated alkylamines (POEAs), which is known to be extremely toxic on its own and can synergistically increase the toxicity of Glyphosate by 125 fold! These authors wrote ([39] Abstract, p. 1): “Despite its reputation, Roundup was by far the most toxic among the herbicides and insecticides tested”. Moreover, Monsanto claims that Glyphosate is not harmful to humans as it disrupts the Shikimate pathway that is present in plants but not in animal cells. This argument overlooks the fact that our gut bacteria also have the shikimate pathway and they use it to make essential nutrients that our cells cannot make! This includes many amino acids, which have been found to be deficient in Alzheimers and Autism cases. One important study that echoed these results was performed by the researcher, Seralini.   It showed rats fed GM corn and soy over their entire lifetime developed mammary tumors, liver and kidney malfunctions. The controversy stemmed from the study sample size and other fraudulent allegations about how the research was set up. However, if you know the power and political pull that Monsanto has, you would question the legitimacy of these claims. Fortunately, the same study has now been republished by another journal.

A scientist named George Church has a wild idea to upend evolution — here’s what you should know about him -- Harvard biologist George Church burst into the headlines (yet again) last week when he helped organize a closed-door meeting of scores of top scientists to discuss accelerating efforts to create synthetic DNA — including a complete human genome.    They’re considering launching a decade-long drive to build, from scratch, all the genes that make humans human.  The meeting raised all sorts of ethical questions. But that’s nothing new for Church. He has been stirring controversy, and excitement, in the scientific community for decades. He wants to reanimate the woolly mammoth, edit pig genes so their organs can be transplanted safely into people — oh, and reverse aging.  Darwin explained how species evolve. Church wants to turbocharge that process by putting new genes into organisms rather than waiting around for them to evolve those genes on their own.  For instance, he is using CRISPR, the revolutionary genome-editing technology he helped develop, to alter 62 pig genes at a time, which might allow their organs to be transplanted into people without being rejected.  Church has also got a bit of Santa in him, bringing the gift of his imagination — and his name — to so many private companies (as advisor, cofounder, or consultant) that his conflict-of-interest slide is notorious.  As for his divinity, not yet. But he has embarked on efforts to resurrect the dead (mammoths, as he explained at a 2013 TedxDeExtinction talk) and smite the living (mosquitoes that carry malaria and other disease-causing pathogens, via a revolutionary technique called gene drive).

The military's special ops may try to develop 'super soldiers' with performance-enhancing drugs - US Special Operations Command is weighing the use of nutritional supplements or even performance-enhancing drugs to push the abilities and endurance of its forces beyond current human limits, according to a report from Defense News.  While special-operations forces already have access to specialized resources, like dietitians and physical therapists, SOCOM is looking to increase their ability to tolerate pain, recover from injuries, and remain physically able in challenging environments. "If there are ... different ways of training, different ways of acquiring performance that are non-material, that's preferred but in a lot of cases we've exhausted those areas," Ben Chitty, the senior project manager for biomedical, human performance, and canine portfolios at US SOCOM's Science and Technology office, told Defense News. While Chitty said SOCOM was exploring nutritional supplements, other substances were in consideration as well. "For performance enhancing drugs, we'll have to look at the makeup and safety in consultation with our surgeon and the medical folks before making any decisions on it," he told Defense News.  One goal of the research to develop what Defense News referred to as "super soldiers" would be to expand troops' ability to operate in places not well suited for humans — high altitudes or underwater in particular.  While the evaluation process would emphasize safety — "We're not cutting any corners," Chitty said — any proposal to deploy pharmaceutical substances among special-operations troops is likely to draw scrutiny, especially in light of recent revelations about what Capt. Jamie Sands, the commander of 900 Navy SEALs on the East Coast, called a "staggering" number of drug cases among Navy Special Operations units. Three active and retired SEALs spoke to CBS in April, with their faces masked and voices disguised, telling the network that illicit drug use among SEAL units was increasing.  "People that we know of, that we hear about have tested positive for cocaine, methamphetamine, heroin, marijuana, ecstasy," one of them said. takes DNA ownership rights from customers and their relatives -- Don’t use the AncestryDNA testing service without actually reading the Terms of Service and Privacy Policy. According to these legal contracts, you still own your DNA, but so does The family history website is selling a new DNA testing service called AncestryDNA. But the DNA and genetic data that collects may be used against “you or a genetic relative.” According to its privacy policies, takes ownership of your DNA forever. Your ownership of your DNA, on the other hand, is limited in years.  It seems obvious that customers agree to this arrangement, since all of them must “click here to agree” to these terms. But, how many people really read those contacts before clicking to agree? And how many relatives of customers are also reading? There are three significant provisions in the AncestryDNA Privacy Policy and Terms of Service to consider on behalf of yourself and your genetic relatives: (1) the perpetual, royalty-free, world-wide license to use your DNA; (2) the warning that DNA information may be used against “you or a genetic relative”; (3) your waiver of legal rights.

The vanishing animals that future generations will never see -- Some of the world’s most exotic animals could be extinct within months, conservationists have warned, with future generations growing up in a world without many of the species that are alive today.The WWF claims that some animals, such as the vaquita porpoise, could be wiped out in the next few months. Some would now be extinct had zoos not provided a ‘Noahs Ark’ from which to reestablish populations.  and disease are pushing many species to the brink to such an extent that the world has now entered a sixth mass extinction. More than 23,000 species are on the IUCN Red List threatened with extinction, including 41 per cent of the world’s amphibians, 25 per cent of mammals and 13 per cent of birds. Numbers of vaquita - dubbed the panda of the sea - have dropped by 90 per cent since 2011 because the porpoise are getting tangled in illegal fishing nets. There are only 30 now left in the wild, and all live in Mexico’s Gulf of California. Conservationists have warned they could be extinct by the autumn if the Mexican government does not do more to protect the area. Lis Key at International Animal Rescue said pangolins - the world’s most trafficked animal - were also in danger of dying out within a generation. Orangutans and slow lorises are also critically endangered because of poaching and habitat loss.

Climate change could slash staple crops: Study -- Climate change, and its impacts on extreme weather and temperature swings, is projected to reduce global production of corn, wheat, rice and soybeans by 23 percent in the 2050s, according to a new analysis.  The study, which examined price and production of those four major crops from 1961 to 2013, also warns that by the 2030s output could be cut by 9 percent.   The findings come as researchers and world leaders continue to warn that food security will become an increasingly difficult problem to tackle in the face of rising temperatures and weather extremes, combining with increasing populations, and volatile food prices.  The negative impacts of climate change to farming were pretty much across the board in the new analysis. There were small production gains projected for Russia, Turkey and Ukraine in the 2030s, but by the 2050s, the models “are negative and more pronounced for all countries,” the researchers wrote in the study published this month in the journal Economics of Disasters and Climate Change.  Lead author, Mekbib Haile, a senior researcher at the Center for Development Research, University of Bonn, said that an increase in average temperatures during the growing season isn’t projected to have much impact on the staple crops. But this is only true until that increase hits a certain “tipping point”, he said, which is about 89 degree Fahrenheit for these crops.“Rising temperature at the two extremes—minimum temperature in the case of rice and maximum temperature in the case of corn—are detrimental to production of these crops,” he said. In addition to temperature, extreme weather—including droughts and excessive rainfall—was predicted to slow production.

How 36 million pounds of soybeans treated with pesticide became 'organic' -- A shipment of 36 million pounds of soybeans sailed late last year from Ukraine to Turkey to California. Along the way, it underwent a remarkable transformation. The cargo began as ordinary soybeans, according to documents obtained by The Washington Post. Like ordinary soybeans, they were fumigated with a pesticide. They were priced like ordinary soybeans, too. But by the time the 600-foot cargo ship carrying them to Stockton, Calif., arrived in December, the soybeans had been labeled "organic," according to receipts, invoices and other shipping records. That switch - the addition of the "USDA Organic" designation - boosted their value by approximately $4 million, creating a windfall for at least one company in the supply chain. After being contacted by The Post, the broker for the soybeans, Annapolis-based Global Natural, emailed a statement saying it may have been "provided with false certification documents" regarding some grain shipments from Eastern Europe. About 21 million pounds of the soybeans have already been distributed to customers. The multimillion-dollar metamorphosis of the soybeans, as well as two other similar grain shipments in the past year examined by The Post, demonstrate weaknesses in the way that the United States ensures that what is sold as "USDA Organic" is really organic. The three shipments, each involving millions of pounds of "organic" corn or soybeans, were large enough to constitute a meaningful proportion of the U.S. supply of those commodities. All three were presented as organic, despite evidence to the contrary. And all three hailed from Turkey, now one of the largest exporters of organic products to the United States, according Foreign Agricultural Service statistics. Agriculture Department officials said that they are investigating fraudulent organic grain shipments. But it declined to identify any of the firms or shipments involved. "We are continuing the investigation based on the evidence received," it said in a statement. 

Calls to reform food system: ‘Factory farming belongs in a museum’ - We can feed an extra 4 billion people a year if we reject the bloated and wasteful factory farming systems that are endangering our planet’s biodiversity and wildlife, said farming campaigner Philip Lymbery on Monday night, launching a global campaign to Stop the Machine. At present, 35% of the world’s cereal harvest and most of its soya meal is fed to industrially reared animals rather than directly to humans. This is a “wasteful and inefficient practice” because the grain-fed animals contribute much less back in the form of milk, eggs and meat than they consume, according to Lymbery, the chief executive of Compassion in World Farming (CIWF). “The food industry seems to have been hijacked by the animal feed industry,” he said.  In recent years the developing world in particular has seen significant agricultural expansion. According to independent organisation Land Matrix, 40m hectares have been acquired globally for agricultural purposes in the last decade and a half, with nearly half of those acquisitions taking place in Africa.The impact of that expansion is still unclear, but meanwhile the world’s wildlife has halved in the past 40 years. “Ten thousand years ago humans and our livestock accounted for about 0.1% of the world’s large vertebrates,” said Tony Juniper, the former head of Friends of the Earth. “Now we make up about 96%.  The Sumatran elephant, for example, has been disastrously affected by the growing palm oil industry, with more than half of its habitat destroyed to create plantations, and elephant numbers falling rapidly. The old argument that we need factory farming if we are to feed the world doesn’t hold true, says Lymbery, who argues that ending the wasteful practice of feeding grain to animals would feed an extra 4 billion people. Putting cattle onto pasture and keeping poultry and pigs outside where they can forage, and supplementing that with waste food is far more efficient and healthy, he says. According to his calculations, based on figures from the UN’s Food and Agriculture Organisation (FAO), the total crop harvest for 2014 provided enough calories to feed more than 15 billion people (the world’s population is currently 7.5 billion), but waste and the animal feed industry means that much of that is going elsewhere.

Norway to boost protection of Arctic seed vault from climate change - Norway is boosting the flood defences of its Global Seed Vault on the Arctic archipelago of Svalbard after water entered the entrance tunnel last year.The storage facility, deep inside a mountain, is designed to preserve the world's crops from future disasters.Unseasonably high temperatures last year caused the permafrost to melt, sending water into the access tunnel.No seeds were damaged but the facility is to have new waterproof walls in the tunnel and drainage ditches outside.The vault stores seeds from 5,000 crop species from around the world. Dried and frozen, it is believed they can be preserved for hundreds of years. Although most countries keep their own supplies of key varieties, the Global Seed Vault acts as a back-up. If a nation's seeds are lost as a result of a natural disaster or a man-made catastrophe, the specimens stored in the Arctic could be used to regenerate them. Scientists at the facility describe the vault as the most important room in the world. Government spokeswoman Hege Njaa Aschim told the BBC that the reason the vault was built on Svalbard was because the permafrost was thought to be permanent. She said the problems emerged last October when the temperatures, instead of being -10C or colder, were hovering around 0C.

France lobbied EU to cut forests without counting climate impact | Climate Home - climate change news: France has partially succeeded in watering down EU carbon accounting rules to give countries a free pass on depleting forests, leaked documents show. Ahead of an Environment Council meeting on 19 June, member states have been proposing tweaks to the framework drawn up by the European Commission for measuring greenhouse gases. One of the biggest line items relates to forest management. By 2030, the amount of carbon stored in EU forests is predicted to decrease by 112 million tonnes from 2005 levels, a 30% cut, according to the European Commission impact assessment. That is roughly equivalent to the annual emissions from 100 million cars. A French amendment proposal, seen by Climate Home, would allow countries to harvest more trees for bioenergy or toilet paper without recording the climate impact of reducing forest carbon stocks. A draft Council text dated 17 May shows that the French lobbying has partially succeeded. The compromise, to be discussed by an expert working group on Tuesday ahead of the ministerial meeting, would only count half the decline in carbon storage. NGOs have written to France’s newly-appointed environment minister Nicolas Hulot, urging him to change course and back tighter rules. “In the forest, the decisions we make today will have far-reaching consequences for the decades to come,” wrote France Nature Environment, a network of green groups. “EU accounting rules must fully account for the development of forest carbon sources and sinks to 2030.”

Where Nestlé Guzzles Water, Michigan Neighbors Take Exception - Nestlé can pump more than 130 million gallons of water a year from a well near this northwestern Michigan town to bottle and sell. It’s a big business: Last year, for the first time, bottled water outsold carbonated soft drinks in the United States.  And now Nestlé wants more. It has applied to increase its pumping allowance at the well by 60 percent. The application, which the Michigan Department of Environmental Quality is expected to rule on within months, has catalyzed opposition in part because of what Nestlé pays for most of the water it bottles: nothing. That is, it pays only a $200 annual permit fee to pump from wells it owns (like this one) or leases. “Having anybody take away some of the very best water that should be going into the creeks and the Muskegon River and eventually Lake Michigan, that’s a big deal,” said Jeff Ostahowski, vice president of Michigan Citizens for Water Conservation, who lives 25 miles from Evart. “That Nestlé does it for free? That’s just crazy.”  Actually, it is standard; landowners and commercial businesses have long had rights in much of the United States to use as much water as they want free if they drill and pump it themselves. Even customers on municipal water systems technically pay not for the water they use but for infrastructure and energy to deliver it. Still, in a state where access to clean, affordable water, most notably in Flint and Detroit, has dominated the news, it offends many that a foreign company can profit from bottling so much for so little. Even in this deeply conservative corner of rural America, fear of environmental despoliation and a sense of being exploited is propelling many to denounce Nestlé’s demand for more.

Presidents can't undo national monuments, new study says | The Salt Lake Tribune: As Utah political leaders continue predicting President Donald Trump will shrink or even erase the new Bears Ears National Monument, a soon-to-be published legal analysis concludes that presidents have no authority to mess with monuments established by a predecessor. Such moves would defeat the purpose of the Antiquities Act, the 1906 law that authorizes presidents to unilaterally set aside public lands to protect "historic landmarks, historic and prehistoric structures, and other objects of historic or scientific interest," according to Sean Hecht, a law professor at the University of California, Los Angeles. "If you look at both the original Antiquities Act in context of other statutes of its time and the Federal Land Policy and Management Act that overhauled public land management in 1976, the evidence is clear Congress intended this to be a one-way designation," said Hecht, co-executive director of UCLA's Emmett Institute on Climate Change and the Environment. "It can be proclaimed, but not revoked or reduced."  Hecht is an author on the paper, accepted for publication online next month in the Virginia Law Review. He and fellow scholars, including University of Colorado's Mark Squaillace, conclude that Congress in 1906 delegated monument-making authority to presidents, whose designations carry the weight of congressional acts that only Congress has the power to adjust. They also argue that if Congress wanted to empower presidents to undo monuments, it would have specified that authority in various land statutes it passed following the Antiquities Act — but instead chose not to.

Landslide Closes Section of Popular Coastal Highway in California -- Travelers in California enjoy the isolation that comes with driving along Highway 1, a serpentine route with steep cliffs known for its spectacular views of the Pacific Ocean. That feeling of being cut off from civilization took on a different meaning on Saturday after more than 1 million tons of rock and dirt cascaded down a slope in a landslide the likes of which local officials said they had never seen before.The slide buried about a quarter of a mile of the highway in dirt up to 40 feet deep. The road, also known as State Route 1, was shut for about 12 miles from Ragged Point to Gorda, Calif., which is about 70 miles south of Monterey.Aerial photos show a mound of dirt shaped like a duck’s bill protruding 250 feet from the shoreline into the ocean. The hillside, with two long scrapes exposing stripes of brown, looked as if it had been clawed.  No one was injured. The authorities said they could not estimate when the section of road would be reopened but said it would take months. “This is by far the worst we’ve ever seen,” Smaller landslides had been occurring at the site since January. That section had been recently closed to the public as crews worked to stabilize the hillside, but conditions deteriorated, and the workers were pulled out last week, she said. There are enough landslides there that locals have names for them. This one was called Arleen’s Slide, after a longtime road flagger who works in that area.  Highway 1, which is more than 600 miles long with numerous hairpin turns, is a popular destination for tourists and sightseers. The landslide on Saturday in an area called Mud Creek was the latest disruption to businesses and residents along the route. A project to replace the Pfeiffer Canyon Bridge farther north caused a section of Route 1 to be shut.

Weather forecasts are imperfect. Under Trump's budget, they'll be nearly impossible: If President Donald Trump gets his way, weather forecasts in America will become less accurate over time, lagging behind those produced in Europe, Japan and other parts of the world. Trump's budget contains a head-scratching provision that would cancel key upgrades to the National Weather Service's (NWS) computer modeling program, forcing an agency that has already fallen behind its peers abroad to fall even further behind. If approved by Congress in its current form, the National Weather Service would fail to catch up in both computing power and all-around reliability, leaving American forecasters in the dark about potentially dangerous weather events like blizzards, hurricanes, and tornado outbreaks.As we reported on Tuesday, the Trump administration's budget request includes language that calls for the National Oceanic and Atmospheric Administration (NOAA), which houses the NWS, to slow its implementation of more accurate computer models. The agency is already well behind Europe when it comes to the accuracy of its main forecasting model, known as the Global Forecast System or GFS, and Trump would simply let the accuracy gap grow. The NOAA budget, if implemented, would also eliminate the array of Pacific Ocean buoys that enable forecasters to detect and predict the evolution of El Niño events, which can alter worldwide weather patterns. That part of the Trump budget would also do away with a network of specially-designed ocean instruments to detect destructive tsunamis in the Pacific Ocean before they hit land. 

April 2017: Earths 2nd Warmest April on Record - April 2017 was the planet's second warmest April since record keeping began in 1880, said NOAA's National Centers for Environmental Information (NCEI) on Thursday; NASA also rated April 2017 as the second warmest April on record. The only warmer April was just last year, in 2016. April 2017 ranked as the eighteenth warmest month (expressed as the departure of temperature from average) of any month in the global historical record in the NASA database. The extreme warmth of January 2017 (thirteenth warmest month of any month in NASA’s database), February 2017 (sixth warmest), March 2017 (fifth warmest) and now April gives 2017 an outside chance of becoming Earth’s fourth consecutive warmest year on record--if an El Niño event were to develop this summer and continue through the end of the year, as some models are predicting. It's more likely, though, that 2016 will remain as the warmest year in Earth's recorded history. For the year-to-date period of January–April 2017, Earth's temperature was 0.95°C (1.71°F) above the 20th century average of 12.6°C (54.8°F). This was the second highest such period since records began in 1880, behind 2016 by 0.19°C (0.34°F.) Global ocean temperatures last month were the second warmest on record for any April, and global land temperatures were the fourth warmest on record. Global satellite-measured temperatures for the lowest 8 km of the atmosphere were the fifth warmest for any April in the 39-year record, according to the University of Alabama Huntsville (UAH).

Most of Europe set for warmer than normal June, July: forecaster - Almost all of Europe is set for warmer-than-normal temperatures in June and July, the Weather Company -- formerly WSI -- said in an update Monday, with the risk of "extreme" heat in southeastern Europe. The closely watched forecasts predict the temperatures across the northern and southern European mainland will be above the the seasonal norms for the coming two months, which could trigger additional power demand for air conditioning and natural gas demand for gas-fired power generation. Only Scandinavia and the northern part of the UK could have cooler temperatures in June and July, the Weather Company said."The latest evidence strongly suggests that the coolest summer weather, relative to normal, may be focused more across Scandinavia than across northwestern Europe, with the biggest risk for extreme summer heat and dryness focused across southeastern Europe," the Weather Company's chief meteorologist Todd Crawford said. Further out into August, the company sees cooler temperatures across most of Europe apart from the southeastern parts of the continent.

Facing fire: India’s poorest regions are the most vulnerable to heat waves - People living in underdeveloped parts of central India are most vulnerable to the health impacts of heat waves, a Heat Vulnerability Index for India has found. The index considered various factors including a person’s age, caste, income and health, as well as the green cover in an area as having a bearing on people’s heat vulnerability, and its analysis of 640 of the 707 districts in the country finds 10 districts to be “very high risk”. Six of these are in relatively underdeveloped areas in Madhya Pradesh and Chhattisgarh. In contrast, the 20 districts in the “very low risk” category are mostly in the relatively developed states of Kerala and Goa and the Union Territory of Lakshadweep. The index was published in The International Journal of Environmental Research and Public Health, a peer-reviewed scientific journal, in March 2017. Researchers used data from the 2011 Census of India, the District Level Household Survey-3 and the Indian Space Research Organisation, combining it statistically to create the index, according to this Rand Corporation blog post by two of the authors, Gulrez Shah Azhar and Jaime Madrigo.  These high-risk areas are not the same as areas with high or rising temperatures – the correlation between the index and average land surface temperatures is moderate. “When we think of temperature, there are several issues to consider – in addition to temperature there is effect of humidity and radiant heat on mortality,” Gulrez Shah Azhar, one of the authors, told IndiaSpend. “At the same time, local populations are adapted to (used to) the prevailing temperatures. Deaths happen when heat exceeds these adaptation thresholds.”

The Race to Understand Black Carbon’s Climate Impact -- Black carbon is a product of incomplete combustion from forest fires and the burning of both wood and fossil fuels, and its influence on the Arctic is like the proverbial death by a thousand cuts. At the top of the world, black carbon can land on snow and ice, darkening them, which makes them soak up more heat from the sun and melt faster. It can also absorb and radiate heat from sunlight as it floats through the atmosphere.Black carbon may be worsening the extreme warming felt all over the Arctic, record temperatures that are making permafrost disintegrate and sea ice melt. And if the Arctic gets too much warmer, it is, in the long term, like setting off a giant Rube Goldberg machine — once Arctic ice melts, seas rise; ocean waters absorb more heat; methane, another potent greenhouse gas, escapes from the permafrost. The particles that end up in the Arctic have millions of points of origin, drifting northward from sources like wood and coal stoves used for cooking in India or diesel trucks chugging down U.S. highways. But any particles produced in the Arctic itself are far more likely to linger here and become a more damaging pollution problem. As the melting Arctic becomes more accessible to ships and enticing for new development, some black carbon sources in the region are increasing. But there are only a handful of research stations monitoring the impact. The Arctic is a difficult place to do research — tough to reach and subject to extreme weather that can interfere with even the best-designed equipment. Utqiaġvik is one of about a half-dozen places in the entire high-Arctic region that are capturing ongoing data on soot. Scientists had been making a lot of assumptions about how black carbon ended up in the Arctic — based on estimates and sophisticated models of global air masses. But few people had actually ventured out to the tundra to measure it themselves with this level of precision. And unless scientists and policy-makers knew where the problem was coming from, it would be tough to remedy it.

Varied increases in extreme rainfall with global warming -- A new study by researchers from MIT and the Swiss Federal Institute of Technology in Zurich shows that the most extreme rain events in most regions of the world will increase in intensity by 3 to 15 percent, depending on region, for every degree Celsius that the planet warms.  If global average temperatures rise by 4 degrees Celsius over the next hundred years, as many climate models predict given relatively high CO2 emissions, much of North America and Europe would experience increases in the intensity of extreme rainfall of roughly 25 percent. Some places such as parts of the Asian monsoon region would experience greater increases, while there will be smaller increases in the Mediterranean, South Africa and Australia.  There are a few regions that are projected to experience a decrease in extreme rainfall as the world warms, mostly located over subtropical oceans that lie just outside the tropical, equatorial belt.   The study, published today in Nature Climate Change, finds that the varied changes in extreme precipitation from region to region can be explained by different changes in the strength of local wind patterns: As a region warms due to human-induced emissions of carbon dioxide, winds loft that warm, moisture-laden air up through the atmosphere, where it condenses and rains back down to the surface. But changes in strength of the local winds also influence the intensity of a region’s most extreme rainstorms.

Ocean acidification is global warming’s forgotten crisis - Most of us are familiar with the climate change impacts we see and feel in our communities: heatwaves, storms, droughts, floods, and so on.But a UN meeting this week about climate change and oceans reminds us a related crisis is unfolding largely away public attention: the one-two punch of ocean warming and acidification.With record temperatures sweeping over continents year after year, it is easy to overlook that the ocean has absorbed some 90% of the heat trapped by the carbon dioxide dumped into the atmosphere since the industrial revolution; and how much of that CO2 has dissolved into seawater as carbonic acid, altering its basic chemistry.The UN meeting follows on the heels of a new secretary general report that investigates the impacts of these changes and the findings are concerning, to say the least. The report describes record ocean temperatures pushing fish species toward cooler latitudes and out of reach of artisanal fishers; it documents widespread coral bleaching across the tropical belt and how most reefs could enter a state of permanent decline by 2040; it shows how ocean acidification has damaged a range of calcifying marine life, such as corals and shellfish; and it raises fears that the cumulative effects of the impacts are degrading phytoplankton, zooplankton, and krill, the foundation of the ocean’s food chain. Perhaps most ominously, it warns that the ocean system could be reaching the limits of its ability to store all that excess carbon and heat released by human activities.

Alaska's sea ice is melting unusually early, 'another sign Arctic is unraveling' -  The Arctic's record-warm winter has allowed thousands of square miles of sea ice off Alaska to melt more than a month early, leaving the shoreline vulnerable to waves and exposing dark ocean water to absorb more heat from the sun. The loss of ice in the Chukchi Sea will boost the regional temperature and could increase precipitation over nearby land, said Alaska-based climate scientist Rick Thoman.  As of May 24, the ice cover on the Chukchi Sea had melted away from the shore along a 300 mile stretch, from Point Hope all the way to Barrow, the northernmost town in the United States. Satellite and radar data show the ice-free area totaled about 54,000 square miles. The huge area of open water off the coast is something you would normally see in early July, said Mark Serreze, director of the National Snow and Ice Data Center. The rapid disintegration of the Chukchi Sea ice is an "exclamation point" on a remarkable series of rapid fire Arctic changes, he said.  "It's another sign that the Arctic is unraveling. We had heat waves in the central Arctic last winter, record-low winter sea ice coverage, and even periods of ice retreat when it should be growing. These extremes are moving from place to place," Serreze said.  "If it's just one event, you can say it's natural variability, but it's the collective picture you're seeing now, that things are changing very fast," he said. "If this is natural variability, it's of a kind I'm not familiar with."

 So much water pulsed through a melting glacier that it warped the Earth’s crust -  NASA scientists detected a pulse of melting ice and water traveling through a major glacier in Greenland that was so big that it warped the solid Earth — a surge equivalent in mass to 18,000 Empire State Buildings. The pulse — which occurred during the 2012 record melt year — traveled nearly 15 miles through the Rink Glacier in western Greenland over four months before reaching the sea, the researchers said. “It’s a gigantic mass,” said Eric Larour, one of the study’s authors and a researcher at NASA’s Jet Propulsion Laboratory. “It is able to bend the bedrock around it.” Such a “wave” has never before been detected in a Greenland or Antarctic glacier. The total amount of mass carried in the wave — in the form of either water, ice or some combination of both — was 1.67 billion tons per month, or 6.68 billion tons over four months, according to the study, which was published in Geophysical Research Letters. “Rivers can have inundations upstream where a lot of water is collected, and the water gets bunched up as it’s going downstream and doesn’t ever really flatten out. It just remains as this wave and continues down a river.” However, the scientists don’t know what the wave actually looked like or precisely what caused it — much of it was occurring below the surface of the glacier. They also don’t know precisely what it was made of. “We are losing a combination of water and ice. We don’t know what fraction,” said Adhikari. 

Miles of Antarctic ice are collapsing into the sea as scientists try to understand speed of change -One of Antarctica’s largest ice shelves is breaking apart at an alarming, according to researchers NASA Miles of ice sheets in the Antarctic are collapsing into the sea in a trend that scientists fear may indicate the early stage of an unstoppable disintegration.  The collapse of the most vulnerable parts of the ice sheet would cause the rising of the sea level, threatening some of the world's biggest coastal cities such as Miami, New York, Mumbai and Shanghai.  While the melting of the ice cap is widely known, scientists are trying to gather information about the rate at which it is occurring.   Although the predictions are worrying, The New York Times reports scientists still lack information over the future trajectory of the climate in Antarctica. Computer forecasts suggested that if emissions continue at this rate to warm up the atmosphere, parts of Antarctica could break up rapidly, which could see the ocean rise six feet or more by the end of this century. This would be double the maximum increase that an international climate panel projected four years ago. Robert M. DeConto of the University of Massachusetts, Amherst, told The New York Times the latest forecast “could be decades too fast, or decades too slow”. Since 1950, temperatures in the Antarctic Peninsula have risen by about half a degree Celsius each decade, which is much faster than the global average.With the ocean getting warmer and speeding up the ice flow, American and British scientific agencies are now working together to get a better understanding of the rate of the collapse in the most vulnerable areas.  It could be years before this study brings a set of answers but urgent insight into the potential speed at which sea level could rise is crucial.

 USGS: In Next Decades, Frequency of Coastal Flooding Will Double Globally -- from USGS, May 18, 2017 - The frequency and severity of coastal flooding throughout the world will increase rapidly and eventually double in frequency over the coming decades even with only moderate amounts of sea level rise, according to a new study released today in “Nature Scientific Reports.” [Readers, note that this press release does not mention the cause of sea level rise, i.e., atmospheric carbon dioxide pollution, and it only mentions, at the very end, "climate adaptation."  Nothing is stated about how sea level rise is expected to be 2 meters (over 6 feet) by 2100.] This increase in flooding will be greatest and most damaging in tropical regions, impairing the economies of coastal cities and the habitability of low-lying Pacific island nations. Many of the world's largest populated low-lying deltas (such as the Ganges, Indus, Yangtze, Mekong and Irrawaddy Rivers), also fall in or near this affected tropical region. The new report from scientists at the U.S. Geological Survey, the University of Illinois at Chicago, and the University of Hawaii shows that with just 10-20 cm (4-8 inches) of sea level rise expected no later than 2050, coastal flooding will more than double. This dramatic increase in coastal flooding results from rising sea levels combined with storm-driven flooding, including the effects of waves and storm surge. In most coastal regions, the amount of sea level rise occurring over years to decades is small, yet even gradual sea level rise can rapidly increase the frequency and severity of coastal flooding. Until now, global-scale estimates of increased coastal flooding due to sea level rise have not considered elevated water levels due to waves, and thus have underestimated the potential impact. The researchers combined sea level projections with wave, tide and storm surge models to estimate increases in coastal flooding around the globe. They found that regions with smaller variations in ocean water levels due to tides, waves and storm surge, common in the tropics, will experience the largest increases in flooding frequency.

In Bonanza for Real Estate, Tourism Sectors, Centre to Dilute Coastal Protection Rules -- The National Democratic Alliance has drafted a complete overhaul of the environmental regulations that protect India’s 7,500-kilometre coastal belt from overdevelopment and exploitation. In what promises to be a bonanza particularly for the tourism industry and the real estate industry along the coastline, the draft proposes easing several of the key provisions in the existing regulations in favour of opening up the coasts to development activity. A copy of the draft which is currently under inter-ministerial consultations at the moment was accessed under Right To Information (RTI) Act by the CPR-Namati Environment Justice Program, a Delhi-based think tank. It was reviewed by Business Standard. A senior official in the government said the draft is under advanced stage of finalisation. It would be put out for mandatory public consultations once the inputs from other ministries have been considered. Another official that Business Standard spoke to said while the government was keen to make the changes quickly, it was eventually decided that public consultations would be essential before finally notifying them. Neither of the two wanted to speak on record. The coastal protection rules are notified as subordinate legislation under the Environment Protection Act, 1986 and only require an executive decision and do not require approval from the Parliament.

Interior Department agency removes climate change language from news release - Thursday, a group of scientists, including three working for the U.S. Geological Survey, published a paper that highlighted the link between sea-level rise and global climate change, arguing that previously studies may have underestimated the risk flooding poses to coastal communities. However, three of the study’s authors say the Department of Interior, under which USGS is housed, deleted a line from the news release on the study that discussed the role climate change played in raising Earth’s oceans. “While we were approving the news release, they had an issue with one or two of the lines,” said Sean Vitousek, a research assistant professor at the University of Illinois at Chicago. “It had to do with climate change and sea-level rise.”“We did end up removing a line,” he added.  Vitousek and five co-authors wrote the study, which was published in the journal Nature Scientific Reports. Three of the authors worked for USGS and the other three worked for universities. That deleted line, they said, read: “Global climate change drives sea-level rise, increasing the frequency of coastal flooding.”  Instead, the USGS news release leaves the cause unmentioned. It begins: “The frequency and severity of coastal flooding throughout the world will increase rapidly and eventually double in frequency over the coming decades even with only moderate amounts of sea level rise.”  “It’s a crime against the American people,” Neil Frazer, a geophysics professor at University of Hawaii at Manoa and one of the study’s co-authors, said of the line’s removal and of other efforts to limit scientific communication from federal agencies. “Because scientists have known for at least 50 years that anthropogenic climate change is a reality.”

Trump Administration Edits Science, Again - The Department of Interior edited a news release on a study coauthored by government scientists to remove a mention of climate change , the Washington Post reported.  The DOI deleted a sentence linking climate change to sea level rise from the press release on the study, which found that the risk of flooding to coastal communities may be higher than previously estimated. "It did not cause any direct inaccuracy, but it did eliminate an important connection to be made by the reader—that global warming is causing sea-level rise," study coauthor Chip Fletcher told the Post.  Fortunately, peer-reviewed science marches on outside the U.S. government: a separate study from European researchers published yesterday in the journal Proceedings of the Natural Academy of Sciences finds that the rate of sea level rise has nearly tripled since 1990, due partially to the melting of ice sheets in Greenland and Antarctica .  The Post reported that the deleted sentence read, "Global climate change drives sea-level rise, increasing the frequency of coastal flooding."

Sinkhole Opens In Front Of Mar-a-Lago, Jokes Pour In - With Trump traveling half-way around the globe, on Monday an amusing "event of nature" took place at the president's favorite "ground zero", when a sinkhole opened up in front of Trump’s Mar-a-Lago resort where he has previously hosted world leaders including China's Xi Jinping and Japan's PM Shinzo Abe, prompting an advisory from the Town of Palm Beach. The 4-foot-by-4-foot sinkhole, first reported by the local municipality, formed on Southern Boulevard directly in front of Mar-a-Lago, in the vicinity of a newly installed water main. The town says utility crews will likely do exploratory excavation on Monday to determine the cause of the sinkhole.A 4' x 4' sinkhole has formed on Southern Boulevard directly in front of Mar-a-Lago. It appears to be in the vicinity of the newly installed water main. West Palm Beach Utilities distribution crews have secured the area and will most likely need to do some exploratory excavation today. One lane is closed but the road remains open. Please pay attention to signs.While t here were no further details about the geological aberration, and certainly no comment from the White House or Trump, who is currently having dinner with Netanyahu, users on Twitter decided to have some fun with news first noted by the WaPo, and shortly after the sinkhole opened up the jokes started pouring in.

Trump Sued for Censorship of Climate Change Data - The Center for Biological Diversity sued the Trump administration Tuesday to uncover public records showing that federal employees have been censored from using words or phrases related to climate change in formal agency communications.Tuesday's lawsuit, filed in U.S. District Court in Washington, DC, seeks to require four federal agencies to release climate-censorship records, in compliance with the Freedom of Information Act. The U.S. Department of Energy, U.S. Environmental Protection Agency, U.S. Department of the Interior and U.S. Department of State have failed to provide records requested by the Center for Biological Diversity or indicate when they might do so, violating deadlines established under the law."The Trump administration's refusal to release public information about its climate censorship continues a dangerous and illegal pattern of anti-science denial," said Taylor McKinnon at the Center for Biological Diversity. "Just as censorship won't change climate science, foot-dragging and cover-ups won't be tolerated under the public records law."On March 30 the Center for Biological Diversity filed Freedom of Information Act requests for all directives or communications barring or removing climate-related words or phrases from any formal agency communications. The records requests followed news reports that federal agencies had removed climate information from government websites and instructed Department of Energy staff to avoid using the phrases "climate change," "emissions reductions" and "Paris agreement."The Center for Biological Diversity has filed identical requests with the Council on Environmental Quality, the U.S. Department of Agriculture, the U.S. Department of Health and Human Services and the National Oceanic and Atmospheric Administration. ‘

Scientists just published an entire study refuting Scott Pruitt on climate change - In a sign of growing tensions between scientists and the Trump administration, researchers published a scientific paper Wednesday that was conceived and written as an explicit refutation to an assertion by Environmental Protection Agency Administrator Scott Pruitt about climate change. The study, in the journal Nature Scientific Reports, sets up a direct test of a claim by Pruitt, made in written Senate comments following his confirmation hearing, that “over the past two decades satellite data indicates there has been a leveling off of warming.”  After reviewing temperature trends contained in three satellite data sets going back to 1979, the paper concludes that the data sets show a global warming trend — and that Pruitt was incorrect. “Satellite temperature measurements do not support the claim of a ‘leveling off of warming’ over the past two decades,” write the authors, led by Benjamin Santer of Lawrence Livermore National Laboratory. Santer co-authored the study with three Livermore colleagues and scientists from MIT, the University of Washington in Seattle, and Remote Sensing Systems, which keeps one of the three satellite temperature data sets. “In my opinion, when incorrect science is elevated to the level of formal congressional testimony and makes its way into the official congressional record, climate scientists have some responsibility to test specific claims that were made, determine whether those claims are correct or not, and publish their results,” said Santer in an interview, when asked about the framing of the research. The study wades into an ongoing and highly fraught debate over how to interpret the temperature records of the planet’s lower atmosphere, or troposphere, provided by polar orbiting satellites. But the new study finds that all of the three satellite data sets — kept by Remote Sensing Systems, the Center for Satellite Applications and Research at the National Oceanic and Atmospheric Administration, and the University of Alabama at Huntsville — show a long-term warming trend in the middle-to-upper part of the troposphere. After correcting for a cooling-down of the stratosphere (the layer above the troposphere), the paper finds that the trend is roughly 0.36 degrees Fahrenheit per decade for the first two data sets, and 0.26 degrees Fahrenheit per decade for the third.

France's Macron to try to convince Trump to back Paris accords: diplomats | Reuters: French President Emmanuel Macron will seek to convince his U.S. counterpart Donald Trump on Thursday to stick to a global deal to combat climate change ahead of a Group of Seven leaders where there is currently no consensus on the matter, diplomats said. Trump, who doubts climate change is man-made and made a campaign pledge to "cancel" the 2015 Paris Agreement, has postponed a planned decision on whether to stay or leave that had been due before the May 26-27 summit in Italy. A newcomer to international diplomacy, Macron travels on Thursday to Brussels for a NATO summit before heading to Sicily for the G7 summit that also includes Germany, Britain, Italy, Japan and Canada. Ahead of NATO, he will meet Trump for the first time for an informal lunch that will immediately test his diplomatic skills given the unpredictable nature of the U.S. leader and France's desire to ensure the U.S. does not renege on the climate deal. "What's at stake is to be firm on the Paris accord," said a senior French diplomat, adding that Macron would put his case to Trump in the face-to-face talks in the Belgian capital. "We don't want the U.S. to pull out because it would be a very bad signal and lead others to pull out."

Trump still deciding on Paris climate agreement | TheHill: President Trump is still deciding whether the United States will stay in the Paris climate change agreement. Secretary of State Rex Tillerson told reporters aboard Air Force One that the topic of the Paris pact came up in Trump's and Tillerson's Wednesday meeting with Vatican Secretary of State Cardinal Pietro Parolin, following the president's meeting with Pope Francis. “The president indicated we’re still thinking about that, that he hasn’t made a final decision. He, I think, told both Cardinal Parolin and also told [Italian] Prime Minister [Paolo] Gentiloni that this is something that he would be taking up for a decision when we return from this trip,” Tillerson told reporters en route to Brussels.“It’s an opportunity to hear from people. We’re developing our own recommendation on that. So it’ll be something that will probably be decided after we get home.” Tillerson said he, Trump and Parolin had a “good exchange” on climate change, and Parolin pushed Trump to remain in the agreement. At the meeting earlier in the day, Francis gave Trump a copy of Laudato Si, his 2015 encyclical on climate change that pushes all people of faiths across the world to take action to slow global warming. Trump promised on the campaign trail last year to “cancel” the Paris accord, in which nearly 200 nations agreed to limit their greenhouse gas emissions. But some in the administration, including Tillerson, are pushing Trump to remain in the accord while potentially changing the 26 percent to 28 percent emissions cut that former President Barack Obama pledged. 

Environmentalists Are Ignoring the Elephant In the Room: U.S. Military Is World’s Largest Polluter -  Newsweek reported in 2014:The US Department of Defence is one of the world’s worst polluters. Its footprint dwarfs that of any corporation: 4,127 installations spread across 19 million acres of American soil. Maureen Sullivan, who heads the Pentagon’s environmental programmes, says her office contends with 39,000 contaminated sites.Camp Lejeune is one of the Department’s 141 Superfund sites, which qualify for special clean up grants from the federal government. That’s about 10% of all of America’s Superfund sites, easily more than any other polluter. If the definition is broadened beyond Pentagon installations, about 900 of the 1200 or so Superfund sites in America are abandoned military facilities or sites that otherwise support military needs. The U.S. military is the third-largest polluter of U.S. waterways.The Washington Post noted Monday:The U.S. military is the single largest consumer of fuel in the world.We use a highly-polluting form of nuclear power so the U.S. military can make bombs.  U.S. military considerations also drive nuclear policy in Japan (that didn’t turn out very well) and other countries.The government has been covering up nuclear accidents for more than 50 years.Above-ground nuclear tests – which caused numerous cancers to the “downwinders” – were covered up by the American government for decades. See this, this, this, this, this and this.At least 33,480 U.S. nuclear weapons workers who have received compensation for health damage are now dead.And the country’s main storage site for nuclear waste from military production may be in real trouble.The Pentagon is also one of the largest greenhouse gas emitters in the world … and yet has a blanket exemption from all greenhouse gas treaties.The defense department also uses open-air burn pits which send a parade of horribles into the air.Sealife is not exempt. Military sonar kills whales and dolphins.  And the military has long been a flagrant user of chemical weapons and depleted uranium … which can trash ecosystems and human health.

EPA science chair ‘surprised’ by dismissal of advisers | TheHill: The chairwoman of an Environmental Protection Agency (EPA) science panel told lawmakers Tuesday that she was “surprised” by the agency’s dismissal of several scientific advisers earlier this month. The EPA did not renew the terms for nine members of the 18-member Board of Scientific Counselors (BOSC) earlier in May. Agency officials have said they hoped to add to the board more representatives from industries regulated by the EPA. The plan angered Democrats and scientists, who said such a decision would water down the quality of the science that underpins the agency’s rulemaking. After the dismissals, two members of a BOSC subcommittee resigned in protest.Deborah Swackhamer, the chairwoman of BOSC, said the dismissals “surprised” her and others because the agency traditionally renews the terms of its scientific advisers if they wish to stay at the agency. “I’m obviously concerned,” Swackhamer told the House Science Committee on Tuesday. “My committee is no longer populated, so I’m anxious to make sure it gets repopulated as quickly as possible.” Swackhamer — who emphasized that she was testifying personally and not on behalf of the board — said she is “troubled by the fact that there is an intent to politicize and marginalize the science” in the Trump administration. “Policy is by its nature political,” she said. “But the science should never be politicized. … My personal fear is that the actions taken by the federal government are, in fact, diminishing the role of science.” 

Trump Budget Would Cut E.P.A. Science Programs and Slash Cleanups - President Trump’s fiscal 2018 budget proposal would cut the Environmental Protection Agency’s Office of Science and Technology nearly in half, while paring by 40 percent funding for E.P.A. employees who oversee and put in place environmental regulations, according to a White House document that was shared with The New York Times.And while the agency’s administrator, Scott Pruitt, has vowed to prioritize the agency’s cleanup of hazardous waste sites, the president would cut funding for the program, known as Superfund, by about 25 percent. And spending for a program to restore former industrial sites contaminated by pollution, another stated priority of the administrator, would shrink by about 36 percent.Those cuts are part of an overall E.P.A. budget reduction of about 30 percent, as outlined originally in March, when the White House unveiled the top-line budget requests for the fiscal year that begins in October. The agency’s budget would drop to $5.7 billion — its lowest level in 40 years, adjusted for inflation — from its current $8.2 billion.On Tuesday, the White House will fill in the details with a full budget release. White House officials did not respond to requests for comment Friday on the E.P.A. budget request. But Liz Bowman, an agency spokeswoman, said the proposal “prioritizes federal funding for work in infrastructure, air and water quality, and ensuring the safety of chemicals in the marketplace.”

Budget chief: Trump won't continue Obama's ‘crazy’ spending on climate | TheHill: President Trump’s top budget official says that the administration will not continue former President Obama’s “crazy” spending on climate change science. Speaking with reporters Tuesday, the day the Trump administration rolled out its first full budget proposal, Office of Management and Budget Director Mick Mulvaney said climate spending has often been wasteful. “I think what you saw happen during the previous administration is that the pendulum went too far to one side, where we’re spending too much of your money on climate change, and not very efficiently,” Mulvaney said when asked about climate science spending. Spending for climate science is significantly reduced in Trump's budget across multiple agencies, including the Environmental Protection Agency (EPA), which would see an overall 31 percent cut. “We don’t get rid of it here. Do we target it? Sure. Do a lot of the EPA reductions aim at reducing the focus on climate science? Yes. Does it mean that we are anti-science? Absolutely not,” he continued. “We’re simply trying to get things back in order to where we can look at the folks who pay the taxes and say, ‘Look, yeah, we want to do some climate science, but we’re not going to do some of the crazy stuff the previous administration did.'” Mulvaney justified his position in part by bringing up a National Science Foundation grant that gave $700,000 to a theater company to produce a climate change science education musical. He incorrectly said the grant was given last year. “Do you think that’s a waste of your money?” he said to the reporter who asked the initial question. 

Trump's budget screws over climate research, but don't freak out yet: Shots fired. President Donald Trump may be 6,000 miles away from Washington, D.C., on Tuesday, but that didn't stop him from launching an all-out assault on climate science and related energy research. The weapon of choice? His fiscal year 2018 budget proposal. The cuts are staggering in scope, and the consequences are already starting as federal employees and contractors — spooked by the figures out this week — begin job searching in earnest.Every single agency that touches climate change research, from the National Science Foundation (NSF) to the Department of Energy, NASA, and especially the Environmental Protection Agency (EPA), would see sharp reductions and eliminations of climate research programs. While the proposal is just the start of negotiations with Congress over a final, enacted budget, it represents the clearest statement yet of Trump's priorities for governing the country. And those priorities do not put climate change — ranked by other major industrialized and developing countries as one of the top threats facing the world today — high on the list. According to Mick Mulvaney, the head of the White House Office of Management and Budget (OMB), the administration targeted climate funding for sharp reductions, but he rejected the charge that it's anti-science. “What I think you saw happen during the previous administration is the pendulum went too far to one side, where we were spending too much of your money on climate change, and not very efficiently,” Mulvaney said at a budget briefing on Tuesday morning. 

Trump's 'Environmentally Disastrous' Budget Would Cripple EPA - The U.S. Environmental Protection Agency ( EPA ) budget will still be slashed by nearly a third, from $8.2 billion to $5.65 billion, under President Trump 's fiscal 2018 budget proposal released Tuesday.The EPA, which has long been targeted by the Trump administration, is the hardest hit federal agency under the new plan. Opponents say it "endangers Americans" and cripples an institution charged with protecting their health and safety.As detailed by the National Association of Clean Air Agencies , notable components of the anticipated budget include a 30 percent cut in federal grants to state and local air pollution control agencies; a 39 percent cut in EPA's Science and Technology budget; a 35 percent cut in EPA's Environmental Program and Management budget (the agency's overall operating budget); and the elimination of funding several regional programs, including restoration of the Chesapeake Bay, Great Lakes and Puget Sound.The Washington Post noted that "dozens of other programs also would be zeroed out entirely, including funding for radon detection, lead risk reduction, projects along the U.S.-Mexico border and environmental justice initiatives." Additionally, less money will be allocated to enforcement of environmental crimes andclimate change research.Significantly, the budget proposes deep cuts to the EPA's Superfund program despite EPA Administrator Scott Pruitt previously saying he does not support cutting the program and listing it as one of his priorities .

White House moving ahead with stiff EPA budget cuts: group, citing document | Reuters: President Donald Trump's administration plans deep cuts to state environmental programs, a summary of the Environmental Protection Agency's 2018 budget showed on Friday, even after some Republicans in affected states raised concerns when the agency released an initial outline of the budget in March. The EPA's grants to state and local governments on pollution issues from air quality management to pesticides enforcement would be cut 45 percent to $597 million in the fiscal year 2018 budget proposal the administration will send to Congress next week, according to details released by the National Association of Clean Air Agencies (NACAA). ( The nonprofit group, an association of pollution control agencies in 40 states and various municipalities and territories, said details on the budget came directly from a leaked administration document. More than a dozen programs to tackle environmental problems in environmentally sensitive regions, such as the Chesapeake Bay, the Great Lakes and South Florida, would be cut to nothing. "You would have thought the administration would have revised the budget in light of the overwhelming adverse reaction they encountered from previous trial balloons, instead ... they doubled down," said Bill Becker, the NACAA's executive director. Several Republicans, including Senator Rob Portman of Ohio and Wisconsin Governor Scott Walker, had raised concerns about the EPA's plans to cut Great Lakes program funding.

Trump Budget Would Wallop EPA's Climate and Environment Programs - Details of President Donald Trump's 2018 budget proposal, leaked this week, reveal that the administration appears determined to wallop environmental programs, including many that tackle climate change. It would cut Environmental Protection Agency funding by nearly one-third, slash spending on renewable energy innovation, and eliminate the Greenhouse Gas Reporting program, among other programs.The White House only has the first move in the long budget process; once the proposal is unveiled officially next week, it will be Congress' turn to weigh in on spending priorities. With Trump embroiled in scandal, and many popular programs targeted for elimination, it's not at all clear that lawmakers will follow the president's lead.The president's so-called "skinny" budget, released in March, also called for slashing EPA funding by 31 percent but was light on detail. This second version of the budget proposal, leaked late this week, reveals that the administration intends to follow through on its commitment to reduce EPA to the size it was in the 1970s, when climate change wasn't on its radar screen. Research on air and energy would be slashed by 67 percent, and clean air regulatory programs—which include climate change—would be cut 47 percent.

White House proposes slashing funds to clean up toxic sites despite EPA's pleas - Environmental Protection Agency head Scott Pruitt’s vow to shift the agency back towards the “vital” work of dealing with toxic sites that pollute air and water has been dashed by a White House budget plan that would slash funding for the clean-ups.Donald Trump’s 2018 budget plan proposes severe cuts to clean-up programs targeting some of the most toxic sites in the US, which are invariably situated near low-income communities and minorities, despite a push by the EPA to prioritize these hazardous areas.This month, Pruitt issued a directive that instructed the agency to quicken its response to polluted areas known as Superfund sites, where industrial activity or toxic accidents have tainted the air, water or soils.In an internal memo, Pruitt said he will take oversight of Superfund remedial efforts, promising that the clean-ups will be “restored to their rightful place at the center of the agency’s core mission”. There are more than 1,700 Superfund sites such as shuttered factories, quarries and landfills in the US, with a disproportionate number situated beside communities of color.But Trump’s budget proposal, set to be fully unveiled on Tuesday, would reduce funding for those clean-ups by nearly a third, while the budget for enforcing Superfund remedies with businesses would be slashed by almost 40%. The EPA budget documents were obtained and released by the National Association of Clean Air Agencies.Furthermore, the EPA’s environmental justice office, which champions the rights of communities burdened by pollution, would be closed down and the civil rights program would experience an 18% funding decrease. Congress will have the responsibility for setting federal spending but Trump’s budget request makes clear that the administration wants to pare down the EPA while increasing military spending and paying for a border wall with Mexico. Trump envisages cuts that would see the EPA’s total budget shrink by nearly one third from $8.2bn to $5.65bn – its lowest level, adjusting for inflation, in 40 years.

Trump administration stands by three Obama-era energy rules | TheHill: President Trump’s Department of Energy is moving forward with three Obama-era efficiency rules. Toward the end of former President Obama's administration, the Energy Department’s Office of Energy Efficiency and Renewable Energy issued new energy conservation standards for various refrigeration products, dedicated-purpose pool pumps and residential central air conditioners and heat pumps. Following a regulatory review by the Trump administration, the Energy Department said Thursday it will enforce these efficiency rules. This comes as Trump and Republican lawmakers have sought to repeal a number of high-profile regulations from the Obama administration, including certain efficiency standards. The energy industry will have until October 2019 to comply with the refrigeration rules, July 2021 to comply with the pool pump rules and January 2023 to comply with the rules for air conditioners and heat pumps.

Trump EPA transition chief laments slow progress in killing green rules | Reuters: The man who led President Donald Trump's transition team for the U.S. Environmental Protection Agency, Myron Ebell, told a conservative conference last month that the new administration is moving too slowly to unravel climate change regulations. In closed-door remarks to members of the conservative Jefferson Institute in Virginia on April 18, a recording of which was obtained by Reuters, Ebell said Trump's administration had made a series of missteps, including delays in appointing key EPA officials, that could hamper efforts to cut red tape for industry. "This is an impending disaster for the Trump administration," Ebell, a prominent climate change doubter, said in the recording provided to the Center for Media and Democracy and shared with Reuters. Ebell was chosen by Trump's campaign to lead the EPA's transition until the Jan. 20 inauguration, a choice that had reinforced expectations Trump would follow through on promises to rescind Obama-era green rules and pull the United States out of a global pact to fight climate change. Ebell had been seen as a candidate for the EPA administrator job, a post that ultimately went to former Oklahoma Attorney General Scott Pruitt. Ebell no longer works at the agency but remains influential within a faction of the U.S. conservative movement with ties to the Trump administration. His criticism reflects a broader disappointment by some conservatives about Pruitt's focus and commitment to scrapping even more complex Obama-era regulations.

Shell shareholders reject emissions target proposal | Reuters: Royal Dutch Shell shareholders on Tuesday widely rejected a proposal by an environmental group calling for the oil company to set and publish annual targets to reduce carbon emissions. The vote is a setback for climate activists who are increasing pressure on global oil companies, including U.S. firms Exxon Mobil and Chevron, to become more ambitious in helping combat climate change. Around 94 percent of Shell shareholders who cast a vote decided against resolution 21, according to final results reported following the company's annual general meeting in The Hague. Roughly 5 percent of voters abstained. "The resolution is an unreasonable ask," said Shell Chief Executive Ben van Beurden, promising to engage further with investors on how the oil company can become more transparent about its plans to tackle climate change. Shell said binding emissions reduction targets would mean "tying its hands" and weakening the company because it would be forced to reduce production and sales. Growing investor sensitivity to climate change risks have already led Shell to invest in renewable energy projects such as offshore wind farms. Shareholders overwhelmingly approved the company's new remuneration policy which for the first time ties 10 percent of executives bonuses to cutting greenhouse gas emissions.

These Two Words Can Solve the Climate Crisis - If you want to see a solution to the climate crisis in your lifetime, they might be the two most important words you hear this year: carbon pricing .Sure, the crisis is a complex challenge with no one solution. But while carbon pricing may not be a silver bullet, it's one we're going to need in the chamber—and critically, support is growing all along the political spectrum right when we need it. First, a quick primer. Carbon pricing as a concept is basically just what it sounds like: attaching a market price to carbon pollution emitted from burning fossil fuels. From there, things get a little more complicated as there are several ways to do it.

  • Carbon Tax: The simplest approach, a carbon tax assigns a price to each unit of carbon emitted or the carbon content of a fuel, either for designated industries or entire societies. There's a clear cause and effect: the more carbon you burn and emissions you put into the air, the more you pay. Plus, the price rises over time, gradually putting more and more pressure on people or industries to cut their emissions.
  • Emissions Trading Scheme (ETS): Usually called "cap-and-trade" in the U.S., the principle is that a state, provincial or national government establishes a market with a limit on how much a designated set of industries can emit in a year (the "cap" part). The government then distributes and/or sells allowances to emit a certain amount to everyone in the market. If a company, for example, is going to emit more than it originally bought, it has to buy more from someone else in the market who's not planning to emit as much (the "trade" part).
  • Fuel Tax: This is where a government will directly tax a fuel based on the amount of say, coal itself, rather than the carbon it produces when burned.
  • Hybrid Instruments: An increasingly popular option, hybrid instruments combine elements of a carbon tax and an ETS.

There's more to say about each of these—and we've put together the 2017 Handbook on Carbon Pricing Instruments to say it—but the important thing is that each uses market forces to encourage people or companies to burn less carbon—and so put less pollution driving climate change into the air.

Focus on Carbon Removal a ‘High-Stakes Gamble’ -- The manmade emissions fueling global warming are accumulating so quickly in the atmosphere that climate change could spiral out of control before humanity can take measures drastic enough to cool the earth’s fever, many climate scientists say. The most important way the earth’s rising temperature can be tempered is to reduce the use of fossil fuels. But scientists say another critical solution is to physically remove greenhouse gases from the atmosphere — something called “negative emissions” — so that carbon dioxide and rising temperatures could peak, and then begin to decline over time. Many of the assumptions underlying the landmark Paris Climate Agreement rely on the idea that humans will be actively removing carbon from the atmosphere late this century because reducing emissions won’t be enough to prevent global warming from exceeding levels considered dangerous. But that assumption relies on technology that hasn’t been proven to work on a global scale. Removing carbon dioxide from the atmosphere on a scale large enough to slow global warming is untested, and the technology is in its infancy. The effect it could have on the earth is largely unknown, and some scientists warn that some of the consequences of using negative emissions technology could be catastrophic.

Carbon emissions, carbon intensity and the global trade in CO2 - In previous posts several commenters have pointed out that we can’t correctly estimate a country’s carbon emissions or carbon intensity without allowing for the CO2 emitted in the manufacture of goods that the country imports and consumes. The preliminary numbers developed in this post indicate that while such “outsourced” CO2 emissions account for probably less than 10% of total global emissions they cause significant underestimation of carbon intensity in some countries that import manufactured goods, such as Switzerland, and significant overestimation in some countries that manufacture and export these goods, such as Taiwan. It is unlikely, however, that current carbon accounting procedures will be changed to take outsourced emissions into account. Here are a few illustrative examples of how outsourced CO2 figures into the emissions equation:

  • In 2007 the EU’s domestic CO2 emissions were 7.7Gt. But the EU imported and consumed goods that generated 1.6Gt of CO2 emissions in their manufacture. The EU’s CO2 emissions were therefore 7.7 domestic + 1.6 outsourced = 9.3Gt total.
  • The USA’s domestic CO2 emissions were 6.4Gt. But the USA imported and consumed  goods that generated 1.1Gt of emissions in their manufacture. The USA’s emissions were therefore 6.4 domestic + 1.1 outsourced = 7.5Gt total.
  • China’s domestic CO2 emissions were 9.3Gt. But China exported goods that generated 2.0Gt of emissions in their manufacture. China’s emissions were therefore 9.3 domestic – 2.0 outsourced = 7.3Gt total.

 As climate change sets in, scientists are taking a harder look at geoengineering | Fusion -- President Trump’s efforts to undermine U.S. climate action come at a critical time. While nations are making progress in the fight against global warming, carbon emissions are not falling quickly enough to maintain a stable climate. Faced with rising temperatures and a dearth of American leadership, scientists are investigating geoengineering — deliberate, large-scale interventions to cool the Earth’s climate. Geoengineering can take many forms. Solar geoengineering is the most risky and controversial. To understand how it works, look to nature. In 1991, the Mount Pinatubo volcano in the Philippines erupted in a big way, spewing millions of tons of sulfur dioxide gas into the atmosphere. Once there, the gas turned into small droplets that circled the globe for weeks, reflecting sunlight back into space. The result: Earth became cooler. “Nature performed this experiment for us,” said Trude Storelvmo, associate professor of geology and geophysics at Yale.   “We had a cooling of a half degree of Celsius or more for a year or two after the eruption, until the particles settled down again. Every time we have a volcanic eruption, it puts particles up there. That’s how we know for a fact that this works.”By “this,” she means solar geoengineering, a process that involves the deliberate injection of reflective aerosols such as sulfuric acid or diamond dust into the stratosphere as a way of temporarily offsetting the warming effects of greenhouse gases. Scientists have been studying the concept in the lab and in computer models in recent years, and increasingly, they have come to believe it eventually could be a valuable adjunct — but not an alternative — to cutting emissions. “Unlike reducing our emissions of greenhouse gases, climate change doesn’t stop when you use geoengineering, which is why you couldn’t use it forever,” said Kate Ricke, assistant professor at UC San Diego’s Scripps Institution of Oceanography. “It’s one of the big reasons it’s not a substitute for mitigation efforts, and it’s not a long-term solution.”

How Much Does the U.S. Government Subsidize Electricity Generating Technologies? - Exactly what is a subsidy, who pays for them, and who benefits? These questions incite cross-talk, not cross-tabulation. But we elected to do the latter as part of a comprehensive, interdisciplinary research project called the Full Cost of Electricity (FCe-) conducted by the University of Texas at Austin Energy Institute. Our analysis of energy subsidies aims to estimate the magnitude of federal financial support offered to various electricity supply chains and technologies—gas turbines, nuclear power plants, wind turbines—from mine-mouth to wall socket. Over the period 2010 to 2019, we identified 76 programs worth US $11 billion to $18 billion per year that met our criteria for intentionality, selectivity/preferentiality, and the potential for wealth transfer. Bottom line? In total dollars, the fossil fuel industry receives benefits comparable to that for the renewables industry, but when considering only the portion of fossil fuel support that relates to electric power, renewables receive far more support.

Shell CEO says climate change is real but energy demand is unstoppable  -  Ben van Beurden, the chief executive of Royal Dutch Shell, took time to speak to The Washington Post on May 17 during a visit to Washington, and he touched on the oil giant’s transformation, climate change, millennials, the new Trump administration, economic sanctions and the Organization of the Petroleum Exporting Countries. It’s been a turbulent couple of years for the Shell CEO. With the roller coaster in crude oil prices, the company’s stock has lurched from a high of $83.12 a share six months after he took charge to a low of $36.87. The stock has climbed back, but revenue has plunged by a third since 2013. The shareholders’ annual meeting is on May 23 at The Hague. Along the way, van Beurden has been reorienting Shell, placing more emphasis on natural gas and less on oil, based on the theory that as climate concerns grow companies will favor gas because of its lower carbon dioxide emissions. Last year, Shell made a $53 billion acquisition of BG Group, which is big in the growing liquefied natural gas market. At the same time, van Beurden has abandoned some of Royal Dutch Shell’s high-profile oil ventures. He halted the unsuccessful $7 billion quest to find oil off Alaska’s Chukchi Sea coast; he sold the company’s oil, or tar, sands holdings in Alberta, and he sold some older oil fields in the North Sea. Eager to reduce debt after purchasing BG, van Beurden has sold about $30 billion worth of assets. This article is edited for clarity and brevity. 

Perry’s “review” of the energy grid is just what it looks like: a bid to save coal -  Donald Trump has made it very clear that he wants to revive the flagging US coal industry. In statements and executive orders since taking office, he has instructed virtually every agency of his government to review its procedures, with an eye toward making things easier on coal mining and coal plants.  Meanwhile…Last month, Energy Secretary Rick Perry, as one of his first acts in his new job, initiated a review of US electricity-grid policies. The purported rationale of the review is to examine whether baseload power plants (mostly coal and nuclear) are being unfairly pushed off the grid, thus threatening grid reliability, national security, and our precious bodily fluids. The connection between the two facts above has not been lost on observers. While the coal industry has been supportive of the review, virtually everyone else — energy analysts, Democrats in Congress, renewable energy industries, people who have paid attention — greeted it as a transparent attempt to prop up coal and nuclear power.  It would be fun to have some counter-intuitive take here, but the evidence to date demonstrates that Perry is doing exactly what Trump instructed: casting about for some justification to prop up coal. There are many reasons to think so, but, so as not to strain your patience, I will share only the top 10.

Duke Energy sues environmentalists, Roanoke River Basin Association over coal power plant | News & Observer: North Carolina-based Duke Energy sued an environmental group last week, asking a federal judge to rule that one of the company’s coal-fired power plants is not polluting the groundwater in Person County, N.C. The Roanoke River Basin Association accused Duke Energy last month of breaking the law by not disposing of its coal ash properly, and it’s polluting water near the Mayo power plant in Person County. But Duke Energy says it’s following the Clean Water Act and state laws at the plant in Roxboro, N.C. In a federal civil lawsuit filed May 11 in Danville, Va., Duke seeks action against the Roanoke River Basin Association, “an advocacy group that unlawfully seeks to impose, through initiation of a civil action under unlawful interpretation of the Clean Water Act.” Specifically, Duke alleged that the Roanoke River Basin Association is wrong when it says the power plant is violating the Clean Water Act and polluting the groundwater in Person County. “RRBA is wrong,” the lawsuit says. “Duke Energy has not violated the (Clean Water Act) or the terms of the applicable permit, as RRBA has alleged. First, Duke Energy does not make unpermitted discharges to ‘waters of the United States,’ as RRBA claims.” Duke argues in the lawsuit that it disposes of the pollutants in a “wastewater treatment system created by Duke Energy, with the full knowledge and approval of the State of North Carolina.”

Navajo Power Plant Gets Two-Year Lease Extension -- A massive coal-burning Arizona power plant that has been one of the American West’s biggest electric generators has won a reprieve that will allow it to continue in operation for at least two more years, according to a Native American leader whose tribe is landlord for the plant. A tentative lease extension will keep the 43-year-old Navajo Generating Station open through the end of 2019, instead of beginning a shutdown as early as this summer, Navajo Nation President Russell Begaye said at a public hearing Monday in Phoenix. The extension is designed to give the Native American tribe that owns the land and the federal agencies that oversee the Northern Arizona plant extra time to determine whether increasingly expensive coal-generated electricity can find a market for a longer operation of the plant. A spokesman for the Arizona utility that operates the plant confirmed “significant progress toward an agreement for a replacement lease.” Scott Harelson of the Salt River Project (SRP) called it “possible” that the new lease would be in the hands of Navajo tribal leaders by Thursday or Friday.

Poland Faces Harsh EU Reality in Push for Coal Exemptions -The EU’s largest eastern economy needs to build more coal-fired power plants to avoid blackouts and an economic slump, Poland’s energy minister said last week in the southern city of Katowice. That puts him on a collision course with the EU’s representative for Energy Union, who reiterated at the same event that the regulator won’t allow subsidies for coal-fired plants. Poland has ignored EU calls to quickly walk away from the highly polluting energy source, saying its economy is too dependent on coal. “Nobody is plotting against Poland,” Maros Sefcovic, the European Commission’s vice president for Energy Union, said in Katowice, the capital of the nation’s coal region. “It’s not the Commission which wants to have 100 percent of renewables when dealing with a country: but it’s Google, it’s Ikea, it’s Tesco.”

Vietnam set to approve coal-fired power plants worth $7.5 bln | Reuters: Vietnam expects to grant investment licences for three coal-fired power plants worth a combined $7.5 billion, the country's investment minister said. Although Vietnam wants to boost renewable energy output amid resources scarcity and environmental issues, it has been mostly reliant on coal-fired and hydro power plants to meet its annual electricity demand growth of around 11 percent. Two of the projects by Japanese, South Korean and Saudi Arabian investors are expected to receive licences ahead of Vietnamese Prime Minister Nguyen Xuan Phuc's visit to Japan next month, investment minister Nguyen Chi Dung told Reuters on Tuesday. Details provided by the ministry showed South Korea's Taekwang Power Holdings Co. and Saudi Arabia's ACWA Power would invest $2.07 billion for a 1,200-megawatt thermal power plant. Each investor would have a 50-percent stake in the plant and commercial operation is expected to start in 2021. Japan's Marubeni Corp and Korea Electric Power Corp would invest $2.79 billion in a 1,200-megawatt plant, with operation expected to start in 2021. The investors will also share half of the investment each.

 Coal projected to be largest source of power in SE Asia by 2030 -- Following increasing demand in recent years, coal is projected to overtake natural gas by 2030 to become the largest source of power in Southeast Asia. The International Energy Agency has forecast a three-fold increase in coal-fueled power generation to 920 terawatt hours (TWh) in 2035 from only 255 TWh in 2013. As a result, the share of coal in total electricity generation is expected to increase to 48 percent. “We see a shift toward more investment in high-efficiency coal. What is the reason for this? It is essentially because the background infrastructure costs for coal are lower,” Benjamin Sporton, the chief executive of World Coal Association (WCA), said in Jakarta on Wednesday. Hence, he said it was natural to see coal take over the crown from natural gas as the largest source of power in Southeast Asia by 2030.

India cancels plans for huge coal power stations as solar energy prices hit record low - India has cancelled plans to build nearly 14 gigawatts of coal-fired power stations – about the same as the total amount in the UK – with the price for solar electricity “free falling” to levels once considered impossible. Analyst Tim Buckley said the shift away from the dirtiest fossil fuel and towards solar in India would have “profound” implications on global energy markets. According to his article on the Institute for Energy Economics and Financial Analysis’s website, 13.7GW of planned coal power projects have been cancelled so far this month – in a stark indication of the pace of change. In January last year, Finnish company Fortum agreed to generate electricity in Rajasthan with a record low tariff, or guaranteed price, of 4.34 rupees per kilowatt-hour (about 5p). Mr Buckley, director of energy finance studies at the IEEFA, said that at the time analysts said this price was so low would never be repeated. But, 16 months later, an auction for a 500-megawatt solar facility resulted in a tariff of just 2.44 rupees – compared to the wholesale price charged by a major coal-power utility of 3.2 rupees (about 31 per cent higher).“For the first time solar is cheaper than coal in India and the implications this has for transforming global energy markets is profound,” Mr Buckley said. “Measures taken by the Indian Government to improve energy efficiency coupled with ambitious renewable energy targets and the plummeting cost of solar has had an impact on existing as well as proposed coal fired power plants, rendering an increasing number as financially unviable.

India will build ten new reactors in huge boost to nuclear power India will build 10 heavy water reactors to boost its nuclear power capacity, the government has announced. India currently operates 22 nuclear plants, with a capacity of 6,780 megawatts. “A total of 7,000 megawatts will be added. It will help produce clean energy,” Power Minister Piyush Goyal told reporters. The planned nuclear units will generate business worth $11bn (£8.48bn) and create more than 33,000 jobs, the government said. The homegrown reactors will be built under the ambitious “Make in India” initiative, with the government saying it will boost India’s nuclear manufacturing capability.

Swiss Voters Back Plan to Phase Out Nuclear Power Swiss voters on Sunday backed the government’s plan to ban new nuclear plants, provide billions of dollars in subsidies for renewable energy and help bail out struggling utilities. Provisional final figures from a binding referendum showed support at 58.2 percent under the Swiss system of direct democracy, which gives voters the final say on major policy issues. The Swiss initiative mirrors efforts to reduce dependence on nuclear power elsewhere in Europe, partly in response to Japan’s Fukushima disaster in 2011. Germany intends to phase out nuclear power by 2022; Austria banned it decades ago. Doris Leuthard, the Swiss energy minister, said the vote showed that the public “wants a new energy policy and does not want any new nuclear plants.” She said the law would bolster domestic renewable energy while reducing the use of fossil fuel and Switzerland’s reliance on foreign supplies. “The law leads our country into a modern energy future,” Ms. Leuthard said at a news conference. Some parts of the law will take effect early next year, she said. The law, known as Energy Strategy 2050, will ban the construction of new nuclear plants. Switzerland has five such plants, with the first scheduled to close in 2019. The others will be allowed to run as long as they meet safety standards.

Georgia's nuclear rebirth at Plant Vogtle now a costly quagmire: Southern Company’s chief executive has said more than once that the giant utility’s project to build two more nuclear reactors at Plant Vogtle would be history-making. He may be right, but not in the way he meant. Years behind schedule, billions over budget, and with a key contractor’s bankruptcy clouding its future, the troubled Vogtle project near Augusta is fast becoming Exhibit A for why no U.S. utility before Atlanta-based Southern had tried building a new reactor in 30-plus years.Most Georgians who get electric bills could eventually pay for overruns on the project that are likely to grow. Customers of Southern subsidiary Georgia Power already pay a Vogtle-related surcharge that adds about $100 a year to the average residential bill, with the ultimate effect on ratepayers yet to be determined. Also uncertain is how the project will get done.On March 29, Westinghouse Electric, the company that designed the new Vogtle reactors and eventually became the primary contractor on the project, filed for bankruptcy. As part of its Chapter 11 restructuring, the company is expected to ditch the fixed-cost contracts that led to billions in losses on its work at Plant Vogtle and a similar nuclear project in South Carolina. Under an interim deal announced a week ago, Southern and Georgia Power plan to take over running the Vogtle expansion, which is not quite half-done. Westinghouse will still help, but in a smaller role.

Turkey Point nuclear plant on way to expansion, but will it survive a changing industry? 0  When Florida Power & Light proposed building new reactors at Turkey Point nearly a decade ago, it joined a nuclear revival that included proposed expansions at 17 other power plants around the country aimed at replacing the nation’s aging atomic fleet.  Today, that rebirth looks more like a funeral.  Twelve of those applications have been withdrawn, suspended or remain under review. The massive 1,100-megawatt reactor design that FPL picked for Turkey Point appears in trouble after the builder, Westinghouse, filed for bankruptcy in March, dragged under by the swelling construction costs of similar reactors at Georgia and South Carolina plants. Energy experts say the bankruptcy filing — along with emerging technology that focuses on smaller, cheaper reactors — points toward an industry shake-up. Innovations in wind and solar have also diminished nuclear’s once firm grasp on the energy sector, while cheap natural gas continues to make it more attractive to utilities than costly reactors.  Criticism over nuclear expansion at Turkey Point also mounted after cooling canals connected to two existing units produced a growing plume of underground saltwater that threatened drinking water supplies. FPL hit the pause button on the reactors last year for at least four years. But despite the industry retrenchment, the utility has consistently maintained that it wants nuclear to remain a big part of its energy portfolio.  And this month, FPL came closer to clearing what might be the last hurdle in obtaining its federal license for expansion during a two-day hearing when it defended attacks from environmentalists and neighboring cities over plans to dispose of millions of gallons of wastewater used in cooling the new reactors in wells deep underground. A decision on the wastewater plan from the Nuclear Regulatory Commission could come in the next two months, clearing the way for FPL to finally secure that critical license. But what might get built and when remain uncertain.

EIA Sees US Nuclear Capacity Drop By 2050 -- The U.S. Energy Information Administration projects a sharp drop in the role of nuclear power in the nation’s energy mix by 2050, owing to the capacity represented by plant retirements vastly outnumbering the gains expected through new reactors being built and upgrades to existing plants. The EIA’s Annual Energy Outlook 2017 sees a drop of about nine percentage points from 20 percent of the nation’s energy generation capacity to about 11 percent by 2050. While several plants are expected to undergo upgrades, increasing capacity by 4.7 gigawatts in the next 23 years, the report anticipates only 4.4 GW of capacity from brand new plants, all of which are represented by the expansion projects at Plant Vogtle in Georgia and V.C. Summer in South Carolina. The report does not anticipate any other new plant projects and even the four reactors currently being built are in jeopardy of being abandoned before construction is completed, owing to the March 29 bankruptcy filing of proprietary construction project leader Westinghouse Electric Company.

A predictable nuclear accident at Hanford - Bulletin of the Atomic Scientists - On May 9, workers discovered a 20-foot-diameter hole where the roof had collapsed on a makeshift nuclear waste site: a tunnel, sealed in 1965, encasing old railroad cars and equipment contaminated with radiation through years of plutonium processing. Potential radiation levels were high enough that some workers were told to shelter in place while others donned respirators and protective suits as they repaired the hole. The Hanford complex, which dates back to 1943, produced the plutonium for the atomic bomb dropped on Nagasaki. Half the size of Rhode Island, it is often described as the most contaminated place in the United States. Until its last reactor closed in 1987, it churned out plutonium for the roughly 70,000 nuclear weapons the United States built during the Cold War. Hanford has been a slow-motion environmental disaster since its opening, constantly excreting radioactive contaminants into the air and water. More dangerous than the tunnels are the giant tanks of liquid nuclear waste: 177 of them containing 56 million gallons of radioactive soup whose composition is only approximately known. The contents of some have to be stirred periodically to prevent the formation of hydrogen bubbles that would cause the tanks to explode. One million gallons of this witches’ brew have already leaked into the groundwater from tanks that were built to last only 20 years. The US government projects that it will cost more than $107 billion to clean up the site, with remediation finished by 2060. Few knowledgeable people put much credence in either number. Hanford may be the most contaminated, but it is far from alone. At the Rocky Flats facility outside Denver, where workers fashioned Hanford’s plutonium into cores (or “pits”) for nuclear weapons, there were major fires in 1957 and 1969; each sent plutonium-laced plumes of smoke over nearby communities.  At Ohio’s Fernald plant, which processed uranium for the weapons complex, operators dumped radioactive waste into makeshift pits where it contaminated local groundwater, and blew uranium dust particles out of the smokestacks when the filters failed, as they did with some regularity. Similar stories could be told for the nuclear weapons facilities at Savannah River in North Carolina and Oak Ridge in Tennessee, which hushed up criticality accidents while contaminating nearby air and water.

Hanford contractor finds radioactive contamination on worker’s clothes -- A worker at the Hanford Nuclear Reservation in Washington state got radioactive contamination on his clothing this week during an incident at an underground waste storage tank that indicated a possible leak.Contractor Washington River Protection Solutions said the worker was removing a robotic device out of the space between the double walls of Tank AZ-101 on Thursday evening. Monitors detected radiation at three times the expected level, and the workers left the area, said the company, which operates the storage tanks for the U.S. Department of Energy.Radioactive contamination was found on one worker's protective clothing, which was removed, the company said. Monitors showed no further contamination on that worker, and all members of the crew were cleared to return to normal duty, the contractor said.Hanford is near Richland, Washington, and for decades made plutonium for nuclear weapons. Millions of gallons of the most dangerous wastes produced by that work are stored in 177 underground tanks, many of which are decades old and have leaked.This incident came after last week's accident in which the roof of a tunnel that contains nuclear waste partially collapsed at Hanford, prompting the evacuation of nearby workers. No one was injured in that event, and Hanford officials said no airborne release of radiation occurred.  But Washington Gov. Jay Inslee said Friday he was alarmed by the two incidents."It is another urgent reminder that Congress needs to act, and they need to act quickly," Inslee said. "We expect the U.S. Department of Energy to immediately investigate and report on the source of contamination."

"Everybody's Freaked" - Washington Nuclear Facility Admits Second Radiation Leak, Workers Contaminated -- Just under two weeks since the emergency at the Hanford nuclear facility in Washington state (following a tunnel collapse), NBC's local affiliate King5 reports Hanford’s owner, The U.S. Department of Energy, is scrambling to deal with a second emergency - signs have emerged that a massive underground double shell nuclear waste holding tank may be leaking.The tank is known as AZ 101 and was put into service in 1976. The tank’s life was expected to be 20 years. Now it has been holding hot, boiling radioactive and chemically contaminated waste for 41 years.This 2013 @ENERGY graph shows expected life of AZ tanks holding hot, liquid nuclear waste. Now 21 years past expected use.   As King5 reports, a seven-person crew was undertaking a routine job around 7 p.m. Thursday night. They had deployed a remote controlled devise into the safety space of what is known as a double shell tank. The device is used to evaluate structural integrity of the aging tanks.Normally, equipment lowered in this two-foot wide outer shell of the tank comes up clean. But not this time. A radiation specialist on the crew detected higher than expected readings.“Radiological monitoring showed contamination on the unit that was three times the planned limit. Workers immediately stopped working and exited the area according to procedure,” said Rob Roxburgh, deputy manager of WRPS Communications & Public Relations, the government contractor in charge of all 177 underground storage tanks at the nuclear site.  “Everybody was freaked, shocked, surprised,” said a veteran worker, who is in direct contact with crew members. “(The contamination) was not expected. They’re not supposed to find contamination in the annulus (safety perimeter) of the double shell tanks.” "We are of course concerned it might be a leak," a Washington state Department of Ecology spokesperson said.

How a US Non-Proliferation Failure Became a Global Cyber Security Threat -- Picture this scenario – a nuclear weapon developed by Pakistan for a limited purpose and a preordained destination is captured by a terrorist group. Neither Islamabad nor other powers in the region are able to gauge the intention of this group, or predict where the ‘tactical’ weapon will be deployed. Leaders of the G7 nations, agitated by the development, issue a strong statement condemning Pakistan for its lax nuclear security and reiterate their call for all countries to sign the Nuclear Non-Proliferation Treaty. Pakistan is placed under sanctions that curtail, among other things, its ability to trade in critical technologies.Were such a scenario to materialise, it is likely the ‘proliferator’ in question will be named and shamed. The international community should wonder, then, why the same G7 issued a tepid declaration about the “growing threat of cyber incidents” in the wake of destruction by a weapon created in the US. Into its fifth day, “WannaCry” – a ransomware that takes advantage of a zero-day developed by the US National Security Agency (NSA) and leaked into the wild by a group calling itself the Shadow Brokers – has crippled “mission-critical” systems across the world. It has slowed down or altogether stopped the working of traffic systems in Xi’an (China), fuel filling stations run by the China National Petroleum Corporation, emergency health services of the UK National Health Services, and the state electricity department’s operations in West Bengal. Far from being a pandemic with no known origins, WannaCry’s effects are directly attributable to the failure of the US government to prevent the proliferation of malicious cyber instruments. Its actions may well be in breach of several international non-proliferation norms and obligations.

 Bill in Ohio House would permanently subsidize 2 coal-fired power plants - Columbus Dispatch - A new proposal in the Ohio House would provide a perpetual subsidy for two coal-fired power plants owned jointly by American Electric Power and just about every other major electricity utility in the state.  House Bill 239 calls for the owners of Ohio Valley Electric Corp. to receive a guarantee of income at times when the market price of electricity is less than the cost to operate the power plants. That money would come from a charge to consumers.  If the market shifts and the plants become profitable, customers would receive a credit. The Public Utilities Commission of Ohio already has approved a similar plan for AEP, which leads to a varying monthly charge that is now about $2 per month for a typical household.The legislation would take the PUCO’s action, which needs to be re-approved every few years, and make it last for the remainder of the life of the plants — which could be decades. Also, the bill would provide benefits to all Ohio Valley Electric co-owners in the state, not just AEP. There has been debate about having a similar arrangement for other Ohio plants owned by AEP and FirstEnergy, an idea opposed by consumer advocates, environmentalists and others. The opponents say that the subsidies distort the market and extend the life of plants that otherwise would face pressure to close. This proposal is much narrower, covering just the two plants.“(Ohio Valley Electric) is, for lack of a better term, an anomaly,” said Rep. Rick Carfagna, R-Genoa Township, a co-sponsor, speaking to the House Public Utilities Committee on Tuesday. He was referring to its unusual origins and its ownership by more than a dozen parties in several states. Ohio Valley Electric was founded in the 1950s to provide electricity for the uranium-enrichment facility near Portsmouth. The enrichment site has since closed, but the two coal-fired power plants remain in operation. AEP owns 43 percent of it, more than any other company. The other owners include Buckeye Power, which serves rural electric cooperative utilities, and several other large, investor-owned utilities, such as FirstEnergy, Duke Energy and Dayton Power and Light.

Forest along Ohio River sold to Nature Conservancy - The Columbus Dispatch - This past fall, after decades of discussions, the Gaffin family and another long-time family, the Lockharts, sold their land to the Nature Conservancy. The sale marks the Nature Conservancy's largest purchase ever in Ohio and brings its Edge of Appalachia Preserve system — the state’s largest privately owned nature preserve — up to 19,418 acres. The Nature Conservancy's plan is to eventually create an unbroken corridor for wildlife in southern Ohio that stretches from the original preserve in West Union to the Shawnee State Forest, about 20 miles to the east near Portsmouth.  The tract of unbroken forest and bluffs lies in a confluence of “eco-regions,” where various layers of rock give way to different types of soils, each with their own special suite of plants, insects, flora and fauna.  But since most of the land in the area is privately owned by families, the Conservancy has had to stitch together small parcels over time.  Rich McCarty, an Adams County native and the Edge of Appalachia's naturalist, knocks on doors and tries to persuade families to consider selling their land. And for years, he and others at the Conservancy had been swinging for the Gaffin-Lockhart property. The parcel's size alone is remarkable. According to the Conservancy, most of Ohio’s forestland is found on parcels smaller than 50 acres.

3.4 Magnitude Earthquake Hits Vinton County – WOSU --A 3.4-magnitude earthquake was detected near McArthur, Ohio, by the United States Geological Survey at 12:24 p.m. on Wednesday.  McArthur is the county seat of Vinton County, with a population of about 1,700, and sits near Wayne National Forest.  According to the Vinton County Sheriff's Office, people reported houses shaking and things falling off countertops.  Wednesday's earthquake follows a similar, 3.0-magnitude quake that also struck near Wayne National Forest, in Monroe County, in April. The April earthquake shut down oil and gas drilling operations in southeastern Ohio while the state investigated the causes.According to FracTracker, a number of hydraulic fracturing - or fracking - wells are in operation in the area surrounding the epicenter. A statement from ODNR, however, said the earthquake was "naturally-occurring." "Seismologists are examining the data to define a more precise location, but it appears to be in the McArthur area, and it is likely associated with the Athens fault line," said ODNR spokesperson Eric Heis.

State: Vinton County quake probably not related to oil and gas industry - The Columbus Dispatch -- Ohio Department of Natural Resources officials are investigating an earthquake reported Wednesday in southeastern Ohio, but don't believe it was related to oil and gas production. The initial analysis shows a 3.4 magnitude, "naturally occurring seismic event" happened at 12:24 p.m. in Elk Township, just south of McArthur in Vinton County, that was likely associated with the Athens fault line, department spokesman Eric Heis said. He said there were no reports of injuries from the earthquake. Scientists with the department's Division of Geological Survey calculated that the quake's epicenter occurred 20 kilometers (or nearly 12.5 miles) below the earth's surface, Heis said. That's a significant depth because usually any seismic event induced by a well occurs one to two kilometers (1.24 miles or less)  below the earth's surface, he said "We're still looking into it," said Heis, who said the department received 21 "felt" reports about the earthquake. Melanie Houston, director of oil and gas for the Ohio Environmental Council, said the earthquake Wednesday renews the environmental coalition's concerns about fracking.  Hundreds of earthquakes have been linked to drilling operations and injection wells in Ohio and other states. A wastewater injection well induced 12 earthquakes in Youngstown in 2011, a state investigation found. Wednesday's earthquake follows a similar 3.0 magnitude earthquake in the Wayne National Forest in Monroe County that occurred on April 2. Eight permitted Utica shale well sites are within five miles of the epicenter of that quake, according to the state. "This is really concerning, these earthquakes occurring," Houston said.

Group Demands Environmental Compliance Records for Rover Pipeline Construction -- The Center for Biological Diversity filed four public records requests Wednesday to state and federal agencies demanding disclosure of environmental compliance documents relating to the Rover Pipeline in Ohio. The natural gas pipeline is owned by Energy Transfer Partners, the company behind the controversial Dakota Access Pipeline .  Earlier this month the Federal Energy Regulatory Commission halted construction of unbuilt pipeline sections and required a doubling of environmental inspectors after 18 spills were reported. One of the spills released about 2 million gallons of drilling fluid into a pristine wetland along the Tuscarawas River south of Akron.  "Wildlife, including endangered species , can't afford more spills and environmental disasters," said Taylor McKinnon, with the Center for Biological Diversity.  "We rely on state and federal agencies to protect us from these kinds of incidents, but clearly that didn't happen with the Rover Pipeline."  Wednesday's requests target records relating to Endangered Species Act compliance in connection with all phases of the Rover Pipeline construction and operation from the Federal Energy Regulatory Commission, U.S. Fish and Wildlife Service, U.S. Environmental Protection Agency and Ohio Environmental Protection Agency.  According to the U.S. Fish and Wildlife Service, 30 species protected under the federal Endangered Species Act live in Ohio, many of which are dependent on streams, rivers and wetlands that could be harmed by the pipeline or associated fracking spills. In the face of new information showing that a project may affect endangered species in a way not previously considered, or if a proposed development is modified in a way that may affect those species in ways not previously considered, the Endangered Species Act requires that projects be halted pending completion of new formal consultations between proponent agencies and the U.S. Fish and Wildlife Service.

Rover Pipeline Owner Disputing Millions Owed After Razing Historic Ohio Home -- Steve Horn -- After taking heat last fall for destroying sacred sites of the Standing Rock Sioux Tribe , the owner of the Dakota Access pipeline finds itself embattled anew over the preservation of historic sites, this time in Ohio.  Documents filed with the Federal Energy Regulatory Commission (FERC) show that Energy Transfer Partners is in the midst of a dispute with the Ohio State Historic Preservation Office over a $1.5 million annual payment owed to the state agency as part of a five-year agreement signed in February. Energy Transfer Partners was set to pay the preservation office in exchange for bulldozing the Stoneman House, a historic home built in 1843 in Dennison, Ohio, whose razing occurred during construction of the Rover Pipeline . Rover is set to carry natural gas obtained via fracking from the Utica Shale and Marcellus Shale —up to 14 percent of it—through the state of Ohio. The pipeline owner initially bulldozed the historic home, located near a compressor station, without notifying FERC , as the law requires.  FERC provides regulatory and permitting oversight for interstate pipeline projects like Rover , and as a result, is tasked with performing an environmental and cultural review. Because Energy Transfer Partners didn't notify the commission of the plan to tear down the historic home, citizens and other concerned stakeholders, including the Ohio State Historic Preservation Office, did not have the ability to file a formal protest of the action. In May 2015, Energy Transfer Partners purchased the Stoneman House from the Ohio State Historic Preservation Office for $1.3 million and bulldozed it just two weeks later, according to FERC documents. The $1.5 million annual payment owed to the Ohio State Historic Preservation Office was in addition to the initial cost of purchasing the home. On April 28, Lox Logan Jr., executive director and CEO of the Ohio State Historic Preservation Office, requested that FERC help with formal dispute resolution over the issue. "The Ohio State Historic Preservation Office has been in repeated contact with representatives from Rover LLC regarding the fulfillment" of the monetary commitments outlined in the Memorandum of Agreement [MOA], wrote Logan . "As of this date, no efforts have been made to meet those obligations. As the lead federal agency with jurisdiction over this undertaking, we are notifying you of this dispute."

FERC Rejects Rover Pipeline's Drilling Request - The Federal Energy Regulatory Commission (FERC) rejected on Thursday Energy Transfer Partners' request to resume horizontal directional drilling at two sites for its Rover fracked gas pipeline . This rejection comes after numerous leaks into Ohio's wetlands, and Clean Air and Clean Water act violations. FERC has halted the process at only eight locations of the 32 where drilling is taking place under Ohio's wetlands and streams. Since news of the 15 violations broke on April 18, Energy Transfer Partners has racked up 12 additional stormwater violations in northwest and southwest farming areas of Ohio, a spill of 10,000 gallons of drilling fluid in Harrison County, and failed to pay its 2nd installment of its 401 permit fee. Energy Transfer Partners is currently operating without a Clean Water Act permit in Ohio.  Thursday's rejection is further evidence that FERC should never have approved the fracked gas pipeline in the first place. The Rover pipeline has repeatedly proven to be disastrous for Ohioans and our land, and this will only get worse should construction continue. We applaud FERC for taking action now, but continue our calls for all construction on this dirty and dangerous pipeline to be halted as a comprehensive review and investigation into Energy Transfer's practices and plans is conducted.

US FERC rejects Rover gas pipeline horizontal drilling request -  US regulators have rejected a request by Energy Transfer Partners' Rover Pipeline to resume horizontal directional drilling at two key sites, putting further pressure on the operator's efforts to meet its in-service target of July 1 for the first phase of a 3.25 Bcf/d natural gas project being closely watched by Northeast and downstream markets.Following leaks of drilling fluids into Ohio wetlands in April, including one during horizontal directional drilling at the Tuscarawas River, the Federal Energy Regulatory Commission ordered Rover earlier in May not to conduct any more drilling of that type in some areas where it has not started work. ETP then asked to be allowed to continue the drilling at two sites where the activity was already underway, one in Ohio and the other in West Virginia. It said halting excavation there could cause further environmental problems and expressed concerns about the project being delayed.  FERC said in a letter to Rover on Thursday that the agency must complete its review before allowing the horizontal directional drilling activities to resume. For now, it granted the operator permission to remove the drill stem from the borehole at the West Virginia location and install a casing to prevent the hole from collapsing.  "Authorization to resume drilling activities in conjunction with the Rover Pipeline Project is contingent upon commission staff's consideration of the independent third-party contractor's analysis of all drilling activity at the Tuscarawas River HDD and the independent third-party contractor's recommended plan detailing the measures that Rover can put into place to ensure that the same level of impacts do not occur on the other HDDs during project construction," FERC said in the letter. The 500-mile Rover pipeline will impact upstream supply fundamentals in the Northeast and downstream gas markets in the Midwest and Southeast US, as well as the Dawn, Ontario, hub. Producers have been eagerly awaiting new infrastructure, to give them extra capacity to move their output out of the pipeline constrained Marcellus and Utica shale basins. With the possibility of a Rover delay, some producers have been hedging their production and considering alternative pipelines for moving some of their gas until Rover enters service.

Firm behind Dakota Access pipeline faces intense scrutiny for series of leaks - The oil company behind the Dakota Access pipeline is facing intense scrutiny from regulators and activists over a series of recent leaks across the country, including a major spill now believed to be significantly bigger than initially reported.  Documents obtained by the Guardian suggest that a spill from the Rover pipeline that Ohio regulators originally described as 2m gallons might now be more than twice as large. The revelation was included in a legal challenge activists filed on Wednesday to block the natural gas pipeline run by Energy Transfer Partners (ETP), the corporation that operates the controversial Dakota Access pipeline and is now facing numerous government fines and violations. The complaint against the Rover pipeline – which has been cited for more than a dozen environmental incidents, including a spill into a wetland that Ohio regulators described as a “tragedy” – comes on the heels of reports that Dakota Access had three recent leaks before it was even fully operational.  The growing number of problems with the two pipelines raises serious questions about the safety record of ETP and the effectiveness of the regulatory processes designed to protect the environment, according to activists fighting the projects. “Put together how the company has conducted itself, the environmental damage and the rejection of the authority of the state, we fear the impact to our water resources,” said Clifford Rowley, a Michigan resident who is part of a group challenging the Rover pipeline.  Shortly after his inauguration, Donald Trump, who, records show, has close financial ties to ETP, ordered the expedited completion of the Dakota Access pipeline. While preparing for the formal launch over the last two months, small leaks were reported in South Dakota and North Dakota, according to government records. In April, there was a reported release of roughly 2m gallons of “drilling fluids” within a 500,000 sq ft wetland area, according to violation records from the Ohio Environmental Protection Agency (EPA). Another report cited the release of 50,000 gallons into a different wetland. There have been a total of 18 incidents across 11 counties, according to the complaint. The state EPA director Craig Butler recently described the problem to the Washington Post as a “pattern” of spills, saying the company’s response was “dismissive” and “exceptionally disappointing”. The rebuke from Butler is significant given that he is an appointee of Republican governor John Kasich, a former presidential candidate who supports increased drilling and a rollback of Obama-era restrictions.

Oil and gas still generating taxes - The Review — Oil and gas activity in Columbiana County may have slowed to a crawl, but there is still enough going on to have generated $1.6 million in property taxes between 2010 and 2015.A report issued in April by Energy In Depth Ohio and the Ohio Oil and Gas Association stated nearly $1.1 million of those taxes came in 2015 as production significantly increased. “Like many other Ohio counties, Columbiana County has been producing oil and gas for decades, and prior to the shale revolution, the total ad valorem tax from conventional production had been around $70,000 per year. But thanks to fracking that number jumped to $1,072,685 in 2015,” wrote report author Jackie Stewart. According to OOGA, 60 wells are currently in production in the county at 20 locations and they produced a combined 491,295 barrels of oil and 61.4 million mcf of shale gas between 2010 and 2015. A mcf is equal to 1,000 cubic feet.Stewart pointed out that these taxes are based on production from two years before, so the 2015 figures are based on 2013 production. “Considering Columbiana County’s Utica shale production showed moderate increases in 2014 and 2015, the county can expect higher tax receipts in 2016 and 2017,” she said. “In addition to this spike in tax revenue, Columbiana County Utica shale development has led to a $1.1 billion natural gas-fueled power plant, which will yield an incredible $30 million windfall to the county, townships and local school,” Stewart said.

Could the Aliso Canyon natural gas leak happen in Ohio? New study examines the risk --   Ohio has the most underground natural gas storage wells of any state and the highest number of those which might be vulnerable to leaks, according to a new study by researchers at Harvard University and Boston Children’s Hospital. Of Ohio’s 3,318 underground wells used for natural gas storage, 902 are repurposed wells. Those wells were initially drilled for something else, such as the extraction of oil and gas. That means they’re more likely to share age and design characteristics that contributed to the four-month methane leak at Aliso Canyon in California from 2015 to 2016, said Drew Michanowicz at the Harvard T.H. Chan School of Public Health. He is lead author of the study published Tuesday in Environmental Research Letters. Ohio has about two dozen active facilities that put natural gas into wells under pressure and take it out on an as-needed basis, compared to 47 in Pennsylvania and 44 in Michigan. Each facility can have dozens or hundreds of storage wells connected to it. “The primary function of gas storage is to meet peak demands of the winter heating season, especially for residential heating, and to balance the supply and demand on the system,” Dominion Energy Ohio spokesperson Tracy Oliver explained. Nonetheless, on a nationwide basis, “around half of the facilities have potentially obsolete wells that wouldn’t meet today’s standards for safety,” Michanowicz said. Those facilities raise concerns about potential risks to public health and the environment.Natural gas storage fields are typically between 1,000 and 5,000 feet underground. But, “when an accident occurs at these facilities, it can create a major public health risk for unsuspecting neighbors,” said Melanie Houston at the Ohio Environmental Council. “And that risk is amplified by the fact that there are very limited standards in place for operators of these facilities.” 

Noble Energy sells Marcellus shale holdings in region | TribLIVE: Texas-based Noble Energy, which owns and operates about 50 hydraulic fracturing wells in Washington and Greene counties, will move out of Marcellus shale and move on to “more lucrative oil fields,” the company announced Tuesday. An undisclosed buyer agreed to purchase $1.2 billion worth of Noble Energy's Marcellus shale assets, according to a news release. Of the total amount, $100 million will be made in three separate payments as contingencies that depend on regional gas prices rising above a certain level over the next three years. The sold assets produce 415 million cubic feet of natural gas equivalent a day and span 385,000 acres in northern West Virginia and southern Pennsylvania, with proved reserves reaching 1.5 trillion cubic feet. Noble Energy CEO David L. Stover said the Marcellus shale play has been a strong performer for the last few years, but the company is moving to more lucrative plays in “liquid-rich, higher-margin onshore assets.” “This enables us to further focus our organization on our highest-return areas that will deliver industry-leading U.S. onshore volume and cash flow growth,”

Trump's rural voters fighting to keep their land from a growing web of pipelines - McClatchy -- MacQueen would seem to fit the profile of a property owner comfortable with an oil and gas pipeline running through his land. A retired oil refinery employee, MacQueen worked amid risky conditions for more than 20 years, as a pipe fitter and a welder. But early last year, MacQueen learned that an oil company, Sunoco, was planning to install two more pipelines past his family’s home in eastern Pennsylvania, where one already runs. According to MacQueen, Sunoco’s agents told him the company will force his neighbors and him to sell the rights to some of their land – through a process called eminent domain – if they don’t agree to turn it over.  “These oil companies have so much power,” fumed MacQueen, standing in his yard on a recent weekday. “They think they can do anything they want.”Eminent domain is often used by governments to gain right-of-way for projects such as highways or government buildings. But state and federal regulators who authorize pipeline projects also typically grant the private companies that are building them the right to use eminent domain to secure needed right-of-way.That means rural and suburban landowners from Pennsylvania to the Dakotas are finding it increasingly difficult to combat an ever-growing network of pipelines that companies are racing to build to accommodate the prodigious amounts of oil and natural gas that fracking is producing.MacQueen, who voted for President Donald Trump, says he has no problem with the need for pipelines. His beef is with what he calls the industry’s “bullying tactics” and its mixed safety record. He and others describe a process in which agents pressure them to sign easement agreements and then threaten court action if they don’t agree to the offered terms.

Pennsylvania School Now Doing Emergency Drills in Case of Pipeline Explosion -- At the Glenwood Elementary School in Media, Pennsylvania, roughly 450 students interrupted their regular schedules one day this month for an unusual emergency drill. Just after 1:30 p.m. on May 3, the entire student body practiced sheltering in place in the school's gymnasium, then prepared to evacuate the campus by bus, under the watchful eye of the school's superintendent, state police, and local first responders. "Everyone took this seriously and it was reflected in how quickly they moved through the drill -- two minutes to be sheltered in place and three minutes to be completely evacuated from the building," Principal Eric Bucci told local reporters. It wasn't fears of natural disaster or terror attack that prompted the emergency drill. Instead, worries about a fossil fuel pipeline construction project nearby left the school district drafting emergency response plans and practicing safety protocols.The school is one of dozens neighboring the route for Sunoco Logistics' Mariner East 2 pipeline, now under construction and slated for completion this fall. At Glenwood Elementary, the Mariner East project will carry natural gas liquids like butane, propane, and ethane (used to make plastics) through a pipe under a road about 650 feet from the school's playground -- and some parents and safety experts are worried about the risks posed by leaks or other accidents. "The exercise raised more questions than it answered and seemed only to demonstrate that [the school district] is unprepared to deal with a large scale release of hazardous, highly volatile liquids near the school,"

ASPH Association of Schools of Public Health : Maryland Study Explores Chronic Noise Exposure from Natural Gas Compressor Stations in West Virginia -- People living near natural gas compressor stations may be subject to high environmental noise exposures, according to a study published in PLOS ONE by environmental health researchers at the University of Maryland School of Public Health (UMD SPH). Compressor stations are necessary to concentrate and move pressurized natural gas, which has been extracted through hydraulic fracturing ('fracking'), along gas pipelines. Environmental exposures from these stations, including toxic chemicals and noise, are a significant public health concern and a source of stress for nearby residents in communities like Doddridge County, West Virginia, where researchers conducted this study.  'Previous studies have documented noise exposure associated with the temporary process of gas extraction site development and preparation, but our research adds new information about the potential extent of noise exposure associated with compressor stations. These stations remain as a permanent structure in the impacted communities,' said Meleah Boyle, MPH, lead author of the study and a doctoral student in toxicology and environmental health.  Outdoor noise pollution above 55 decibels and indoor noise pollution above 45 decibels may interfere with activities and lead to annoyance, according to the U.S. Environmental Protection Agency. The World Health Organization recommends nighttime noise levels below 40 decibels to reduce the risk of sleep disturbance, insomnia, and use of drugs for sleeping. 'We found that five out of six homes that we monitored which were located within 750 meters of a compressor station had combined outdoor average sound levels greater than 55 decibels over a 24 hour period,' said Ms. Boyle.   Noise from compressor stations along interstate pipelines is regulated by the Federal Energy Regulatory Commission, whereas noise from compressor stations not located on an interstate pipeline is regulated at the state or local level. 'Noise regulation is primarily delegated to the state and local governments,' Ms. Boyle said. 'It is a patchwork system of regulation that varies across the country. To our knowledge, in Doddridge County, West Virginia, there were no noise standards at the time our study was conducted.'

`Gas Apocalypse' Looms Amid Power Plant Construction Boom - The glut of cheap natural gas from a single, gigantic, shale basin that straddles the Northeast, mid-Atlantic and Midwest has sparked a massive construction boom of power plants. Dozens have been built in the past two years alone.There’s just one problem: There isn’t nearly enough electricity demand to support all the new capacity. And as wholesale electricity prices plunge, industry experts are anticipating a fire sale of scores of plants in the region. Many, in fact, have already been sold along the PJM Interconnection LLC grid, the nation’s largest, encompassing 13 states from Virginia to Illinois.“Everything in fossil fuels is for sale,” said Ted Brandt, chief executive officer at Marathon Capital LLC, a mergers-and-acquisitions adviser in Chicago. “People are bleeding.” Drawing from abundant, cheap and nearby natural gas in the country’s most prolific shale field, the new plants are adding a gigantic amount of power generation -- more than 20 gigawatts --- to a region that arguably has more than it needs. The new gas-fired plants are also coming online at a time of market turmoil, buffeted by Obama administration efficiency policies that have helped tamp down demand and by the Trump administration’s determination to keep old coal-fired plants going.Spot wholesale prices at PJM’s benchmark Western hub slumped to an average of $28.79 per megawatt-hour last year, falling by more than half since 2008 as the shale boom took hold. Many players are exiting the market.

US Northeast DUCs to continue boosting gas output - The puzzling drawdown in US Northeast inventories of drilled-but-uncompleted wells -- in sharp contrast to the broader industry trend -- is likely to continue buoying regional gas production in the near term as risk-averse producers cash in on recent infrastructure expansions and elevated gas prices. DUC counts in the Northeast have continued falling this year through April, according to the latest data available from the US Energy Information Administration. In the Marcellus, producers have added just three new wells to inventory since December. Over the same period, inventories in the Utica have fallen by 14 and are now at their lowest on record dating back to late 2013. Over the last five months, that drawdown lifted regional production by more than 2% to a record-high average of 23.7 Bcf/d in May to date, according to Platts Analytics, compared with output around 23.2 Bcf/d in December. In the EIA's other five production-reporting areas, well inventories continue to rise, led by the Permian where operators have cataloged 476 new DUCs this year alone.And while the motivation behind the recent builds in the Permian, Eagle Ford, Haynesville, Bakken and Niobrara likely vary by producer and basin, the Northeast drawdown in DUCs appears to be driven by a single factor -- uncertainty. "Forward prices for 2018 are below $3/MMBtu and there's a lot of uncertainty about capacity expansions due to pipeline construction delays," Chief among those uncertainties is the fate of the greenfield 3.25 Bcf/d Rover Pipeline. While developer Energy Transfer Partners has maintained its targeted in-service date of July for Phase I of the project, a recent order from the Federal Energy Regulatory Commission -- putting a stay on about half of the project's remaining horizontal directional drilling -- has raised serious doubts about the proposed timeline. 

 East Coast refiners eye Texas oil as North Dakota alternative | Reuters: U.S. East Coast refiners are looking to buy increasing volumes of domestic crude oil from the Gulf Coast, two sources said, the latest twist in a trade flow upheaval in the wake of the opening of the Dakota Access pipeline. Major U.S. East Coast refiners profited from railing hundreds of thousands of barrels of discounted Bakken crude to their plants daily from 2013 until 2015. But as more and more pipelines were built in North Dakota, the discount began to disappear, and so did the rail cars. Now, at least two East Coast refiners, Phillips 66 (PSX.N) and Delta Air Lines Inc's (DAL.N) subsidiary Monroe Energy, are looking to move more crude by ship from Texas into the Philadelphia area. The Dakota Access pipeline starts up in May, giving the Gulf access to the Bakken shale play, and will likely sap any lingering economic incentive for Bakken-by-rail, which is more expensive. This option is more expensive than oil imported to the East Coast, typically from Nigeria. Analysts and traders expected that once the Dakota line came into service, East Coast and West Coast refiners would rely on foreign barrels. In 2016, 13 million barrels of crude went from the U.S. Gulf to the East Coast, according to the U.S. Energy Information Administration. By comparison, the East Coast took in 323 million barrels of imported crude last year. Shipping sources say that costs could range between $2.60 to $3.50 a barrel for the two-week round trip on a U.S. flagged vessel. That is lower than the peak, brokers said, because a number of spare vessels are available. Taking a cargo of Nigerian Bonny Light to Philadelphia costs about $1.40 a barrel, brokers said.

Saudi Arabia’s Motiva plans for billions in Texas growth | Fuel Fix: Saudi Arabia’s Motiva Enterprises said it plans to spend billions of dollars more to expand its Port Arthur Refinery — already North America’s largest — and grow more in the petrochemical and refining sectors. Motiva, which finalized its divorce from Royal Dutch Shell in the beginning of May, said it plans to spend close to $18 billion in the U.S., largely along the Gulf Coast, within the next five years. Although scant on details, this comes after Motiva already expanded the Port Arthur Refinery in recent years. Motiva emphasized it will continue to expand its crown jewel asset in Texas near the Louisiana border. Motiva, which operated as a joint venture between Saudi Aramco and Shell for nearly 20 years, is now purely a Saudi venture with a growing headquarters in downtown Houston. The Motiva growth is intended as part of an overall Saudi strategy to diversify its global footprint, including substantial growth in Texas. Motiva kept the 600,000-barrel-a-day Port Arthur Refinery, while Shell received the Convent and Norco refineries in Louisiana, both of which combine to process less than 500,000 barrels daily. Aramco paid Shell $2.2 billion as part of the deal, including $700 million in cash and the assumption of additional Motiva debt. Likewise, Saudi Arabia’s Saudi Basic Industries Corp., called Sabic, has a joint venture with Exxon Mobil to develop a $10 billion chemicals and plastic complex north of Corpus Christi. Motiva said it plans to branch out into the chemical sector, explore more refining growth and expand its commercial operations. Motiva already is working with Northstar Terminals on a new marine terminal at the Port of Port Arthur set to open in July. 

 Putting Frac Sand Supply, Demand and Prices in Perspective -- The accelerating trend toward high-intensity completions in the Permian, SCOOP/STACK, Marcellus/Utica, Haynesville and other key shale plays is sharply increasing demand for frac sand. As a result, there's upward pressure on sand prices and there are shortages of certain grades of sand that may continue into 2018.  There is also increased interest in developing sand mines near production areas. It’s important to remember, though, that (1) there’s no evidence that sand-supply issues will seriously curtail drilling and completion activity, and (2) higher sand costs can be offset by the production gains that usually come from using a lot more sand. Today we continue our surfing-themed series on sand costs and water-disposal expenses with a look at the forecast for 2017-18 demand for frac sand, sand pricing trends, efforts to develop regional sand supply sources and the bottom-line upside of high-intensity completions. Freeing the vast amounts of oil, gas and natural gas liquids (NGLs) trapped in shale and tight sands requires horizontal drilling to access the long, horizontal layers where the trapped hydrocarbons reside.  In addition, a mix of water, other liquids and proppant (natural sand, ceramics and resin-coated sand) is forced out of perforated pipe in the horizontal portion of the well bore at high pressure to fracture openings in the surrounding shale/tight sands. When the pressure is released, the fractures attempt to close but the proppant contained in the fluids keeps them open, making a ready path for oil, gas, NGLs and produced water to flow into the well bore.

Permian output already outstripping pipeline expansion plans - Midland Reporter-Telegram: Billions of dollars are being poured into expanding the Permian Basin’s midstream infrastructure to allow moving crude to market. It still may not be enough. The growth in Permian Basin production could overwhelm pipeline capacity by early next year, according to Morningstar Commodities Research. “The key point is they’re reaching their limits faster than thought and continued expansion is needed,” Sandy Fielden, Morningstar’s director, oil and products research, said in a phone interview. He cited Energy Information Administration data showing Permian Basin crude output jumped by 143,000 barrels a day between December and March, as well as the EIA’s forecast that Permian output will rise another 155,000 barrels a day during April and May. This is an average increase of 60,000 barrels a day from December to June, and if that trend continues, it will overwhelm efforts to expand takeaway capacity in 2018, he said. Among the factors boosting Permian output are the big jump in drilling rigs at work in the region and an increasing number of wells coming in with higher initial production rates.Fielden offered a lower-production scenario based on a Bentek Energy forecast from earlier in the year that has Permian output reaching 2.43 million barrels a day by the end of the year and 3.5 million barrels a day by the end of 2022. But by continuing current production trends from December through May, Permian output could reach 4.2 million barrels a day by the end of 2019. Fielden said there are some things that could slow the rise in output, primarily the recent slump in crude prices, which could reduce drilling activity. New pipeline capacity is expected on line during the remainder of the year. With expansion of Sunoco’s Permian Express pipeline, there will be an increase of 100,000 barrels a day. Magellan Midstream-Plains All-American's BridgeTex Pipeline will have 100,000 barrels per day and Plains' Cactus Pipeline by 140,000 barrels per day. 

How the Eagle Ford boom prepped Corpus Christi for a flood of Permian crude oil.  Over the past five years, the Corpus Christi area’s ability to refine or ship out crude oil has increased substantially, driven initially by rising production in the Eagle Ford play in South Texas — growth that has since subsided. Now, Corpus is preparing for a coming onslaught of crude from the red-hot Permian, whose producers see the coastal port as the preferred destination for their light crude and condensates. Today we continue a blog series on Corpus Christi’s crude-related infrastructure with a look at what’s already there and how storage and marine-terminal upgrades made over the past few years will be coming in handy. As we said in Part 1, the Permian production area in West Texas and southeastern New Mexico defied the oil-price collapse that started nearly three years ago. Crude output in the 70,000-square-mile play continued rising through the downturn; it now tops 2.3 million barrels/day (MMb/d), and is likely to rise by at least another 1.4 MMb/d by 2022, perhaps a lot more — a testament to the region’s extraordinary, multistack hydrocarbon resource and producers’ ongoing ability to increase per-well productivity by drilling longer laterals and using more proppant (see Faster Horses and Wipe Out!). The Permian’s forecasted production growth already is having a ripple effect on crude oil infrastructure, not just within the play, where new gathering pipelines, storage and other assets are being built and planned, but hundreds of miles away. In Will It Go Round in Circles, we noted that three takeaway pipeline projects currently under construction will provide 610 Mb/d of incremental capacity out of the Permian, and that six or more takeaway projects in various stages of pre-construction development would add far more. These current and prospective projects would move crude to one of three destinations: the storage and distribution hub in Cushing, OK; Houston, the refining and marine-terminal giant; and Corpus Christi, an important refining center in its own right and an increasingly popular send-off point for ships transporting Eagle Ford and Permian crude (and condensate) to ports in the U.S. and export markets.

Taxpayers Charged $7 Billion a Year to Subsidize Fossil Fuels on Public Lands - The federal government is providing extensive support for fossil fuel production on public lands and waters offshore, through a combination of direct subsidies, enforcement loopholes, lax royalty collection, stagnant lease rates and other advantages to the industry, a report released Wednesday found.  The government is contributing at least $7 billion per year in subsidies to support fossil fuel production on federally held lands and offshore waters alone, and is holding some $35 billion in public liabilities for drilling in public waters of the Gulf of Mexico. These subsidies support increased fossil fuel production on U.S. lands and waters out of step with efforts to meet international climate objectives. The report, released by Oil Change International in partnership with , WildEarth Guardians , Center for Biological Diversity , Clean Water Action , Food & Water Watch and Public Citizen , for the first time outlines in detail the subsidies and other public support being provided in the U.S. to the fossil fuel industry for its activities on public lands. The report, Unequal Exchange: How Taxpayers Shoulder the Burden of Fossil Fuel Development on Federal Lands , presents an accounting of the minimum amounts of direct taxpayer dollars going to support fossil fuels on public lands, not including externalities such as climate and health impacts, which would bring the totals even higher. If those factors are taken into account, for example, mining coal in the Powder River Basin alone would have a net cost to the U.S. public of some $17.8 billion per year as of 2015.  " Rex Tillerson and other members of the Trump administration deny that these subsidies even exist just like they deny climate change . The reason is clear—in both cases, if you admit the truth, the only answer is a managed decline of the fossil fuel industry," said Stephen Kretzmann, executive director of Oil Change International.

Trump proposes sharp cuts at Interior Department while pushing for more drilling on public land --The White House wants to cut the Interior Department budget by about 12 percent as the Trump administration shifts the agency’s focus toward promoting fossil fuel drilling and extraction on public lands and in federal waters.The budget proposal released Tuesday would reduce Interior’s funding to $11.6 billion in fiscal 2018 — about $1.6 billion less annually — and eliminate programs that Interior Secretary Ryan Zinke has called unnecessary, duplicative or a low priority. Among them: discretionary grants to help reclaim abandoned mine sites, National Heritage areas that Trump administration officials say are more appropriately funded locally and National Wildlife Refuge payments to local governments.The budget also significantly decreases funding for new major acquisitions of federal land, cutting such appropriations by more than $120 million. The administration says it instead intends to focus on investing in and maintaining existing federal lands. In particular, Tuesday’s proposal would boost money to help address the roughly $11 billion maintenance backlog within the national park system.“It was not an easy job. There were difficult decisions that were made,” Zinke said in a call with reporters. “This budget overall speaks to the core mission of the Department of the Interior. It funds our highest priorities — safety, security, infrastructure.” The budget proposal would pour more funding into the development of oil, gas and coal investments on public lands. Onshore fossil fuel programs would receive $189 million annually, an increase of $24 million; offshore programs would get $343 million, including a $10 million increase to update the nation’s five-year offshore drilling plan. The Bureau of Land Management would get a $16 million increase in its oil and gas management program to accelerate the rate at which its staff processes permit applications and addresses right-of-way requests for infrastructure projects. The budget also includes a proposal aimed at opening the Arctic National Wildlife Refuge to oil and gas leasing, though that would require approval by Congress.  “We have not been a good partner with industry,” Zinke said of the push for expanded energy production on public lands, adding that federal revenue from offshore drilling leases is only a fraction of what it was a decade ago. “Energy production is vital to our national security and our national economy.”

One Dead, Three Injured in Anadarko Oil Tank Explosion - An oil tanker in Mead, Colorado exploded , killing one and injuring three on Thursday. Authorities are continuing to investigate the cause of the explosion. The death is the third fatality caused by Anadarko's Colorado operations in just the past six weeks. On April 17, a home explosion in Firestone, Colorado was the result of an Anadarko oil well. In the days that followed, the company closed 3,000 of its wells across the area, disconnecting all one-inch lines and Gov. John Hickenlooper ordered a statewide review of oil and gas operations.  Anadarko announced Thursday that it was permanently closing the well that caused the disaster along with two others in the neighborhood.  The explosion in Mead is approximately four miles from the disaster in Firestone. Our thoughts and prayers are with the families of those killed and injured in yesterday's disaster. One injury, one life lost, is one too many. Anadarko must immediately shutter all of its operations while state and federal authorities conduct a comprehensive review of its operations.  Anadarko, like so many fossil fuel companies across the country, have proven that it cannot be trusted to put its workers and the communities surrounding operations first, which is why we must expand—not shrink—federal oversight.

How Rollbacks at Scott Pruitt’s E.P.A. Are a Boon to Oil and Gas — In a gas field here in Wyoming’s struggling energy corridor, nearly 2,000 miles from Washington, the Trump administration’s regulatory reversal is crowning an early champion. Devon Energy, which runs the windswept site, had been prepared to install a sophisticated system to detect and reduce leaks of dangerous gases. It had also discussed paying a six-figure penalty to settle claims by the Obama administration that it was illegally emitting 80 tons each year of hazardous chemicals, like benzene, a known carcinogen. But something changed in February just five days after Scott Pruitt, the former Oklahoma attorney general with close ties to Devon, was sworn in as the head of the Environmental Protection Agency. Devon, in a letter dated Feb. 22 and obtained by The New York Times, said it was “re-evaluating its settlement posture.” It no longer intended to move ahead with the extensive emissions-control system, second-guessing the E.P.A.’s estimates on the size of the violation, and it was now willing to pay closer to $25,000 to end the three-year-old federal investigation. Devon’s pushback, coming amid an effort to ease a broad array of federal environmental rules, is the first known example under the Trump administration of an accused polluter — which has admitted violating the law — backing away from a proposed environmental settlement. It is already being hailed by other independent energy companies as a template for the future.   The extraordinary about-face reflects the onset of an experiment in President Trump’s Washington that is meant to fundamentally reorder the relationship between government and business. Across the federal government, lobbyists and lawyers who once battled regulations on behalf of business are now helping run the agencies they clashed with.

Time for the oil industry to snuff out its flares -- The emission of air pollution from traffic in our cities is the last step for a fuel that produces air pollution at every stage of production, often starting with flaring at a distant oil well. The World Bank estimates that the 16,000 flares worldwide produce around 350m tonnes of CO2 each year.Black carbon from sooty flames adds to the problems, especially across the northern hemisphere where it darkens arctic and mountain snow encouraging melting. The flared gas is also a wasted resource.Despite increases globally in 2016 some areas have improved. Iraq is the latest country to join a World Bank initiative to eliminate routine flaring by 2030. Nigeria reduced flaring by 18% between 2013 and 2015. In 2017 it dropped from the second largest flaring nation to seventh place. Global media attention has focused on soot covering the city of Port Harcourt, but more than 20 million people across the Niger Delta are exposed to flaring pollution. This is mainly from onshore wells and refineries rather than the off-shore industry. The impacts are not just local to the well or refinery. Dominant south westerly winds carry pollution from flaring areas to those with little oil industry. Air pollution across hundreds of square kilometres is above World Health Organisation guidelines for nitrogen dioxide and ozone.  These pollutants also cause acid rain across sensitive savanna, mangrove, rainforest and freshwater habits and directly attack crops. Twenty seven percent of the pollution came from just 14% of flares, suggesting targeted improvement could yield big results in Nigeria. But more action is needed worldwide.

Two More Spills for Dakota Access Pipeline - The Dakota Access Pipeline (DAPL) system leaked more than 100 gallons of oil in two separate incidents in North Dakota in March. This is the $3.8 billion project's third known leak. The controversial pipeline, which is not yet finished and not yet operational, also spilled 84 gallons of oil in South Dakota on April 4. The state's Health Department database shows that two barrels, or 84 gallons, spilled on March 3 in Watford City due to a leaky flange (the section connecting two sections of pipeline) at a pipeline terminal. Vicki Granado, spokeswoman for pipeline backer Energy Transfer Partners (ETP), told the Associated Press that the discharge came from a line operated by a connecting shipper on the Dakota Access Pipeline. "They are responsible for the operations, maintenance, etc.," she said. Then on March 5, a half a barrel, or 20 gallons, spilled in Mercer County due to a manufacturing defect of an above-ground valve, according to data from the federal Pipeline and Hazardous Materials Safety Administration.  Both leaks were contained and cleaned up. No people, wildlife or waterways were affected.

Faulty weld behind Dakota Access leak - A faulty weld on the Dakota Access pipeline was responsible for a 20-gallon leak reported March 5 at an above-ground station in Mercer County, while an 84-gallon spill at a pipeline terminal in Watford City on March 3 was actually owned and operated by a different company, Caliber Midstream — though ultimately the line will feed oil into the Dakota Access system. The faulty weld that caused the 20-gallon leak on the Dakota Access line in Mercer County was identified during a standard commissioning process designed to identify problems before a pipeline is put into service, ensuring a line’s integrity before it begins operation. The spill was not reported to North Dakota, but was reported to the Pipeline and Hazardous Materials Safety Administration, as required. “Our crews were on site at this valve site as the commissioning process was under way, so it was immediately remediated,” Vicki Granado, a spokeswoman for Dakota Access, said. “It occurred during the process of getting the pipeline ready to go into service.” Caliber Midstream CEO Dave Scobel confirmed their company was also engaged in a commissioning process for their line, which will tie into Dakota Access in Watford City once it is put in service. “Ours was probably significantly less than two barrels, but we always take a conservative approach in reporting,” he said. “We don’t want people to accuse us of minimizing a spill, so we always exaggerate the size.”The spill occurred because of a loose bolt, Scobel said, which was immediately corrected. There was snow on the ground at the time, so most of the oil sprayed as a fine mist on top it, never reaching the ground, the incident report stated. All the contaminated snow was removed using a vacuum truck. There was some pooling in an area 10 feet by 20 feet, which had both snow and contaminated soil. This was also immediately removed by vacuum truck. No personnel, wildlife or waterways were affected, the report said. 

DAPL Photographer Cleared of Charges After Drone Footage Proves His Case -- A Dakota Access Pipeline (DAPL) protester and photographer was cleared of all charges Thursday after he was accused of endangering a police plane with his drone.Aaron Turgeon, also known as Prolific the Rapper, faced seven years in prison after he was arrested in October and charged with reckless endangerment and physical obstruction of a government function. Prosecutors said he had put the pilot of a surveillance plane, as well as water protectors on the ground, in harm's way when he used a drone to capture protest footage over a DAPL site.The footage proved to be useful in the trial, which ended in one day after Judge Allan Schmalenberger found that Turgeon flew his drone in a "methodical manner" and did not put others at "substantial risk of bodily injury under circumstances manifesting extreme indifference to the value of human life," the Bismarck Tribune reported."The defendant did not fly the drone at the plane. He did not fly the drone in a reckless manner over either the people or at the plane," Schmalenberger said.Turgeon testified that he was flying the drone to film the protest, and that he was aware of the police plane's position and made sure to stay out of its way. He said protesters raised their fists when they saw the drone, indicating that they wanted to be filmed, the Tribune reported. Turgeon documented the DAPL resistance often, posting videos and livestreams to various Facebook groups. Among the footage he captured was of police assaulting protesters with water cannons and tear gas. North Dakota Highway Patrol Sgt. Shannon Henke, who spoke with Turgeon at the scene and briefly attempted to confiscate the drone, testified in court that the aerial device could have fallen from the sky and injured someone. The incident helped prompt the Federal Aviation Administration (FAA) to implement a no-fly zone over the protest sites.

Trump budget slashes EPA funding, opens Alaska refuge to drilling | TheHill: President Trump is proposing deep cuts for the Environmental Protection Agency (EPA), federal energy research and public lands oversight in his 2018 budget, the White House announced Monday. The administration’s budget document also includes a controversial plan to open up Alaska’s Arctic National Wildlife Refuge (ANWR) for oil drilling, and it proposes drawing down the nation’s oil reserve — two strategies for raising new federal revenues. Trump’s budget would cut the EPA’s funding by $2.6 billion, or 31.4 percent, the largest cut for any cabinet-level agency.In a preliminary budget outline released in March, the White House said those cuts would target the EPA’s regulatory efforts, climate change initiatives, research accounts, industrial clean-up measures, state grants and region-specific environmental work. Taken together, it would shutter 50 agency programs and eliminate 3,200 of the agency’s 15,000 jobs. The proposal — if enacted — would fulfill a key campaign promise from Trump, who has complained about what he considers excessive federal regulation, and promised to hobble the nation’s environmental regulators. The White House’s budget also aims to cut the Department of Energy’s (DOE) budget by $1.7 billion, or 5.4 percent. Trump officials are proposing an 11.4 percent increase in spending for the DOE office that oversees militarizing nuclear science, coupled with an 18 percent cut across the rest of the department’s budget, which includes programs like energy research and development, national laboratories and radioactive waste disposal. The Interior Department, responsible for the nation’s national parks, offshore drilling, wildlife refuges and much of its public land, would absorb a cut of $1.4 billion, or 10.9 percent. The cuts are part of a budget plan that would slash $54 billion in domestic discretionary spending next year while raising defense spending by the same amount. The budget document released on Monday includes a proposal to lease drilling sites in ANWR by 2022, something long opposed by Democrats and environmentalists. Such a plan, if enacted, would raise $1.8 billion by 2027, according to budget documents. 

Trump budget would cut oil stockpile, open Arctic refuge to drilling | Reuters: U.S. President Donald Trump's White House would sell half of the nation's emergency oil stockpile and open the Alaska National Wildlife Refuge to drilling as part of a plan to balance the budget over the next 10 years, documents released by the administration on Monday showed. The White House budget, which will be delivered to Congress on Tuesday, is meant as a proposal and may not take effect in its current form. But it reveals the administration's policy hopes, which include ramping up American energy output. The U.S. Strategic Petroleum Reserve, the world's largest, holds about 688 million barrels of crude oil in heavily guarded underground caverns in Louisiana and Texas. Congress created it in 1975 after the Arab oil embargo caused fears of long-term motor fuel price spikes that would harm the U.S. economy. The Trump budget proposes to start selling SPR oil in fiscal year 2018, which begins on Oct. 1, with sales that would generate $500 million, according to the documents. The sales from the reserve would gradually rise over the following years, peaking at nearly $3.9 billion in 2027, and totaling nearly $16.6 billion from 2018 to 2027. Past SPR sales have sometimes caused crude oil futures prices to drop by adding to available supply. In this case, that would work against Trump's efforts to revive the downtrodden oil and gas drilling industries. U.S. crude oil prices on Monday settled at $50.73 a barrel, a relatively low level that has limited energy company profits. The Trump budget would also seek to raise $1.8 billion over the coming decade by leasing oil in the Arctic National Wildlife Reserve, the largest protected wilderness in the United States, believed to hold rich reserves of crude.

Trump’s Budget Delivers Big Oil’s Wish: Reducing Strategic Petroleum Reserve - Steve Horn - President Donald Trump‘s newly proposed budget calls for selling over half of the nation’s Strategic Petroleum Reserve (SPR), the 687 million barrels of federally owned oil stockpiled in Texas and Louisiana as an emergency energy supply.While most observers believe the budget will not pass through Congress in its current form, budgets depict an administration’s priorities and vision for the country. Some within the oil industry have lobbied for years to drain the SPR, created in the aftermath of the 1973 oil crisis.Leading the way has been ExxonMobil, which lobbied for congressional bills in both 2012 and 2015 calling for SPR oil to be sold on the private sector market. The Trump administration says selling off oil from the national reserve could generate $16.58 billion in revenue for U.S. taxpayers over the next 10 years.But EnergyWire’s Peter Behr reported that the Trump SPR budget proposal would potentially violate U.S. commitments as a member of the International Energy Agency.   “As a member of the International Energy Agency, the United States must store enough petroleum to equal at least 90 days of U.S. crude imports, according to DOE,” wrote Behr. “The SPR held the equivalent of 141 days of imports as of last September, so cutting the supply in half would apparently put the United States below its commitment to global stockpiles, an insurance policy against a major loss of crude supply from conflict or natural disasters.”   Trump’s budget plan would not only reduce the SPR storage to a level of 260 million barrels, it would shut down two of the four SPR sites.  Exxon, as well as the American Petroleum Institute (API) and the Independent Petroleum Association of America (IPAA), have long lobbied for a drawdown of SPR‘s supply, according to lobbying disclosure records reviewed by DeSmog. They supported two key bills, proposed but never passed by Congress: H.R. 4136 in 2012 and S. 1231 in 2015.

Factbox: Trump administration's plans to halve US oil reserve, sell gasoline stocks - The Trump administration wants to sell 270 million barrels of crude oil from the US Strategic Petroleum Reserve over the next 10 years, shut two of four SPR storage sites on the Gulf Coast and sell its 1 million-barrel gasoline reserve in the Northeast. Along with a series of sales already approved by Congress, the SPR will hold about 250 million-260 million barrels of crude by 2027, according to the administration's proposal. The SPR, the world's largest government oil stockpile, held 687.7 million barrels of crude as of Friday, according to the Department of Energy, which manages it. The planned selloff, however, is complicated by a variety of factors, including the fact that it is contained in a proposed budget congressional leaders already say is dead on arrival. Here's a look at the administration's SPR plans and some likely complications along the way: The White House Tuesday unveiled a proposed, fiscal 2018 budget which included $28 billion for the DOE, down $1.7 billion, or 5.6%, from fiscal 2017. The DOE plan proposes a "half-liquidation sale" of the SPR, selling an estimated 270 million barrels of crude by 2027. According to details of the Trump budget proposal, in fiscal years 2018 and 2019, DOE would need to sell roughly $1 billion worth of crude. The budget estimates this would require about 15 million barrels of crude to be sold, which assumes an average price of nearly $67/b over those two years. The Energy Information Administration currently forecasts WTI spot prices to average about $55/b in 2018 and $64/b in 2019. Starting in fiscal 2020, the DOE would begin a schedule where a specified number of barrels would be sold each year until a total of 255 million barrels were sold by end-fiscal 2027. According to the schedule: 10 million barrels would be sold in fiscal 2020, 25 million barrels each in fiscal years 2021 through 2025 and then 60 million barrels in 2026 and another 60 million barrels in 2027. DOE estimates all the sales planned in the budget will raise nearly $16.59 billion over this 10-year span.

US E&Ps return to profitability after posting massive losses in 2015 - 2016. - Higher crude oil and natural gas prices, improved efficiency in drilling and completion and other factors combined to give most U.S-based exploration and production companies (E&Ps) solid financial results in the first quarter of 2017 — a stark contrast to their performance in 2015 and 2016. Better yet, the turnaround is providing E&Ps with the optimism and wherewithal to significantly ramp up their planned capital spending this year and in 2018. It’s also giving them an opportunity to zero in on shale plays with low breakeven costs that will help them maintain profitability even if commodity prices stay flat or sag. Today we analyze the first-quarter financial results of a group of 43 U.S. exploration and production companies. Recovering from nearly $160 billion in losses in 2015 and 2016, the universe of 43 major significant U.S. E&Ps we’ve been tracking earned $9 billion in operating income in first-quarter 2017 and generated an impressive $24 billion in cash flow. Higher realized prices for crude oil and natural gas and dramatically lower impairment charges primarily drove the return to profitability. This revival of profitability by U.S. E&Ps is greasing the wheels of the ongoing transformation of the E&P sector that we analyze in depth in Piranha!, a new market study of the same 43 E&Ps. Of that universe of companies, 21 focus on oil (60%+ liquids reserves), nine are gas-weighted producers (60%+ natural gas reserves) and 13 are diversified producers. All major U.S. shale/unconventional plays are represented in the combined portfolios of these firms.

U.S. oilfield service firms lag shale recovery; old deals hold -- U.S. oil services companies have been doing a lot more work as recovering oil prices have lifted the shale industry from a two-year slump, but producers have been pocketing much of the new cash generated by rising output and squeezing service providers to keep costs down. Oil service companies that provide the crews, labor and technology used to drill, construct and operate wells are lagging the recovery in U.S. shale producers. The lopsided situation could chill the production rebound or keep it from spreading to more shale fields, executives of services companies said. Rising demand for certain services means raising salaries to attract workers and refurbishing equipment, while often being paid under fixed contracts signed during harder times, these companies said. That has pressured margins, leading to further losses. Law firm Haynes and Boone LLP said the U.S. oilfield sector experienced 127 bankruptcies between 2015 and April 2017. Among the 10 largest oilfield service providers, just five were profitable last quarter, the same number as a year ago. In contrast, seven of the top shale oil producers posted a first quarter profit, up from just one a year ago. "Both of us have to be able to earn a return and give something back to our shareholders," David Lesar, chief executive officer of Halliburton Co (HAL.N), the world's second-largest oilfield services company, said in an interview. The sector is struggling to change onerous contract terms set when oil prices were much lower. Service companies agreed to those prices out of necessity; they needed cash flow to cover expenses. Those contracts, some of which extend into next year, are contributing to losses, preventing some companies from adding equipment or moving it to oil fields where it could be put to use.

OFS Crew Cuts May Shave Near Term US Crude Oil Production Growth | Rigzone --  The net result of the industry’s massive layoffs may be steeped in irony: Now that oil prices are gaining some steam, the workers needed to get the stuff out of the ground are increasingly harder to come by. Between March and April, the number of drilled but uncompleted (DUC) wells increased in the U.S. by 187, according to the U.S. Energy Information Administration (EIA). That’s part of an increase of 529 DUCs since the beginning of the year, which makes the April 2017 number of DUCs the highest since April 2014 – five months before the generally accepted ‘beginning’ of the downturn. Federal numbers show that the number of DUCs increased as oil prices decreased:

  • April 2017 – 5,721
  • April 2016 – 5,452
  • April 2015 – 5,303
  • April 2014 – 4,063

As Andrew Slaughter, executive director of the Deloitte Center for Energy Solutions, explains, there is a general base number of DUCs that will always exist. But upward of 500 DUCs has implications of a market trying to respond to steadily increasing commodity prices.  “Given the fact we lost a lot of completion capacity – both in equipment and in crews during the downturn – it’s going to take time to bring back the completion capacity to start working off the DUC inventory,” he said. “But it’s not a quick process. It’ll be over months and quarters, not weeks.”  And part of that process is finding workers to replace the hundreds of thousands cut during the last three years. “(Oilfield service companies) laid off a huge amount of people, beginning in 2015 and through 2016, so not all of those people are coming back clearly. You need to attract more people, get them trained, and it probably won’t be as efficient or as effective as experienced crews,” he said. “Over time it’ll work itself out – it usually does. But it’s one factor behind my statement that U.S. production maybe won’t increase as fast as many people are expecting.”

Resilient US Shale Has Flipped Imports Upside Down -- With shale production booming, why does the U.S. still import oil? It’s a common question.  . It’s true that growing oil production from tight formations and shale beds has changed things in the U.S. Not only has shale production decreased the need for the U.S. to import as much oil as it historically has, but it has changed the type of oil that is being imported into the country. . In total, U.S. crude imports from 1986 to 2016—30 years of recording every incoming oil delivery—amount to just under 244,000 separate records representing tanker cargoes from abroad, pipeline shipments from Canada and other deliveries of crude oil—both large and small. The takeaway is this: during the last thirty years the U.S. has imported over 91 billion barrels of crude oil from the rest of the world.  But U.S. production of oil has grown sharply in recent years, from a bottom of 5,000,000 barrels per day in 2008 to an average of 8,875.000 million barrels per day in 2016. This growth, more than 75% in eight years, has almost entirely been fueled by production from formations like the Bakken, Permian and Eagle Ford. These shale formations produce almost exclusively light sweet oil, which has filled U.S. markets.  U.S. refineries are in large part set up to handle heavy, sour crude. Here’s why: before the shale boom U.S. production was declining steadily, and because of the fact that oil fields have a natural decline curve for production, no one had any expectation that there would be a reversal (‘Peak Oil’ theory). It appeared that the U.S would be reliant on imported crude, so refineries made large investments to improve heavy oil processing capabilities. Heavy oil requires much more extensive processing than light oil, and often sells for less than light, sweet oil.     Total imports have dropped from a peak of 10.126 million barrels per day in 2011 to 7.877 million barrels in 2016. That’s a whopping decrease of 22% in just 5 years.  Beyond the decrease in volume of imported oil, the type of oil being imported has changed. Oil with an API gravity lower than 25 is often defined as “heavy oil,” while oil between 25 and 35 is “medium” and oil with an API gravity above 35 it typically called “light oil.” In 1986 (gold columns), the first year the EIA carefully tracked imported crude, the U.S. imported 371.9 million barrels of heavy oil, or just under one quarter of the total for that year. Medium oil accounted for about 41% of 1986 imports, while light oil made up the remaining 34%. Overall, the U.S. imported a broad range of crude in 1986, 1.525 billion barrels in total.   2016 (gray columns) presents a very different landscape. Oil production was hampered by the downturn, but at 8,875 MBOPD production still exceeded 2005 levels by nearly 3,700 MBOPD. Crude imports totaled 2.883 billion barrels, down more than 25% from 2005. Heavy oil dominates imports, making up 55.6% of import volumes. Medium oil has fallen to about one-third of imports, while light oil accounts for less than 11% of volumes.

U.S. freight recovery spurs diesel demand - U.S. freight movements have started increasing again, which should help boost consumption of distillate fuel oil in 2017 and 2018.The tonnage of freight moved by road, rail, barge, pipeline and air cargo has been increasing year on year since October, after stagnating for much of 2015/16 ( Freight movements hit a new record in February, before slipping slightly in March, according to the U.S. Bureau of Transportation Statistics (  Most freight is hauled by equipment that uses diesel engines, or jet turbines in the case of air cargo.Freight is therefore the main driver for consumption of fuels refined from the middle of the crude oil barrel, including distillate fuel oil and jet fuel.  The U.S. Energy Information Administration forecasts that distillate consumption will increase by 80,000 barrels per day in 2017 and a further 90,000 in 2018.By contrast, the agency forecasts gasoline demand will be flat in 2017 and grow just 30,000 barrels per day in 2018 (“Short-Term Energy Outlook”, EIA, May 2017).  Forecast growth in distillate consumption is largely due to stronger freight demand, where a cyclical recovery is being driven by a general normalization of business inventories as well as specific improvements in the oil, gas and coal sectors. Freight movements were sluggish during 2015 and 2016 as U.S. businesses tried to reverse an unplanned build up in inventories of raw materials, work-in-progress and finished goods all along the supply chain.  .After struggling in 2015, destocking finally began to pay off with inventory ratios turning down from April 2016 and falling to 1.35 by December.With better inventory control, manufacturers, wholesalers and retailers have shown more confidence to increase their orders and freight deliveries are picking up. Freight movements have also been strengthened by the resurgence in the oil and gas sector, where the number of active rigs has more than doubled in the last 12 months ( number of rigs drilling for oil and gas has increased from a low of just over 400 at the end of May 2016 to more than 900, according to oilfield services company Baker Hughes.Drilling and well completion need large amounts of equipment and materials, including sand, water and steel drill pipe, to be delivered to remote sites, usually by rail and road. Oil and gas drilling also supports distillate consumption directly because diesel-electric generators provide power for drilling rigs as well as auxiliary supplies for heating, lighting and other operations.

U.S. Oil and Gas To Contribute $1.9 Trillion to U.S. GDP by 2035 -- Since U.S. oil production started recovering at the end of 2016, coinciding with a pro-oil administration entering the White House, industry bodies and analysts have been projecting that the U.S. shale patch output will continue to rise.Earlier this week, the American Petroleum Institute (API) released a study it had commissioned which claims that not only will production grow, but investment in oil and gas infrastructure will contribute between US$1.5 trillion and US$1.89 trillion to U.S. GDP by 2035, or between US$79 billion and US$100 billion annually.  Energy infrastructure is a leading catalyst for economic growth, said the oil industry association in the study commissioned to ICF.The study also sees rapid oil infrastructure development likely to continue for a prolonged period, with total capital expenditures (capex) for oil and gas infrastructure development between 2017 and 2035 ranging from US$1.06 trillion in the base case to US$1.34 trillion in the high case. The investments under consideration include existing and new infrastructure for surface and lease equipment; gathering and processing facilities; oil, gas, and natural gas liquids (NGL) pipelines; oil and gas storage facilities; refineries and oil products pipelines; and export terminals. Infrastructure development is expected to employ an average of 828,000 to 1,047,000 individuals annually across the U.S., not only in the states where infrastructure development takes place, and including indirect and induced labor impacts, the study finds. The projections are only for employment associated with oil and gas infrastructure development, “and do not include jobs more broadly across the upstream and downstream segments of the industry, nor do they include jobs related to operating and maintaining oil and gas infrastructure, each of which would add millions to the U.S. labor pool,” the study notes.

Shale Oil & Gas Production Costs Spiral Higher As Monstrous Decline Rates Eat Into Cash Flows- If you believe the recent surge in U.S. oil production suggests that good times are here once more, think again. While the U.S. oil industry continues to increase production by adding a great deal more drilling rigs, there is serious trouble taking place in the shale patch that very few are aware. This has to do with the rapid deterioration of oil and gas economics as horrendous decline rates eat into company cash flows.The advent of shale oil and gas production, which created the vision of ‘ US energy independence’ , has brought renewed interest in the economics of oil and gas production. What are the key parameters for productivity and costs? In short, it is the cost per produced barrel and not – as often referred in the media – the absolute cost per individual well. As a conclusion, the true costs are strongly dependent on the life span (or the yearly decline rate – referred to very often as ‘legacy’ rate) of the well. So, if a company boasts it has decreased its drilling costs from $10 million per well to $8 million per well, it is just half of the truth as the well may decline much faster and thus produce less oil over its life span and the drilling cost per barrel could be actually much higher, despite the reduction in costs per well. As it is difficult to assess the future performance of wells, we can luckily see a trend from the history of performance from existing wells. In its monthly drilling report, the EIA publishes the performance of new oil and gas wells versus existing wells. This gives an excellent insight into the status of the shale industry. Below chart 1 depicts the addition of new wells (blue line) in the Permian versus the legacy decline of existing wells (red line) and the resulting net growth for the field in million barrels per day (yellow bars right hand scale). The massive addition of nearly 2.5 million barrels per day and year of new production (blue line) is mitigated by the already equally monstrous decline of existing wells (red line). Furthermore, chart 1 shows a fast growing legacy decline rate, which is actually growing faster than the addition of new production. Therefore, the monthly production growth has been already decreased over the last two months. As a strongly rising decline rate reduces cash flow of companies very swiftly, I expect new production will decline considerably over the next few months.   

 Following the flow of US crude oil around the globe -- Capitol Crude podcast - US crude exports are in their nascent stages, relative to the rest of the world. But data about the exports reveals how the crude is entering the market. Mason Hamilton, petroleum markets analyst with the US Energy Information Administration, joins senior oil editor Brian Scheid and global director of energy news Beth Evans to parse the numbers and determine where US crude is being shipped. Additionally, Hamilton details what restrictions are limiting the domestic market, how tankers and shipping costs factor into the flows, how crude exports stack up against refined products like gasoline and why US crude ended up in the Marshall Islands.

Canada’s Oil Tanker Moratorium Act - On Friday Canada’s federal government introduced legislation that will turn its informal ban on crude oil tanker traffic off the North Coast of British Columbia into law. This new law, once enacted, would dash hopes of Canadian oil producers for a Canadian-domiciled Pacific export takeaway port to send its crude oil to Asian markets, and likely eliminate the need for the proposed Northern Gateway pipeline that would have brought oil from Alberta to export facilities on Canada’s Pacific coast. “This legislation will prohibit oil tankers carrying crude and persistent oils as cargo from stopping, loading or unloading at ports or marine installations in northern British Columbia,” the government’s press release said.

Kinder Commits to Pipe Linking Oil-Sands Crude to Asian Markets - -- Kinder Morgan Inc. has committed to expanding a pipeline that will allow Canadian crude to be exported to Asia, a controversial C$7.4 billion ($5.5 billion) project that’s set to face revitalized opposition amid political upheaval in the nation’s Pacific Coast province.The Houston-based company announced its final investment decision for the Trans Mountain expansion project Thursday, saying it expects to secure enough financing from an initial public offering of its Canadian subsidiary to proceed with the project. It expects to raise C$1.75 billion from the IPO by May 31, according to a statement.The project will nearly triple Trans Mountain’s capacity, giving producers from Alberta’s oil sands access to Pacific shipping routes from the coast of British Columbia. Currently, almost all of Canada’s oil is exported to the U.S. With the expanded line, Canada can export to Asian refineries capable of processing its heavy crude and pay higher margins than those in the U.S.The development will be "a game changer for global heavy oil flows," Wood Mackenzie said in November when Canadian Prime Minister Justin Trudeau approved the project amid strident environmental opposition."Our approvals are in hand, and we are now ready to commence construction activities this fall,” Ian Anderson, president of Kinder Morgan Canada Ltd., said in the statement.  Those plans are likely to face a galvanized opposition in British Columbia, where the pipeline terminates near Vancouver. Two political parties -- the New Democratic Party and Green Party -- expanded their support in an election there earlier this month. Both are staunchly opposed to the project, which they say would increase tanker traffic and the risk of a catastrophic oil spill. Together they could muster a majority of lawmakers to overwhelm the more energy-friendly Liberal Party. The expansion will add 590,000 barrels a day of capacity for a total of 890,000. About 80 percent of that is underpinned by long-term shipping commitments of up to 20 years. Construction is set to start in September and complete in December 2019, according to the statement.

New rules aim to cut methane emissions in Canada’s oil, gas sector  -- New rules to reduce methane emissions from Canada’s energy sector will cost the industry an estimated $3.3-billion over the next two decades, and will hit conventional oil and natural-gas producers the most dramatically. But federal officials also say that the value of conserved gas from 2018 to 2035, as a result of the regulatory changes, could total $1.6-billion – alongside billions saved in avoiding costs related to climate-change damage. The draft rules for the oil and gas sector, released on Thursday, are part of Ottawa’s climate-change plan that includes a goal of reducing methane emissions by 40 to 45 per cent from 2012 levels by 2025. The government argues that working to reduce methane emissions from leaky equipment or reducing gas venting is the low-hanging fruit as Canada works to mitigate climate change. It costs less to reduce potent methane emissions compared with other greenhouse gases. And most methane emissions from the oil and gas industry are not subject to the provincial and federal carbon-tax regimes designed to prompt GHG reductions – which is why the government is instead moving to set hard and fast regulations in this area.Methane is the colourless, odourless main component of natural gas, used to heat homes and run industrial factories. The oil and gas industry produces about 44 per cent of Canada’s methane emissions – with methane as a whole representing 15 per cent of Canada’s GHG emissions. Ottawa is proposing rules regarding equipment leaks, venting, pneumatic devices, compressors and well completions. Speaking after the announcement on Thursday, Shell Canada president Michael Crothers said the company supports controls on methane emissions, and has long had voluntary leak detection and repair programs in place at its Alberta and B.C. operations. But “maintaining cost competitiveness” remains an issue, he added. While the Trump administration in the United States continues to move to loosen environmental rules – including those related to methane emissions – Canada is enacting a wide swath of measures to combat climate change. In the industry, there are concerns the differences between the two countries could render the Canadian oil and gas sector less competitive.

WSJ: Why Canada and Brazil are hurting market balancing efforts - No one really thinks about how the “little guys” affect the effort to rebalance the oil market. Today, the Wall Street Journal reported that a “wave of new petroleum production from countries like Canada and Brazil is adding a new problem for oil traders.” The WSJ notes that the two countries are the seventh and 10th largest oil suppliers, and production in these two countries is growing fast. While they might not be “little,” production is overall far less than countries like the United States, Russia and Saudi Arabia. According to EIA data, in 2016, Canada ranked sixth in overall oil production while Brazil didn’t even make the top ten. In addition to Canada and Brazil, the U.K. and Norway are also producing more and pose a concern at the meeting next week in Vienna of the Organization of Petroleum Exporting Countries (OPEC) , according to the WSJ. Last year, OPEC agreed to cut production in order to help balance the markets and raise oil prices back into profitability. The 13 countries of OPEC plus 11 non-OPEC countries, such as Russia, pledged cuts of 1.8 million barrels per day (bpd). The deal is expected to extend to March of 2018, reports Reuters. While OPEC countries continue to make pledges to cut production, other oil-producing nations have taken advantage of the gap in the market. Today, Reuters also reported that oil tankers carrying around 10 million barrels of U.S. crude are en route to Asia. The OPEC production cuts, if extended, may be a big advantage to U.S. producers, since the premium for Brent crude over WTI continues to widen.  However, the Doug King, chief investment officer at RCMA Asset Management and manager of the company’s Merchant Commodity hedge fund, told the WSJ that while everyone is focusing on increased production in the shale regions of the United States, increased production by smaller producers, like Canada and Brazil, are a factor “that people seem to overlook.”  While the amount of production from these countries might seem significant, every extra bit of oil on the market contributes to the persistent oil glut that’s keeping prices from rising. In Canada, says the Journal, output is expected to hit an all-time high this year at 4.7 million barrels a day. Brazil , with as much as 50 billion barrels of recoverable resources, is expected to grow by 212,000 barrels a day to reach 2.8 million barrels per day.

Anemic drilling rates in Mexico point toward further gas output declines - Platts Snapshot video - Platts Analytics expects total Mexican dry gas production will fall another 0.4 Bcf/d by the end of 2017, further increasing Mexico's need for US pipeline imports. However, this year has seen a number of delays on new export pipelines. Ross Wyeno explains how much LNG could be imported to help fill demand, as well as how the power sector is turning to fuel oil. 

Interview: Argentine energy minister sees $50/b oil supporting shale growth - Crude oil prices around $50/b are providing Argentina with a strong opportunity to push expansion of its nascent shale industry, which would ultimately help to improve the efficiency of its oil and gas sector, Minister of Energy and Mining Juan Jose Aranguren told S&P Global Platts Friday. "What these new price scenario is giving the whole oil and gas sector is the opportunity to improve our efficiency to be more competitive even at this low price," Aranguren said in an interview on the sidelines of the Japan-Argentina Economic Forum in Tokyo. "Of course if you have a higher price, you can have more opportunities, but in this particular case, I think the Argentine sector is adjusted to this price scenario," said Aranguren, who was accompanying Argentine president Mauricio Macri with other cabinet ministers. "At $50/b, companies are telling me that if we manage to improve productivity in the country, particularly labor productivity, they can cope with this price scenario." Argentina has among the largest shale oil resources in the world, which have started to come into production and are expected to offset dwindling conventional oil production at maturing fields. Although Argentina's oil production is falling to less than 500,000 b/d from an average of 511,000 b/d in 2016, Aranguren said: "It will be the balance between local production and opportunities to import crude." Argentina is not concerned about the current $50/b oil price, and is more concerned about gas prices because of its higher exposure, Aranguren said. "Honestly, we are more concerned about natural gas prices than oil prices," Aranguren said. "Of course we are producing oil, but you need to take into account that our energy mix in Argentina is dominated by natural gas --54% of our primary energy mix is gas."

Conservative manifesto: Energy efficiency focus, oil and gas support and ‘fracking revolution’ - The Conservatives have pledged to maintain the UK’s climate change commitments through enhanced clean technology and energy efficiency funding, but the Party’s manifesto also proposes continued support for the North Sea oil and gas industry and an additional focus on fracking. The 88-page document, launched by Prime Minister Theresa May this morning (18 May), places a large emphasis on the critical role of the private sector, promising to “create the conditions where successful businesses can emerge and grow”. The manifesto outlines a plan to “lead international action against climate change”, citing the importance of technologies such as battery storage and offshore wind to help the country meet its 2050 climate change targets to reduce emissions by 60% from 1990 levels. Friends of the Earth (FoE) has said the commitment sends a “strong message” to both Donald Trump and opponents of climate action in the UK. “The Conservatives have comprehensively rejected the siren voices calling for the UK to walk away from its international and domestic commitments to tackle climate change,” FoE campaigner Dave Timms said. But the decision to continue support for the North Sea oil and gas industry is likely to upset environmental groups, as will the commitment to develop fracking in the country.

The Tories’ Energy Manifesto --  The Tory party manifesto for the forthcoming UK general election is 84 pages long and the word energy appears on 8 of those pages from which we can conclude that energy is rising up the political agenda. The word “energy” appears 37 times and the word “electricity” once, from which we can conclude that the energy author of the manifesto does not have a clear grasp of the subject since it is mainly electricity that the Tories have in mind. This short post reproduces the main energy sections from the manifesto together with some commentary. The meat of the energy policy appears on pages 22 and 23 and reads as follows:

India Looking To The US For Alternate Oil Supplies -- May 23, 2017 - We've talked about this before. US operators bring a) transparency; and, b) guarantees when it comes to delivering oil.  The Financial Times is reporting that India is looking to the US as it seeks alternatives to OPEC. India is complaining that Saudi Arabia is curtailing supplies and is marking up their prices. The US, he noted, had some fields that were able to produce economically at $25 a barrel, as costs have come down after the price collapse that has entered its third year. “The energy business has changed very fast in recent years,” he said. “We can’t put all of our eggs in a single basket.” Mr Pradhan used his meeting with OPEC delegates to air grievances with the group of producers from which India sources 86 per cent of its oil supplies. This feeds into its refineries that have processing capacity of 4.6m barrels a day. He said despite the collapse in prices since the middle of 2014, Asian customers traditionally dependent on Middle Eastern oil to meet their energy needs continue to pay a premium for crude compared with buyers in Europe or the US.  India said oil output cuts by OPEC producers could prove a threat to its energy security, which together with higher prices, is pushing the world’s third-largest crude consumer towards alternative suppliers.

India moving beyond oil as seeks alternatives to OPEC | Reuters: OPEC production cuts and the prospect of more expensive oil are pushing India to consider U.S. and Canadian suppliers, as well as encouraging it to turn to renewable energy, the country's petroleum and natural gas minister said on Monday. Dharmendra Pradhan made the comments in Vienna ahead of OPEC's meeting this Thursday when members will decide whether to extend production cuts to ease the global oil glut that has grown in tandem with rising North American output. Pradhan said India, the world's third biggest consumer, would act in its national interest to secure inexpensive crude, expand its use of natural gas as it seeks to honor the Paris climate change agreement and is keen to explore biodiesel and other renewable fuels. "I want to protect my consumers' interests," Pradhan, who assumed his role in 2014, said in an interview. "India's leadership is very focused on energy security for all its citizens." The Organization of the Petroleum Exporting Countries had sought to undermine the North American oil boom for several years by raising output, which pushed prices too low for costly shale producers. But low prices also hurt OPEC states, encouraging them to change tack and limit output. Pradhan acknowledged that OPEC's production cuts are an attempt to stem the crude price slide, but said he was worried that it could result in under-investment in the energy sector and push prices up in the long run. "Gone are the days of market stability for consumers," he said. "Now, producers seek market stability."India has been in touch with oil suppliers it had not traditionally used and said Indian refiners were "working out details of the strategy to buy cargos, including from the USA and Canada, which happens to be becoming very competitive. 

Will Extracting the World's Most Abundant Fossil Fuel Release the Methane Monster? -- Japan and China have successfully extracted methane hydrate —ice crystals with natural methane gas locked inside—from the ocean floor near their coastlines.  Commercial development of this frozen fossil fuel is considered by many countries as a key to energy security. However, releasing this massive methane monster is a potential environmental disaster.  According to the Associated Press , a drilling crew in Japan successfully extracted methane hydrate on May 4 near the Shima Peninsula. Similarly, Xinhua reported that a Chinese drilling rig extracted the fuel in the South China Sea on Thursday, with Chinese Minister of Land and Resources Jiang Daming heralding the event as a breakthrough that could spearhead a "global energy revolution."  Methane hydrate is created by organic matter decomposing under the ocean floor and is often called "combustible ice" because it can be lit on fire. It also happens to be one of world's most abundant fossil fuels.  As the AP reports, between 280 trillion cubic meters (10,000 trillion cubic feet) to 2,800 trillion cubic meters (100,000 trillion cubic feet) of it is trapped under permafrost and in seas around the Earth's continental shelves—meaning the fuel could meet global gas demands for 80 to 800 years at current consumption rates. In comparison, total natural gas production worldwide was only 3.5 billion cubic meters (124 billion cubic feet) in 2015.  However, unlocking the globe's vast swaths of methane buried deep in the sea has a number of risks. First, it can be costly and difficult. Japan, for instance, has invested around $700 million on methane-hydrate R&D over the past decade, getting only $16,000 worth of natural gas in return. And although we often talk about carbon dioxide being a climate change villain, methane hydrate is much, much worse—about 23 times more potent as a heat-trapping gas. If methane escaped or leaked during the extraction process, it could significantly increase greenhouse gas emissions.  It's already worrisome that the world's rising temperatures are causing permafrost to thaw , which is releasing methane. Now, countries are actively drilling into the world's seabeds to harvest this potentially dangerous fuel.

China unveils market reform for oil and gas industry - (Xinhua) -- Chinese authorities on Sunday announced a reform plan for the country's oil and gas industry, eyeing better efficiency and competitiveness by giving market a decisive role in the sector.The plan was approved by the Central Committee of the Communist Party of China (CPC) and the State Council, or the cabinet."Market should play a decisive role in resource allocation and the government role should be better played in order to safeguard national energy security, boost productivity and meet people's needs," according to the reform guideline.The long-awaited reform of the sprawling state-controlled sector is a priority for Chinese authorities as the world's second largest economy is slowing amid cyclical and structural changes.The reform is also a key plank of the country's 13th Five-Year Plan for 2016-2020.The plan reaffirmed the leadership's commitment to deepening the reform of state-owned oil and gas companies, encouraging eligible enterprises to diversify their shareholder base and introduce mixed-ownership reform.The prime goal of mixed-ownership reform is to create a flexible and efficient market-oriented mechanism with the incorporation of private shareholders, to improve the management of state-owned companies.According to the plan, efforts should be made to advance reshuffling of the oil and gas industry based on work specialization. Engineering companies and oil and gas equipment manufacturers are encouraged to perform as independent enterprises.State-owned oil and gas companies should "keep fit to stay healthy", free themselves from running social services, and explore ways to sort out problems left over from history.

Why China's Strategic Petroleum Reserve Is All That Matters For OPEC - When OPEC sits down on Thursday, keeping the price of Brent above $50 (to avoid a budget catastrophe and social upheaval in Saudi Arabia) and below $60 (to prevent US production from going exponential), will be just one problem the cartel nations and various hangers-on will be desperate to solve. A much bigger one, literally, is the problem that led to this week's OPEC meeting in the first place, and years of headache for OPEC and non-OPEC nations: a record global oil inventory glut.The supply glut that began in mid-2014 has dumped almost one billion barrels of petroleum into global inventories. However, of this only 35–45% has ended up in transparent OECD tanks. For OPEC, that is all the matters - in the past, OPEC oil ministers have repeatedly referenced the level of OECD petroleum inventories relative to their five-year average as a gauge of the rebalancing. And, as ScotiaBank notes, those inventories were more than 280 Mbbl above their five-year average as of January and, while European stocks have been falling into a healthier range, the same cannot be said of industry stocks in the US, which despite declining for several weeks, are just below all time highs. But forget OECD: an increasingly greater concern for OPEC is not the less than a third of above ground oil held in developed nations; it is the rest that is the big challenge. As ScotiaBank's Rory Johnston points out in the following chart, the majority of the remainder was absorbed by China’s vast and growing strategic petroleum reserve (SPR), which means that "the lion’s share of functional—and thus needing to draw from an OPEC perspective—industry inventories remain in the OECD, and specifically in the US (chart 3)."

Uganda, Tanzania Sign Deal for World's Longest Heated Pipeline - (Reuters) - Uganda and Tanzania signed a framework agreement on their proposed $3.55 billion crude export pipeline on Friday, a key milestone for the project, which is expected to start pumping Ugandan oil to international markets in three years.An official at Uganda's Ministry of Energy told Reuters the agreement covered terms on tax incentives for the project, implementation timelines, the size of the pipeline and local content levels, keeping it on track to complete in 2020.Adewale Fayemi, the manager for Uganda at Total, said the project will become "the longest electrically heated crude oil pipeline in the world"."It's a record," he told Reuters, adding it will increase the flow of foreign direct investment and open a new phase of economic development in the region when completed.The 1,445 km-long, 24-inch diameter pipeline will be heated so it can keep highly viscous crude oil liquid enough to flow.It will begin in landlocked Uganda's western region, where crude reserves were discovered in 2006, and terminate at Tanzania's Indian Ocean seaport of Tanga.Total is one of the owners of Ugandan oilfields, alongside China's CNOOC and Britain's Tullow Oil.Total has said it is willing to fund the pipeline's construction but has not what stake it will own in the project.Uganda estimates overall crude reserves at 6.5 billion barrels, while recoverable reserves are seen at between 1.4 billion and 1.7 billion barrels.Irene Muloni, Uganda's energy minister, said construction of pipeline would "facilitate and boost trade in the region" and create over 10,000 jobs.The agreement stipulated that Uganda would pay an estimated transit tariff of $12.20 per barrel for pumping its oil through the pipeline, she said.

Saudi Arabia's control of the global oil supply is 'on the ropes' thanks to Iran and US fracking -  Revamped Iranian oil production and US hydraulic fracturing operations has Saudi Arabia’s control of the global oil supply "on the ropes," according to Bloomberg’s Sam Wilkin. The Saudi-led Organization of Petroleum Exporting Countries (OPEC) will meet Thursday to work out a plan to cut global oil supplies and boost prices, but OPEC member Iran has an incentive and the power to screw the whole plan up. Wilkin noted that Saudi Arabia’s previous attempts to boost prices failed due to rising oil production from the US and Iran, which are gaining on the Saudi’s oil market share. Iran is inviting foreign investment in its oil industry, which could boost oil production enough to harm Saudi Arabia. Experts see Iran’s gunning for Saudi Arabia’s oil business as an extension of lingering tensions between the two nations. "Iran and Saudi Arabia have had serious frictions in the past, but the last few years have seen a real increase in tension," John Gay, executive director of the John Quincy Adams Society and coauthor of the book "War With Iran," told The Daily Caller News Foundation. "They’re fighting a bit of a proxy war in Syria, and Iranian activists, likely with state collusion, stormed the Saudi embassy in Tehran after the execution of a Shia cleric in Saudi Arabia in January 2016, which led Saudi Arabia to cut relations," Gay said.  OPEC wants to keep oil prices relatively higher than they have been in recent years, having lost $76 billion in 2016 due to cheap oil caused by rising American and Iranian oil production, according to a report by the US Energy Information Administration (EIA).

Fracking, Now The Dominant Technology, Will Keep Oil Price Around $55: Goldman Sachs –  Oil prices may rise or fall in the short-term, but they will return to a range of $55 to $65 in the long term because that's the price of oil from fracking shale wells, the Goldman Sachs head of research said in Chicago Wednesday. Oil prices today were about $52 for West Texas intermediate and $54 for Brent crude, and Goldman Sach's "boring" forecast is that they will remain at $55 to $57 respectively, said Jeffrey R. Currie, the global head of commodities research for Goldman Sachs. "The key point is not that there’s a consensus developing around the price, there’s a consensus developing around the technology, the dominant technology," Currie said in a seminar at the University of Chicago's Saieh Hall for Economics. The dominant technology is the combination of horizontal drilling and hydraulic fracturing that have revolutionized oil and gas production in the United States. "If you think about it, we didn’t even know it was scalable until around 2012. By 2014 the scalability was shocking, and the returns from investing in it were absolutely impressive. Such that now we’re to the point that it is by far the dominant technology. You can see that by looking at the evolution of the supply curves in oil."  The supply curves show that when cost reaches about $55, the supply looks nearly endless. That forces higher priced operations, like deepwater drilling, to lower their prices to compete with U.S. shale. And cheaper operations, like conventional wells in Russia, can safely raise their prices to just under the U.S. shale price. It also means OPEC loses the leverage its traditional oil producing countries have long enjoyed."Not only will cutting output do nothing to price, increasing output will do nothing to price," Currie said at a seminar hosted by the Energy Policy Institute of Chicago. Canadian oil sands are least likely to be able to adapt to the new price, Currie said. Two years ago, a McKinsey and Company expert said oil sands and deepwater wells need a price of $75 to $80 to compete. But Currie said oil companies have been able to reverse engineer deepwater platforms to lower the price: "One example would be BP Maddog in the Gulf of Mexico. It was $85, $95 a barrel. They just reengineered it to $45."

Saudis See All ‘on Board’ to Extend Oil Cuts for Nine Months - All oil producers participating in a deal to limit output agree on extending the cuts by nine months to help trim a supply glut, according to Saudi Arabia’s energy minister. An extension through the first quarter of 2018 will help producers reach their goal of trimming global stockpiles to a five-year average, Khalid Al-Falih said. OPEC and other global producers such as Russia had agreed to reduce production in the first six months of this year, and the decision to extend the cuts will be taken when they meet in Vienna at the end of the month, he said. “We believe that continuation with the same level of cuts, plus potentially adding one or two small producers if they wish to join, will be more than adequate to bring the balances to where they need to be by the first quarter of 2018,” Al-Falih said Sunday at a news conference in Riyadh. He spoke as Donald Trump spent his second day in Saudi Arabia, the world’s biggest crude exporter, on his first overseas trip as U.S. president.  “We think we have everybody on board,” Al-Falih said earlier, in an interview on Saturday with Bloomberg television. “Everybody I’ve talked to indicated that nine months was a wise decision.”

OPEC heads towards supply cut extension as Saudi signals most on board | Reuters: OPEC and other oil producers are on course to agree an extension of supply cuts at a meeting on Thursday, with Saudi Arabia saying most participants are on board with the plan to rein in a global supply glut. Saudi Arabia's energy minister said on Sunday that extending the supply cuts by a further nine months until next March, and adding one or two small producers to the pact, should reduce oil inventories to their five-year average, a key gauge for OPEC to monitor the success of the initiative. "Everybody I talked to... expressed support and enthusiasm to join in this direction, but of course it doesn’t preempt any creative suggestions that may come about," Khalid al-Falih told a news conference in Riyadh. "We believe that continuation with the same level of cuts, plus eventually adding one or two small producers, if they wish to join, will be more than adequate to bring the five-year balance to where they need to be by the end of the first quarter 2018." The Organization of the Petroleum Exporting Countries, Russia and other producers agreed last year to cut production by 1.8 million barrels per day (bpd) for six months starting from Jan 1. Oil prices have gained support from reduced output, but high inventories and rising supply from producers not participating in the accord, such as the United States, have limited the rally, pressing the case for extending the curbs. Saudi Arabia and non-OPEC member Russia, the world's top two oil producers, last week agreed on the need to prolong he current deal on cuts, which expires in June, until March 2018, pushing up prices.

OPEC Thinks Deeper Cuts Might Not Be Required ---The addition of another couple of smaller producers to the OPEC-non-OPEC oil production cut deal will be enough to bring global supply to a more acceptable level.That’s what Saudi Oil Minister Khalid Al-Falih said at a news conference in Riyadh.The reduction will take the whole nine months of the output cut extension that should be announced next w eek at OPEC’s Vienna meeting, Al-Falih said.“We believe that continuation with the same level of cuts, plus eventually adding one or two small producers … will be more than adequate to bring the five-year balance to where they need to be by the end of the first quarter 2018.”The initial deal failed to bring supply back within the limits of the five-year average, which is considered by OPEC to be a fair measure of oil’s fundamentals.The new potential additions to the deal were not named, but there are also reports that OPEC may deepen the cuts, according to Reuters. This pushed prices up, so both Brent crude and West Texas Intermediate started the week with gains. For now, the prospect of deeper as well as more extensive cuts is only a rumor, but it could turn into reality as OPEC is eager to demonstrate its willingness to do whatever it takes to prop up prices. Meanwhile, shale producers are continuing to boost their production, with Goldman Sachs reporting a staggering 128-percent increase in the number of active drilling rigs since May. In absolute terms, the increase is of 404 rigs, allowing the shale patch to increase output to 9.3 million bpd, or 10 percent more than in mid-2016. This has the U.S. breathing down Saudi Arabia’s neck as the world’s third-largest producer, and raises the stakes for the output cut extension.

From suspicion to engagement: OPEC, hedge funds and the Sistine Chapel | Reuters: In the Vatican's Sistine Chapel in the summer of 2016, OPEC's new secretary general Mohammed Barkindo bumped into Citigroup's global head of commodities research Ed Morse. Their chat, at an energy industry event held in the Chapel, led to a series of meetings that have reshaped the way the Organization of the Petroleum Exporting Countries interacts with the hedge funds and trading houses that influence world oil markets. Barkindo, elected to OPEC's top job in June 2016 to deal with an oil price slump, told Morse that OPEC wanted to better understand the way financial players worked in the oil markets. It was a departure for OPEC from its long-held suspicion of such players. In the past it has routinely accused them of speculation that distorted oil prices, pushing them higher or lower than supply-demand fundamentals warrant. OPEC and non-OPEC oil ministers meet in Vienna on Thursday to decide whether to extend beyond June 30 their deal to reduce output, and perhaps deepen it, in an effort to support prices. "It was at the Vatican that we first discussed the idea of OPEC reaching out to the financial players in the oil markets," Barkindo told Reuters. "The world of oil has changed, including the fundamentals and its dynamics. And so must OPEC." He said Morse helped organise a meeting for OPEC officials with hedge funds at the end of 2016. "We went further to break the Berlin Wall with tight oil producers and met them in Houston in March," said Barkindo. Morse did not respond for a request for comment.

OPEC's Worst Cheater Will Get Harder to Ignore as Curbs Falter -- OPEC’s second-biggest producer is also its biggest cheater. And if past is prologue, that lengthens the odds the group will be able to squeeze too many more price gains out of its output cuts. Iraq pumped about 80,000 more barrels of oil a day than permitted by Organization of Petroleum Exporting Countries curbs during the first quarter. If that deal gets extended to 2018, the nation will have even less incentive to comply because capacity at key southern fields is expanding and three years of fighting Islamic State has left it drowning in debt. “Leaving that productive capacity idle will come with an opportunity cost that Iraq may prove reluctant to bear,” said Harry Tchilinguirian, the London-based head of commodity-markets strategy at BNP Paribas SA. He’s nonetheless optimistic that global inventories will fall by year-end as members like Saudi Arabia pick up the slack for Iraq’s transgressions. A risk, though, emerges if Iraqi compliance worsens to such an extent that other countries in the 13-member group start cutting corners too, exacerbating a global surplus that’s already erased much of the price gain that unfolded after the deal was struck in November. Brent crude tumbled below $50 a barrel this month as data showed U.S. shale producers were alive and kicking, confounding OPEC’s efforts to control the supply glut. While oil recovered losses after Saudi Arabia and Russia threw their weight behind extending the six-month output reductions, it’s still 7 percent off post-deal highs. “A lot of market participants have been a bit underwhelmed by the impact of the cut,” Martijn Rats, an oil analyst at Morgan Stanley, said in an interview in Dubai. He says OPEC members are most likely to respect curbs if Brent trades in the $50-$60 range, with prices on either side increasing the risk of non-compliance. 

OPEC Deal: 9-Month Extension Looking Increasingly Likely | Oil prices continued to rebound on growing optimism over the likelihood of a nine-month extension of OPEC’s production cuts. Saudi energy minister Khalid al-Falih flew to Baghdad for some last-minute diplomacy. Iraq seemed resistant to a nine-month extension, but al-Falih’s efforts appeared to have paid off. Iraq’s oil minister said that his country would support a nine-month extension at the May 25 OPEC meeting, paving the way for a likely extension. Nevertheless, Iraq has fallen short of compliance and remains a question mark even if the nine-month extension is sealed. Goldman Sachs says that the nine-month extension should normalize oil inventories, but risks loom for the second half of next year. "A nine-month extension would normalize OECD inventories by early 2018, in our view, but we see risks for a renewed surplus later next year if OPEC and Russia's production rises to their expanding capacity and shale grows at an unbridled rate," Goldman wrote in a recent report. Essentially, the OPEC cuts will only work so long as they are in place. Once OPEC members ratchet up production, the surplus reappears because U.S. shale is expected to rise in the interim. The one way to prevent too much shale from coming online, Goldman says, is a state of backwardation – shifting the futures curve so that near-term oil is more expensive than futures for next year. That could potentially scare away new shale drilling. The Chinese government unveiled a plan to radically transform its state-owned oil companies with the aim to have them perform more like their market-oriented peers. The plan seeks to allow state-owned giants like PetroChina to “lose weight and be fit,” a likely reference to job cuts. The reforms would also open up the state-owned companies to more private sector investment, echoing the opening up of Sinopec in 2014.

Saudi efforts to convince Iraq on 9-month extension bear fruit - Saudi Arabia's last-ditch efforts to convince Iraq to accept a proposal to extend output cuts for nine more months have borne fruit, according to comments from Saudi oil minister Khalid al-Falih. In a move that demonstrated Saudi Arabia's ardent desire to seal the deal ahead of Thursday's ministerial meeting in Vienna, Falih managed to convince the Iraqi oil minister, Jabbar al-Luaibi, to extend the cuts for nine months. This comes a week after Saudi Arabia and Russia unveiled a proposal for a nine-month extension to the OPEC/non-OPEC oil output cuts, with consensus now growing for the duration of cuts. "We have agreed after much discussion that it is better to extend it for another nine months, until March 2018," Falih said in a press conference in Baghdad. "In my visit today and during my meeting with the [oil] minister and the prime minister, the agreement is almost completed in reaching ... a [full] agreement in Vienna," he added. Falih, however, conceded that this does not mean that other suggestions will not be discussed. "We will still be open to any other suggestions. But I think the feeling now about the production deal is that it will be extended nine months," he said. Falih had traveled to Baghdad to clear the air with Iraqi oil minister Jabbar al-Luaibi, as Falah Alamri, who heads Iraq's state-run oil marketing company SOMO, told reporters in London that his country was only prepared to support a six-month extension.

Iraq Mulls Largest Sovereign Oil-Hedging Deal, Topping Mexico  -  Iraq is mulling an oil hedging program to lock in prices for future crude sales, potentially topping a similar deal run by Mexico that is considered the largest energy trade in Wall Street. The Middle Eastern nation is in the very early stages of exploring a hedge for as much as a quarter of either its crude production or exports, Falah Al-Amri, the head of Iraq’s state oil-marketing company, known as SOMO, said in an interview at the Iraq Petroleum Conference in London. "We will not rush. This is a long process," Al-Amri said. "We must make sure we do not lose money. You know the Iraqi parliament, it would not accept that." If Iraq goes ahead, that would require contracts giving price protection to about 400 million barrels a year of crude, according to Bloomberg calculations. That would be significantly larger than the Mexican oil hedge, run by the country’s finance ministry, which uses options contracts to cover about 250 million barrels a year. Petroleos Mexicanos, the state-owned oil producer also known as Pemex, this year also hedged its output, an additional 100 million barrels. Although oil hedging is common in the private sector, for example by U.S. shale producers to lock-in revenues and airlines to guarantee a maximum price for their jet-fuel, they are rare among oil-producing countries. On top of Mexico, only a handful other nations have publicly disclosed hedging programs, including Ecuador and Ghana. Oil-producing countries face a number of obstacles to hedge. Mexico has spent on average $1 billion a year buying options contracts that give it the right, but not the obligation, to sell at a predetermined price. The size of the transaction could roil the market, sending prices lower. Any losses could carry a heavy political price. Oil traders and bankers who monitor the Mexican oil hedge have said in the past the program contributed to push oil prices lower at least in 2008 and 2014. 

OPEC Wants to Carry on Pumping Less and Earning More Anyway -  At first glance, OPEC’s cuts haven’t worked -- global oil inventories remain well above normal levels. But the policy’s made a difference where it really counts: juicing the coffers of finance ministries from Baghdad to Caracas. The resurgent flow of petrodollars explains why Saudi Arabia and Russia have largely convinced everyone else in the deal to extend the production cuts another nine months to the end of March 2018. “Make no mistake, it is all about oil revenues,” said Bhushan Bahree, a senior director at consultant IHS Markit. “The bottom line for oil producers begins, unsurprisingly, with a dollar sign and ends in billions.” The International Energy Agency, which advises rich countries on oil policy, said earlier this month that OPEC has a “financial motivation to extend the supply cuts.” The IEA calculates the cartel earned almost $75 million extra a day in the first quarter of this year than in the last quarter of 2016, despite collectively cutting output to 31.9 million barrels a day from 33.3 million. IHS Markit said Russia, the largest country outside the group to join the cuts, also earned more. The Organization of Petroleum Exporting Countries and its allies believe they can continue earning more while pumping less. Even those countries that question whether an extension can rebalance the market and bring down elevated stockpiles don’t oppose maintaining the cuts. While oil ministers have a sense of defeat in their battle against high inventories, finance ministers are happy, one OPEC delegate said. Brent crude, the global benchmark, has risen to more than $54 a barrel from about $46 since production cuts totaling 1.8 million barrels a day were first decided in the final weeks of last year. But prices have dipped below $50 a barrel a couple of times as investors sold the commodity amid signs the global glut isn’t notably easing. “Charitably, one would argue that things have not quite worked out yet,” said Jan Stuart, chief energy economist at Credit Suisse Group AG in New York. 

Global Shipping Fleet Braces for Chaos of $60 Billion Fuel Shock -- Little more than 2 1/2 years from now, the global fleet of merchant ships will have to reduce drastically how much sulfur their engines belch into the atmosphere. While that will do good things -- like diminishing the threat of acid rain and helping asthma sufferers -- there’s a $60 billion sting in the tail. That’s how much more seaborne vessels may be forced to spend each year on higher-quality fuel to comply with new emission rules that start in 2020, consultant Wood Mackenzie Ltd. estimates. For an industry that hauls everything from oil to steel to coal, higher operating costs will compound the financial strain on cash-strapped ship owners, whose vessels earn an average of 70 percent less than they did just before the 2008-09 recession. The consequences may reach beyond the 90,000-ship merchant fleet, which handles about 90 percent of global trade.  Oil refiners still don’t have enough capacity to supply all the fuel that would be needed, and few vessels have embarked on costly retrofits. “We are talking about 2.5 million to 4 million barrels a day of fuel oil to basically shift into a different product.” Merchant ships around the world are required to cut the amount of sulfur emitted under rules approved in October by the International Maritime Organization, a UN agency that sets industry standards for safety, security and the environment. As well as contributing to acid rain, sulfur, combined with oxygen, can form fine sulfate particles that can be inhaled by humans and may cause asthma and bronchitis, according to the U.S. Environmental Protection Agency. There are two main ways to comply: vessel engines are fitted with scrubbers that would eliminate the pollutant, or oil refiners will have to make lower-emission fuels. The limit on sulfur content will drop to 0.5 percent from 3.5 percent. 

Today's Stunted Oil Prices Could Cause Oil Price Shock In 2020 - As oil prices remain unsteady and OPEC continues to make headlines every hour, the world is focused on oil’s immediate future. As Saudi Arabia announces plans to slash production and move their economy away from oil dependency, many industry insiders are predicting that the now over-saturated market will reach an equilibrium with higher commodity prices by 2018 and U.S. shale production will continue to grow along with global demand. Robert Johnston, the CEO of one of the world’s biggest political risk consultancies, is unconvinced. In a speech made at the Association of International Petroleum Negotiators’ 2017 International Petroleum Summit, Johnston laid out his concerns for the future of oil.“What I don’t hear people asking is, ‘then what?’ Are the Saudis going to maintain these production cuts forever, or at some point do they have to start reversing that? I think in 2018 they will be reversing those production cuts,” he said. Despite the recent dip in oil prices, industry experts have been predicting a supply-gap and rising oil prices for years. This is due in large part to an oil investment drought marked by two year of consecutive decline, a statistic that has no precedent in the oil industry. This year a report by the International Energy Agency concluded that if oil investment remains stagnant over the next few years, by 2020 we will see a significant increase in the price of oil as global demand continues to climb. The IEA’s Executive Director Fatih Birol addressed these findings in a keynote address at the Atlantic Council Global Energy Forum in Abu Dhabi in January, announcing that no major oil projects were started in the last year and there were zero large oil discoveries “because there is no money for exploration. You find something if you look for it,"Birol said. The potential supply gap has far-reaching implications that we are not ready to combat. Gas and oil are still fundamental to much of the world’s infrastructure, despite a steady increase of research and utilization of renewable energy resources. While electric cars continue to show a promising future, especially in the light of ambitious new green car policy initiatives in India and China, they still account for less than 2 percent of the world’s cars. And, as the global middle class continues to grow and exercise their buying power, the demand for oil will continue to grow alongside them.

Art Berman: Don't Get Used To Today's Low Oil Prices - Oil expert and geological consultant Art Berman returns to the podcast this week to address head-on the question: Was the Peak Oil theory wrong? With the world "awash" in sub-$50 per barrel oil, were all the warnings about persistently higher future oil prices just a bunch of alarmist hand-wringing?In a word: No. Art explains how the current glut of oil created by the US shale boom -- along with high crude output by both OPEC and non-OPEC producers -- is a temporary anomaly. Fundamentally, we are not finding nearly as much oil as we need to continue the trajectory of our demand curve. And at the same time, we're extracting our reserves at a faster rate than ever. That's a mathematical recipe for a coming supply crunch. It's not a matter of if, but when:I’m not interested in spreading any kind of false ideas that we’re running out of oil. We’re not running out of oil. We’re not running out gas. The problem that we’ve had now for the past twenty years is that we seem to have run out of inexpensive oil and gas -- and that’s where the so-called shale plays, the offshore deep water kinds of ventures that have dominated the industry now for much of the last twenty years come in.So, you can always find more. The question is: At what cost? That’s I think an issue that we don’t really want to talk about very much.The second piece of that is the idea that somehow technology is always going to save us. I think that theme goes way beyond oil and gas and energy. But, it’s certainly prevalent in my line of work which is oil and gas and so the problem there is that people seem to lose the distinction between technology and energy. Technology does not create energy. Technology is simply a way to convert energy, or to convert resources, into work. So, you can improve the technology and basically it allows you to turn the faucet on harder. It doesn’t create any new energy and it certainly doesn’t help you conserve what you already have. In fact quite the opposite. The better the technology the quicker you run through what you have left. So, yeah, we can always find more oil and gas. But will be able to afford it? Is our global economy capable of managing that cost? That’s really the issue.

Goldman Warns Of "Sharp Oil Price Drop", Inventory Glut "If Backwardation Is Not Achieved" -- Increasingly some of the more prominent sellside analysts appear to be picking and choosing ideas from their competitors. Earlier, it was JPM echoing Goldman's reco when it cut its 10Y yield forecast. Now, in a note previewing the outcome of this week's OPEC meeting and proposing a way forward for OPEC, Goldman's Damien Couravlin adopted the "backwardation" idea presented last week by Morgan Stanley's Francisco Blanch.As a reminder, Blanch's latest thesis on oil market dynamics, is that "OPEC’s goal for the oil market is not a specific price level, but reaching backwardation", (which is also why he does not believe that OPEC will proceed with deeper cuts as this would likely mean ceding more market share to U.S. shale production). Fast forward to Monday, when Goldman's energy strategist Damien Couravlin effectively cribbed the whole note by writing that while "oil prices are rebounding with stock draws and greater certainty on an extension of the production cuts" and a "9 month extension would normalize OECD inventories by early 2018" he warns that he sees "risks for a renewed surplus later next year if OPEC and Russia’s production rises to their expanding capacity and shale grows at an unbridled rate."

Should OPEC worry about contango and backwardation? -- "Backwardation is the solution" to OPEC's problem of how to raise output and revenues without sparking another shale boom, according to the influential oil research team at Goldman Sachs. Backwardation would allow low-cost oil producers in OPEC to sell their output at a higher price linked to the spot market while curbing growth from shale firms that sell at prices linked to the forward curve. Goldman's strategy aims to "share growth" between OPEC and shale firms to avoid another repeat of boom and bust in oil prices ("Backwardation is the solution", Goldman Sachs, May 22). The plan exploits differences in pricing behavior between low-cost producers in OPEC that do not hedge and higher-cost shale drillers that hedge a substantial portion of their output. Because they do not hedge, OPEC members' revenues are linked to spot prices but shale firms' earnings and access to capital are more closely linked to futures prices one or two years forward. Since the end of 2014, Brent and WTI have generally been in contango, with futures prices higher than spot, which has meant shale hedgers have realized higher prices than OPEC non-hedgers. But if OPEC can shift the market into a sustained backwardation, the situation would be reversed, with shale producers realizing lower prices than OPEC. Contango is normally associated with an oversupplied oil market and high and/or rising levels of inventories while backwardation is associated with undersupply and low and/or falling stocks. Contango makes it profitable for crude traders to store large volumes of crude oil through "cash and carry" strategies which are no longer possible when the market is in backwardation. Many observers have therefore focused on backwardation as an essential element of any plan for rebalancing the oil market. Contango is sometimes blamed for causing crude traders to build up stockpiles and causing the oil market to carry excess inventories. But contango is a symptom of an oversupplied market with abundant inventories, not the cause. Likewise backwardation is a symptom not the cause of an undersupplied market with tight stockpiles. 

 Saudi Finance Minister: “I Wouldn’t Care If The Oil Price Is Zero” - The Saudi Deputy Crown Prince Mohammed bin Salman unveiled the nation’s ambitious “Vision 2030” in an interview with Al-Arabiya in April. The roadmap lays out a wide variety of economic reforms that will transition Saudi Arabia away from oil and into a broader array of investments.  While Saudi Arabia’s economy is currently suffering from an 18-month decline in oil prices and soaring unemployment rates, they are planning for a future in which they won’t have to worry about the price of oil at all. Speaking of the plans outlined in Vision 2030, Saudi finance minister Mohammed Al Jadaan told CNN,“We will not really care much whether the price is 40, 45, 50, 55 at that time because we have gone significantly out of our way to be independent of the oil price…We are planning to totally [end] that dependency that we have been living for the last 40, 50 years. Hopefully by 2030, I wouldn’t care if the oil price is zero.” Vision 2030 proposes an economic restructuring that would in theory add 6 million non-oil jobs by 2030 and generate $100 billion per year in additional non-oil revenue by 2020 by reducing subsidies for gasoline, electricity and water and introducing a new value-added tax as well as initiatives to foster more non-oil industries like mining and military hardware. They have also suggested grandiose ideas to create the world’s biggest IPO for Aramco (the world’s biggest oil company) and to establish the world’s biggest sovereign-wealth fund worth over $2 trillion to invest in a wide variety of assets. These proposals, groundbreaking in their extent, are especially radical in a country relying on oil for 90 percent of its GDP. Whether these ambitious goals are realistic for Saudi Arabia, whose national deficit is expected to reach 13.5 percent of GDP this year after over a year of decreasing oil prices, remains to be seen. The 30-year-old Prince bin Salman also announced that he believed the plan could be realized even sooner, eliminating Saudi Arabia’s oil dependency by 2020, in a statement that the Economist referred to as “manic optimism among the youthful new policy-setters of the royal court.”

Producers Set to Extend Cuts as Rally Stalls: OPEC Reality Check -  Reeling from the worst oil-market rout in a generation, producers controlling about 60 percent of the world’s supply came together last year determined to put an end to the global glut. Five months on, the historic deal has failed to drain inventories or sustain prices much above $50 a barrel after early gains brought output from U.S. competitors roaring back to life.  On Thursday ministers from the Organization of Petroleum Exporting Countries and its allies will meet in Vienna to decide whether to re-up. All producers participating in the deal agree on extending the cuts by nine months beyond their June expiry, according to Saudi Arabia’s Minister of Energy and Industry Khalid Al-Falih.  That may not be enough. OPEC’s own forecasts show it would need to double its cuts to clear the inventory surplus this year. While the group has impressed the market with unprecedented levels of compliance, the curbs will be harder to keep up if the deal is extended. Meanwhile Nigeria and Libya, two OPEC countries exempt from the cuts, threaten to undermine the accord as they restore lost output.   Following is the latest position of each OPEC country plus Russia. The respective shares of supply are based on April levels. Estimates for the price each member needs to balance its 2017 budget are from the International Monetary Fund unless stated otherwise.

WTI/RBOB Pop-n-Drop After Mixed Inventory Data --More OPEC jawboning and continued (modest) draws in crude inventories beat production increases and SPR sales headlines heading into tonight's API data and with inventory drawdowns across the entire crude complex sending both WTI & RBOB prices jumped higher. However, prices quickly reversed lower as traders realized the Crude draw was smaller than expected...API

  • Crude -1.5mm (-2mm exp)
  • Cushing -210k
  • Gasoline -3.15mm (-1.08mm exp)
  • Distillates -1.85mm

The 7th weekly draw in crude inventories in a row (but it was smaller than expected). Gasoline continued to draw...

OPEC meets again but has it had an impact on oil prices? Kemp -- Ministers from OPEC and non-OPEC oil exporters are meeting in Vienna today and tomorrow to decide whether to extend production cuts that have been in effect since the start of the year. The formal conference comes after extensive consultations in recent weeks which seem to have produced a consensus to extend cuts at the same level for a further nine months to the end of March 2018. But with oil traders focused on Vienna, it is worth asking whether the cuts agreed by OPEC on Nov. 30 and non-OPEC on Dec. 10 have had any significant impact on prices so far. The front-month Brent futures contract is currently trading around $7.50 per barrel higher than before the OPEC cuts were announced. But front-month prices had already risen by more than $18 per barrel over the 10 months prior to the last OPEC meeting. There is no prima facie evidence that OPEC and non-OPEC production cuts changed the previous trend in prices ( A proper evaluation of the output cuts requires a comparison with what would have happened to oil prices without them. As with any counterfactual, it is impossible to know with certainty what would have happened to prices in their absence. Cut supporters argue that the OPEC and non-OPEC deals averted a renewed collapse in oil prices by halting the rise in inventories. They can point to a remarkable turnaround in market sentiment and hedge fund positioning from very bearish prior to the OPEC meeting to very bullish afterwards which helped push prices sharply higher. For doubters, the production cuts and rising prices threw a lifeline to U.S. shale producers and encouraged them to ramp up drilling even faster, jeopardizing the long-term market balance.  From the available evidence, it is difficult to conclude with any certainty whether or not the OPEC and non-OPEC agreements had a significant impact on prices.

Length of OPEC/non-OPEC oil output cut still in play: ministers - OPEC is still debating a three-, six- or nine-month extension of its oil output agreement but will not consider deeper cuts, Iranian oil minister Bijan Zanganeh said Wednesday. "All maintain OPEC's production ceiling, [but] the term is not clear," Zanganeh said on the sidelines of an Iranian cabinet meeting in Tehran, according to the country's ISNA news agency. "Maybe three months, six or nine months." He added that he was under the impression that "Saudi Arabia is looking to raise [oil] prices." Zanganeh is due to arrive in Vienna later Wednesday for OPEC's ministerial meeting on Thursday, when the organization will also meet with 11 key non-OPEC oil producers that agreed to last December's production cut deal.Under the deal, OPEC committed to a 1.2 million b/d cut, while the 11 non-OPEC countries led by Russia agreed to cut 558,000 b/d, from January through June. Saudi Arabia and Russia last week jointly declared their support for a nine-month extension through March 2018, and several ministers within the producer coalition appear to be coalescing around that. A five-country monitoring committee overseeing the deal is set to formally recommend the nine-month extension at a meeting today, according to Kuwaiti official news agency Kuna, but OPEC sources have told S&P Global Platts that the deal is not yet nailed down. "All options are open," Kuwaiti oil minister Essam al-Marzouq told reporters after a meeting of OPEC's Gulf Cooperation Council countries at the Kempinski Hotel in Vienna. "Everything is on the table. We will see the Q3 effect on the cuts and we will have other options." 

Libya again seeking 'absolute' exemption if OPEC oil output cuts are extended: official - Libya will continue to ask for an "absolute" exemption if OPEC extends its current oil output cuts, according to Ibrahim al-Besbas, the country's ambassador to Austria, who is representing the North African country at Thursday's OPEC meeting in Vienna. "We are producing just under half of our original production quota so we will seek to be exempt [again]," he said to reporters. Civil unrest along with political instability prompted OPEC to grant Libya an exemption, along with Nigeria, from a production cut agreement signed late last year, in which OPEC agreed to lower output by 1.2 million b/d to help hasten the market's rebalancing. Ministers have indicated that Libya likely would receive another exemption in any extension, though full details of any deal are still to be negotiated. Besbas also said that the country was currently producing just below 800,000 b/d and because of the fluid security situation, output has been fluctuating a lot this year. Earlier in the week, Mustafa Sanalla, chairman of state-owned National Oil Corporation, told S&P Global Platts that oil production was averaging 788,000 b/d but that technical issues at Sharara oil fields were still a concern. Libyan oil output has been extremely volatile in the past month due to political and technical issues, and far below its full capacity of 1.6 million b/d. Production fell to a seven-month low of 492,000 b/d in late April only to rise to a two-and-a-half year high of over 800,000 b/d in early May, after NOC reached a deal on April 27 with militias blockading a pipeline leading to the Zawiya port, allowing production to restart at the Sharara and El Feel fields in the southwest of the country. Earlier this year, Sanalla has said that the country had set itself a target of reaching 1.1 million b/d by August.

Weekly Petroleum Data -- Only 38 Weeks Until US Crude Oil Stocks Reach Historical Levels -- May 24, 2017 --Weekly oil data starting to be posted. From John Kemp, via Twitter:

  • US refinery throughput accelerated -- another seasonal record, and (almost) literally off the chart
  • US refinery crude processing was up 1 million b/d higher than 2016 and up 2.1 million b/d higher than the 10-year seasonal average
  • gasoline stocks at record seasonal highs despite falling 0.8 million bbls to 240 million bbls last week
  • gasoline stocks remain very high (as in, "off the chart")
  • US commercial crude oil stocks are tightening and now just up 10 million bbls (up 2%) higher than 2016, though up an astounding 162 million bbls (up 46%) over the 10-year average (or as we say, "off the chart")
  • US commercial crude stocks have risen 37 million bbls since the start of the year, compared with an increase of 55 million bbls in 2016 and a 10-year average of a 44-million-bbl increase
  • US commercial crude oil stocks fell 4.4 million bbls to 516 million bbls in most recent reporting period -- if this rate of decline were to continue, US supply of crude oil would be back to its "historical average" (350 million bbls) in only 38 weeks

WTI/RBOB Stumble After Mixed Inventory Data, 16th Straight Week Of Increased Crude Production -- WTI/RBOB prices were relatively unchanged from last night's API inventory print (despite some volatility from OEPC headlines) ahead of the DOE print, but that did not last long as Crude saw a much bigger than expected draw (-4.43mm vs -2mm exp) and gasoline a considerably smaller draw than API (-787k vs -3.18mm API) and the same with distillates.Lower 48 crude production rose for the 16th straight week and seemed to take the shine off the inventory data - sending WTI/RBOB prices lower. DOE:

  • Crude -4.43mm (-2mm exp)
  • Cushing -741k
  • Gasoline -787k (-1.08mm exp)
  • Distillates -485k (-493k exp)

Crude's 7th weekly draw in row was much bigger than expected, but Gasoline only saw a modest draw...

Oil prices dip as market awaits OPEC decision on output cuts: Oil prices retreated slightly Wednesday as investors reacted to a smaller-than-expected U.S. gasoline stock draws as they awaited the outcome of discussions in Vienna between OPEC and other oil-exporting countries on whether to extend output cuts. U.S. crude oil inventories fell for the seventh straight week as refiners processed a near-record amount of crude last week, the Energy Information Administration said on Wednesday, even as gasoline and distillate stocks also dipped. Crude inventories fell 4.4 million barrels in the week ended May 19, more than analysts' forecasts of a 2.4 million barrels decline. But gasoline inventories fell by only 787,000 barrels, compared with expectations for a 1.2 million barrel draw. The data comes one day before the Organization of the Petroleum Exporting Countries, along with non-member producing nations, are scheduled to decide whether to extend an agreement to cut world supply, an effort that has only recently started to bear fruit in global inventory figures. U.S. light crude oil ended Wednesday's session 11 cents lower at $51.36. Benchmark Brent crude oil was down 22 cents a barrel at $53.93 by 2:36 p.m. ET (1836 GMT). Both benchmarks have gained more than 10 percent from their May lows below $50 a barrel, rebounding on a consensus that OPEC and other producers will maintain strict limits on production in an attempt to drain persistent global oversupply. 

OPEC still battling oil glut after five months of cuts | Reuters: How long will it take for oil inventories to drop to normal levels? That's the question OPEC and oil markets are grappling with before Thursday’s meeting of producer countries in Vienna. At just over 3 billion barrels, stockpiles in consumer nations are about 300 million barrels above their five-year average, little changed from levels in December when the Organization of the Petroleum Exporting Countries and its allies agreed to cut output by about 1.8 million barrels per day (bpd). The cuts were initially agreed to run during the first half of 2017. OPEC and other producers, including Russia, are now expected to agree to extend the deal on Thursday, possibly for nine more months until March. OPEC expects inventories to return to the five-year average of 2.7 billion barrels by the end of 2017. Other experts see a longer overhang, with one institution seeing it lasting into 2019. OPEC has repeatedly said eliminating excess stockpiles was one of its main goals but inventories remain stubbornly high. OPEC states have cut output at the wellhead, but kept exports to consumer countries high by draining their own stockpiles. The Paris-based International Energy Agency and most other experts say global oil demand is outstripping production, so at some point stocks held in consumer states will start to drop. But making forecasts is fraught with uncertainty because it depends on assumptions about supply and demand, the rate of exports from storage from producer nations and guesswork about storage in nations such as China, which does not disclose data. The IEA releases monthly data for inventories held by the OECD group of industrialized nations, saying stockpiles of crude, oil products and other liquids at the end of March stood at 3.025 billion barrels. But IEA inventory analyst Olivier Lejeune said this only covered 50 to 60 percent of the global picture, including inventories in Western Europe, North America, Japan, South Korea, Australia and New Zealand. It does not track stockpiles in China and India, the world's No. 2 and No. 3 oil consumers. 

OPEC, non-OPEC extend oil output cut by nine months to fight glut -- OPEC and non-members led by Russia decided on Thursday to extend cuts in oil output by nine months to March 2018 as they battle a global glut of crude after seeing prices halve and revenues drop sharply in the past three years. Oil prices dropped more than 4 percent as the market had been hoping oil producers could reach a last-minute deal to deepen the cuts or extend them further, until mid-2018. [O/R] OPEC's cuts have helped to push oil back above $50 a barrel this year, giving a fiscal boost to producers, many of which rely heavily on energy revenues and have had to burn through foreign-currency reserves to plug holes in their budgets. Oil's earlier price decline, which started in 2014, forced Russia and Saudi Arabia to tighten their belts and led to unrest in some producing countries including Venezuela and Nigeria. The price rise this year has spurred growth in the U.S. shale industry, which is not participating in the output deal, thus slowing the market's rebalancing with global crude stocks still near record highs. "We considered various scenarios, from six to nine to 12 months, and we even considered options for a higher cut. But all indications discovered that a nine-month extension is the optimum," Saudi Energy Minister Khalid al-Falih said. He told a news conference he was not worried by what he called Thursday's "technical" oil price drop and was confident prices would recover as global inventories shrink, including because of declining Saudi exports to the United States.

Oil drops nearly 5% as OPEC’s 9-month output-cut extension disappoints -  Oil prices suffered a drop of nearly 5% Thursday, marking their lowest finish in a more than a week, as traders showed disappointment with the Organization of the Petroleum Exporting Countries’ decision to extend production cuts by nine months. An extension was widely expected, but traders had started to speculate that the cartel would make deeper reductions to output or extend the out-limit deal by 12 months.July West Texas Intermediate crude dropped $2.46, or 4.8%, to settle at $48.90 a barrel on the New York Mercantile Exchange. That was the lowest price a front-month contract since May 16 and largest percentage decline since May 4, according data from Dow Jones. July Brent crude, the global benchmark, lost $2.50, or 4.6%, to $51.46 on the ICE Futures exchange in London. WTI oil finished below both its 50 and 200-day moving averages. Oil’s 50-day moving average is $49.59 a barrel, while its 200-day moving average is $49.55, according to FactSet data. “The market is sending a signal that they were looking from more out of the [OPEC] meeting, maybe a 12 month extension,” At the conference, Saudi Arabia oil minister Khalid al-Falih said the oil market “is on its way to recovery” but “more time is needed” to bring oil supplies back to their five-year average. The extension of the supply pact “was signaled well in advance by the Saudi and Russian oil ministers,” The extension “reflects the alliance’s concern that a large inventory overhang continues to weigh on prices and is taking longer to whittle down than expected”—in part because of “fast-rising output, notably from shale developments in the United States,” More than 20 OPEC and non-OPEC countries in November last year agreed to collective cut production by 1.8 million barrels a day in an effort to reduce the global supply glut that kept a lid on prices. 

Oil Tumbles After OPEC Ends With A Whimper; Agrees Only To Nine Month Extension -- The OPEC Vienna meeting has not officially concluded just yet, but moments ago a delegate told the WSJ and Reuters that the oil producing cartel had decided to do what had been widely telegraphed previously, and merely extend output cuts by nine months to March 2018. While the full quota breakdown has not been released yet, the cuts are likely to be shared again by a dozen non-members led by top oil producer Russia, while several nations like Iran and Nigeria will remain exempt from production caps. Two delegates say: consensus reached for 9 month extension #OOTT #OPEC but other items on addenda OPEC cuts had helped push oil back above $50 a barrel this year, giving a fiscal boost to producers, many of which rely heavily on energy revenues and have had to burn through foreign-currency reserves to plug holes in their budgets, however in recent weeks oil dropped to the mid-$40s again, forcing OPEC to agree to the production extension in hopes of creating backwardation in the oil strip, in order to eliminate shale producers from the question. The rebound in oil prices has in turn spurred growth in shale output, which is not participating in the output deal and whose breakeven prices have tumbled,  slowing the market's rebalancing with global crude stocks still near record highs while US producers steal market share from Saudi Arabia and other OPEC members.

Oil prices tumble after OPEC rollover -  - Ministers from OPEC and non-OPEC oil-exporting countries agreed on Thursday to extend existing production cuts for a further nine months to the end of March 2018.Front-month Brent futures prices reacted by closing down $2.50 per barrel or more than 4 percent, reversing around half of their gain the run up to the meeting ( price decline was fairly predictable once OPEC decided to roll over existing production cuts rather than deepen them ("OPEC nears decision time: roll over or deepen cuts?" Reuters, May 19). The market reaction was consistent with research showing prices tend to fall when OPEC leaves output unchanged ("The behaviour of crude oil spot and futures prices around OPEC and SPR announcements", Demirer and Kutan, 2010).In this instance, the fall in prices reflects repositioning among market makers and short-term tactical traders rather than a re-evaluation of supply and demand fundamentals.Many crude traders closed out short positions and bid up prices in advance of the meeting in case ministers surprised with a deeper cut ("Hedge funds shuffle positions as OPEC decision nears", Reuters, May 23). OPEC and non-OPEC ministers signalled repeatedly that a rollover was the most likely outcome of the meeting but there was always the possibility, however small, of a deeper cut.Most market makers and tactical traders will therefore have wanted to hold flat or a small long position during the meeting in case a surprise cut sent prices rising sharply.Once the threat of a cut was removed and the rollover was confirmed many of those long positions became unnecessary and were liquidated. The simultaneous attempt to liquidate so many long positions at the same time and create fresh short positions resulted in a classic crowded trade ("Predatory trading and crowded exits", Clunie, 2010).In any event, the price decline was not especially large, equivalent to a daily move of just over 2 standard deviations and well within the normal range of daily fluctuations ( and non-OPEC ministers may be mildly disappointed with the response to their announcement but they are unlikely to be seriously concerned.

Wall Street Throws Up On OPEC: Barclays Sees "No Light At The End Of The Tunnel"; MS Cuts WTI Price Target --Oil bulls were unhappy with yesterday's OPEC announcement, which disappointed by adding nothing to the 9 month supply cut extension announcement which had already been leaked and largely priced in while leaving key questions unanswered, including what it has planned for the long-term.The broader Wall Street commentary was similarly downbeat: “To say that yesterday’s performance was disappointing for bulls is an understatement,” Tamas Varga, analyst at PVM Oil Associates wrote in an emailed report. “It is, however, not a foregone conclusion that the trend is definitely turning. The question now is whether yesterday’s sharp drop in oil prices was a panic long-liquidation or the technical picture is now firmly turning bearish." Barclay's analyst Michael Cohen captured the mood best with a note overnight titled "No light at the end of the tunnel:, in which he writes that "OPEC and several non-OPEC countries finalized plans to extend production cuts for an additional nine months (through Q1 2018)without specifically articulating an exit strategy. During the press conference, Saudi Energy Minister Khalid Al-Falih expressed confidence in the plan to extend the cuts through Q1 2018, saying that inventories would fall below the five-year average before year-end, but cuts should remain in place during Q1 2018 due to seasonal demand weakness, which we highlighted yesterday (OPEC’s Vienna Meeting: Intermission, May 24, 2017).  By our calculations, if half of the supply deficit is applied to OECD stocks, we do not see the inventory level approaching the five-year average by this timeframe."

OPEC Leaves Market Guessing on Exit Strategy After Oil Pact - OPEC may be celebrating an historic deal to extend supply cuts, but after the party, the organization will face a trio of questions it left unanswered.Will the lucrative yet delicate relationship between Saudi Arabia and Russia survive the life of the agreement? Will surging U.S. shale output prove too much temptation for OPEC countries to stick to their own production promises? And, perhaps most perplexing: What does OPEC have planned long-term?The deal to maintain the cut another nine months, hammered out this week in Vienna, could expire in March with a return to OPEC’s pump-at-will policy that prevailed between 2014 and 2016 and pushed prices below $30 a barrel. Or the organization could keep adjusting production.“What concerns me is that there is no clear messaging around the exit strategy,” Ebele Kemery, head of energy investing at JPMorgan Asset Management, told Bloomberg TV. “The way we look at the market going forward, there’s going to be oversupply in 2018. They’re talking about price stability. To get price stability we need to know what the end-game is.”Kemery’s concern over a lack of strategy appeared to be widespread. Brent crude fell 5 percent to $51.24 a barrel on the decision, wiping out most of the gains since Russia and Saudi Arabia publicly backed the nine-month extension last week. Futures in London slid 25 cents to $51.21 a barrel at 12:35 p.m. Singapore time, heading for a weekly decline. Despite an admission that November’s landmark agreement to limit output failed to eliminate the global oil glut, the commitment of two-dozen oil-producing countries did succeed in establishing a new floor for prices that’s well above the lows seen last year.

Prices tumble but OPEC/non-OPEC oil producers seek to maintain grip on fundamentals - Key oil producers led by OPEC sought to reassure a skeptical market Thursday after announcing a gentler extension of their output cut agreement than they had earlier teased, while downplaying the boon-canceling potential of their free-market rivals, especially US shale. Together controlling just more than half the world's oil output, the producer coalition composed of an expanded OPEC -- with Equatorial Guinea joining its ranks -- and 10 non-OPEC partners including Russia rolled over a 1.8 million b/d production cut agreement into March 2018. Militancy-wracked Libya and Nigeria, both of whose oil prospects appear to have improved in recent weeks, will remain exempt from the cuts, which amount to just 2% of global oil demand. Iran, which was allowed a slight increase in production as it recovers from western sanctions on its oil sector, also will maintain its quota level under the deal. Various ministers and delegates throughout the week had hinted that an extension of the cuts could include deeper output reductions or as long as a 12-month agreement. But after reviewing various proposals, the producers settled on their nine-month deal, sending oil prices tumbling. The rumored participation of Turkmenistan, Egypt and other producers also failed to materialize. "At a point in 2018, it is likely that those small reductions in output will no longer lead to a greater improvement in [producer] revenues because of other supply and demand offsets," analysts with Barclays said in a note. "Even if the curve moves to steep backwardation, producers will still hedge more output, and this will have ramifications for the supply and demand balance for the rest of 2018."

Cut extension agreed, OPEC/non-OPEC coalition now faces difficult path of compliance - With the world's largest oil producers Saudi Arabia and Russia having already announced their support for a nine-month output cut extension last week, getting the 24-nation OPEC/non-OPEC coalition to fall in line Thursday at its closely watched summit was the relatively easy part. Now comes the heavy lifting of continued strong compliance and commitment to supply management through the length of the agreement, to convince a wary market that the producer group's efforts to clear the glut of oil in storage are sincere.The deal, under which the producers will cut a combined 1.8 million b/d through March 2018, was intended to calm the market but instead had the opposite effect, generating doubts over the coalition's lack of exit strategy from the cuts amid resilient US shale oil production."Shale is roaring back and threatening OPEC's drive to rebalance the market," analysts with Citi said in a recent note.Many countries achieved their committed cuts through the first five months of the deal by bringing forward field maintenance, which can not be extended indefinitely without damaging infrastructure. Because of this, many barrel counters remain skeptical that deal participants will be able to maintain their high compliance levels. The OPEC/non-OPEC monitoring committee overseeing the deal pegged compliance among the deal's 24 members at 102% for April."Saudi Arabia and other Gulf producers will maintain high levels of compliance during the nine-month extension but compliance may be a challenge for others," said Joe McMonigle, an analyst for Hedgeye Potomac Research. "Morever, the market will continue to view non-OPEC compliance, especially Russia, with great skepticism."Libya and Nigeria, whose militancy-wracked oil sectors have shown signs of recovery in recent weeks, remain exempt from the deal, and with the extension into next year, have more time to restore their production levels.Ministers from the participating countries said they would be amenable to changing the deal to help juice the market rebalancing if the fundamentals turn against them, but have left unclear how this may happen. "The more accelerated declines we will see in stocks in the coming quarters and the floor OPEC has provided for the coming nine months are likely to result in aggressive growth in US tight oil," analysts with Barclays said in a note. "OPEC is likely to struggle to find a big enough hole to fit its incremental supply, keeping the proverbial light at the end of the tunnel out of reach for longer than just the first quarter of 2018."

Goldman: Oil Glut To Return When OPEC Deal Expires -- OPEC has agreed to extend its production cuts for another nine months in an effort to bring the oil market back into balance. Keeping in place the 1.2 million barrels per day (mb/d) of OPEC cuts, plus the 558,000 bpd of non-OPEC reductions, for nine months rather than six should be enough to “normalize” crude oil inventories, according to most analysts.Great. Mission Accomplished. By the end of the first quarter of 2018, the market will have tightened and OPEC members can go back to producing as they were before, producing as much as possible and fighting for market share.But here’s the thing. When the deal expires and OPEC members open up the spigots again, it could create another glut just as before. That is the warning from a new Goldman Sachs report, which says that the oil market could find itself once again awash in oil in the second half of 2018 after the expiration of the OPEC deal.“[W]e see risks for a renewed surplus later next year if OPEC and Russia’s  production rises to their expanding capacity and shale grows at an unbridled rate,”Goldman analysts wrote in the research note.While the extension of the OPEC cuts will succeed in bringing down inventories to normal levels over the next nine months, the problem is that oil production capacity continues to grow both within and outside of OPEC. Everyone knows the story of surging U.S. shale – drillers are coming back quickly, having achieved lower and lower breakeven costs over the past several years. Energy watchers are having to repeatedly revise up their forecasts for shale growth. The EIA says that shale production will grow by more than 800,000 bpd this year, with an annual average output of 9.3 mb/d in 2017 and a staggering 10.0 mb/d in 2018.

OilPrice Intelligence Report: OPEC Sinks Oil With Lackluster Deal: OPEC and non-OPEC members secured a nine-month extension of their deal, pushing the combined 1.8 million barrels per day in reductions through to the first quarter of 2018. The cohesion among the disparate members was notable, although the markets, hoping for a bullish surprise, were less than impressed. After hinting at deeper cuts or perhaps an extension through the middle of 2018, oil traders were left disappointed. There is evidence that hedge funds and other money managers built up a bullish position ahead of the meeting on the off chance that OPEC would surprise the market with more aggressive action. Once that was off the table, there was a selloff in crude positions. OPEC officials shrugged off the price drop, arguing that they can’t be concerned with daily price movements.One of the principle motivations for Saudi Arabia to keep the production cuts going is to boost the valuation of Saudi Aramco when it stages an IPO next year. The Saudi government needs higher oil prices in 2018 in order to maximize the sale of Aramco. Saudi officials allege that the company is worth some $2 trillion, although others dispute that figure. Nevertheless, the timing of the Aramco IPO ensures that Saudi Arabia will do “whatever it takes” to keep oil prices afloat. . OPEC is confident that the nine-month extension will drain inventories back to average levels by the end of the compliance period. However, some analysts have raised the prospect of a renewed glut once the deal expires. If that were to happen, OPEC might find itself in a position of having to extend the cuts indefinitely. Obviously, it does not want to do that. When asked about an “exit strategy,” Saudi energy minister Khalid al-Falih said that they did not have one, but that they would work on coming up with a plan over the next nine months.  The compliance rate from within OPEC has been very strong, save for Iraq. Non-OPEC cuts were less impressive over the initial six-month period. Nevertheless, the display of unity in Vienna on Thursday is a sea change from the past, and the understanding between Saudi and Russian officials in particular is important. However, compliance will be much more difficult going forward, with more members achieving higher levels of production capacity. Historically, such alliances to restrain output have proven to move oil prices in the short-run, but “they eventually fall apart,” Robert McNally, president of energy consultancy the Rapidan Group, told the Wall Street Journal.

Why OPEC Couldn't Move Oil Prices Higher - The latest OPEC meeting was uncharacteristically tranquil, with little of the eleventh hour infighting and arm-twisting that has been so prevalent in previous meetings. The cooperative spirit has allowed OPEC to roll over its production cuts for another nine months, as expected, a move that has to be described as a successful outcome. "Nine months with the same level of production that our member countries have been producing at is a very safe and almost certain option to do the trick,” Saudi energy minister Khalid al-Falih told reporters. Yet the oil markets are unimpressed. Crude prices dropped on Thursday as it became apparent that a much more aggressive move – a lengthier extension or deeper supply cuts – was off the table. For OPEC, the price reaction is surely frustrating. Keeping so many oil producers on board with a plan that requires significant sacrifice has always been a monumental task, not least because many of the countries involved seriously distrust one another. More importantly, they are extending the cuts for another nine months, longer than anyone expected up until just a few weeks ago.  But oil traders are difficult to please. After Saudi Arabia and Russia signaled earlier this month that they had agreed to extend the cuts for nine months rather than six – a surprise announcement at the time – the oil markets essentially said, “Great. What else can you give me?” The nine-month extension became the baseline and was quickly incorporated into market assumptions. If OPEC had come away with anything less than a nine-month extension, prices would have plunged. So, the markets were a bit disappointed that OPEC only came away with nine months. "It is a disappointment that OPEC hasn't done more to balance the markets,"  "A nine-month extension of the output cuts is already baked into prices. This shows there's not much more OPEC can do."

U.S. oil-rig count rises for a 19th straight week, but rise is modest -- Baker Hughes on Friday reported that the number of active U.S. rigs drilling for oil climbed by 2 to 722 rigs this week. That marked a 19th weekly rise in a row, but the increase was the smallest weekly rise of the year. The total active U.S. rig count, which includes oil and natural-gas rigs, climbed by 7 to 908, according to Baker Hughes. Oil prices appeared unfazed in the wake of the data. July West Texas Intermediate crude was up 62 cents, or 1.3%, to $40.52 a barrel on the New York Mercantile Exchange, unchanged from where it traded before the data.

US Crude Production Hits 21-Month Highs As Rig Count Rises For 19th Straight Week --For the 19th week in a row, the number of US oil rigs rose (up 2 to 722). This is the largest number of oil rigs since April 2015 as Lower 48 crude production (much to the chagrin of OPEC) surges to its highest since August 2015. Lagged WTI prices lead rising rig counts...NOITE - if the relationship holds then we would expect the rig count rised to stall here... And rising rig counts lead US crude production...  And this is why it matters...(graphs) And prices are holding their post-OPEC losses... “It was so well telegraphed a lot of people were probably thinking they’d take it the extra mile,” Jasper Lawler, senior market analyst at London Capital Group, told Bloomberg. “One of the things worth noting is that the ramp-up into the meeting and the drop down have averaged out; markets are definitely not as optimistic as they were”

BHI: Colorado, gas-directed rigs lead latest US rig count rise - The Baker Hughes Inc. US rig count’s 19th straight weekly increase came by way of Colorado and gas-directed rigs instead of the usual lift from Texas and oil-directed rigs.The overall count gained 7 units during the week ended May 26 to 908, up 504 units since a bottom in recent BHI data on this week a year ago and its highest point in more than 2 years (OGJ Online, May 19, 2017). Since May 27, 2016, the count has risen in all but 5 weeks.Gas-directed rigs rose 5 units to 185, up 104 units since Aug. 26, 2016, as part of their own rebound. Oil-directed rigs increased 2 units to 722, up 406 units since their nadir in recent BHI data on May 27, 2016. One rig considered unclassified remained active.According to US Energy Information Administration data, US crude oil production for the week ended May 19 gained 15,000 b/d to average 9.32 million b/d. The Lower 48 contributed a 20,000-b/d increase, slightly offset by a 5,000-b/d decrease from Alaska.All 7 units are drilling onshore, bringing that tally to 881. Also up 7, horizontal rigs now total 766, an increase of 452 since May 27, 2016. At 84.4% of the overall US rig count, horizontal rigs have never represented a larger portion of total units working. Directional drilling rigs edged down a unit to 65.Both offshore rigs and those drilling in inland waters were unchanged during the week at 23 and 4, respectively.Colorado led the major oil- and gas-producing states with a 5-unit jump to 34, up 18 year-over-year. The DJ-Niobrara gained 4 units to 27, up 14 year-over-year. All 27 of the rigs drilling in the DJ-Niobrara are targeting oil.Oklahoma, New Mexico, North Dakota, and Alaska each increased 1 unit to 123, 57, 45, and 7, respectively. Oklahoma is up 69 units since its recent low on June 24, 2016; New Mexico is up 44 units since Mar. 18, 2016; and North Dakota is up 23 units since June 3, 2016.The Cana Woodford gained 3 units to 56, up 32 units since June 24, 2016. The Permian edged up a unit to 362, up 228 since its recent low on May 13, 2016. The Williston increased a unit to 45, up 23 since June 3, 2016. Texas posted its first loss in 19 weeks, edging down 1 unit to 458, still up 285 since its nadir on May 27, 2016. The Eagle Ford, however, rose a unit to 86, up 57 since June 3, 2016.

 OPEC net oil revenues in 2016 were the lowest since 2004 - Members of the Organization of the Petroleum Exporting Countries (OPEC) earned about $433 billion in net oil export revenues in 2016, the lowest since 2004. In real dollar terms, the 2016 revenue represents a 15% decline from the $509 billion earned in 2015, mainly because of the fall in average annual crude oil prices and, to a lesser extent, because of decreases in OPEC net oil exports.  EIA projects that OPEC net oil export revenues will rise to about $539 billion dollars (nominal) in 2017, based on the forecast of global oil prices and OPEC production levels in EIA's May 2017 Short-Term Energy Outlook (STEO). The expected increase in OPEC's net export earnings is attributed to slightly higher forecast annual crude oil prices in 2017 as well as slightly higher OPEC output during the year. For 2018, OPEC net oil export revenues are forecast to be $595 billion (nominal), with an increase in forecast crude oil prices and higher OPEC production and exports contributing to the rise in overall earnings. Saudi Arabia has consistently earned more oil export revenues than any other member of OPEC, with its share in total OPEC net oil export revenues ranging between 29% and 34% since 1996. Iran's revenue share has fluctuated, with a significant reduction evident over the 2012–15 period mainly as a result of the imposition of nuclear-related sanctions by the United States and the European Union that targeted Iran’s oil exports. These sanctions resulted in roughly 800,000 barrels per day of Iranian production being shut-in between January 2012 and December 2015. Iran was the only OPEC member country whose net oil revenues increased in 2016, when its share of total OPEC net oil export revenues increased to 8%.

Trump Comes To Riyadh Bearing Gifts – Weapons Approved By Obama - As Saudi Arabia rolls out the red carpet for President Donald Trump this weekend, his administration will arrive bearing the same gifts as every visiting president before him: billions in high-tech American weaponry and military support, and pledges for more. The Kingdom’s relationship with the new administration in Washington appears poised to enter a new phase, with the Saudis taking the lead in the fight to contain Iranian-backed Houthi rebels in Yemen, spearheading a region-side counterterrorism effort, and appearing eager to build a deeper defense partnership with Washington that could be good for business for both countries.   Those sales will be spread out over a variety of expensive and high-maintenance projects including new ships, tanks, armored vehicles, precision guided bombs, missile defense and radar systems according to people with knowledge of the discussions, and several published reports. The biggest item in the basket looks to be the restart of a deal for four brand-new Littoral Combat Ships by by Lockheed Martin for about $6 billion. The Saudi version of the vessels will come more heavily armed than their American counterparts, and will replace the aging vessels in the Kingdom’s Eastern Fleet, based in the Arabian Gulf facing Iran. The original proposed sale — worth an estimated $11 billion when it was first announced in October 2015 — was rejected by the Saudis three months later due to their concerns over the cost and the redesigns Lockheed Martin engineers made to the original American hulls. Discussions have continued since that time, and many of those concerns appear to have been ironed out. Also included in the total is an August 2016 deal for 153 Abrams tanks worth about $1.1 billion, and the sale of 16,000 guided munitions kits — which upgrade so-called dumb bombs to smart bombs — worth over $350 million. The deal for the kits was suspended by the Obama administration in December, citing concerns over the high civilian casualty toll in the Saudi air campaign in Yemen.

US and Saudi Arabia sign arms deals worth almost $110bn | USA News | Al Jazeera: The US and Saudi Arabia signed arms deals worth almost $110bn on Saturday, the first day of President Donald Trump's visit to the traditional US ally.US Secretary of State Rex Tillerson said that the arms agreements will help Saudi Arabia deal with "malign Iranian influence"."The package of defence equipment and services supports the long-term security of Saudi Arabia and the entire Gulf region," Tillerson told reporters in Riyadh on Saturday.This is "in particular in the face of malign Iranian influence and Iranian-related threats which exist on Saudi Arabia's borders on all sides," Tillerson said.Al Jazeera's James Bays, reporting from Riyadh, said that the arms deal would be seen by both signatories as a "win-win", especially as the deal involved arms that Obama was not prepared to sell to Saudi Arabia, including missile defence systems."I think this is what both sides are trying to project here: a successful meeting and the US relationship with Saudi Arabia returning to the way it was before President Obama," said Bays. "Because certainly the White House says that it feels President Obama 'abandoned' Saudi Arabia and this region, and they want the whole world to know that now they are getting things 'back on track'."

Donald Trump puts US on Sunni Muslim side of bitter sectarian war with Shias | The Independent: It was crude stuff. President Trump called on 55 Muslim leaders assembled in Riyadh to drive out terrorism from their countries. He identified Iran as a despotic state and came near to calling for regime change, though Iran held a presidential election generally regarded as fair only two days previously. He denounced Hezbollah and lined up the US squarely on the side of the Sunni against the Shia in the sectarian proxy war that is tearing apart the Middle East.The most important aspect of Mr Trump’s two-day visit to Saudi Arabia is that it took place at all. He chose to go first to the world’s most thorough-going autocracy where his speech will be lauded by the state-controlled media. But the radicalism of what he said can be exaggerated because so far his policies towards Syria, Iraq, Turkey and other countries in the region are so far little different from what Mr Obama did in practice. Almost all of the 55 Muslim rulers and leaders in the vast hall in Riyadh will have breathed a little easier on hearing Mr Trump’s repeated call “to drive out terrorism”, since they have always described anybody who opposes their authority as “terrorists”. This will be a green-light to people like Egyptian President Abdel-Fattah el-Sissi to go on imprisoning and torturing Muslim Brotherhood members. American pressure on the ruling Sunni minority in Bahrain to stop persecuting the Shia majority was always tame, but Mr Trump’s praise for the island’s rulers may make the situation even worse. Mr Trump’s failure to refer to human rights’ abuses was criticised by some observers, but more serious than his words was his presence in Riyadh before an audience of autocrats. Saudi leaders will be pleased by Mr Trump’s condemnation of Iran as the fountainhead of terrorism. This was the most substantive part of speech and is the one most likely to increase conflict. 

“It’s The Economy, Stupid!”: The Iranian Presidential Election -- “It’s the economy, stupid!” quoth Stella Morgana in an informative piece written a few days ago prior to and about the Iranian presidential election as linked to by Juan Cole The Iranian Election: It’s the Economy, Stupid!. For those who have not seen it yet, incumbent President Hassan Rouhani has won decisively with 57% of the vote over his main rival, Ebrahim Raisi, who got 38.5%. Rouhani is viewed as a moderate in the traditon of former president Khatami, who is under house arrest, while Raisi was supported by hard line clerics and the supreme leader, Ali, Khamenei. Many view Raisi as a potential successor to Khamenei. In the Iranian system the Supreme Jurisprudent, Khameinei, has control over the judiciary and security forces and ultimately over foreign policy, while the president has most control over economic policy and other domestic policies, although social policies are controlled partly by both, with a sharp difference over those, even though Rouhani himself is a Shi’i cleric. The Supreme Jurisprudent also has a veto through his Council of Guardians on all laws passed, which are judged on whether or not they are sufficiently Islamic. Also, all candidates must be vetted by them on the same grounds, with Rouhani passing four years ago through their filter, while other more “liberal” candidates were banned. So, Iran is a partial democracy at best, but still a partial democracy, with the same kinds of rules and restrictions applying to the elections for its Majlis, the legislative body.  As Morgana notes, the economy was the leading issue, especially from Raisi’s side, although Rouhani also emphasized his relative social liberalism, and it is thought that he got support on this from young, urban, and female voters. In many ways the Iranian economy looks sort of like the US one did a few years ago, say at the time of Obama’s reelection campaign. It is not in all that good shape, with 12% unemployment, 30% for youth, stagnant wages, 7% inflation, and entrenched inequality with substantial amounts of corruption. OTOH, there has been positive growth in the last two years since the partial lifting of international economic sanctions following the 2015 nuclear deal, with inflation down from 40%, and much of the corruption is perceived to be among the clerical elites who supported Raisi, even as Raisi attempted to play the populist and push a program of monetary handouts for the very poor. His line was essentially that things may be getting better, but they are still bad. He also pushed a harder line nationalism and religious extremism, and in this regard looked more like politicians such as Trump and Le Pen, and his defeat can be seen as another rejection of authoritarian nationalism that has been going on since Trump took office.

Rouhani’s victory is good news for Iran, but bad news for Trump and his Sunni allies | The Independent: The Saudis will be appalled that a (comparatively) reasonable Iranian has won a (comparatively) free election that almost none of the 50 dictators gathering to meet Trump in Riyadh would ever dare to hold. So it’s a good win for the Iranian regime – and its enormous population of young people – and a bad win for Trump’s regime, which would far rather have had an ex-judicial killer as Iranian president so that Americans would find it easy to hate him. Maybe Hassan Rouhani’s final-week assault on his grim rival candidate and his supporters – “those whose main decisions have only been executions and imprisonment over the past 38 years” – paid off. Who among Iran’s under 25s, more than 40 per cent of the population, would have wanted to vote for Ebrahim Raisi whose hands had touched the execution certificates of up to 8,000 political prisoners in 1988? So the man who signed Iran’s nuclear agreement with the United States, who struggled (often vainly, it has to be said) to reap the economic rewards of this nuclear bomb “truce” with the West, who believed in a civil society not unlike that of former president Mohamed Khatami – who supported him in the election – won with 57 per cent of the vote, backed by 23½ million of the 41 million who cast their ballot. The corrupt and censorious old men of the Revolutionary Guard Corps and the bazaaris and the rural poor – the cannon fodder of the Iran-Iraq war as they often are in elections – have been told they no longer belong to the future. But what a contrast this election has been to the vast congress of dictators and cut-throat autocrats greeting Donald Trump in Riyadh – just as the Iranian election results were announced. Save for Lebanon and Tunisia and Pakistan, almost every Muslim leader gathered in Saudi Arabia treats democracy as a joke or a farce – hence the 96 per cent victories of their leaders – or an irrelevancy. They are there to encourage Sunni Saudi Arabia’s thirst for war against Shia Iran and its allies. Which is why the Saudis will be appalled that a (comparatively) reasonable Iranian has won a (comparatively) free election that almost none of the 50 dictators gathering to meet Trump in Riyadh would ever dare to hold.

 Syria's White Helmets suspend members caught on camera during rebel execution - Syria’s White Helmets have suspended several members of their rescue team after stomach-churning footage emerged showing rebel militants conducting a summary execution of a man in the town of Jasim, with the White Helmets helping get rid of the body. Graphic images released on Wednesday show blood pouring out of the execution victim’s head. After the man is shot dead on camera – in front of a large crowd in the town of Jasim in Daraa, southern Syria – volunteers from the White Helmets move in to dispose of the body, AMN reported. On Thursday, Syria’s White Helmets, also known as the Syrian Civil Defense, issued a statement, acknowledging that their volunteers’ actions “did not fully uphold the strict principles of neutrality and impartiality.”“Two Civil Defense volunteers were seen to act improperly and not in accordance with the voluntary Code of Conduct for Syria Civil Defense members,” the statement said, adding that the members have been suspended for three months.“Syria Civil Defense expects each and every volunteer to perform their duties to the highest professional standard, as the individual actions of one member impact the reputation of all volunteers and the organization as a whole,” the statement noted.  Hailed as peace-bearing heroes by the mainstream media, the White Helmets have long been plagued by allegations of having ties with terrorist groups. Russia's Foreign Ministry spokeswoman, Maria Zakharova, said late last month that the White Helmets support terrorists and cover up their crimes.

Yet Another Video Shows U.S.-Funded White Helmets Assisting Public Executions in Rebel-Held Syria - Syria Civil Defense, popularly known as the White Helmets, can be seen in a new video assisting in a public execution in a rebel-held town in Syria. It is at least the second such execution video featuring members of the Nobel Prize-nominated group. The White Helmets have received at least $23 million in funding from the U.S. Agency for International Development (USAID), a wing of the State Department. The British Foreign Office and other European governments have pitched in as well.Frequently cited as an invaluable source of information by major Western media outlets, the group was the subject of an Academy Award-winning 2016 Netflix documentary, The White Helmets.Endorsements from A-list Hollywood celebrities like George Clooney and Justin Timberlake, as well as Hillary Clinton and British Foreign Minister Boris Johnson, have followed. Large corporate media networks have yet to report on the dark side of the White Helmets, however, and films like the widely celebrated Netflix feature function as uncritical commercials for the group, helping to keep the public in a state of ignorance about the domination of the Western-backed Syrian armed opposition byextremist Salafi jihadist groups, and about the civil conflict in general.While CNN and other outlets rely heavily on footage taken by White Helmets members, not one major Western media outlet has reported on the latest execution video starring the group’s uniformed members.The video, which Syrian opposition activists uploaded to Facebook, shows three men from the White Helmets rushing into the center of a crowd, mere seconds after an alleged criminal was shot in the head, and removing the body on a stretcher. A member of the White Helmets can be seen celebrating along with the crowd of onlookers. WARNING: This video features violence that may disturb viewers.

U.S. airstrike set off explosion that killed at least 105 civilians in Mosul, Pentagon finds: A two-month investigation into one of the worst civilian casualty events in decades found that a U.S. military airstrike in Iraq inadvertently set off explosives that ripped through a sprawling apartment block and killed at least 105 civilians. The deadly March 17 incident in Jadidah, a densely populated neighborhood in the war-torn Iraqi city of Mosul, garnered worldwide attention after photos of smoldering rubble mixed with lifeless bodies rippled across social media. The Pentagon said military investigators, led by Air Force Brigadier Gen. Matthew Isler, twice visited the site of the airstrike, spoke to witnesses, and pored through more than 700 videos taken from coalition warplanes over a 10-day period before, during, and after the airstrike. According to the Pentagon account released Thursday, a U.S. military warplane dropped a 500-pound GPS-guided bomb on two Islamic State fighters firing on Iraqi forces from the roof of a building in Jadidah. The investigation said the GBU-38 bomb should have killed the pair and maintained the structural integrity of the two-story building, which was constructed of reinforced concrete and had 30-inch walls at points. Instead, a massive explosion ripped through the neighborhood, reducing the apartment block to flaming wreckage, twisted rebar, and a tomb for innocent victims, including women and children. The investigation said 101 bodies were found in a main building and four others were killed in a nearby building.

U.S. Air Strikes in Syria Kill More than 100 -- Air strikes since Thursday evening have killed more than 100 people including children and other family members of Islamic State fighters in al-Mayadin, a town held by the jihadists near Deir al-Zor in eastern Syria, a war monitor reported. The Britain-based Syrian Observatory for Human Rights said the raids were carried out by U.S.-led coalition warplanes. A spokesman for the U.S.-led coalition fighting Islamic State told Reuters that its forces had conducted strikes near al-Mayadin on May 25 and 26 and were assessing the results. The Observatory said more than 40 children were among those killed in the strikes, which leveled al-Mayadin's municipality building. Many of the families had fled from Raqqa, Islamic State's stronghold to the northwest, which U.S.-backed Syrian Kurdish and Arab fighters are pushing toward in an offensive against the jihadists, the Observatory said. Residents saw reconnaissance aircraft and warplanes circling the city at 7:25 p.m. (1625 GMT) before they fired missiles which struck two buildings, one of which was a four-storey block housing Syrian and Moroccan families of Islamic State fighters. More strikes took place after midnight.

U.S. and Russia boost dialogue about Syria operations to include generals - The U.S. military and Russia have stepped up their communication about operations over Syria to include dialogue between U.S. and Russian generals in the Middle East, said the top Air Force general in the region.Lt. Gen. Jeffrey L. Harrigian, the commander of Air Forces Central Command, told reporters at the Pentagon that “deconfliction” between the two countries has been boosted as the U.S.-led campaign against the Islamic State progresses in preparation for an assault on Raqqa, the de facto capital of the militant group. The talks are designed to prevent aerial accidents or clashes between aircraft.“We have had to increase the amount of deconfliction work we are doing with the Russians given the tighter airspace that we are now working ourselves through,” Harrigian said, speaking from his headquarters in Qatar. “The Russians, while we don’t give them the specifics, we note where we are going to operate so that we can portray that to them in a manner that allows us to continue our attack on the enemy and gives us the freedom of movement we need.”Marine Gen. Joseph F. Dunford, the chairman of the Joint Chiefs of Staff, announced last week in a news conference that a new deconfliction “channel” was added recently between the Russians and the Americans to ensure the safety of aviators and troops on the ground. Marine Lt. Gen. Kenneth F. McKenzie Jr., a member of Dunford’s staff, regularly communicates with Russian officers as part of it, Dunford said.  Harrigian added Wednesday that deconfliction talks also were enhanced within the past few months to include his deputy, Air Force Maj. Gen. David S. Nahom, speaking with Russian officers. That has occurred only a few times, Harrigian said, but it has helped both sides make clear what their plans are.

The Lights Are Going Out in the Middle East -    Six months ago, I was in the National Museum in Beirut, marvelling at two Phoenician sarcophagi among the treasures from ancient Middle Eastern civilizations, when the lights suddenly went out. A few days later, I was in the Bekaa Valley, whose towns hadn’t had power for half the day, as on many days. More recently, I was in oil-rich Iraq, where electricity was intermittent, at best. “One day we’ll have twelve hours. The next day no power at all,” Aras Maman, a journalist, told me, after the power went off in the restaurant where we were waiting for lunch. In Egypt, the government has appealed to the public to cut back on the use of light bulbs and appliances and to turn off air-conditioning even in sweltering heat to prevent wider outages. Parts of Libya, which has the largest oil reserves in Africa, have gone weeks without power this year. In the Gaza Strip, two million Palestinians get only two to four hours of electricity a day, after yet another cutback in April.The world’s most volatile region faces a challenge that doesn’t involve guns, militias, warlords, or bloodshed, yet is also destroying societies. The Middle East, though energy-rich, no longer has enough electricity. From Beirut to Baghdad, tens of millions of people now suffer daily outages, with a crippling impact on businesses, schools, health care, and other basic services, including running water and sewerage. Little works without electricity. “The social, economic and political consequences of this impending energy crisis should not be underestimated,”  Iraq has the world’s fifth-largest oil reserves, but, during the past two years, repeated anti-government demonstrations have erupted over blackouts that are rarely announced in advance and are of indefinite duration. It’s one issue that unites fractious Sunnis in the west, Shiites in the arid south, and Kurds in the mountainous north. In the midst of Yemen’s complex war, hundreds dared to take to the streets of Aden in February to protest prolonged outages. In Syria, supporters of President Bashar al-Assad in Latakia, the dynasty’s main stronghold, who had remained loyal for six years of civil war, drew the line over electricity. They staged a protest in January over a cutback to only one hour of power a day.

"We Will Go To War; We Will Fight You": China's Xi Threatens Duterte If Philippines Drills For Oil -- The Philippines' outspoken president Rodrigo Duterte got a glimpse of the true snarling, belligerent Chinese dragon hiding behind the cheerful, globalist Panda facade earlier this week, when in response to a claim that his country was prepared to drill for oil in a disputed part of the South China Sea, China's president Xi told him matter-of-factly that in that case he should prepare for war. In a meeting on Monday between the two presidents, Duterte asserted his nation's sovereignty over disputed South China Sea territory citing last year's ruling by the Permanent Court of Arbitration. "We intend to drill oil there, if it's yours, well, that's your view, but my view is, I can drill the oil, if there is some inside the bowels of the earth because it is ours," Duterte said in a speech, recalling his conversation with Xi. That prompted a surprisingly abrupt retort from Xi: “Well, if you force this, we’ll be forced to tell you the truth. We will go to war. We will fight you,” Duterte on Friday quoted Xi as saying. The unexpectedly direct response, coming just days after China hoped to set the world at easy with its new globalist ambitions after it officially launched the Silk Road regional infrastructure project last week, caught China watchers by surprise. It stunned Duterte as well. The Philippine president has long expressed his admiration for Xi and said he would raise the arbitration ruling with him eventually, but needed first to strengthen relations between the two countries, which the Philippines is hoping will yield billions of dollars in Chinese loans and infrastructure investments. As a reminder, the Hague award from July 2016 clarified Philippine sovereign rights in its 200-mile Exclusive Economic Zone to access offshore oil and gas fields, including the Reed Bank, 85 nautical miles off its coast. It also invalidated China's nine-dash line claim on its maps denoting sovereignty over most of the South China Sea. China has repeatedly said it would not comply with the Court's ruling, setting the stage for potential conflicts in the future between China and its neighbors.

Gas Guzzlers Rule in China - The Chinese government’s plan to replace gasoline-powered cars with a new generation of electric vehicles has hit an unexpected bump: Chinese consumers’ love affair with gas-guzzling sport-utility vehicles. In a country where 700 people are killed in road accidents every day, according to the World Health Organization, and where most drivers are inexperienced, hefty SUVs have grown wildly popular because they provide a sense of security, says Yale Zhang, managing director of research company Automotive Foresight. A shortage of charging stations also is helping to persuade many Chinese buyers to choose SUVs over electric alternatives. Official targets call for 40% of cars bought in China in 2030 to be pure electric vehicles or plug-in hybrids. The country already is the world’s largest electric-vehicle market. Roughly half the 700,000 electric cars sold world-wide last year were sold in China. China’s newfound taste for outsize cars that gulp gasoline may mark a temporary reprieve for a domestic petroleum industry that has struggled with the decline in crude-oil prices in recent years. Surging SUV demand will help propel oil consumption in China upward for at least the next decade, according to energy experts and estimates from state-owned China National Petroleum Corp., more than offsetting the impact of the rise of electric vehicles and hybrids. “We don’t think [electric cars] will be any risk to the gasoline demand in the next five to 10 years,” says Nelson Wang, a China oil analyst at Hong Kong-based investment firm CLSA. The popularity of inefficient cars helps account for China’s recent growth in oil imports. In March the country imported a record average of 9.2 million barrels of crude a day. Imports for the first quarter were up 15% from a year earlier, and that trend looks set to continue. Transportation in China required 2.5 million barrels of gasoline a day last year, and that will keep rising until it hits 3.6 million in 2024, according to Bernstein.

China's Teapot Refiners Set to Slow Crude Imports as Tanks Overflow - (Reuters) - As OPEC extends production cuts in a bid to tighten the oil market, China's independent refiners - awash with crude and facing disappointing local demand - are poised to slow purchases of oil for at least the next two months.The move by China's so-called "teapots", a key driver of the country's crude appetite, will stir concerns about demand in the world's top oil buyer, which fell from a peak of 9.2 million barrels per day (bpd) in March to 8.4 million bpd in April.Independent refiners, mainly based in Shandong, are under pressure to cut run rates as profit margins have been squeezed by Beijing's tighter scrutiny over taxes and shifting quota policies, while some have begun seasonal maintenance.Plans by state oil majors to bring on new refining capacity later this year will help offset some import losses, but lower appetite from teapots and the potential for falling output indicates that the boom among this group of upstart refiners that has transformed China's oil market may be slowing."There will be more shutdowns in June, July and possibly August. It's seasonal but also because the market is not doing well and stocks are plentiful," said a manager at a Dongying-based independent refiner, who asked not to be named.Independent refiners, which make up some 12 percent of China's crude demand, have enjoyed record profits since winning the right since late 2015 to import oil, selling diesel and gasoline throughout Asia while expanding domestic sales in unprecedented competition with state firms. However, Beijing in January abruptly banned quotas for independents to export fuel, favouring its large state-owned refiners, put in a deadline for new applications for crude oil permits and tightened scrutiny on tax practices, squeezing margins.

Moody's downgrades China for first time in 25 years: Huge debt bubble is threat to WORLD --  The strength of the world's second-largest economy is set to wane and debt levels rise higher still in the coming years, warned Moody's as it slashed China's rating down to A1 from Aa3. It is the first time in 25 years that Moody's has marked down the country and comes as China's staggering debt levels reach around 260 per cent of GDP. The downgrade is embarrassing for the Government and could raising the cost of borrowing higher for the country. China is desperately trying to manage its slowing growth, and balance the economy away from debt - without plunging into a devastating financial crisis. In a statement Moody's said China's economy could "erode somewhat over the coming years, with the economy-wide debt continuing to rise as potential growth slows".Share prices of mining stocks tumbled this morning after Moody's downgrade. The companies are affected by China's demand for commodities, which could dry up if its economy dives. But markets in Asia and in Europe were broadly cautious amid Moody's warning. Fears of China's economic slowdown triggered market panic at the start of last year, resulting in heavy sell-offs and losses. Economic growth was officially said to be 6.7 per cent last year - its lowest level in 27 years. Many critics are suspicious of the figures released by the state and fear growth levels could in reality be lower. 

Moody’s downgrades China rating to A1 from Aa3, with stable outlook: Moody's Investors Service on Wednesday downgraded China's credit rating to A1 from Aa3, changing its outlook to stable from negative, citing concerns efforts to support growth will spur debt growth across the economy. Marie Diron, senior vice president for Moody's soverign rating group, told CNBC's "Street Signs" on Wednesday that the catalyst for the downgrade was a combination of factors, including expectations that potential growth would fall to 5 percent by the end of the decade. It was Moody's first downgrade for the country since 1989, according to Reuters. "Official growth targets are also moving down, but probably more slowly. So the economy is increasingly reliant on policy stimulus," she said, adding that was likely to spur increasing debt levels for the government. "It's really the size of the leverage, the trends in leverage as well as the debt servicing capacities of the institutions that have that debt. When growth slows, then that points toward slower revenue growth, probably slower profitability and somewhat weaker debt servicing capacity," she added. Unsurprisingly, China's finance ministry didn't agree with the move. In a statement on its website, the ministry said the downgrade was based on an "inappropriate method" and that Moody's was overestimating the difficulties China's economy faced, while underestimating the government's efforts to tackle structural reforms and overcapacity. Foreign-exchange markets reacted to the downgrade, with the Australian dollar dropping from levels around $0.7480 to as low as $0.7452 in the wake of the announcement. China is among Australia's largest export markets. But China's yuan didn't react much, with the dollar fetching 6.8940 yuan at 9:38 a.m. HK/SIN, compared with Tuesday's close of 6.8890 yuan.

U.S. warship drill meant to defy China's claim over artificial island: officials | Reuters: A U.S. warship carried out a "maneuvering drill" when it sailed within 12 nautical miles of an artificial island built up by China in the South China Sea, to show Beijing it was not entitled to a territorial sea around it, U.S. officials said on Thursday. The operation near Mischief Reef on Thursday, Pacific time, among a string of islets, reefs and shoals over which China has disputes with its neighbors, was the boldest U.S. challenge yet to Chinese island-building in the strategic waterway. It drew an angry response from China, which President Donald Trump has tried to court in recent weeks to persuade it to take a tougher line on North Korea's nuclear and missile programs. [nL1N1IQ2FH] Analysts say previous U.S. "freedom-of-navigation operations" in the Spratly archipelago involved "innocent passage," in which a warship effectively recognized a territorial sea by crossing it speedily, without stopping. On Thursday, the destroyer USS Dewey conducted a "man overboard" exercise, specifically to show that its passage within 12 nautical miles was not innocent passage, U.S. officials said. "USS Dewey engaged in normal operations by conducting a maneuvering drill inside 12 nautical miles of Mischief Reef," one official said, speaking on condition of anonymity. "The ship’s actions demonstrated that Mischief Reef is not entitled to its own territorial sea regardless of whether an artificial island has been built on top of it."Commander Gary Ross, a Pentagon spokesman, said that freedom of navigation operations are not specific to one country and the Defense Department would release summaries of these operations in an annual report and not sooner.

Hong Kong and Macau regulators intensify efforts against money laundering, financial crime and terrorist funding - Hong Kong and Macau have launched simultaneous shake-ups of the systems they have in place to tackle the growing menace of money laundering, financial crime and the funding of terrorist groups. In separate yet starkly similar announcements issued late Friday, financial regulators in both cities stated their “determination” to fight serious financial crime and laundering, underlining the threat they posed to “financial security and stability”. In a signal that Beijing – whose concerns about capital flight and the movement of corrupt cash are well documented – wants a more co-ordinated approach to tackling the problem, the opening line of the Macau Monetary Authority statement said the upholding of financial security had been “elevated to the national level”. The casino hub’s financial regulator stressed that the statement had been agreed by the People’s Bank of China and the Hong Kong Monetary Authority (HKMA) following a meeting in the former Portuguese enclave on Friday which agreed to create a “Financial Security Expert Alliance”. The meeting was attended by the HKMA’s head of information technology, Tan Yong-wah, and senior officials from the People’s Bank of China. It also heard a statement from the vice-governor of the PBOC, Yi Gang. The HKMA statement made no mention of the Macau meeting or the fact that they had a high-level representative in attendence. 

North Korea Launches Another Ballistic Missile -- North Korea successfully launched a ballistic missile Sunday afternoon which flew more than 500 kilometers, only one week after it launched its previously ballistic missile last Sunday, South Korea's military announced. The missile was launched at 0759 GMT from a location near Pukchang, 60 km northeast of the capital Pyongyang, an area where North Korea attempted to test-launch another missile last month but failed, South Korea's Office of Joint Chiefs of Staff said in a statement quoted by Yonhap.  The missile flew about 310 miles, a spokesman for Seoul’s defense ministry said, adding that authorities were analyzing the details of the test launch. Japan's Chief Cabinet Secretary Yoshihide Suga said the missile landed outside Japan's exclusive economic zone and no damage to ships or airplanes was reported.  The launch was the 11th missile Pyongyang has fired this year according to the WSJ. North Korea last test-launched a missile from the Pukchang airfield late last month. In that case, the missile blew up minutes after launch in an apparent failed test. U.S. authorities said at the time that the missile didn’t leave North Korean territory.  In contrast, Sunday’s successful test launch was further evidence of a pickup in momentum for North Korea’s missile program, coming on the heels of the testing of the country's most advanced missile yet a week earlier that surprised many North Korea missile watchers.

Manila deploys commandoes, helicopters to retake city from Islamists | Reuters: The Philippines mobilized attack helicopters and special forces to drive Islamic State-linked rebels out of a besieged southern city on Thursday, with six soldiers killed in street combat amid heavy resistance. Ground troops hid behind walls and armored vehicles and exchanged volleys of gunfire with Maute group fighters, shooting into elevated positions occupied by militants who have held Marawi City on Mindanao island for two days. Helicopters circled the city, peppering Maute positions with machine gun fire to try to force them from a bridge vital to retaking Marawi, a mainly Muslim city of 200,000 where fighters had torched and seized a school, a jail and a cathedral, and took more than a dozen hostages. Commander Gary Ross, a Pentagon spokesman, said that freedom of navigation operations are not specific to one country and the Defense Department would release summaries of these operations in an annual report and not sooner.

Philippine President Rodrigo Duterte declares martial law - Rodrigo Duterte declared martial law on the southern island of Mindanao after clashes between government troops and Islamist militants on Tuesday left three people dead. Two soldiers and a police officer were reportedly killed. A representative of Duterte's made the announcement in Moscow, where the president is visiting, saying Mindanao — which makes up almost one-third of the country — would be under martial law for 60 days. He said instating the law would "suppress lawless violence and rebellion and for public safety." Duterte cut his trip to Russia short to return to Manila, according to Philippine Foreign Secretary Alan Peter Cayetano said. Martial law is the temporary rule by military authorities during a time of emergency when the civil authorities are deemed unable to function. Duterte had been warning for months that he would enforce military rule.  Most recently, in March, he said he may impose martial law to aid his brutal crackdown on the country's drug trade. He also mentioned implementing it in response to criticism of his drug war in August. He again mentioned it in December, in remarks lamenting the constitutional limits on the president's power to deal with security threats.  And he returned to the subject on January, saying, "No one can stop me," in reference to the Congress and Supreme Court.  "If I declare martial law, I will finish all the problems, not just drugs," Duterte told reporters in March. Read more on that here.

Former Fed chief Bernanke endorses BOJ's inflation goal | The Japan Times: Former head of the U.S. Federal Reserve, Ben S. Bernanke, endorsed the Bank of Japan’s extraordinary easing measures to break free of persistent deflation and underlined the importance of coordinating monetary policy with fiscal stimulus. “Despite improvement in the Japanese economy, I think there’s still a strong case for the Bank of Japan to continue to pursue its target (of 2 percent inflation),” the former Fed chairman said in a speech Wednesday at the BOJ’s Tokyo headquarters. Since April 2013, Japan’s central bank has maintained a policy involving an aggressive asset purchase program and later negative interest rates, hoping to reach its target sometime around fiscal 2018. But it remains far from achieving the goal, with consumer prices rising a tepid 0.2 percent in March from a year earlier. The target date for achieving 2 percent inflation has been pushed back five times. “What tools remain if current policies are not enough? The scope for further easing by Japanese monetary authorities on their own seems limited,” Bernanke said. “If more stimulus is needed, the most promising direction would be through fiscal and monetary cooperation, in which the BOJ agrees to temporarily raise its inflation target as needed to offset the effects of new fiscal spending or tax cuts” on the ratio of national debt to gross domestic product. Japan’s debt-to-GDP ratio is by far the highest in the world. The central bank’s massive purchases of government bonds have drawn criticism for effectively financing government debt.Bernanke also expressed support for the BOJ’s promise made last September to continue its accommodative policy until inflation overshoots its 2 percent target in a stable manner. 

India's population already overtaken China's: Chinese demographer : World, News - India Today: China's population may be smaller than the official 1.37 billion figure and closer to around 1.29 billion people - less than India's population - according to an independent Chinese demographer. "China's real population may have been about 1.29 billion last year, 90 million fewer people than the official figure released by the National Bureau of Statistics," the South China Morning Post quoted Yi Fuxian, a scholar and demographer at the University of Wisconsin-Madison, as saying at a seminar in Peking University on Monday. Yi, who has been a critic of the Chinese government's family planning measures and warned of an upcoming ageing crisis for China, said that the government had overstated China's population since 1990. He suggested the ageing crisis may be more severe than expected. According to his numbers, India, with more than 1.3 billion people, is now the world's most populous country, overtaking China five years ahead of forecasts. Yi said "there were 377.6 million new births from 1991 to 2016, less than the official figure of 464.8 million," the SCMP reported, noting that China's official figure was 1.37 billion. Despite the population burdens faced by both countries, this landmark is being seen by most Chinese scholars as a warning rather than any cause for relief, with fears of a rapidly declining workforce and concerns of supporting the world's largest above 60 population.

India’s unfounded fears: For China, One Belt One Road is about economics – not world domination -- On Sunday, May 14, China hosted a well-attended and hugely touted conference to promote its One Belt, One Road initiative – which aims to create the world’s largest platform for economic, social and cultural cooperation through a network of road and sea links and infrastructure projects connecting China with South and Central Asia, West Asia and Europe. Also known sometimes as the New Silk Road and Maritime Silk Route initiatives, the project has been hailed or condemned by commentators all over the world as a “game changer” and China’s big play to seek world domination. Both the fears and the optimism are unfounded. One Belt One Road is a project meant to very simply get out Chinese reserves invested in western banks into investments where it will fetch a higher rate of return, and to take up the slack from the huge overcapacity problem that plagues the Chinese economy. Speaking at the conference, President Xi Jinping announced that Beijing would advance 380 billion Yuan or $55 billion to support One Belt One Road. This is a far cry from the huge figures, sometimes as high as $750 billion or $1 trillion, bandied about. While economists are generally skeptical about China’s goals and intentions, strategists – mostly the garden-variety Indian military types – have endowed this project with sinister overtones. I was on a television show a couple of days ago where both the prominent anchor and a prominent commentator of the unempirical stuff that passes off as strategic thought raised the issue of the so-called String of Pearls – a theory that China is cultivating commercial or military ties at strategic ports in the Indian Ocean region. To them, it seemed that every port or airport where a Chinese company is the contractor had a military purpose. The String of Pearls is a bogus idea. It was cooked up by consultants working for a Central Intelligence Agency and United States Department of Defence-tied company called Booz Allen Hamilton and was given much traction by some well-known Indian “strategic thinkers”.

Can the OBOR Project Be Made to Work for Countries Other Than China? - Around the world, and especially in India, there is a lot of disbelief and suspicion about China’s One Belt One Road (OBOR) scheme. Many of its projects have actually been around for years, but its economics are questionable, as are its aims. However, it is clearly attractive to countries looking for development. So while critiquing it is legitimate, there is also need to ask why there is no comparable vision emanating from other countries. In a speech at the recent Belt and Road Forum in Beijing, China’s President Xi Jinping put across the initiative as one aimed at promoting global development and trade liberalisation and as a factor in boosting peace and security. He added another $124 billion to the already massive commitments to the initiatives’s schemes of connecting China to other parts of Asia, Europe and Africa. Countries like the US, Japan, Germany, the UK and others have provided (and continue to provide) tens of billions of dollars in development assistance and grants through national agencies or through institutions like the World Bank and the Asian Development Bank for decades. Not many people know that India has been one of the biggest recipients of US economic assistance in the period 1946-2012. And India and China have been, and continue to be, major recipients of funds from these multilateral banks. But in recent times, the US has preferred to fritter away its great economic powers in military ventures in Iraq, Afghanistan and in propping up Pakistan. Japan remains important in the developmental narrative, with its generous Overseas Development Assistance and other schemes run by agencies like the Japan International Cooperation Agency and the Japan Bank for International Cooperation. Following OBOR, in 2015, Japan said it would provide $110 billion over five years for financing “high quality and innovative infrastructure.” Half this sum would be spent through the ADB and the other half through other Japanese official aid agencies.

S&P downgrades the entire dumb bubble -- Lordy: S&P Global Ratings today said  that it has lowered its long-term issuer credit ratings on 23 financial  institutions operating in Australia. At the same time, we have revised our outlooks on most of these financial institutions to stable. Our outlooks on  seven financial institutions remain negative (see ratings list below). The rating actions reflect our view that continued buildup of economic  imbalances in the country over the past few years due to a rapid rise in  private sector debt and house prices–particularly in two of the most populous  cities of Sydney and Melbourne–has exposed Australian financial institutions  to greater economic risks (see our Banking Industry Country Risk Assessment  (BICRA) snapshot, below). To reflect the increased risk, we have lowered our  assessment of the stand-alone credit profiles (SACPs) of almost all financial  institutions operating in Australia. Strong growth in private sector debt (which we estimate will increase to about  136% of GDP in June 2017 from 117% in 2013, or an annual average increase of  4.6 percentage points) coupled with an increase in property prices nationally  (our estimated average inflation-adjusted increase for the four years to June  2017 is 6.4% nationally) have driven the buildup in imbalances in the economy,  in our view. We note that the strong growth in property prices continued  within Melbourne and Sydney contrary to our base-case expectation that we  articulated in October 2016, when we revised the outlooks on our ratings on  most Australian banks to negative. Consequently, we believe the risk of a sharp correction in property prices has  increased. We consider that if this downside scenario were to occur, all  financial institutions operating in Australia are likely to incur  significantly greater credit losses than at present. In addition, with  residential home loans securing about two-thirds of banks’ lending assets, the  impact of such a scenario on financial institutions would be amplified by the  Australian economy’s external weaknesses, in particular its persistent current  account deficits and high level of external debt.

Bloodshed, fires and chaos as thousands march in Brazil to demand president’s ouster - Tens of thousands of Brazilians descended on Brasilia, the capital, on Wednesday, setting fires, smashing windows and storming government buildings to demand the ouster of yet another Brazilian president engulfed in a corruption scandal. President Michel Temer ordered federal troops to restore order, and black smoke could be seen billowing around the government grounds as protesters ran from police, who were on foot and on horseback.In television images, an officer could be seen firing an unknown object at a protester sitting on the ground just feet away with his hands in the air. Video circulated on Twitter showed chaotic scenes, with mounted officers advancing on the crowd, which retreats while tear gas canisters fly about.Officials put the number of protesters at 35,000, and said about 500 buses full of protesters arrived on Wednesday in Brasilia from other states.A number of ministries were set on fire, leading to evacuations of the buildings. Protesters were also seen smashing windows and lighting tires on fire near Congress, as well as other objects on the government grounds, including bus stops, signs and portable toilets. “This mess, this mayhem, is unacceptable,” Defense Minister Raul Jungmann said. “President Temer will not allow it.”   The protest, organized by leftist parties and union groups, started off peacefully in the early afternoon in front of the capital’s soccer stadium. As protesters approached Congress, small confrontations turned into violent clashes. When some protesters tried to jump a cordon, police began to use tear gas, stun grenades and pepper spray to contain the crowd. It’s unclear how many were injured, but ambulances arrived on the scene and reports of one person being shot and video of another who lost a hand have circulated.

Lawmaker says Chavez’s childhood home set aflame: (AP) -- An opposition lawmaker says protesters have set Hugo Chavez's childhood home and several government buildings on fire in western Venezuela. Pedro Luis Castillo says the home of Venezuela's late president was set ablaze in the state of Barinas Monday afternoon. Several other government buildings including the regional office of the National Electoral Council were also seen in flames. The fires come after at least one person was killed during protests in Barinas on Monday. Thousands of Venezuelans have taken to the streets over the last two months to protest the government of President Nicolas Maduro and demand new elections. At least five statues of Chavez -- the founder of Venezuela's socialist revolution -- have been destroyed in the unrest.

Exclusive: Venezuela holds 5,000 Russian surface-to-air MANPADS missiles | Reuters: Venezuela possesses 5,000 Russian-made MANPADS surface-to-air weapons, according to a military document reviewed by Reuters, the largest known stockpile in Latin America and a source of concern for U.S. officials amid the country's mounting turmoil. Venezuela's socialist government has long used the threat of an "imperialist" invasion by the United States to justify an arms buildup. Much of that arsenal was obtained from Russia by Venezuela's late President Hugo Chavez, whose tenure lasted from 1999 until his death in 2013. The missiles, which are shoulder-mounted and can be operated by one person, pose a serious threat to commercial and military aircraft. Weapons experts said there have long been fears that the weapons could be stolen, sold or somehow channeled to the wrong hands, concerns exacerbated by the current civil unrest in Venezuela and the economic crisis roiling the oil-producing nation. According to a Venezuelan military presentation seen by Reuters, the South American country has 5,000 SA-24 Man-Portable Air-Defense System (MANPADS) missiles, also known as the Igla-S. The document seen by Reuters provides the most complete count to date of the size of the arms stockpile. Public weapons registries confirm the bulk of the numbers seen on the Venezuelan military presentation.

All Power to the Banks! The Winners-Take-All Regime of Emmanuel Macron - A ghost of the past was the real winner of the French presidential election.  Emmanuel Macron won only because a majority felt they had to vote against the ghost of “fascism” allegedly embodied by his opponent, Marine Le Pen.  Whether out of panic or out of the need to feel respectable, the French voted two to one in favor of a man whose program most of them either ignored or disliked.  Now they are stuck with him for five years. If people had voted on the issues, the majority would never have elected a man representing the trans-Atlantic elite totally committed to “globalization”, using whatever is left of the power of national governments to weaken them still further, turning over decision-making to “the markets” – that is, to international capital, managed by the major banks and financial institutions, notably those located in the United States, such as Goldman-Sachs. The significance of this election is so widely misrepresented that clarification requires a fairly thorough explanation, not only of the Macron project, but also of what the (impossible) election of Marine Le Pen would have meant.  Despite the multiparty nature of French elections, for the past generation France has been essentially ruled by a two-party system, with government power alternating between the Socialist Party, roughly the equivalent of the U.S. Democratic Party, and a party inherited from the Gaullist tradition which has gone through various name changes before recently settling on calling itself Les Républicains (LR), in obvious imitation of the United States. For decades, there has been nothing “socialist” about the Socialist Party and nothing Gaullist about The Republicans.  In reality, both have adopted neoliberal economic policies, or more precisely, they have followed European Union directives requiring member states to adopt neoliberal economic policies. This has had inevitable political repercussions.  The simplest reaction has been widespread reaction against both parties for continuing to pursue the same unpopular policies. The most thoughtful reaction has been to start realizing that it is the European Union itself that imposes this unpopular economic conformism. To quell growing criticism of the European Union, the well-oiled Macron machine, labeled “En Marche!” has exploited the popular reaction against both governing parties.  It has broken and absorbed large parts of both, in an obvious move to turn En Marche! into a single catch-all party loyal to Macron.

New French Science Minister Appointed - France's new prime minister, Lionel Jospin, announced today that his longtime science and education adviser, geochemist Claude Allegre, will become minister of science and education. French scientists hope that the upset victory last Sunday of France's Socialist Party will lead to better support for research.Many French researchers had come to view the outgoing conservative government as hostile to basic science. During the tenure of the outgoing science minister, François d'Aubert, research was demoted to a subministry, for example. Researchers hope that Allegre will restore it to full ministerial status and shore up France's flagging research effort--especially by stepping up recruitment of young researchers to replace senior scientists facing retirement. "This is a real crisis," said one leading French scientist who asked not to be identified. "We are in danger of losing a whole generation of researchers." Allegre, a scientist at the Institute of the Physics of the Globe in Paris, himself has also recently stressed the importance of beefing up research at universities. But others caution that the new government may not have the means to give more than a limited boost to research. "There will be the same economic problems as before," says AIDS researcher Luc Montagnier of the Pasteur Institute in Paris. At the same time, adds Montagnier, who a few months ago accused the conservative government of "holding researchers in contempt": "We are hoping for somewhat less contempt from the new government."

Greece falls short in efforts to secure deal with creditors - Greece and its European creditors failed to clinch a deal Monday that would have seen the cash-strapped country get its next batch of bailout loans and secure an agreement on the sort of debt relief measures it can expect to get when its current bailout program ends next year. However, Jeroen Dijsselbloem, the eurozone’s top official, said a broad settlement involving both the next payout and the outlines of a debt relief deal is close, and could be reached in three weeks when finance ministers from the 19 countries from the single currency bloc meet next in Luxembourg. While hailing the recent progress the Greek authorities have made to implement the reforms and cuts demanded from creditors, Dijsselbloem said certain issues still needed to be addressed. But time is running out for Greece as without the rescue loans it would struggle to meet a big repayment hump in July of some 7 billion euros ($7.8 billion). “We have made huge progress on the policy package on which so much work has been done,” Dijsselbloem said. “A lot of work has already been done in Greece by the Greek government and they are committed to continue that work as soon as possible so that we can work towards that next disbursement before the summer.” One of the major stumbling blocks has centered on a divergence of opinion between the eurozone and the IMF, which is not involved financially in Greece’s current three-year bailout program agreed in the summer of 2015 and which could be worth up to 86 billion euros in total. Getting the IMF involved is important as Germany and The Netherlands have indicated that they will refuse to lend more money to Greece without the Fund’s participation. The IMF has argued that the eurozone forecasts underpinning the Greek bailout are too rosy and that the country as a result should get substantial debt relief so it can start growing on a sustainable basis following a depression that’s seen the economy shrink by a quarter and unemployment and poverty levels ratchet up sharply. While the eurozone has ruled out any debt write off, it has indicated that extending Greece’s repayment periods or reducing the interest rates on its loans are possible at the conclusion of the bailout next year. 

Greek Debt Relief Deal Fails In Last Minute, As Germany, IMF Clash --Stop us if you've heard this story before: insolvent Greece, having last week voted itself into even more austerity in hopes of unlocking some of the money promised it by Brussels so it can then repay use it to repay debt maturities owed to the ECB (whether it will actually follow through with such unpopular measures remains unclear), is dragged to the finish line of yet another Euro finance minister negotiating session with promises that this time a debt deal is virtually guaranteed, and then... it all falls apart.That's what again happened today, when Euro-area finance ministers gathered in Brussels with hopes, at least for the Greek delegation, to come home with a signed agreement, only to fail to break the impasse on debt relief for Greece, delaying the conclusion of the country’s bailout review and the disbursement of fresh loans needed to repay obligations in July.“The Eurogroup held an in-depth discussion on the sustainability of Greece’s public debt but did not reach an overall agreement,” said Jeroen Dijsselbloem, the Dutch finance minister who presides over meetings with his euro-area counterparts, and who again failed to reach a solution after another hardline stance by his German colleague, Wolfgang Schauble, prevented any potential concessions. As a reminder, ever since the 3rd Greek bailout in the summer of 2015, rhe IMF and Germany have been at odds over Greece’s economic outlook and the amount of debt relief required to assure economic stability: it was the same debate, that prevented a deal from being inked on Monday.

Coalition feeling the heat after failing to secure funds, debt relief - The government was reeling on Tuesday from its failure, again, to clinch a deal at Monday’s Eurogroup to unlock much-needed rescue loans and to secure an agreement on debt relief measures after the end of the current bailout.Eurozone chief Jeroen Dijsselbloem said Greece had made progress and that a broad settlement to unfreeze money including progress on debt relief was “close,” but deferred it to the next meeting of the 19 eurozone finance ministers on June 15.But it was another blow for the government, which had hoped to at least secure the release of bailout funds after having met the demands of international creditors to legislate fresh cuts and austerity in Parliament last week. The parties of the opposition also spoke of a “shipwreck” at the Eurogroup.Moreover, not reaching a deal on Monday turned up the heat on the government as it had convinced lawmakers of the coalition (SYRIZA and Independent Greeks) to vote the measures through Parliament with the prospect of receiving specifics about the debt relief measures.For now, and in the crucial three-week period leading up to the next Eurogroup, Athens’s strategy will be to get the International Monetary Fund to join the Greek program – as countries including Germany and the Netherlands have said they will refuse to lend more money to Greece without the Washington-based organization’s participation.Moreover, it will strive to persuade creditors to specify what sort of debt relief measures Athens can expect.The differences on the way forward between the IMF and the eurozone were exemplified by the German-inspired proposal at the Eurogroup stipulating the IMF should join the bailout now, but without having to fund Greece until 2018. The proposal, which was rejected, also suggested that the discussion of debt relief measures should be deferred until after Germany goes to the polls in September

Debt Relief or a Fourth Financial Assistance Program for Greece? -- naked capitalism - Yves here. The difference between different flavors of austerity in Greece may seem like what the Japanese would call a height competition among peanuts. And it may seem even more peculiar to find the IMF trying to act as a moderating force on Germany.  The IMF has been pushing for some time for bona fide debt reduction for Greece, not more extend and pretend. As we’ve discussed at length in earlier posts, the staff at the IMF has been in an internal revolt over the Fund continuing in the Greece bailouts, to the extent of repeatedly leaking documents, like a program review that said in bureaucrat-speak that Greece couldn’t pay off its massive borrowings. The IMF’s rules require that loan be made to borrowers that look viable at the time of the loan, as they won’t require yet more lending to service outstanding debt.  While Greece not meeting that standard seems like a no-brainer, for the IMF to be revealed to be saying as much put the various European governments that have been telling their citizens otherwise in a hot spot.  With elections coming up this fall, Germany’s government is particularly loath to admit now that the loans to Greece need to be written down, even though this is a matter of loss recognition, not of the loans ever having a chance of being money good. The guest post below has some mind-boggling stats on how far the Greeks gone in squeezing their budgets to satisfy Troika paymasters.The immediate pressure come from yet another bailout deadline, this one in early July. And a Financial Times story yesterday makes clear how important the optics in Germany are:Eurozone finance ministers and the International Monetary Fund are exploring a compromise plan for Greece’s bailout that would provide much-needed funds this summer while delaying sensitive talks on debt relief. Diplomats said the proposal, put forward by the IMF, would involve the fund taking a formal decision to join Greece’s bailout with the proviso it would not provide any money until the euro area gives further details on how it is prepared to ease Athens’ debts.Supporters of the plan argue that it would deliver formal IMF backing for the Greek programme, which Germany has made a prerequisite for Athens to receive any further tranches of aid from its €86bn bailout. At the same time, the approach would buy time for politically sensitive talks on a debt relief package, which the IMF says is essential for Greece to recover… Note that Greece met the conditions of its last bailout round, at even more domestic pain. The IMF will not join the July financing under the scheme sketched out above but has committed to participate if Europe, meaning Germany and other hard-core austerians like The Netherlands agree to, as opposed to make handwaves under duress about, debt cuts.

Greek Authorities To Launch Mass Confiscation Of Safe Deposit Boxes, Securities, Homes In Tax-Evasion Crackdown -- Last week, the Greek parliament once again approved more austerity to unlock withheld Greek bailout funds in Brussels: a symbolic move, which has little impact without any actual follow through, like for example, actually imposing austerity. And while Greeks have been very good in the former (i.e. promises), they have been severely lacking in the latter (i.e. delivery).That may be changing. According to Kathimerini, Greek Finance Ministry inspectors are about to start seeking out the owners of all local undeclared properties, while the law will be amended to allow for financial products and the content of safe deposit boxes to be confiscated electronically. The plan for the identification of taxpayers who have “forgotten” to declare their properties to the tax authorities is expected to be ready by year-end, according to the timetable of the Independent Authority for Public Revenue. What follows then will be a wholesale confiscation by the government of any asset whose source, origins and funding can not be explained.

Austerity Kills! Bank of Greece reports “Greek’s health deteriorating, life expectancy shrinks -  The economic crisis and the strict austerity bound to the loan agreement kill. They kill Greeks. The Bank of Greece may not write it in such a melodramatic way on its Monetary Policy Report 2015-2016. However, the conclusions in the chapter about “Reforms in health, economic crisis and impact on the health of population” are shocking and confirm what we have been hearing and reading around from relatives and friends in the last years: that the physical and mental health of Greeks has been  deteriorating – partly due to economic insecurity, high unemployment, job insecurity, income decrease and constant exposure to stress. Partly also due to economic problems that have patients cut their treatment, partly due to the incredible cuts and shortages in the public health system. The Report notes that “while it takes longer to record the exact effect, trends show a deterioration of the health of Greeks in the years of loan agreements and austerity cuts.”The BoG states:

  • – Suicides increased. “The risk of suicidal behavior increases when there are so-called primary risk factors (psychiatric-medical conditions), while the secondary factors (economic situation) and tertiary factors (age, gender) affects the risk of suicide, but only if primary risk factors pre-exist.
  • – Infant mortality increased by nearly 50%, mainly due to increase of deaths of infants younger than one year, and the decline of births by 22,1%. Infant mortality increase: 2.65% in 2008 and 3.75% in 2014
  • – Increase of parts of population with mental illness, especially with depression. Increase:  3.,3% in 2008 to 6.8% in 2009, to 8.2% in 2011 and to 12.3% in 2013. In 2014, a 4.7% of the population above 15 years old declared it suffered form depression – that was 2.6% in 2009.
  • -Increase of chronic diseases increased by approximately 24%.

Catalonia Threatens Spain with “Financial Bloodbath” -  Don Quijones - On Monday El Pais published leaked excerpts from what it claims to be the Catalonian regional government’s road map to independence. The secret document includes a plan for the region to unilaterally break away from Spain should its citizens be prevented from holding a referendum on independence in the fall. It provoked a fierce backlash from Madrid. “This proposal is an unacceptable attempt to blackmail the state,” Spain’s Prime Minister Mariano Rajoy said in a hastily convened press conference. Spain’s defense minister María Dolores de Cospedal likened the plot to a coup d’état. In the meantime, Madrid continues to refuse to even entertain the idea of allowing a referendum on Catalan independence, despite the fact that in just about every survey of the last few years 80% of Catalans, including many unionists, have requested one.It would mean the loss of 25-30% of Spain’s gross domestic product (GDP), says Spain’s Minister of the Economy, Luis de Guindos. And that’s something the government “will never let happen.”But Catalonia knows it has a card up its sleeves: its tick-tocking debt bomb. Catalonia can no longer issue its own debt and depends on the central government’s national liquidity fund (FLA, for its Spanish acronym) for about 60% of its funds. As ratings agency Fitch warned in April last year when it sent Catalonian debt even deeper into junk territory, the region has grave liquidity problems that will require “proactive management” and “close collaboration with the central state ” — something that’s clearly not on the cards any time soon.At the same time, Spain’s public debt continues to grow, recently bursting through 100% of GDP. Even with historically low interest rates (gracie, Signor Draghi), the price of servicing government debt can spiral out of control. Between 2011 and 2015 Spain’s central government spent €121 billion – the equivalent of 12% of annual GDP – on interest payments. As Catalonia’s finance minister, Oriol Junqueras, recently noted, Rajoy’s government has already burnt through the €65 billion social security fund surplus it inherited in 2011 and is now using a toxic blend of tax funds and public debt to finance the country’s widening pension deficit, which is forecast to reach between €10 billion and €15 billion a year.

Moscovici: Blueprint on future of Eurozone will be an “offer you cannot refuse” - Pierre Moscovici, European Commissioner for Economic and Financial Affairs, Taxation and Customs, told the media that he will announce plans next week for “completing the Economic and Monetary Union by 2025.” Discussing the plans, which aim to make adoption of the Euro more attractive to the EU members currently outside the single currency, he said, “We will try to make a framework that is attractive enough, that is like, as they say in the movies, an offer you cannot refuse.” However, he highlighted that the Commission could not force EU member states to adopt the single currency by a particular deadline.Elsewhere, in a letter to a member of the European Parliament, European Central Bank President Mario Draghi warned that post-Brexit the EU could see a “reduction in the level of supervision and oversight of UK central counterparties by the EU authorities, including the ECB as central bank of issue of the euro.” Meanwhile, German Finance Minister, Wolfgang Schäuble has said that a “major part” of euro-denominated clearing should be inside the EU post-Brexit.Separately, in an interview, Bundesbank board member Andreas Dombret has said, “It doesn’t look like a soft Brexit to me at all. It looks like either a hard Brexit or a very hard Brexit.” He stressed, “Now is the time for the banks and the market participants to prepare,” adding, “Brexit is manageable for banks. I truly believe so, but I think we need a very thorough preparation and we have to do this in a very efficient manner.”

Euro zone business kept up fast pace in May: PMI: Businesses across the euro zone maintained April's blistering growth rate this month as firms struggled to meet growing demand, suggesting the bloc's economic momentum is being sustained, a survey showed. IHS Markit's Flash Composite Purchasing Managers' Index for May, seen as a good guide to growth, matched the previous month's 56.8, its highest since April 2011. A reading above 50 indicates growth.That confounded the median expectation in a Reuters poll for a dip to 56.6. "It's a very good result and it's broad based. We've got a good pace of growth here. The fact we have maintained this high level in May is great news for second quarter GDP," said Chris Williamson, chief business economist at IHS Markit. Williamson said the PMI pointed to second quarter GDP growth of 0.7 percent, much faster than the 0.4 percent predicted in a Reuters poll last week. Official flash data said the bloc's economy grew 0.5 percent in the first quarter. Buoyant demand meant firms built up backlogs of work at the second fastest rate in over six years. The sub-index rose to 53.3 from 53.0. Factories across the currency union had a much better May then predicted. A Reuters poll said the manufacturing PMI would fall to 56.5 but it instead climbed to 57.0 from 56.7, its highest since April 2011. An index measuring output, which feeds into the composite PMI, rose to 58.4 from 57.9, also the highest since April 2011. 

Financial Times Editorial: Time To 'Ditch' Corporate Sovereignty In Trade Deals - The European Union's top court has just handed down an important ruling about an otherwise minor trade deal between the EU and Singapore. The two sides initialled the text of the agreement in September 2013, and since then it has been waiting for the Court of Justice of the European Union (CJEU) to hand down its judgment. The issue is who gets to sign off on the deal: is it just the European Union, or do all 28 Member States of the EU need to agree too? There's clearly a big difference there, because in the latter case, there are 28 opportunities for the deal to be blocked, whereas in the former situation, the EU can simply wave it through on its own. The CJEU ruling (pdf) is fairly straightforward: the EU can sign and conclude trade deals covering most areas, but not for a few that must involve the EU Member States. Of most significance is the following:The regime governing dispute settlement between investors and States also falls within a competence shared between the EU and the Member States. Such a regime, which removes disputes from the jurisdiction of the courts of the Member States, cannot be established without the Member States’ consent. That is, the thorny area of corporate sovereignty, also known as investor-state dispute settlement (ISDS), is one of the few that requires the approval of all Member States. There's an interesting corollary to that ruling: if the EU wants to agree trade deals as quickly as possible, without the risk of Member States vetoing them -- as Wallonia did with CETA -- it should not include a corporate sovereignty chapter. If it seems hopelessly naïve to think that might ever happen, here's an editorial in a ruthlessly hard-headed newspaper, the Financial Times (FT), recommending that it should (paywall): [The CJEU's ruling] would be an excellent opportunity for the EU to go further, and reverse one of its bigger recent errors in trade policy. It should ditch the whole idea of having rules on investment, or at least rules allowing companies to sue a government directly, in FTAs. Such "investor-state" provisions have attracted intense opposition, not just from the Walloons but also from anti-corporate campaigners. Removing these rules would ease the way for future deals.

We are ready for Brexit talks, says EU’s chief negotiator -- The European Union has agreed its Brexit negotiating stance, clearing the way for talks to begin with the British government in mid-June. Michel Barnier, the EU’s Brexit negotiator, said he hoped to begin the first round of talks in the week of 19 June, while playing down suggestions negotiations could collapse. “From the day the UK decided to leave, the EU has gone through an intense preparatory process,” Barnier said. “We are ready and well-prepared.”Meeting in Brussels on Monday, the EU’s 27 Europe ministers agreed unanimously on the bloc’s “negotiating directives”, a more detailed version last month of the strategy laid down by heads of state and government.The key directives are laid out in an 18-page document intended to cover the first phase of the Brexit talks. Many areas, services for example, will be covered later.  The document agreed by EU ministers confirms:

  • Britain will leave the EU on 30 March 2019 00.00 Brussels time, unless the EU27 agrees unanimously to extend talks.
  • The status of EU citizens (3.5 million EU citizens in the UK and 1.2 million Britons on the continent) is the EU’s top priority. The Brexit agreement must ensure “effective, enforceable, non-discriminatory and comprehensive guarantees” for those people and their families.
  • There is no mention of the €100bn Brexit bill (or any other number). Instead, the EU states that Britain will have to agree on a “single financial settlement” covering the EU budget and British contributions to the European Investment Bank and other common funds.
  • The EU’s hope of avoiding a hard border on the island of Ireland, while “respecting the EU’s legal order”, meaning customs checks will have to be in place, if the UK leaves the customs union.
  • The EU wants to ensure that any future British government can be held to account if it fails to uphold the Brexit agreement: it proposes “an institutional structure to ensure an effective enforcement of the commitments” and refers to the importance of the European court of justice.

U.K. Threatens to Quit Brexit Talks If It Faces Massive Bill -- The U.K. will quit talks on leaving the European Union unless the bloc drops its demands for a divorce payment as high as 100 billion euros ($112 billion), Brexit Secretary David Davis said. Britain’s negotiations would otherwise be plunged into “chaos,” and even a 1 billion-pound settlement would be “a lot of money,” Davis said in an interview published in the Sunday Times. The size of Britain’s exit bill, and which types of negotiations can begin before it has been agreed, has been a source of debate for weeks. European Commission President Jean-Claude Juncker has said the U.K. will have to pay about 50 billion pounds, while Luxembourg’s Prime Minister Xavier Bettel has signaled a figure between 40 billion euros and 60 billion euros. The Financial Times estimated the cost could balloon to 100 billion euros, while a study by the Institute of Chartered Accountants in England and Wales put the cost at as low as 5 billion pounds ($6.5 billion). Prime Minister Theresa May’s government has said it will meet its commitments to the EU, but has questioned how Brussels officials reached their preliminary estimates.“We don’t need to just look like we can walk away, we need to be able to walk away,” Davis said. “Under the circumstances, if that was necessary, we would be in a position to do it.” Davis also said the negotiations, which are expected to begin on June 19, will be “fairly turbulent” and that he would reject any blueprint for discussions that requires the issues of the divorce bill, EU citizens’ rights and Northern Ireland’s border to be solved before talks can begin on future trade.“The first crisis or argument is going to be over sequencing,” he said. May also weighed in on the Brexit bill, saying in an interview with the Sunday Telegraph that “money paid in the past” by the U.K. into joint EU projects and the European Investment Bank ought to be taken account in the final sum.“There is much debate about what the U.K.’s obligations might be or indeed what our rights might be,” she said. “We make it clear that we would look at those both rights and obligations.”

UK Threatens To Quit Brexit Talks Over Excessive 'Divorce Payment' Demands -- With negotiations between the UK and EU likely to formally begin on June 19, Bloomberg reports that Brexit Secretary David Davis has pre-emptively lashed out at EU officials, threatening that "The UK will quit talks on leaving the European Union unless the bloc drops its demands for a divorce payment as high as EUR100bn." Britain’s negotiations would otherwise be plunged into “chaos,” and even a 1 billion-pound settlement would be “a lot of money,” Davis said in an interview published in the Sunday Times. As Bloomberg notes, the size of Britain’s exit bill, and which types of negotiations can begin before it has been agreed, has been a source of debate for weeks.European Commission President Jean-Claude Juncker has said the U.K. will have to pay about 50 billion pounds, while Luxembourg’s Prime Minister Xavier Bettel has signaled a figure between 40 billion euros and 60 billion euros.The Financial Times estimated the cost could balloon to 100 billion euros, while a study by the Institute of Chartered Accountants in England and Wales put the cost at as low as 5 billion pounds ($6.5 billion).Prime Minister Theresa May’s government has said it will meet its commitments to the EU, but has questioned how Brussels officials reached their preliminary estimates... especially the oddly round number of 100-billion-euros..."We don't need to just look like we can walk away, we need to be able to walk away...Under the circumstances, if that was necessary, we would be in a position to do it."May also weighed in on the Brexit bill, saying in an interview with the Sunday Telegraph that“money paid in the past” by the U.K. into joint EU projects and the European Investment Bank ought to be taken account in the final sum.

UK needs more immigrants to ‘avoid Brexit catastrophe’ -- The British economy needs a net inward migration flow of 200,000 people a year, double the Conservative target, if it is to avoid the “catastrophic economic consequences” linked to Brexit, a study by an employer-backed thinktank has said.The Global Future report says the UK’s low productivity, ageing population and shortage of labour in key areas, such as the NHS, show that net migration of 200,000 will be needed annually.The report, backed by three employer groups, criticises Labour and the Conservatives for refusing to be honest with the British public about the level of migration the UK requires. It warns that if the UK refuses to be flexible about its sources of labour, it could face a decade of slow growth similar to that of the Japanese economy.The Conservatives recommitted themselves to a target of limiting net migration to tens of thousands in their manifesto on Thursday, promising to double the cost to an employer of hiring a skilled worker from overseas. The net migration target recommended by Global Future is broadly in line with actual levels from 2000 onwards. The figure, covering both EU and non-EU migration, is based on macroeconomic analysis and a bottom-up, sector-by-sector examination of existing labour shortages. The report argues the labour market crisis is likely to become acute in the short term unless ministers give an early signal in the Brexit talks on the UK’s plans for EU residents and immigration. The report says that even with a later retirement age, Britain faces a demographic time bomb, and needs migration of 130,000 a year to maintain the working population at its current level.“The dependency ratio – the number of people of working age (16-64) versus those over 65 – is worsening. Between 1950 and 2015 this fell from 5.5 to 3.5. Only the recent increase in net migration has prevented it from falling even more precipitously,” it says.

Brexit and the coming food crisis: ‘If you can’t feed a country, you haven’t got a country’ -- On 24 June last year, the few hundred residents of a temporary village, hidden from view in the middle of a West Sussex soft fruit farm, received letters. They were signed by David Kay, the managing director of the Hall Hunter Partnership, a business that grows 10% of the UK’s strawberries, 19% of its raspberries and a whacking 42% of its blueberries across thousands of acres, of both glasshouses and polytunnels. The recipients were his seasonal workforce, some of the 3,000 pickers from Bulgaria, Romania and elsewhere who come here each year to get the harvest in, and without whom the business would simply not exist. “I wanted them to know that in the face of the vote for Brexit we would hang together as a family,” he says. Kay may have wanted to reassure his employees in the immediate aftermath of the vote, but 11 months on their status is no clearer. Indeed, this tidy little village could now stand as a blunt symbol for one of the most serious but little talked about issues arising from the Brexit negotiations: the continued ability of this country to feed itself, if the deal goes wrong. Opponents of EU membership talked during the referendum campaign about sovereignty and control. They railed against the free movement of labour. What they didn’t mention is the way the British food supply chain has, over the past 30 years, become increasingly reliant on workers from elsewhere, both permanent residents and seasonal labour. …around 20% of all employees in British agriculture come from abroad, these days mostly Romania and Bulgaria, while 63% of all staff employed by members of the British Meat Processors Association are not from the UK. Around 400,000 people work in food manufacturing here, and more than 30% of those are also from somewhere else. If free movement of labour stops, the British food industry won’t just face difficulties. Some parts will shudder to a halt. Shelves will be emptied. Prices will shoot up. And right now, none of those charged with negotiating Britain’s exit from the EU are making promises that this scenario will be averted. Many of them aren’t even engaging with the issue.

Polls apart, but the Tories and Labour both pose risks to the economy - Labour has produced a manifesto in the image of its leader, which means that a fascinating experiment is now unfolding. There has always been a strand of Labour opinion which holds that the party has suffered electorally, most notably under Ed Miliband two years ago, from not being left-wing enough.Now that proposition is being tested, though sadly it will not settle the issue. If Labour’s vote share is in the low 30s, similar or better than Miliband in 2015 (30.4%), it will be greeted as progress, with alleged media bias against Jeremy Corbyn blamed for the message not fully getting through.There are, as with all manifestos, good and bad ideas in Labour’s proposals. A National Transformation Fund, which would take advantage of low borrowing costs to invest an additional £250bn in Britain’s infrastructure over the next 10 years, has a lot to be said for it.Though the arguments are not as strong as they were, there is also an argument for Labour’s National Investment Bank and its proposed network of regional development banks, which would draw on private finance to generate £250bn of what Labour calls “lending power”, operating in the gaps left by the commercial banks, particularly in small business lending. Calls for such an institution, modelled on European lines, go back a very long way.Where Labour comes over all unnecessary in its manifesto is its proposal to renationalise chunks of the economy, including the rail companies, the water industry, Royal Mail and by “regaining control” of energy supply networks. The argument that “democratic control” of these industries would bring a better deal for consumers defies the experience of the past, though it would keep the unions happy. As a priority it is a weird one. Even weirder, though perhaps entirely predictable, are Labour’s tax plans. Raising taxes on high earners may have made sense in the immediate aftermath of the financial crisis, though it is not clear the 50% rate Labour announced then on incomes above £150,000 raised much money.

Election laws can’t cope with data harvesting – which suits politicians fine -- Political parties are making increasing use of data analytics to track voters’ behaviour on sites such as Facebook and Twitter in order to send them political messages they will find persuasive. Parties have been campaigning on Facebook as part of the current UK election and both Labour and the Conservatives are said to have set aside around £1m for the purpose.  Yet there is a lot of uncertainty about exactly what is going on – and growing concerns that the harvesting of social media data was secretly used to influence swing voters in the EU referendum. Elizabeth Denham, the UK Information Commissioner, has launched a formal inquiry into the implications of deploying personal information in this way, focusing on both the referendum and “potentially also … other campaigns”  It is a welcome move, but it is limited to looking at the law around individual privacy and control of personal information. This is governed by data protection legislation and is mainly about ensuring that voters are not targeted as individuals – as opposed to in larger groups, such as a particular region or pensioners or whatever.  The inquiry will last several months – the political parties deny any wrongdoing – but it will not look at the electoral laws that also exist to protect voters. And this is an area that needs to be closely examined. Data analysis is making it look completely unfit for purpose.

May’s plan to end free school lunches ‘to hit 900,000 struggling families’ -- About 900,000 children from struggling families will lose their right to free school lunches under a cut unveiled in the Conservative manifesto.The total includes more than 600,000 young children recently defined as coming from “ordinary working families”, according to analysis for the Observer by the Education Policy Institute.It means that the surprise measure risks undermining Theresa May’s pledge to prioritise families that are “just about managing” – those who are in work, but struggling to make ends meet.May opted to end universal free school lunches for infants, introduced under the coalition government, and replace them with free breakfasts. The money saved will be used to see off a looming Tory rebellion over school funding.The move risks punishing exactly the kind of families the prime minister has promised to help and will cost families about £440 for every child hit by the cut. It is likely to save about £650m a year. However, the Conservatives pointed to recent evidence that free breakfasts were more cost-effective, adding that the poorest children would still receive a free lunch.After a week in which the parties released their election manifestos, more Tory candidates expressed private reservations about their party’s plan to make people pay for their old-age home care through their estates. With the large Tory poll lead closing slightly in recent days, some nervous candidates are urging the leadership to make another attempt to explain the policy to voters, while others are planning to lobby for concessions after the election. May has insisted it is a fair measure that ensures only those with estates worth more than £100,000 will pay.

Rattled UK PM May forced into 'dementia tax' U-turn after poll lead halves | Reuters: British Prime Minister Theresa May was forced to backtrack on one of her most striking election pledges on Monday to force elderly people to pay more for their social care after her party's opinion poll lead halved in just a few days. In her biggest misstep of the campaign so far, May set out plans on Thursday to make some elderly people pay a greater share of their care costs, before hastily announcing on Monday there would be a limit. Questioned at an election event, she grew irritated at suggestions she was backing down. Six opinion polls published in the past three days have all shown the Conservative Party's lead over the opposition Labour Party narrow by between 2 and 9 percentage points, though all project May will win the election. May said Labour leader Jeremy Corbyn and other opponents had tried to scare the elderly by spreading "fake claims" about her plan to transfer more of the cost from taxpayers to recipients who can afford to fund care themselves. Dubbed the 'dementia tax' by opponents, the proposal had raised concerns that some seniors might see their houses sold off to pay for care, rather than passed on to their descendants. "We will make sure nobody has to sell their family home to pay for care," May said in the Welsh city of Wrexham. "We will make sure there's an absolute limit on what people need to pay."She later denied playing politics, telling the BBC she had addressed concerns about her plans. 

Theresa May's dementia tax U-turn is a study in incompetence | The Independent: The Prime Minister has rendered satirical her claim to offer ‘strong and stable leadership’; she has made Labour seem competent, as well as compassionate; she has annoyed, frightened and distressed Tory-voting pensioners Not that it makes up for the appalling mess over social care policy – one of many great challenges facing the country in the coming decades – but we should be grateful for Theresa May’s efforts to liven up what was becoming a dull, overlong and unnecessary general election campaign. In one single step, or rather one misstep, the Prime Minister has put a spring in the heels of every Labour, Liberal Democrat and SNP canvasser in a marginal seat. She has rendered satirical her claim to offer “strong and stable leadership”; she has made Labour seem competent, as well as compassionate; she has annoyed, frightened and distressed Tory-voting pensioners. In short, she has made a hash of things. That’s not very Brand May. This unnecessary blunder, however, seems to have been a team effort, but not one orchestrated by a large team. In recent days it has become increasingly apparent that cabinet colleagues may have had little if any input into one of the more important policy announcements made by the Government of which if they are still nominally members. It is also unclear whether the relevant ministers and advisers in the Department for Work and Pensions (DWP) and HM Treasury were much consulted on the social care proposals contained in the Conservative Party manifesto. We know that the entirely sensible, balanced and consensual recommendations made some years ago by Sir Andrew Dilnot have been trashed, even though they have already been put into legislation, and Ms May voted for them.  An accurate picture of this study in misgovernment has to include every important detail in the vista. First came the manifesto policy. This went down badly on the doorsteps, and there were open grumbles from all levels of the Conservative Party. The answer to that was that Ms May was indeed pursuing a “tough” policy, but at least she was being honest with voters about the care crisis and not promising something for nothing. Ministers, including Damian Green, the Secretary of State at the DWP, maintained that the policy would not be changed, although there would be a Green Paper as a basis for consultation.

Government Austerity Demands That We Die Within Our Means - naked capitalism - Yves here. Despite pundits originally anticipating that the Tories were set to deliver Labour a crushing, perhaps even party-destroying defeat in the June 8 election, aided and abetted by press and Blairite demonization of Jeremy Corbyn, the tide has turned. Labour’s release of a program backing big increases in social spending appears to mean at a bare minimum that Labour is far from dead. Voters were given a clear alternative to tired old Tory austerity policies and a meaningful number say they will vote for direct plans to deliver more support to citizens, as opposed to “Brexit will make things better” hopium. While May still has a comfortable lead, the change in handicapping has her snap election looking less clever than it did when she called it. She will still contend that it gives her a mandate for Brexit, but a less than thumping victory will mean she may not have improved her position much. And she will have diverted time and energy from preparing for Brexit negotiations. Given how her Downing Street dinner with Jean-Claude Juncker and other members of the EU team revealed how poorly briefed she was, this is a not-inconsequential cost. From the Independent: Labour have continued to cut the Tories’ lead in the polls after the publication of the party manifestos, as party leader Jeremy Corbyn claimed his message was “getting through” to voters.Survation research gave Theresa May’s party a lead of nine percentage points with the Conservatives dropping 5 per cent to 43 per cent in a week while Labour enjoyed a 5 per cent boost to 34 per cent. There was a similar story in four new polls published in the Sunday papers, which put Labour between 35 per cent and 33 per cent, up from the 26 points the party was showing at the start of the campaign.The YouGov poll for The Sunday Times put Labour on 35 per cent, with the Conservatives nine points ahead on 44 per cent…It appears Theresa May’s policies on social care and pensions have damaged her party’s approval rating among older voters. Note that this is the highest Labour has scored since the Brexit vote. Oops. And the reality is that the decline in the standard of living in the UK outside London is due in large measure to Thatcherite policies. Indeed, membership in the EU if anything ameliorated the impact.

Oil bosses have given £390,000 to Tories under Theresa May -- Oil executives whose industry is promised further government support if the Conservatives are returned to power have given more than £390,000 to the party since Theresa May became prime minister. They include Ian Taylor, the chief executive of Vitol, whose firm was fined for making payments to an Iraqi state-owned firm, and Ayman Asfari, the chief executive of Petrofac, who was recently interviewed by the Serious Fraud Office over suspected corruption. Three of the donors have attended dinners with May or senior ministers since she took office. The payments will raise eyebrows because the 2017 manifesto includes a specific commitment to build upon previous “unprecedented” government support for the oil and gas industry. Labour, which compiled the figures, said they exposed a cosy relationship between the prime minister and the oil industry. A Conservative spokesman said: “All donations to the Conservative party are properly and transparently declared to the Electoral Commission, published by them, and comply fully with the law.” Labour’s Jon Trickett, the shadow Cabinet Office minister, said: “It’s worrying to think that while Theresa May omitted to mention ‘living standards’ anywhere in the manifesto, she made a number of manifesto pledges to the oil and gas industry – including active support of new oil and gas facilities – after she and her cabinet ministers have been liaising with, and taking money from, the industry’s top bosses.” Since May became prime minister in July, the Tories have taken more than £390,000 in donations from six leading figures in Britain’s oil and gas industry. 

Labour is surging in the polls – and it's all because the media is finally giving Jeremy Corbyn impartial coverage | The Independent: It is also interesting how Labour’s poll bounce coincides with general election broadcast rules kicking in. The public are finally seeing that Corbyn is not the person he has been portrayed as. It’s conventional for polls to swing to the government during a general election campaign, but Jeremy Corbyn’s Labour Party has absolutely no respect for historical trends. Labour is up seven points in three weeks, halving the Conservative lead, with the fall-out from the proposed “dementia tax” still to be fully factored in, U-turns included. There are two reasons for this. Firstly, the public tends to only engage with politics during a general election campaign. Very few people follow all the twists and turns of Westminster in their day to day lives. They might pick up the odd bit of information, often through the prism of a right wing tabloid press which usually sets the agenda, but as we near 8 June and people have to make their minds up about who to vote for, a lot more attention will be paid to what the parties are saying. This is why a link to Labour’s very popular manifesto went viral on Facebook last week. It is also interesting how Labour’s poll bounce coincides with general election broadcast rules kicking in. The public are finally seeing that Jeremy Corbyn is not the person he has been portrayed as in sections of the right wing press, although some broadcasters still insist on using the pejorative term “hard left”, which is somewhat at odds with polling that indicates the public supports the policies in the Labour manifesto. Labour under Jeremy Corbyn isn’t hard left – it’s mainstream.

Manchester bomber is named as British Libyan jihadist Salman Abedi who killed 22 - including a girl aged EIGHT - in terror attack on packed Ariana Grande concert : The suicide bomber who blew himself up at a pop concert killing 22 people including young children has been named as Salman Abedi.ISIS have claimed responsibility after the terrorist set off a ball bearing bomb at an Ariana Grande concert, killing 22 and injuring 119 in the worst terror attack Britain has seen since the 7/7 London bombings.Eight-year-old Saffie Roussos, 18-year-old Georgina Callander and 26-year-old John Atkinson were among those killed. Of the injured, at least 12 were children were among 59 taken to hospital, with 60 others treated at the scene.Traumatised witnesses have told how of nuts and bolts tore into young music fans when the bomb was detonated in the foyer area of the Manchester Arena moments after a concert by the US popstar ended. The bomber - named today as 22-year-old Salman Abedi - was known to authorities. He died at the scene and police carried out a controlled explosion at what is believed to be his home during raids around the city today.Abedi is understood to have been born in Britain but is from a Libyan family. A school friend told MailOnline had grown a beard when he last saw him and neighbours claimed he had been 'acting strangely' recently.A 23-year-old man, believed to be Abedi's brother, was also arrested by anti-terror officers as police and security services attempt to work out if the suicide bomber was part of a cell.

"He Wanted Revenge": The Story Of The Manchester Suicide Bomber Emerges -- As the investigation into Salman Abedi's deadly suicide bombing expands, discrete details about his motives and state of mind emerge with the most expansive analysis to date just released by the WSJ, which shows the ISIS sympathizer, terrorist and mass killer as a confused young man, the byproduct of a destroyed nation, who - when all is said and done - wanted revenge according to his sister, who is quoted as saying that “he saw children—Muslim children—dying everywhere, and wanted revenge. He saw the explosives America drops on children in Syria, and he wanted revenge."  As the WSJ chronicles, just days before Salman Abedi blew himself up and killed 22 people outside a Manchester concert on Monday, he told his parents he was leaving their home in Libya to go on a pilgrimage to the Muslim holy city of Mecca, despite having other plans. "Abedi grew up in a world that straddled middle-class Britain and the Libya of his parents, both before and after the chaotic collapse of strongman Moammar Gadhafi’s regime" is how WSJ authors describe his troubled formative years.

Jeremy Corbyn links foreign policy to growing terror threat --Jeremy Corbyn will return to campaigning for the general election on Friday morning after the pause following the Manchester bombing. He plans to give a speech criticising police cuts and drawing a link between British foreign policy and terror attacks. With less than a fortnight until polling day, the Labour leader will tell an audience in London that a government led by his party would provide more resources for law enforcement and the NHS to ensure people were “not protected and cared for on the cheap”. The longtime peace campaigner and former chair of the Stop the War coalition will also argue that it is the responsibility of government to ensure that “our foreign policy reduces rather than increases the threat to this country”. Corbyn will say: “Many experts, including professionals in our intelligence and security services, have pointed to the connections between wars our government has supported or fought in other countries and terrorism here at home. “That assessment in no way reduces the guilt of those who attack our children. Those terrorists will forever be reviled and held to account for their actions. But an informed understanding of the causes of terrorism is an essential part of an effective response that will protect the security of our people that fights rather than fuels terrorism.” He will argue that the government should admit the “war on terror” had failed and rethink its approach. .

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