TBR News February 2, 2017

The Voice of the White House

Washington, D.C. February 2, 2018:”There are myths and legends that have become a part of what passes for history. The legend of Atlantis is one and the Wailing Wall in Jerusalem is another. This is supposed to be the last remaining trace of Herod’s Temple which was destroyed by the Romans. It is a focal point for religious Jews who pray daily in front of it and then touch it, weeping. President Trump, black beanie and all can be seen expressing his love and affection for Isreal at the same wall. The problem with this is that the wall had nothing to do with Herod’s Temple. It is retaining wall erected by the Arabs in 600 AD and the pavement in front of the wall was of the same period. To those who express disbelief over this unpleasant revelation, I refer them to: Palestine (Western or Wailing Wall) Order in Council, 1931, Schedule I. p. 39.

 

Table of Contents

• ‘Fiction is outperforming reality’: how YouTube’s algorithm distorts truth
• Draft Legislation Suggests Trump Administration Weighing Work Requirements And Rent Increases For Subsidized Housing
• Trump has picked a fight with the FBI. He’ll be sorry.
• Trump accuses FBI leadership amid row over memo
• No. 3 U.S. diplomat quits in latest departure under Trump
• Trump’s Financial Arsonists
• Japanese authorities raid Coincheck headquarters
• Cryptocurrency tumble erases over $100bn from digital currency market
• No, Kansas, you can’t ban contractors from boycotting Israel

‘Fiction is outperforming reality’: how YouTube’s algorithm distorts truth

An ex-YouTube insider reveals how its recommendation algorithm promotes divisive clips and conspiracy videos. Did they harm Hillary Clinton’s bid for the presidency?

February 2, 2018

by Paul Lewis in San Francisco

The Guardian

It was one of January’s most viral videos. Logan Paul, a YouTube celebrity, stumbles across a dead man hanging from a tree. The 22-year-old, who is in a Japanese forest famous as a suicide spot, is visibly shocked, then amused. “Dude, his hands are purple,” he says, before turning to his friends and giggling. “You never stand next to a dead guy?”

Paul, who has 16 million mostly teen subscribers to his YouTube channel, removed the video from YouTube 24 hours later amid a furious backlash. It was still long enough for the footage to receive 6m views and a spot on YouTube’s coveted list of trending videos.

The next day, I watched a copy of the video on YouTube. Then I clicked on the “Up next” thumbnails of recommended videos that YouTube showcases on the right-hand side of the video player. This conveyor belt of clips, which auto-play by default, are designed to seduce us spending more time on Google’s video broadcasting platform. I was curious where they might lead.

The answer was a slew of videos of men mocking distraught teenage fans of Logan Paul, followed by CCTV footage of children stealing things and, a few clicks later, a video of children having their teeth pulled out with bizarre, homemade contraptions.

I had cleared my history, deleted my cookies, and opened a private browser to be sure YouTube was not personalising recommendations. This was the algorithm taking me on a journey of is own volition, and it culminated with a video of two boys, aged about five or six, punching and kicking one another.

“I’m going to post it on YouTube,” said a teenage girl, who sounded like she might be an older sibling. “Turn around an punch the heck out of that little boy.” They scuffled for several minutes until one had knocked the other’s tooth out.

• ••

There are 1.5 billion YouTube users in the world, which is more than the number of households that own televisions. What they watch is shaped by this algorithm, which skims and ranks billions of videos to identify 20 “up next” clips that are both relevant to a previous video and most likely, statistically speaking, to keep a person hooked on their screen.

Company insiders tell me the algorithm is the single most important engine of YouTube’s growth. In one of the few public explanations of how the formula works – an academic paper that sketches the algorithm’s deep neural networks, crunching a vast pool of data about videos and the people who watch them – YouTube engineers describe it as one of the “largest scale and most sophisticated industrial recommendation systems in existence”.

Lately, it has also become one of the most controversial. The algorithm has been found to be promoting conspiracy theories about the Las Vegas mass shooting and incentivising, through recommendations, a thriving subculture that targets children with disturbing content such as cartoons in which the British children’s character Peppa Pig eats her father or drinks bleach.

Lewd and violent videos have been algorithmically served up to toddlers watching YouTube Kids, a dedicated app for children. One YouTube creator who was banned from making advertising revenues from his strange videos – which featured his children receiving flu shots, removing earwax, and crying over dead pets – told a reporter he had only been responding to the demands of Google’s algorithm. “That’s what got us out there and popular,” he said. “We learned to fuel it and do whatever it took to please the algorithm.”

Google has responded to these controversies in a process akin to Whac-A-Mole: expanding the army of human moderators, removing offensive YouTube videos identified by journalists and de-monetising the channels that create them. But none of those moves has diminished a growing concern that something has gone profoundly awry with the artificial intelligence powering YouTube.

Yet one stone has so far been largely unturned. Much has been written about Facebook and Twitter’s impact on politics, but in recent months academics have speculated that YouTube’s algorithms may have been instrumental in fuelling disinformation during the 2016 presidential election. “YouTube is the most overlooked story of 2016,” Zeynep Tufekci, a widely respected sociologist and technology critic, tweeted back in October. “Its search and recommender algorithms are misinformation engines.”

If YouTube’s recommendation algorithm really has evolved to promote more disturbing content, how did that happen? And what is it doing to our politics?

‘Like reality, but distorted’

Those are not easy questions to answer. Like all big tech companies, YouTube does not allow us to see the algorithms that shape our lives. They are secret formulas, proprietary software, and only select engineers are entrusted to work on the algorithm. Guillaume Chaslot, a 36-year-old French computer programmer with a PhD in artificial intelligence, was one of those engineers.

During the three years he worked at Google, he was placed for several months with a team of YouTube engineers working on the recommendation system. The experience led him to conclude that the priorities YouTube gives its algorithms are dangerously skewed.

“YouTube is something that looks like reality, but it is distorted to make you spend more time online,” he tells me when we meet in Berkeley, California. “The recommendation algorithm is not optimising for what is truthful, or balanced, or healthy for democracy.”

Chaslot explains that the algorithm never stays the same. It is constantly changing the weight it gives to different signals: the viewing patterns of a user, for example, or the length of time a video is watched before someone clicks away.

The engineers he worked with were responsible for continuously experimenting with new formulas that would increase advertising revenues by extending the amount of time people watched videos. “Watch time was the priority,” he recalls. “Everything else was considered a distraction.”

Chaslot was fired by Google in 2013, ostensibly over performance issues. He insists he was let go after agitating for change within the company, using his personal time to team up with like-minded engineers to propose changes that could diversify the content people see.

He was especially worried about the distortions that might result from a simplistic focus on showing people videos they found irresistible, creating filter bubbles, for example, that only show people content that reinforces their existing view of the world. Chaslot said none of his proposed fixes were taken up by his managers. “There are many ways YouTube can change its algorithms to suppress fake news and improve the quality and diversity of videos people see,” he says. “I tried to change YouTube from the inside but it didn’t work.”

YouTube told me that its recommendation system had evolved since Chaslot worked at the company and now “goes beyond optimising for watchtime”. The company said that in 2016 it started taking into account user “satisfaction”, by using surveys, for example, or looking at how many “likes” a video received, to “ensure people were satisfied with what they were viewing”. YouTube added that additional changes had been implemented in 2017 to improve the news content surfaced in searches and recommendations and discourage the promotion of videos containing “inflammatory religious or supremacist” content.

It did not say why Google, which acquired YouTube in 2006, waited over a decade to make those changes. Chaslot believes such changes are mostly cosmetic, and have failed to fundamentally alter some disturbing biases that have evolved in the algorithm. In the summer of 2016, he built a computer program to investigate.

The software Chaslot wrote was designed to provide the world’s first window into YouTube’s opaque recommendation engine. The program simulates the behaviour of a user who starts on one video and then follows the chain of recommended videos – much as I did after watching the Logan Paul video – tracking data along the way.

It finds videos through a word search, selecting a “seed” video to begin with, and recording several layers of videos that YouTube recommends in the “up next” column. It does so with no viewing history, ensuring the videos being detected are YouTube’s generic recommendations, rather than videos personalised to a user. And it repeats the process thousands of times, accumulating layers of data about YouTube recommendations to build up a picture of the algorithm’s preferences.

Over the last 18 months, Chaslot has used the program to explore bias in YouTube content promoted during the French, British and German elections, global warming and mass shootings, and published his findings on his website, Algotransparency.com. Each study finds something different, but the research suggests YouTube systematically amplifies videos that are divisive, sensational and conspiratorial.

When his program found a seed videos by the searching the query “who is Michelle Obama?” and then followed the chain of “up next” suggestions, for example, most of the recommended videos said she “is a man”. More than 80% of the YouTube-recommended videos about the pope detected by his program described the Catholic leader as “evil”, “satanic”, or “the anti-Christ”. There were literally millions of videos uploaded to YouTube to satiate the algorithm’s appetite for content claiming the earth is flat. “On YouTube, fiction is outperforming reality,” Chaslot says.

He believes one of the most shocking examples was detected by his program in the run-up to the 2016 presidential election. As he observed in a short, largely unnoticed blogpost published after Donald Trump was elected, the impact of YouTube’s recommendation algorithm was not neutral during the presidential race: it was pushing videos that were, in the main, helpful to Trump and damaging to Hillary Clinton. “It was strange,” he explains to me. “Wherever you started, whether it was from a Trump search or a Clinton search, the recommendation algorithm was much more likely to push you in a pro-Trump direction.”

Trump won the electoral college as a result of 80,000 votes spread across three swing states. There were more than 150 million YouTube users in the US. The videos contained in Chaslot’s database of YouTube-recommended election videos were watched, in total, more than 3bn times before the vote in November 2016.

Even a small bias in the videos would have been significant. “Algorithms that shape the content we see can have a lot of impact, particularly on people who have not made up their mind,” says Luciano Floridi, a professor at the University of Oxford’s Digital Ethics Lab, who studies the ethics of artificial intelligence. “Gentle, implicit, quiet nudging can over time edge us toward choices we might not have otherwise made.”

Promoting conspiracy theories

Chaslot sent me a database of more YouTube-recommended videos his program identified in the three months leading up the presidential election. It contained more than 8,000 videos – all of them detected by his program appearing “up next” on 12 dates between August and November 2016, after equal numbers of searches for “Trump” and “Clinton”.

It was not a comprehensive set of videos and it may not have been a perfectly representative sample. But it was, Chaslot said, a previously unseen dataset of what YouTube was recommending to people interested in content about the candidates – one snapshot, in other words, of the algorithm’s preferences.

Jonathan Albright, research director at the Tow Center for Digital Journalism, who reviewed the code used by Chaslot, says it is a relatively straightforward piece of software and a reputable methodology. “This research captured the apparent direction of YouTube’s political ecosystem,” he says. “That has not been done before.”

I spent weeks watching, sorting and categorising the trove of videos with Erin McCormick, an investigative reporter and expert in database analysis. From the start, we were stunned by how many extreme and conspiratorial videos had been recommended, and the fact that almost all of them appeared to be directed against Clinton.

Some of the videos YouTube was recommending were the sort we had expected to see: broadcasts of presidential debates, TV news clips, Saturday Night Live sketches. There were also videos of speeches by the two candidates – although, we found, the database contained far more YouTube-recommended speeches by Trump than Clinton.

But what was most compelling was how often Chaslot’s software detected anti-Clinton conspiracy videos appearing “up next” beside other videos.

There were dozens of clips stating Clinton had had a mental breakdown, reporting she had syphilis or Parkinson’s disease, accusing her of having secret sexual relationships, including with Yoko Ono. Many were even darker, fabricating the contents of WikiLeaks disclosures to make unfounded claims, accusing Clinton of involvement in murders or connecting her to satanic and paedophilic cults.

One video that Chaslot’s data indicated was pushed particularly hard by YouTube’s algorithm was a bizarre, one-hour film claiming Trump’s rise was predicted in Isaiah 45. Another was entitled: “BREAKING: VIDEO SHOWING BILL CLINTON RAPING 13 YR-OLD WILL PLUNGE RACE INTO CHAOS ANONYMOUS CLAIMS”. The recommendation engine appeared to have been particularly helpful to the Alex Jones Channel, which broadcasts far-right conspiracy theories under the Infowars brand.

There were too many videos in the database for us to watch them all, so we focused on 1,000 of the top-recommended videos. We sifted through them one by one to determine whether the content was likely to have benefited Trump or Clinton. Just over a third of the videos were either unrelated to the election or contained content that was broadly neutral or even-handed. Of the remaining 643 videos, 551 were videos favouring Trump, while only only 92 favoured the Clinton campaign.

The sample we had looked at suggested Chaslot’s conclusion was correct: YouTube was six times more likely to recommend videos that aided Trump than his adversary. YouTube presumably never programmed its algorithm to benefit one candidate over another. But based on this evidence, at least, that is exactly what happened.

‘Leading people down hateful rabbit holes’

“We have a great deal of respect for the Guardian as a news outlet and institution,” a YouTube spokesperson emailed me after I forwarded them our findings. “We strongly disagree, however, with the methodology, data and, most importantly, the conclusions made in their research.”

The spokesperson added: “Our search and recommendation systems reflect what people search for, the number of videos available, and the videos people choose to watch on YouTube. That’s not a bias towards any particular candidate; that is a reflection of viewer interest.”

It was a curious response. YouTube seemed to be saying that its algorithm was a neutral mirror of the desires of the people who use it – if we don’t like what it does, we have ourselves to blame. How does YouTube interpret “viewer interest” – and aren’t “the videos people choose to watch” influenced by what the company shows them?

Offered the choice, we may instinctively click on a video of a dead man in a Japanese forest, or a fake news clip claiming Bill Clinton raped a 13-year-old. But are those in-the-moment impulses really a reflect of the content we want to be fed?

Tufekci, the sociologist who several months ago warned about the impact YouTube may have had on the election, tells me YouTube’s recommendation system has probably figured out that edgy and hateful content s engaging. “This is a bit like an autopilot cafeteria in a school that has figured out children have sweet teeth, and also like fatty and salty foods,” she says. “So you make a line offering such food, automatically loading the next plate as soon as the bag of chips or candy in front of the young person has been consumed.”

Once that gets normalised, however, what is fractionally more edgy or bizarre becomes, Tufekci says, novel and interesting. “So the food gets higher and higher in sugar, fat and salt – natural human cravings – while the videos recommended and auto-played by YouTube get more and more bizarre or hateful.”

But why would a bias toward ever more weird or divisive videos benefit one candidate over another? That depends on the candidates. Trump’s campaign was nothing if not weird and divisive. Tufekci points to studies showing that “field of misinformation” largely tilted anti-Clinton before the election. “Fake news providers,” she says, “found that fake anti-Clinton material played much better with the pro-Trump base than did fake anti-Trump material with the pro-Clinton base.”

She adds: “The question before us is the ethics of leading people down hateful rabbit holes full of misinformation and lies at scale just because it works to increase the time people spend on the site – and it does work.”

Tufekci was one of several academics I shared our research with. Philip Howard, a professor at the Oxford Internet Institute, who has studied how disinformation spread during the election, was another. He questions whether a further factor might have been at play. “This is important research because it is seems to be the first systematic look into how YouTube may have been manipulated,” he says, raising the possibility that the algorithm was gamed as part of the same propaganda campaigns that flourished on Twitter and Facebook.

In testimony to the House intelligence committee, investigating Russian interference in the election, Google’s general counsel, Kent Walker, played down the degree to which Moscow’s propaganda efforts infiltrated YouTube. The company’s internal investigation had only identified 18 YouTube channels and 1,100 videos suspected of being linked to Russia’s disinformation campaign, he told the committee in December – and generally the videos had relatively small numbers of views. He added: “We believe that the activity we found was limited because of various safeguards that we had in place in advance of the 2016 election, and the fact that Google’s products didn’t lend themselves to the kind of micro-targeting or viral dissemination that these actors seemed to prefer.”

Walker made no mention of YouTube recommendations. Correspondence made public just last week, however, reveals that Senator Mark Warner, the ranking Democrat on the intelligence committee, later wrote to the company about the algorithm, which he said seemed “particularly susceptible to foreign influence”. The senator demanded to know what the company was specifically doing to prevent a “malign incursion” of YouTube’s recommendation system. Walker, in his written reply, offered few specifics, but said YouTube had “a sophisticated spam and security ­breach detection system to identify anomalous behavior and malignant incursions”.

Tristan Harris, a former Google insider turned tech whistleblower, likes to describe Facebook as a “living, breathing crime scene for what happened in the 2016 election” that federal investigators have no access to. The same might be said of YouTube. About half the videos Chaslot’s program detected being recommended during the election have now vanished from YouTube – many of them taken down by their creators. Chaslot has always thought this suspicious. These were videos with titles such as “Must Watch!! Hillary Clinton tried to ban this video”, watched millions of times before they disappeared. “Why would someone take down a video that has been viewed millions of times?” he asks.

I located a copy of “This Video Will Get Donald Trump Elected”, a viral sensation that was watched more than 10m times before it vanished from YouTube. It was a benign-seeming montage of historical footage of Trump, accompanied by soft piano music. But when I played the video in slow motion, I saw that it contained weird flashes of Miley Cyrus licking a mirror. It seemed an amateurish and bizarre attempt at inserting subliminal, sexualised imagery. But it underscored how little oversight we have over anyone who might want to use YouTube to influence public opinion on a vast scale.

I shared the entire database of 8,000 YouTube-recommended videos with John Kelly, the chief executive of the commercial analytics firm Graphika, which has been tracking political disinformation campaigns. He ran the list against his own database of Twitter accounts active during the election, and concluded many of the videos appeared to have been pushed by networks of Twitter sock puppets and bots controlled by pro-Trump digital consultants with “a presumably unsolicited assist” from Russia.

“I don’t have smoking-gun proof of who logged in to control those accounts,” he says. “But judging from the history of what we’ve seen those accounts doing before, and the characteristics of how they tweet and interconnect, they are assembled and controlled by someone – someone whose job was to elect Trump.”

Chaslot and some of the academics I spoke to felt this social media activity was significant. YouTube’s algorithm may have developed its biases organically, but could it also have been nudged into spreading those videos even further? “If a video starts skyrocketing, there’s no question YouTube’s algorithm is going to start pushing it,” Albright says.

YouTube did not deny that social media propaganda might have influenced its recommendations, but played down the likelihood, stressing its system “does not optimise” for traffic from Twitter or Facebook. “It appears as if the Guardian is attempting to shoehorn research, data and their conclusions into a common narrative about the role of technology in last year’s election,” the spokesperson added. “The reality of how our systems work, however, simply don’t support this premise.”

After the Senate’s correspondence with Google over possible Russian interference with YouTube’s recommendation algorithm was made public last week, YouTube sent me a new statement. It emphasised changes it made in 2017 to discourage the recommendation system from promoting some types of problematic content. “We appreciate the Guardian’s work to shine a spotlight on this challenging issue,” it added. “We know there is more to do here and we’re looking forward to making more announcements in the months ahead.”

With its flashy graphics and slick-haired anchor, the Next News Network has the appearances of a credible news channel. But behind the facade is a dubious operation that recycles stories harvested from far-right publications, fake news sites and Russian media outlets.

The channel is run by anchor Gary Franchi, once a leading proponent of a conspiracy that claimed the US government was creating concentration camps for its citizens. It was the Next News Network that broadcast the fabricated claims about Bill Clinton raping a teenager, although Franchi insists he is not a fake news producer. (He tells me he prefers to see his channel as “commentating on conservative news and opinion”.)

In the months leading up to the election, the Next News Network turned into a factory of anti-Clinton news and opinion, producing dozens of videos a day and reaching an audience comparable to that of MSNBC’s YouTube channel.

Chaslot’s research indicated Franchi’s success could largely be credited to YouTube’s algorithms, which consistently amplified his videos to be played “up next”. YouTube had sharply dismissed Chaslot’s research.

I contacted Franchi to see who was right. He sent me screen grabs of the private data given to people who upload YouTube videos, including a breakdown of how their audiences found their clips. The largest source of traffic to the Bill Clinton rape video, which was viewed 2.4m times in the month leading up to the election, was YouTube recommendations.

The same was true of all but one of the videos Franchi sent me data for. A typical example was a Next News Network video entitled “WHOA! HILLARY THINKS CAMERA’S OFF… SENDS SHOCK MESSAGE TO TRUMP” in which Franchi, pointing to a tiny movement of Clinton’s lips during the a TV debate, claims she says “fuck you” to her presidential rival. The data Franchi shared revealed in the month leading up to the election, 73% of the traffic to the video – amounting to 1.2m of its views – was due to YouTube recommendations. External traffic accounted for only 3% of the views.

Franchi is a professional who makes a living from his channel, but many of the other creators of anti-Clinton videos I spoke to were amateur sleuths or part-time conspiracy theorists. Typically, they might receive a few hundred views on their videos, so they were shocked when their anti-Clinton videos started to receive millions of views, as if they were being pushed by an invisible force.

In every case, the largest source of traffic – the invisible force – came from the clips appearing in the “up next” column. William Ramsey, an occult investigator from southern California who made “Irrefutable Proof: Hillary Clinton Has a Seizure Disorder!”, shared screen grabs that showed the recommendation algorithm pushed his video even after YouTube had emailed him to say it violated its guidelines. Ramsey’s data showed the video was watched 2.4m times by US-based users before election day. “For a nobody like me, that’s a lot,” he says. “Enough to sway the election, right?”

Daniel Alexander Cannon, a conspiracy theorist from South Carolina, tells me: “Every video I put out about the Clintons, YouTube would push it through the roof.” His best-performing clip was a video titled “Hillary and Bill Clinton ‘The 10 Photos You Must See’”, essentially a slideshow of appalling (and seemingly doctored) images of the Clintons with voiceover in which Cannon speculates on their health. It has been seen 3.7m times on YouTube, and 2.9m of those views, Cannon said, came from “up next” recommendations.

Chaslot has put a spotlight on a trove of anti-Clinton conspiracy videos that had been hidden in the shadows – unless, that is, you were one of the the millions YouTube served them to. But his research also does something more important: revealing how thoroughly our lives are now mediated by artificial intelligence.

Less than a generation ago, the way voters viewed their politicians was largely shaped by tens of thousands of newspaper editors, journalists and TV executives. Today, the invisible codes behind the big technology platforms have become the new kingmakers.

They pluck from obscurity people like Dave Todeschini, a retired IBM engineer who, “let off steam” during the election by recording himself opining on Clinton’s supposed involvement in paedophilia, child sacrifice and cannibalism. “It was crazy, it was nuts,” he said of the avalanche of traffic to his YouTube channel, which by election day had more than 2m views.

“Breaking news,” he announced in one of his last dispatches before the vote: the FBI, he said, had just found graphic images of Clinton and her aide in “sexually compromising positions” with a teenager. “It seems to me, with Bill Clinton’s trips to paedophile island a number of times, that what we have here is nothing short of the Clinton paedophile ring,” he declared.

Todeschini sits in his darkened living room in New Jersey, staring into his smartphone. “I’ll tell you what: the rabbit hole just got a couple of yards deeper.”

 

Draft Legislation Suggests Trump Administration Weighing Work Requirements And Rent Increases For Subsidized Housing

February 1 2018

by Rachel M. Cohen and Zaid Jilani

The Intercept

Draft legislation obtained by The Intercept suggests the Department of Housing and Urban Development is eyeing a proposal to overhaul the federal government’s administration of subsidized housing, through measures such as rent hikes and conditioning aid on employment.

This change would significantly impact those who rely on public housing and housing choice vouchers, often referred to as Section 8 in reference to Section 8 of the Housing Act. The news comes just weeks after the Trump administration announced that states could start imposing work requirements as a condition of Medicaid eligibility.

When asked about the document, Department of Housing and Urban Development spokesperson Brian Sullivan would not confirm its existence, but he suggested more would become clear when the Trump administration announces its budget later in February. “I think what you’re talking about is going to be expressed publicly in the budget coming up, so prior to that we would have nothing to say,” Sullivan said. He did not return multiple requests for further comment.

Document metadata reveals the name of the author of the document; she is listed as an HUD employee on a number of department web pages between 2013 and 2017.

It is unclear at this time whether the draft legislative language, dated January 17, will be proposed as a standalone bill or included within existing legislation. There are many parts of the 28-page document that are vague and even contradictory. However its text strongly suggests the administration is considering rent reform.

Under current regulations, most households that receive federal housing subsidies pay 30 percent of their adjusted income as rent. Adjusted income is a household’s gross income minus money taken out for four mandatory deductions: dependent deductions ($40 per month per dependent), elderly and disabled deductions ($400 per year), a child care deduction, and medical and disability expense deduction. This 30 percent threshold, which has been the standard for most rental programs since 1981, is based on a rule-of-thumb measure that estimates a household can devote 30 percent of its income to housing costs before it becomes “burdened.”

The draft legislation eliminates all four deductions, effectively making the changes most burdensome on households with children, the elderly, or people with medical problems.

If the draft’s proposals are enacted, those families would have to pay the higher of two figures: Either 35 percent of their household’s gross income, or 35 percent of what they earn from working 15 hours a week for four weeks at the federal minimum wage. A comment in the margins of the document notes that the latter would equal $152.25, something housing advocates say is effectively a new minimum rent floor.

Additionally, the draft legislation would allow public housing authorities to impose work requirements of up to 32 hours a week “per adult in the household who is not elderly or a person with disabilities.” According to the Center on Budget and Policy Priorities, more than half of all recipients who lived in subsidized housing in 2015 were elderly or disabled, and more than a quarter of all households had a working adult.

Diane Yentel, the president and CEO of the National Low Income Housing Coalition, expressed alarm at the possible changes.

“HUD’s proposals could raise rents on millions of low-income households that receive federal rental assistance, with some of the largest rent increases for families and individuals that have the greatest difficulties affording housing,” Yentel said. “By raising rents on some of the lowest income and most vulnerable families in HUD subsidized housing, HUD would jeopardize family stability by increasing the financial burdens they face through higher rents.”

 

Trump has picked a fight with the FBI. He’ll be sorry.

Why the FBI disagrees with Trump over the memo

February 1, 2018

by Eugene Robinson

Washington Post

Presidents don’t win fights with the FBI. Donald Trump apparently wants to learn this lesson the hard way.

Most presidents have had the sense not to bully the FBI by defaming its leaders and — ridiculously — painting its agents as leftist political hacks. Most members of Congress have also understood how unwise it would be to pull such stunts. But Trump and his hapless henchmen on Capitol Hill, led by Rep. Devin Nunes (R-Calif.), have chosen the wrong enemy. History strongly suggests they will be sorry.

The far-right echo chamber resounds with wailing and braying about something called the “deep state” — a purported fifth column of entrenched federal bureaucrats whose only goal in life, apparently, is to deny America the greatness that Dear Leader Trump has come to bestow. It is unclear who is supposed to be directing this vast conspiracy. Could it be Dr. Evil? Supreme Leader Snoke? Hillary Clinton? This whole paranoid fantasy, as any sane person realizes, is utter rubbish.*

The asterisk is for the FBI.

The bureau has no political ax to grind, and the attempt by Nunes and others to portray it as some kind of liberal cabal is comical. But it does have great institutional cohesion, a proud sense of mission, and a culture that inculcates the “us vs. the world” attitude that is so common among law enforcement agencies.

I’m old enough to remember the days when J. Edgar Hoover ran the place like his own private Stasi — wiretapping civil rights leaders such as the Rev. Martin Luther King Jr., infiltrating anti-Vietnam War groups with informers and provocateurs, seeking or manufacturing damaging “evidence” against those he targeted, keeping copious files on the peccadilloes of the politicians who were theoretically his masters. Presidents from Franklin D. Roosevelt through Richard Nixon coexisted warily with Hoover, afraid to fire him for fear of all the beans he might spill.

Harry S. Truman was an especially bitter opponent. “We want no Gestapo or secret police. The FBI is tending in that direction,” he said. “They are dabbling in sex-life scandals and plain blackmail. . . . J. Edgar Hoover would give his right eye to take over, and all congressmen and senators are afraid of him.”

But when Truman left office, Hoover was still FBI director. He held on to the job from the FBI’s founding in 1935 until his death in 1972 — six weeks before the Watergate break-in.

The day after what Nixon’s spokesman would call “a third-rate burglary attempt” took place, the FBI’s major-crimes duty officer, a supervisor named Daniel Bledsoe, opened a federal wiretapping investigation. According to Bledsoe, he received a phone call from Nixon aide John Ehrlichman ordering him to shut down the probe. His simple reply: “No.”

It was another FBI man — Mark Felt, then an assistant director — who became the famous source Deep Throat, secretly meeting Post reporter Bob Woodward in a parking garage to guide the paper’s illumination of the president’s crimes.

In 2004, according to journalist Tim Weiner’s book “Enemies: A History of the FBI,” President George W. Bush was confronted by the man he had appointed to lead the bureau: Robert S. Mueller III. In Weiner’s telling, Mueller threatened to resign unless Bush curtailed some aspects of the domestic electronic surveillance that was taking place in the wake of the 9/11 attacks. Bush reportedly agreed to put the program on a more legal footing.

Now comes Trump. His oafish attempts to neutralize the FBI director he inherited, James B. Comey — trying to extract a Godfather-style loyalty pledge, asking him to drop the investigation of Michael Flynn, ultimately firing him — are potential fodder for what may be an obstruction-of-justice case against Trump being assembled by Mueller.

Comey wrote everything down. The FBI always writes everything down.

Do you see a pattern here? The idea that the likes of Trump and Nunes are going to put a scratch on the FBI with ludicrous innuendo — we’re supposed to believe the bureau is a nest of Bolsheviks? — and selectively edited memos would be laughable, if Mueller and his team were the laughing kind. Which they’re not.

The Trumpists were so proud of themselves when they found evidence that Peter Strzok, an FBI agent originally on Mueller’s team, thought Trump would be a bad president. Now, however, someone has leaked to CNN that Strzok drafted the “October surprise” Comey letter that reopened the bureau’s investigation into Clinton’s emails — without which Trump probably would have lost the election.

Trump and his minions seem to think they can out-leak the FBI. Obviously they haven’t been paying attention.

 

Trump accuses FBI leadership amid row over memo

February 2, 2018

BBC News

US President Donald Trump has accused top officials of politicising FBI and justice department investigations to damage his Republican party.

Later on Friday, he is expected to approve the release of a memo that is thought to suggest the FBI abused its powers to spy on one of his aides.

Controversy over the memo has railed for days in US politics and the two main parties are divided on it.

Democrats say the document is aimed at derailing investigations into Mr Trump.

They portray the memo, commissioned by the Republican head of the House Intelligence Committee, Devin Nunes, as an attempt to undermine a federal inquiry into allegations that the Trump campaign colluded with Russia during the 2016 election campaign.

However, another top Republican, House Speaker Paul Ryan, played down the potential impact of the memo’s publication on the inquiry led by Special Counsel Robert Mueller.

He said Congress had a duty to see surveillance powers were used correctly.

Mr Trump tweeted: “The top Leadership and Investigators of the FBI and the Justice Department have politicized the sacred investigative process in favor of Democrats and against Republicans.”

The current FBI director, Christopher Wray, was nominated to the post by Mr Trump after the president dismissed his predecessor, James Comey.

Last week the agency’s deputy director, Andrew McCabe, resigned. Mr Trump had repeatedly accused him of political bias but the White House said the president was not involved in the decision.

What’s in the secret memo?

Approved by the House Intelligence Committee on Monday, the document reportedly accuses the FBI (Federal Bureau of Investigation) and justice department of misleading a judge in March of last year while seeking to extend a surveillance warrant against Carter Page.

The memo is said to argue the FBI and justice department did not tell the judge that some of their justification for the warrant relied on a much-disputed Trump dossier.

Compiled by a former British intelligence agent, Christopher Steele, that dossier was financed in part through the campaign of Democratic presidential candidate Hillary Clinton to dig up dirt on Mr Trump.

Unnamed sources told Reuters news agency the Republican memo was misleading because all the dossier excerpts used in the FBI warrant application were independently confirmed by US intelligence.

How united are Republicans over the memo?

It would have been “unthinkable just a short time ago”, Mr Trump tweeted, for FBI and justice department officials to have turned the investigative process “in favor of Democrats and against Republicans

Mr Ryan said it was job of the House to “conduct oversight over the executive branch if abuses were made”.

“What this is not, is an indictment on our institutions, of our justice system. This memo is not [an] indictment of the FBI, of the Department of Justice. It does not impugn the Mueller investigation, or the deputy attorney general.”

However, another Republican member of the House who read the memo, Jeff Duncan, predicted in a tweet that the memo would shake the FBI “down to its core”.

It would, he said, show “Americans just how the agency was weaponized” by officials from Barack Obama’s administration and the Democratic Party to “target political adversaries”.

However, there has been a degree of unease among some other Republican representatives over the risk of compromising intelligence-gathering, NBC reports.

“We run the risk of exposing some sensitive sources and methods,” said one, Charlie Dent.

Why are Democrats calling for Mr Nunes to go?

Congressional Democratic leaders called on Thursday for Mr Nunes’ immediate removal as chairman of the House Intelligence Committee.

Democratic Congressman Adam Schiff accused Republicans of having amended the memo after it was approved.

However, an unnamed Republican aide said the amendments were grammatical changes and “minor edits”, including two tweaks requested by the FBI and by Democrats.

It has voiced “grave concerns about material omissions of fact that fundamentally impact the memo’s accuracy”.

The justice department, which oversees the FBI, has warned the memo’s release could jeopardise intelligence-gathering and damage trust between the agency and lawmakers.

Pressure has mounted on the FBI, which is the subject of a forthcoming inspector general report.

Its deputy director, Andrew McCabe, resigned on Tuesday. He had been repeatedly accused of political bias by President Trump.

James Comey, who led the FBI at the time of the 2016 election and who was sacked by the new president, suggested the agency was being subjected to a witch hunt by “weasels and liars”.

What happens next?

While President Trump is expected to approve the memo’s release, the exact method for publishing it is “still being figured out”, the Associated Press news agency reports.

As president, Mr Trump has the power to declassify the document himself and either release it or hand it to Congress to release.

 

No. 3 U.S. diplomat quits in latest departure under Trump

February 1, 2018

by Lesley Wroughton

Reuters

WASHINGTON (Reuters) – The U.S. State Department’s third-ranking official, Tom Shannon, said on Thursday he was stepping down, the latest senior career diplomat to exit since President Donald Trump took office a year ago.

Shannon, who serves as under secretary of state for political affairs, is the most senior career diplomat at the State Department and has been a fixture among the nation’s diplomatic ranks during more than 34 years of service spanning six presidents and 10 secretaries of state.

In a letter to department staff, Shannon, 60, said he was resigning for personal reasons.

“My decision is personal, and driven by a desire to attend to my family, take stock of my life, and set a new direction for my remaining years,” Shannon wrote in a note to staff after informing Secretary of State Rex Tillerson on Wednesday of his decision to retire.

Shannon worked recently on some of the most complex and sensitive issues, including Iran’s compliance with the landmark nuclear deal and Washington’s fraught relations with Russia.

His departure is part of a steady stream of senior career diplomats who have left since Trump became president. It will deprive the State Department of a seasoned veteran at a time when the United States is grappling with crises on several fronts, most notably North Korea’s nuclear threat.

Shannon’s calm demeanor, language skills and decades of experience made him a frequent choice for some of the thorniest assignments.

Addressing students at Duke University in Durham, North Carolina, hours after his retirement was announced, Shannon emphasized he was not stepping down for political reasons.

“Events in my own life have taught me that while I was blessed in many ways, one thing I don’t have enough of right now is time,” he told students.

He acknowledged that political transitions in Washington were difficult for career civil servants, but said the number of those at the State Department who had left for political reasons was “quite small.”

He added: “Which doesn’t mean that we haven’t been hurt by the loss of some of our officers. We certainly have.”

Shannon represented the United States at the inauguration of Liberia’s new president, George Weah, shortly after reported remarks by Trump that immigrants from Africa and Haiti come from “shithole” countries.

Shannon, who was ambassador to Brazil from 2005 to 2009 and served in posts in Cameroon, Gabon and Johannesburg, was tasked by former President Barack Obama in 2015 with improving acrimonious relations with Venezuelan President Nicolas Maduro.

He was seen as a stabilizing force after Trump and Tillerson took office with a promise to downsize the State Department. He had to manage growing dissent among career diplomats over the new president’s policies that antagonized Muslim nations and long-time allies in Europe and in Mexico.

The forcing out of many senior diplomats, the failure to nominate or to win Senate confirmation for officials to fill key agency roles, and a perception that Tillerson is inaccessible have eroded morale, according to current officials.

The State Department’s under secretary of state for public affairs, Steve Goldstein, said Shannon’s departure was not related to low morale and called him “an amazing man.” Tillerson in November said he was offended by claims that the State Department was being hollowed out under Trump, saying it was functioning well despite scathing criticism from former American diplomats including Nicholas Burns and Ryan Crocker.

In a statement on Thursday, Tillerson congratulated Shannon on a distinguished career, saying, “His time was well spent.”

“I particularly appreciate his depth of knowledge, the role he played during the transition … and his contributions to our strategy process over the past year,” Tillerson said.

In his note, Shannon said he had agreed to stay on until a successor had been named and to ensure a smooth transition.

Additional reporting by David Brunnstrom; Writing by Susan Heavey; Editing by Mary Milliken and Leslie Adler

 

Trump’s Financial Arsonists

The Next Financial Crisis — Not If, But When

February 1, 2018

by Nomi Prins

Tom Dispatch

There’s been lots of fire and fury around Washington lately, including a brief government shutdown. In Donald Trump’s White House, you can hardly keep up with the ongoing brouhahas from North Korea to Robert Mueller’s Russian investigation, while it already feels like ages since the celebratory mood over the vast corporate tax cuts Congress passed last year. But don’t be fooled: none of that is as important as what’s missing from the picture.  Like a disease, in the nation’s capital it’s often what you can’t see that will, in the end, hurt you most.

Amid a roaring stock market and a planet of upbeat CEOs, few are even thinking about the havoc that a multi-trillion-dollar financial system gone rogue could inflict upon global stability.  But watch out.  Even in the seemingly best of times, neglecting Wall Street is a dangerous idea. With a rag-tag Trumpian crew of ex-bankers and Goldman Sachs alumni as the only watchdogs in town, it’s time to focus, because one thing is clear: Donald Trump’s economic team is in the process of making the financial system combustible again.

Collectively, the biggest U.S. banks already have their get-out-out-of-jail-free cards and are now sitting on record profits after, not so long ago, triggering sweeping unemployment, wrecking countless lives, and elevating global instability.  (Not a single major bank CEO was given jail time for such acts.)  Still, let’s not blame the dangers lurking at the heart of the financial system solely on the Trump doctrine of leaving banks alone. They should be shared by the Democrats who, under President Barack Obama, believed, and still believe, in the perfection of the Dodd-Frank Act of 2010.

While Dodd-Frank created important financial safeguards like the Consumer Financial Protection Bureau, even stronger long-term banking reforms were left on the sidelines. Crucially, that law didn’t force banks to separate the deposits of everyday Americans from Wall Street’s complex derivatives transactions.  In other words, it didn’t resurrect the Glass-Steagall Act of 1933 (axed in the Clinton era).

Wall Street is now thoroughly emboldened as the financial elite follows the mantra of Kelly Clarkston’s hit song: “What doesn’t kill you makes you stronger.” Since the crisis of 2007-2008, the Big Six U.S. banks — JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley — have seen the share price of their stocks significantly outpace those of the S&P 500 index as a whole.

Jamie Dimon, chairman and CEO of JPMorgan Chase, the nation’s largest bank (that’s paid $13 billion in settlements for various fraudulent acts), recently even pooh-poohed the chances of the Democratic Party in 2020, suggesting that it was about time its leaders let banks do whatever they wanted. As he told Maria Bartiromo, host of Fox Business’s Wall Street Week, “The thing about the Democrats is they will not have a chance, in my opinion. They don’t have a strong centrist, pro-business, pro-free enterprise person.”

This is a man who was basically gifted two banks, Bear Stearns and Washington Mutual, by the U.S. government during the financial crisis. That present came as his own company got cheap loans from the Federal Reserve, while clamoring for billions in bailout money that he swore it didn’t need.

Dimon can afford to be brazen. JPMorgan Chase is now the second most profitable company in the country. Why should he be worried about what might happen in another crisis, given that the Trump administration is in charge? With pro-business and pro-bailout thinking reigning supreme, what could go wrong?

Protect or Destroy?

There are, of course, supposed to be safeguards against freewheeling types like Dimon. In Washington, key regulatory bodies are tasked with keeping too-big-to-fail banks from wrecking the economy and committing financial crimes against the public. They include the Federal Reserve, the Securities and Exchange Commission, the Treasury Department, the Office of the Comptroller of the Currency (an independent bureau of the Treasury), and most recently, under the Dodd-Frank Act of 2010, the Consumer Financial Protection Bureau (an independent agency funded by the Federal Reserve).

These entities are now run by men whose only desire is to give Wall Street more latitude. Former Goldman Sachs partner, now treasury secretary, Steven Mnuchin caught the spirit of the moment with a selfie of his wife and him holding reams of newly printed money “like a couple of James Bond villains.” (After all, he was a Hollywood producer and even appeared in the Warren Beatty flick Rules Don’t Apply.) He’s making his mark on us, however, not by producing economic security, but by cheerleading for financial deregulation.

Despite the fact that the Republican platform in election 2016 endorsed reinstating the Glass-Steagall Act, Mnuchin made it clear that he has no intention of letting that happen. In a signal to every too-big-not-to-fail financial outfit around, he also released AIG from its regulatory chains. That’s the insurance company that was at the epicenter of the last financial crisis. By freeing AIG from being monitored by the Financial Services Oversight Board that he chairs, he’s left it and others like it free to repeat the same mistakes.

Elsewhere, having successfully spun through the revolving door from banking to Washington, Joseph Otting, a former colleague of Mnuchin’s, is now running the Office of the Comptroller of the Currency (OCC). While he’s no household name, he was the CEO of OneWest (formerly, the failed California-based bank IndyMac). That’s the bank Mnuchin and his billionaire posse picked up on the cheap in 2009 before carrying out a vast set of foreclosures on the homes of ordinary Americans (including active-duty servicemen and -women) and reselling it for hundreds of millions of dollars in personal profits.

At the Federal Reserve, Trump’s selection for chairman, Jerome Powell (another Mnuchin pick), has repeatedly expressed his disinterest in bank regulations. To him, too-big-to-fail banks are a thing of the past. And to round out this heady crew, there’s Office of Management and Budget (OMB) head Mick Mulvaney now also at the helm of the Consumer Financial Protection Bureau (CFPB), whose very existence he’s mocked.

In time, we’ll come to a reckoning with this era of Trumpian finance. Meanwhile, however, the agenda of these men (and they are all men) could lead to a financial crisis of the first order. So here’s a little rundown on them: what drives them and how they are blindly taking the economy onto distinctly treacherous ground.

Joseph Otting, Office of the Comptroller of the Currency

The Office of the Comptroller is responsible for ensuring that banks operate in a secure and reasonable manner, provide equal access to their services, treat customers properly, and adhere to the laws of the land as well as federal regulations.

As for Joseph Otting, though the Senate confirmed him as the new head of the OCC in November, four key senators called him “highly unqualified for [the] job.”  He will run an agency whose history snakes back to the Civil War. Established by President Abraham Lincoln in 1863, it was meant to safeguard the solidity and viability of the banking system.  Its leader remains charged with preventing bank-caused financial crashes, not enabling them.

Fast forward to the 1990s when Otting held a ranking position at Union Bank NA, overseeing its lending practices to medium-sized companies. From there he transitioned to U.S. Bancorp, where he was tasked with building its middle-market business (covering companies with $50 million to $1 billion in annual revenues) as part of that lender’s expansion in California.

In 2010, Otting was hired as CEO of OneWest (now owned by CIT Group).  During his time there with Mnuchin, OneWest foreclosed on about 36,000 people and was faced with sweeping allegations of abusive foreclosure practices for which it was fined $89 million. Otting received $10.5 million in an employment contract payout when terminated by CIT in 2015. As Senator Sherrod Brown tweeted all too accurately during his confirmation hearings in the Senate, “Joseph Otting is yet another bank exec who profited off the financial crisis who is being rewarded by the Trump Administration with a powerful job overseeing our nation’s banking system.”

Like Trump and Mnuchin, Otting has never held public office. He is, however, an enthusiastic proponent of loosening lending regulations. Not only is he against reinstating Glass-Steagall, but he also wants to weaken the “Volcker Rule,” a part of the Dodd-Frank Act that was meant to place restrictions on various kinds of speculative transactions by banks that might not benefit their customers.

Jay Clayton, the Securities and Exchange Commission

The Securities and Exchange Commission (SEC) was established by President Franklin Delano Roosevelt in 1934, in the wake of the crash of 1929 and in the midst of the Great Depression. Its intention was to protect investors by certifying that the securities business operated in a fair, transparent, and legal manner.  Admittedly, its first head, Joseph Kennedy (President John F. Kennedy’s father), wasn’t exactly a beacon of virtue. He had helped raise contributions for Roosevelt’s election campaign even while under suspicion for alleged bootlegging and other illicit activities.

Since May 2017, the SEC has been run by Jay Clayton, a top Wall Street lawyer. Following law school, he eventually made partner at the elite legal firm Sullivan & Cromwell. After the 2008 financial crisis, Clayton was deeply involved in dealing with the companies that tanked as that crisis began. He advised Barclays during its acquisition of Lehman Brothers’ assets and then represented Bear Stearns when JPMorgan Chase acquired it.

In the three years before he became head of the SEC, Clayton represented eight of the 10 largest Wall Street banks, institutions that were then regularly being investigated and charged with securities violations by the very agency Clayton now heads. He and his wife happen to hold assets valued at between $12 million and $47 million in some of those very institutions.

Not surprisingly in this administration (or any other recent one), Clayton also has solid Goldman Sachs ties. On at least seven occasions between 2007 and 2014, he advised Goldman directly or represented its corporate clients in their initial public offerings. Recently, Goldman Sachs requested that the SEC release it from having to report its lobbying activities or payments because, it claimed, they didn’t make up a large enough percentage of its assets to be worth the bother. (Don’t be surprised when the agency agrees.)

Clayton’s main accomplishment so far has been to significantly reduce oversight activities. SEC penalties, for instance, fell by 15.5% to $3.5 billion during the first year of the Trump administration.  The SEC also issued enforcement actions against only 62 public companies in 2017, a 33% decline from the previous year. Perhaps you won’t then be surprised to learn that its enforcement division has an estimated 100 unfilled investigative and supervisory positions, while it has also trimmed its wish list for new regulatory provisions. As for Dodd-Frank, Clayton insists he won’t “attack” it, but thinks it should be “looked” at.

Mick Mulvaney, the Consumer Financial Protection Bureau and the Office of Management and Budget

As a congressman from South Carolina, ultra-conservative Republican Mick Mulvaney, dubbed “Mick the Knife,” once even labeled himself a “right-wing nut job.” Chosen by President Trump in November 2016 to run the Office of Management and Budget, he was confirmed by Congress last February.

As he said during his confirmation hearings, “Each day, families across our nation make disciplined choices about how to spend their hard-earned money, and the federal government should exercise the same discretion that hard-working Americans do every day.” As soon as he was at the OMB, he took an axe to social programs that help everyday Americans. He was instrumental in creating the GOP tax plan that will add up to $1.5 trillion to the country’s debt in order to provide major tax breaks to corporations and wealthy individuals. He was also a key figure in selling the plan to the media.

When Richard Cordray resigned as head of the Consumer Financial Protection Bureau in November, Trump promptly selected Mick the Knife for that role, undercutting the deputy director Cordray had appointed to the post. After much debate and a court order in his favor, Mulvaney grabbed a box of Dunkin’ Donuts and headed over from his OMB office adjacent to the White House. So even though he’s got a new job, Mulvaney is never far from Trump’s reach.

The problem for the rest of us: Mulvaney loathes the CFPB, an agency he once called “a joke.” While he can’t unilaterally demolish it, he’s already obstructed its ability to enforce its government mandates. Soon after Trump appointed him, he imposed a 30-day freeze on hiring and similarly froze all further rule-making and regulatory actions.

In his latest effort to undermine American consumers, he’s working to defund the CFPB. He just sent the Federal Reserve a letter stating that, “for the second quarter of fiscal year 2018, the Bureau is requesting $0.” That doesn’t bode well for American consumers.

Jerome “Jay” Powell, Federal Reserve

Thanks to the Senate confirmation of his selection for chairman of the board, Donald Trump now owns the Fed, too. The former number two man under Janet Yellen, Jerome Powell will be running the Fed, come Monday morning, February 5th.

Established in 1913 during President Woodrow Wilson’s administration, the Fed’s official mission is to “promote a safe, sound, competitive, and accessible banking system.” In reality, it’s acted more like that system’s main drug dealer in recent years. In the wake of the 2007-2008 financial crisis, in addition to buying trillions of dollars in bonds (a strategy called “quantitative easing,” or QE), the Fed supplied four of the biggest Wall Street banks with an injection of $7.8 trillion in secret loans. The move was meant to stimulate the economy, but really, it coddled the banks.

Powell’s monetary policy undoubtedly won’t represent a startling change from that of previous head Janet Yellen, or her predecessor, Ben Bernanke. History shows that Powell has repeatedly voted for pumping financial markets with Federal Reserve funds and, despite displaying reservations about the practice of quantitative easing, he always voted in favor of it, too. What makes his nomination out of the ordinary, though, is that he’s a trained lawyer, not an economist.

Powell is assuming the helm at a time when deregulation is central to the White House’s economic and financial strategy.  Keep in mind that he will also have a role in choosing and guiding future Fed appointments. (At present, the Fed has the smallest number of sitting governors in its history.) The first such appointee, private equity investor Randal Quarles, already approved as the Fed’s vice chairman for supervision, is another major deregulator.

Powell will be able to steer banking system decisions in other ways.  In recent Senate testimony, he confirmed his deregulatory predisposition. In that vein, the Fed has already announced that it seeks to loosen the capital requirements big banks need to put behind their riskier assets and activities. This will, it claims, allow them to more freely make loans to Main Street, in case a decade of cheap money wasn’t enough of an incentive.

The Emperor Has No Rules

Nearly every regulatory institution in Trumpville tasked with monitoring the financial system is now run by someone who once profited from bending or breaking its rules. Historically, severe financial crises tend to erupt after periods of lax oversight and loose banking regulations. By filling America’s key institutions with representatives of just such negligence, Trump has effectively hired a team of financial arsonists.

Naturally, Wall Street views Trump’s chosen ones with glee. Amid the present financial euphoria of the stock market, big bank stock prices have soared.  But one thing is certain: when the next crisis comes, it will leave the last meltdown in the shade because our financial system is, at its core, unreformed and without adult supervision. Banks not only remain too big to fail but are still growing, while this government pushes policies guaranteed to put us all at risk again.

There’s a pattern to this: first, there’s a crash; then comes a period of remorse and talk of reform; and eventually comes the great forgetting. As time passes, markets rise, greed becomes good, and Wall Street begins to champion more deregulation. The government attracts deregulatory enthusiasts and then, of course, there’s another crash, millions suffer, and remorse returns.

Ominously, we’re now in the deregulation stage following the bull run. We know what comes next, just not when. Count on one thing: it won’t be pretty.

 

Japanese authorities raid Coincheck headquarters

Coincheck is facing scrutiny after losing $530 million (€424 million) in a recent hack. The Japanese government has been trying to regulate the cryptocurrency exchanges since 2017.

February 2, 2018

DW

Japanese Financial Services Agency (FSA) carried out a search of Coincheck’s headquarters on Friday, as authorities step up their efforts to regulate cryptocurrencies following a recent hack. The breach of the virtual currency exchange was one of the world’s biggest cyber heists to date.

“We have launched an on-site inspection to ensure preservation of clients’ assets,” Finance Minister Taro Aso said at a briefing on the operation.

Yet another cryptocurrency

The FSA inspection focused on compensation of customers, financial conditions and system management at the exchange. It also focused on Coincheck’s efforts to ensure consumer protection, a senior official said.

Japanese officials argue that Coincheck lacked proper security measures and made itself vulnerable to the hack.

Coincheck submitted an application with the FSA in 2017, which was still pending official approval due to concerns with its security gaps. Nonetheless, Coincheck was allowed to operate.

The FSA has given Coincheck a deadline of February 13 to complete an investigation into the cause of the theft. It must also deal with clients “properly,” strengthen risk management and take preventive measures.

The biggest hack

On January 26 hackers managed to steal $530 million worth of the cryptocurrency New Economy Money (NEM). The last theft of this size occurred in 2014, when more than $480 million in bitcoin was stolen from Japan’s MtGox exchange.

After the MtGox hack, Japan became the first country to introduce a law to regulate the cryptocurrency exchanges in 2017.

 

Cryptocurrency tumble erases over $100bn from digital currency market

February 2, 2018

RT

Bitcoin and other digital currencies have lost over $100 billion in value since Thursday. This represents more than 20 percent of the entire crypto market.

The total market capitalization or value of all cryptocurrencies in circulation was $402.9 billion at the time this article was written.

All major cryptocurrencies fell from 15 to over 40 percent on Friday, continuing the sell-off the day after India’s Finance Ministry announced the country wants to “eliminate” the use of cryptocurrencies in criminal activities.

Bitcoin fell below $8,000 for the first time since November. Ethereum and ripple were down 28 percent and 35 percent respectively.

All but one of the top 100 cryptocurrencies on CoinMarketCap’s list were trading lower. DigixDAO was the only exception, with the digital currency trading 40 percent higher. Its growth is reminiscent of the ‘pump-and-dump’ strategy, which many will be familiar with from the movie, ‘The Wolf of Wall Street’. Under the strategy, a specific stock is pushed hard and investors are promised large returns. After prices peak, the owners and early investors quickly sell as many shares as possible, while the others lose.

“Following the ad ban by Facebook, China banned advertising cryptocurrencies as well. Japan has forced local exchanges to warn about risks of cryptocurrency trading. While India announced the toughening of the regulation of the cryptocurrency market. Bitcoin can rebound, but on the upside investors will sell it in the short term,” the chief analyst at GLOBAL FX, Sergey Melnikov, said in an email to RT.

 

No, Kansas, you can’t ban contractors from boycotting Israel

January 31, 2018

by The Kansas City Star Editorial Board

A federal judge in Topeka has ruled that Kansas cannot tell contractors what they can and cannot boycott. That would seem obvious to anyone familiar with free speech protections under the First Amendment.

But last summer, Kansas passed a law requiring all those who contract with the state to certify that they are not boycotting Israel.

Why? In his opinion blocking enforcement of the law while the suit by the American Civil Liberties Union continues, U.S. District Judge Daniel Crabtree wrote that its supporters in the Kansas Legislature argued that it was intended “to stop people from antagonizing Israel.”

They “emphasized the need to oppose ‘Boycott, Divestment, Sanctions’ campaigns,” Crabree wrote, “which protest the Israeli government’s treatment of Palestinians in the occupied territories.”

In other words, the law is supposed to limit political speech. A similar bill proposed in Congress, the Israel Anti-Boycott Act, would criminalize such speech outright.

Have we forgotten that the American Revolution grew out of a boycott of British goods? So did the civil rights protections won through the Montgomery bus boycott.

In 1982, the Supreme Court upheld boycotts as constitutionally protected political speech. In NAACP v. Claiborne Hardware Co., the high court looked at the boycott of white-owned businesses in Port Gibson, Mississippi, and found that “speech, assembly, and petition . . . to change a social order that had consistently treated [African Americans] as second-class citizens” are “on the highest rung of the hierarchy of First Amendment values.”

That’s why Crabtree ruled that the “Supreme Court has held that the First Amendment protects the right to participate in a boycott like the one punished by the Kansas law,” which took effect July 1.

The ACLU suit challenging the law was brought on behalf of Esther Koontz, a Mennonite math curriculum coach from Wichita who had been encouraged by her church to join a boycott of Israeli companies last spring.

A couple of months after Koontz decided to stop buying Israeli products, she was invited to start coaching teachers across the state, as part of the Kansas Department of Education’s Math and Science Partnerships program.

She was eager to take on the extra work, which pays $600 a day plus expenses. But the program director told her that she first had to sign a certificate that she wasn’t boycotting Israel.

After a lot of thought, Koontz decided that she couldn’t in good conscience do that.

The program director said that in that case, she couldn’t have a contract with the state.

In its defense, Kansas argued that it would have given Koontz a waiver on religious grounds had she asked for one.

But had she reached the same conclusion on non-religious grounds, she’d still have the same right to express herself politically.

Kansas also argued that Israel might refuse to do business with or in the state if it did not punish boycotters. But it presented no evidence of any threat to the Kansas economy.

And as a thought exercise, maybe Republican proponents of the law should consider how they’d react if the state barred boycotts of Keurig, or Starbucks, or Nordstrom, or Target or the NFL.

No sale, right? No in all cases.