Week in Review

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Week in Review

03/16/2019

For the week 3/11-3/15

[Posted 11:30 PM ET, Friday]

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Edition 1,040

Eons ago, 2003, I took a long trip on the QE2 from Los Angeles to Sydney, 25 days (we meandered around a lot) and one of the stops was in Auckland.  As was the case on my journey, which was nothing like I thought it would be, for large portions it kind of sucked, especially with poor, nay, virtually non-existent internet service as I was attempting to do columns the entire time, when we hit a port I was the first one off...off to the pub, and then the museums, which I largely went to on my own, rather than the ship-sponsored stuff.

But 2003 was also the year of the America’s Cup races in Auckland, so aside from going to the war museum, and a pub, I went to check out the America’s Cup trophy and some of the yachts, though if I recall, a lot of the competitors weren’t in yet.

Anyway, at night I did sign up for a dinner with a local family in the suburbs, just four of us QE2 folks and the hosting couple, and it was absolutely delightful.  A fond memory. 

But that was the North Island, Christchurch is on the South Island, and we never made it to the South.  In fact we were supposed to dock in Whangerai, further north, the next day, but we were told that night that because it was a national holiday there, Cunard decided it might get a little hairy...as in a bit ‘riotous’ with the partying....so we headed to Hobart, Tasmania, instead. 

Which was great.  Picture, 9/11 was very much a fresh memory for the world, and as our ship purred into Hobart harbor, early in the morning, there was a small band and a children’s choir singing to us, “God Bless America.”  Man, there wasn’t a dry eye on the ship, all of us on the deck taking it in.

[The rest of the day in Hobart was eventful...as in after a little tour with a friend I had made, I headed to a pub near the ship...only I forgot what time I needed to be back and thank god I was in running shape then because I had to race back, literally within two minutes of us leaving, or I would have had to pay major bucks to be airlifted back on the vessel....but I digress...]

When you see what happens to a country like New Zealand this week, Christchurch having also been through that awful earthquake a few years ago, the beautiful South Island, where “Lord of the Rings” was largely filmed (North Island, too), your heart goes out to them.

And it’s so depressing on so many levels.  While we have become inured to the violence, and the mass shootings, whether it is a school, theater, or place of worship, how can you not feel despondent over the future of our civilization? 

And, obviously, a huge culprit is social media, and just the internet (and smartphones) in general, which for all its many benefits is critical in allowing Evil to flourish, whether it’s al Qaeda or ISIS recruiting and planning new attacks, or some white supremacist having access to the kind of hate that is so prevalent.

As I describe below in ‘Street Bytes’ and a story on Huawei, the internet could also be used in ways affecting our ability to defend the country, and our very way of life.

It’s too late now. The genie is long out of the bottle.  But, boy, our kids are going to experience some wicked stuff that we can’t even begin to imagine.

We need leaders...great ones.  We need Reagan and Churchill types...Margaret Thatcher.  FDR.

We need the likes of Dwight Eisenhower.  Harry Truman.  Abraham Lincoln.  And as many in Turkey are rediscovering, curiously, someone like Ataturk, who in today’s vernacular, “got it.”

But now?  We have Putin, Xi, Ayatollah Khamenei, a crazy young guy who goes by the moniker MBS.  And we have a chubby man with an immensely bad haircut in Pyongyang, who likes to blow away his relatives with an anti-tank weapon.

We also have a president of our own country who does not believe white nationalism is a rising global threat.

“I don’t really,” said President Trump today. “I think it’s a small group of people that have very, very serious problems.  It’s certainly a terrible thing.”

Yes, Mr. President, it is.  A synagogue in Pittsburgh.  A church in Charleston.  A Sikh temple in Wisconsin.  Innumerable racist attacks in Britain and France. 

It’s more than a small group, President Trump.

And do you think al Qaeda’s and ISIS’ recruiting numbers will spike after Christchurch?  I wonder if Nielsen can track that.

Sorry for this opening.  I know I just lost a few more readers.  But what happened in Christchurch was big.  A big lesson for those willing to listen.

Thank god we have sports.  Watch The Players Championship this weekend.  Cheer on Rory McIlroy, a truly good guy who’s had trouble closing the deal. Watch some NCAA conference tournament action.  Such events are there for a reason.  Diversions.

Trump World

--The Senate approved a resolution Thursday that would nullify President Trump’s national emergency declaration to confront what he called “a crisis” at the southern border –a rare rebuke for the president in the upper chamber.

The Senate cleared the measure 59-41, with a dozen Republicans ignoring Trump’s pressure and joining all Democrats and two independents who caucus with them in voting to kill the declaration. 

The rebuke came after a lengthy effort by Senate Republicans to convince the White House to withdraw the resolution and turn to other means to construct the border wall.  But then in recent days, 12 peeled away.

Sen. Lamar Alexander (R-Tenn.) publicly urged the administration to look elsewhere for border money, warning that the resolution is “a dangerous precedent” that future Democratic presidents will use to enact other priorities, like gun control and climate change.

Sen. Mike Lee (R-Utah) tried to broker a compromise with a resolution to limit the president’s power to enact emergency declarations.  The White House rejected both of them.

Sen. Mitt Romney (R-Utah) said, “This is a vote for the Constitution and for the balance of power that is at its core.  For the executive branch to override a law passed by Congress would make it the ultimate power rather than a balancing power.”

The other nine joining the above three in voting with the Democrats were Sens. Roy Blunt (Mo.), Susan Collins (Maine), Jerry Moran (Kan.), Lisa Murkowski (Alaska), Rand Paul (Ky.), Rob Portman (Ohio), Marco Rubio (Fla.), Pat Toomey (Penn.) and Roger Wicker (Miss.).

Good for all twelve.

Sen. Thom Tillis (R-N.C.), who is running for reelection next year, said last month he would support the measure, then he flipped Thursday under intense lobbying from the White House.

President Trump tweeted immediately after “VETO!”  And he did this afternoon.

Trump tweeted earlier: “I look forward to VETOING the just passed Democrat inspired Resolution which would OPEN BORDERS while increasing Crime, Drugs, and Trafficking in our Country. I thank all of the Strong Republicans who voted to support Border Security and our desperately needed WALL!”

The Senate will not have the 67 votes to override, but this was an important move by the 12 Republicans, who now face the president’s wrath.  A White House official warned that Trump, who demands loyalty (fealty) above all else from his supporters and Republicans, won’t forget when senators want him to attend fundraisers or provide other help.

Sen. Minority Leader Chuck Schumer (N.Y.) said on the Senate floor: “Democrats and Republicans both know the sad truth: The president did not declare an emergency because there is one. He declared an emergency because he lost in Congress and wants to get around it.  He’s obsessed with showing strength, and he couldn’t just abandon his pursuit of the border wall, so he had to trample on the Constitution to continue his fight.”

But the president has his leading campaign issue now.

--Robert Mueller asked a court to delay sentencing for President Trump’s former deputy campaign chairman, Rick Gates, amid “ongoing investigations” stemming from the Russia investigation.  In a filing with the U.S. District court in Washington, Mueller cited Gates’ continuing cooperation with multiple probes and asked permission to update the judge on the case again by May 14.

Gates was the longtime business partner of Trump campaign chairman Paul Manafort, who faces more than seven years in prison for financial and conspiracy crimes after sentencing this week in a separate case in federal court in Washington.

Unlike Manafort, who stood trial and was found guilty in one case in Virginia before pleading guilty in another case in Washington, Gates agreed early on to cooperate with Mueller’s team and took the stand to testify against his former business partner.  Gates pleaded guilty in February 2018 to conspiracy against the United States and lying to investigators.

Separately, the House voted 420-0 for a resolution calling for any final report in special counsel Mueller’s investigation to be made public, a non-binding action designed to pressure Attorney General William Barr into releasing as much information as possible when the probe is concluded.

As for Manafort, who was sentenced last week to nearly four years in prison,  a sentence viewed as light given the extent of his crimes and sentencing guidelines, he was ordered on Wednesday to serve an additional 3 ½ years for conspiracy, closing out the special counsel’s highest-profile prosecution.

“It is hard to overstate the number of lies and the amount of fraud and the amount of money involved,” Judge Amy Berman Jackson of Federal District Court in Washington said of Manafort’s case. 

But then shortly after Judge Jackson’s decision, a Manhattan grand jury indicted Manafort on charges of residential mortgage fraud and other state crimes.  This was overkill, but seemingly done for one reason.  If Trump ends up pardoning Manafort, he’d still be on the hook for the new state charges.

--House Speaker Nancy Pelosi said she doesn’t support pursuing the impeachment of President Trump, saying such a step would be too divisive and the Democratic Party should focus instead on winning back the White House in 2020.

“I’m not for impeachment,” Pelosi said in an interview with the Washington Post.  “Impeachment is so divisive to the country that unless there’s something so compelling and overwhelming and bipartisan, I don’t think we should go down that path, because it divides the country.  And he’s not worth it.”

She’s right.

Asked about critics’ concerns about the Trump presidency, she said the country “can withstand anything.  But maybe not two [Trump] terms.  So we have to make sure that doesn’t happen.”

--The administration proposed its fiscal 2020 budget and it’s dead on arrival and not worth more than a line or two. 

Except the budget piles on an additional $4.8 trillion in debt over the next five years, and that is based on continued robust growth, so a recession or even slower growth sends the debt even higher.

It’s still all about entitlements, and as an editorial in USA TODAY succinctly puts it, “voters want more from government than they are willing to pay for, and politicians are giving voters what they want.”

“To justify their calls for major increases in health care, education and environmental spending, some progressives are pushing a cockamamie notion called ‘modern monetary theory,’ which holds that deficits don’t matter so long as the government is borrowing in its own currency.  Call it the Democratic counterpart to the cockamamie conservative belief in ‘supply side economics,’ the notion that tax cuts will magically pay for themselves.

“Many Democrats are pushing have-your-cake-and-eat-it-too spending plans that almost perfectly mirror Republicans’ have-your-cake-and-eat-it-too tax cuts.  It has apparently become a race for who can show me the most bad faith and callous disregard for America’s future economic well-being. This race will not end well.”

Editorial / Wall Street Journal

“The real political action will be the debate over defense.  Interest on the federal debt is on track to exceed defense spending by 2024.  Mandatory spending is on auto pilot, and these entitlements are now about two-thirds of the federal budget.  Defense spending is about 3% of the economy, down from 6% in 1986.  That compares to 15% of GDP in 2017 for ‘payments for individuals,’ such as transfer programs like Medicare and food stamps, up from 6.2% in 1970 and 11.7% in 2005.

“The President wants $750 billion for defense in 2020, up from $716 billion in 2019 – a substantial 5% increase.  The budget includes important priorities like more missile interceptors, 110 new jet fighters and artificial-intelligence research and development....

“The Administration is proposing to reach the $750 billion defense target by using an account known as the overseas contingency operations fund.  That fund exists ostensibly to supplement funding for the war on terror and is exempt from the budget caps.  The White House would bump contingency funding to $165 billion in 2020 and $156 billion in 2021, up from $69 billion in 2019.

“Democrats are already objecting....

“Mr. Trump would be on stronger ground politically here if he hadn’t declared a national emergency to raid military construction funds for his border wall.  This has angered GOP defense hawks.  Democrats will remind voters that the last time they increased defense spending, Mr. Trump pilfered some of it to pay for his political project.

“If Republicans don’t hang together, this will probably end with another game of government-shutdown roulette, and another omnibus bill that obviates the President’s spending veto.  Congress’ budget process is broken, but Congress doesn’t want to fix it because it works for the spenders, if not for taxpayers.  Better hope the economy keeps growing enough to fund national defense.”

--Acting Defense Secretary Pat Shanahan shot down reports that the White House may ask allies to pay 150 percent of the costs of basing U.S. forces on their soil, a proposal that has been criticized by lawmakers and former senior defense officials as “a colossal mistake” and “pure idiocy.”

Those reports, which emerged late last week, are “erroneous,” Shanahan told the Senate Armed Forces Committee in his first appearance before Congress as the acting head of the Pentagon.

“We won’t do cost-plus-50,” Shanahan said, using a common shorthand for the alleged proposal.  “We’re not going to run a business and we’re not going to run a charity.  The important part is that people pay their fair share.”

President Trump has been insisting repeatedly that allies contribute more towards having our presence in their nations.

The other day, Bloomberg first reported the proposal, which may have been part of a White House negotiating strategy aimed at pushing U.S. allies in Europe and elsewhere to foot more of the bill.  But it seems, now, that it was a trial balloon, one that was quickly deflated.  Mac Thornberry of Texas, the top Republican on the House Armed Services Committee, said this week that the proposal, if real, wouldn’t go over well on Capitol Hill.  “Some of the allies who host U.S. troops do some of the most to support our joint defense needs,” he said.  “So I don’t know how seriously to take such reports.”

Ben Hodges, a retired 3-star general who was the most recent commanding general of U.S. Army Europe, said in an email to Defense One: “I’m very concerned about this.  It shows either a complete lack of understanding or a complete disregard for the value of the access we get from having bases in Europe.”

On a related note, according to NATO Secretary-General Jens Stoltenberg’s annual report, seven of 29 members in the North Atlantic Treaty Organization met the target of spending at least 2% of gross domestic product on defense last year, compared with four the year before.  Germany, Europe’s biggest economy and a focus of President Trump’s ire, spent 1.23% of GDP on defense in 2018, the same level as in 2017.

Stoltenberg told a press conference: “Germany has after years of cutting military spending started to increase...but I expect more.  Germany has made it clear that they plan to further increase military spending.”

Editorial / Wall Street Journal

“Mr. Trump’s persistent monetary demands send a message that U.S. support for allies is always negotiable and might be withdrawn at a moment’s notice. They also suggest that American support is about money, not shared security.  Is the U.S. military a mercenary corps?

“The U.S. learned through hard experience in the last century that deploying troops abroad serves the national interest.  The forward forces help to maintain global order and prevent aggression by would-be regional hegemons like Russia, China and Iran. They also enable the U.S. to quickly mobilize against terrorists and other regional threats.

“On NBC’s ‘Meet the Press’ Sunday, GOP Rep. Liz Cheney said Cost Plus 50 is ‘wrongheaded and it would be devastating to the security of the nation.’ She added that ‘we should not look at this as though somehow we need to charge them rent or for the privilege of having our forces there because that does us a huge benefit as well.’  She’s right.

“It makes sense to periodically review deployments abroad to see if they still fulfill their strategic purpose. But that review should be done carefully and in consultation with allies, not as an impulsive negotiating strategy leaked to the media.  For decades a major strategic goal of authoritarian states like Russia and China has been to divide the U.S. from its allies. Mr. Trump shouldn’t help them do it.”

--President Trump slammed ex-House Speaker Paul Ryan for not being aggressive enough in going after his perceived enemies and said Democrats “played a tougher game” than Republicans even though all of the really tough people back him.

“Paul Ryan wouldn’t give the right to have any subpoenas,” Trump told Breitbart News in an interview, charging that two of his staunchest congressional backers, Freedom Caucus co-founders Mark Meadows of North Carolina and Jim Jordan of Ohio, wanted more authority to go after unidentified targets.

“Okay? Now in all fairness, Meadows and Jordan and all these guys, they wanted to go tougher, but they weren’t allowed to by leadership,” Trump said.

“So here’s the thing – it’s so terrible what’s happening. You know, the left plays a tougher game, it’s very funny.  I actually think that the people on the right are tougher, but they don’t play it tougher,” the president said.

Then:

“Okay? I can tell you I have the support of the police, the support of the military, the support of the Bikers for Trump – have the tough people, but they don’t play it tough – until they go to a certain point, and then it would be very bad, very bad,” he continued, without specifying what would be “very bad.”

--Trump tweets:

“So, if there was knowingly & acknowledged to be ‘zero’ crime when the Special Counsel was appointed, and if the appointment was made based on the Fake Dossier (paid for by Crooked Hillary) and now disgraced Andrew McCabe (he & all stated no crime), then the Special Counsel....

“....should never have been appointed and there should be no Mueller Report. This was an illegal & conflicted investigation in search of a crime.  Russian Collusion was nothing more than an excuse by the Democrats for losing an Election that they thought they were going to win....

“....THIS SHOULD NEVER HAPPEN TO A PRESIDENT AGAIN!”

“The Democrats are ‘Border Deniers.’  They refuse to see or acknowledge the Death, Crime, Drugs and Human Trafficking at our Southern Border!”

“The ‘Jexodus’ movement encourages Jewish people to leave the Democrat Party. Total disrespect!  Republicans are waiting with open arms. Remember Jerusalem (U.S. Embassy) and the horrible Iran Nuclear Deal! @OANN @foxandfriends”

“I greatly appreciate Nancy Pelosi’s statement against impeachment, but everyone must remember the minor fact that I never did anything wrong, the Economy and Unemployment are the best ever, Military and Vets are great – and many other successes! How do you impeach....

“....a man who is considered by many to be the President with the most successful first two years in history, especially when he has done nothing wrong and impeachment is for ‘high crimes and misdemeanors’?”

“So many records being set with respect to our Economy. Unemployment numbers among BEST EVER.  A beautiful thing to watch!”

“Airplanes are becoming far too complex to fly. Pilots are no longer needed, but rather computer scientists from MIT.  I see it all the time in many products. Always seeking to go one unnecessary step further, when often old and simpler is far better. Split second decisions are....

“....needed, and the complexity creates danger. All of this for great cost yet very little gain. I don’t know about you, but I don’t want Albert Einstein to be my pilot. I want great flying professionals that are allowed to easily and quickly take control of a plane!”

“At a recent round table meeting of business executives, & long after formally introducing Tim Cook of Apple, I quickly referred to Tim + Apple as Tim/Apple as an easy way to save time & words. The Fake News was disparagingly all over this, & it became yet another bad Trump story!”

Pathetic.

Wall Street and China trade talks....

Appearing on “60 Minutes” Sunday, Federal Reserve Chairman Jerome Powell said the U.S. economic outlook is favorable and that the economy doesn’t require higher or lower interest rates today.

“Our interest-rate policy is in a very good place,” he said during a rare television interview.  Powell said the main risks to the U.S. economy are now from slower growth in China and Europe.

The interview itself was basically a non-event, but it allowed Powell a venue to further signal a pivot at the Fed from the beginning of the year that it was moving to the sidelines after four rate hikes in 2018, until officials could better see how recent financial-market developments might slow the economy.

“What’s happened in the last 90 days or so is that we’ve seen increasing evidence of the global economy slowing down,” said Powell.  “We’re going to wait and see how those conditions evolve before we make any changes to our interest-rate policy.”

Separately, in answer to a question, Powell said he didn’t believe President Trump had the authority to dismiss him. The Fed chairman began serving a four-year term in February 2018 after Trump nominated him for the post.

“The law is clear that I have a four-year term.  And I fully intend to serve it,” Powell said.  The chairman has been under pressure from President Trump, who has second-guessed Fed policy in public unlike any president in at least the last 25 years.

“It’s very important that the public understand that we are always going to make decisions based on what we think is right for the American people,” Powell said.  “We will never, ever take political considerations into effect.”

In terms of the economic data this week, Monday, we had the release of January retail sales, following December’s disastrous reading that was revised further downward, -1.6%.  January came in at 0.2%, slightly better than expected but hardly robust.  Nonetheless, the market took heart from it and rallied.

Tuesday, February consumer prices came in at 0.2%, in line, 0.1% ex-food and energy; up 1.5% year-on-year, 2.1% on core.  The next day, February producer prices were also tame, 0.1%, ex-food and energy the same, with the yoy figures being 1.9%, 2.3%.

Wednesday, January durable goods orders were better than forecast, 0.4%, when a decline was expected, but -0.1% ex-transportation.  January construction spending was solid, 1.3%.

Thursday, new-home sales were below forecasts, 607,000, but the 3-month average for this volatile data set of 629,000 is the best since June...encouraging.

Friday, we had February industrial production, 0.1%, less than expected.

The Atlanta Fed’s GDPNow barometer for the first quarter is just 0.4%, with consensus around 1.0%.  At this point, with further data to come, it would appear Q1 GDP will be below 2% and how President Trump reacts to this will be interesting.

It seems as if the stimulus from the 2017 tax cuts is fading, with companies still cautious when it comes to capital spending.  The president and Congress have also failed miserably in enacting a sweeping infrastructure program that would help on the growth front.

But Wall Street took all the above in, as well as perhaps misguided optimism on the trade front between the U.S. and China, and rallied, shaking off its putrid performance from the week before, the Dow Jones up 1.6%...more below.

Speaking of trade talks...

Chinese state media reported on Friday that China and the United States have made “concrete progress” on the text of their trade agreement, Xinhua reporting that Vice-Premier Liu He held a telephone conversation with U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin on Thursday.

The statement came after President Trump said Washington would know where things stood regarding a possible trade deal with China in the next three or four weeks.  He said China had been “very responsible and very reasonable.”

“If that one gets done, it will be something that people will be talking about for a long time,” Trump said.

But Trump also said he was “in no rush” to make a deal, contrasting with what he said was Beijing’s impatience.

“China very much wants to make a deal,” he said, Trump adding that Chinese President Xi understands that he would walk away from a weak offer, as he had done in the Hanoi summit with Kim Jong Un.

Sec. Mnuchin said after a Senate Finance Committee hearing on Thursday that the two sides were “working in good faith” to try to reach a deal “as quickly as possible,” but that a summit between Trump and Chinese President Xi to seal a deal would not happen at the end of March as had been suggested by Trump previously.

“There’s still a lot of work to do, but we’re very comfortable with where we are,” Mnuchin said.  “I don’t think there’s anything significantly different on the currency issue from where we were last time.”

Mnuchin said the two sides were poring over a 150-page document they are working on.

Tuesday, Trade Representative Lighthizer told a Senate committee, “we are in the final weeks of having an agreement – but I’m not predicting one.”

“There are still major, major issues that have to be resolved,” he added, “and if those issues are not resolved in a way that’s beneficial to the United States, we will not have an agreement.”

China reportedly wants a state visit by Xi to the U.S. with the announcement of any forthcoming trade deal, but Washington is non-committal.  Trump and his aides have been pushing for a meeting in Mar-a-Lago at the appropriate time; Trump saying himself it’s only when the two leaders meet that the final details can be ironed out.

But Chinese officials are growing increasingly wary of putting Xi in a position where he might be embarrassed by an unpredictable Trump or forced into last-minute concessions.

China passed a new foreign investment law in a move widely seen as an olive branch to the U.S. as negotiators work to resolve their differences, delegates voting overwhelmingly in favor of the law on the final day of the National People’s Congress.

But the law, which would go into effect on Jan. 1, 2020, hardly addresses the concerns of foreign firms about doing business in China, the provisions very ‘general’ in nature and hardly of a type that addressed persistent concerns of foreign companies in China.

The law would ban forced technology transfer and illegal government “interference” in foreign business practices, with Li stressing that China did not, and would never, ask Chinese companies to spy on other countries.  You can stop laughing.

Separately, Secretary of State Mike Pompeo accused China of blocking energy development in the South China Sea through “coercive means,” preventing Southeast Asian countries from accessing more than $2.5 trillion in recoverable energy reserves.

Addressing top executives from energy companies and oil ministers in Houston, Pompeo criticized “China’s illegal island building in international waterways,” insisting that it was not “simply a security matter.”

By contrast, Pompeo said, “the United States government promotes energy security for those Southeast Asian nations.  We want countries in the region to have access to their own energy.”

Pompeo’s remarks, while spot on, won’t help the trade discussions.

One other issue at play is Boeing.  The company was hoping for a potential order for more than 100 jets worth well over $10 billion at list prices, odds for which had risen in recent weeks as part of the trade deal, but now the Ethiopian Airlines crash, and the grounding of the 737 MAX has cast a pall on any China-Boeing deal, at least for now.

China placed no orders for Boeing aircraft in 2018 (it ordered 300 in 2017), as Beijing and Washington warred, but China has continued to look to split its aircraft orders between the company and rival Airbus (while China frantically invests in homegrown aircraft businesses, no doubt by stealing Boeing and Airbus technology).  China is going to overtake the United States as the world’s largest aviation market in the next decade, with Boeing seeing Chinese demand for 7,700 jets over 20 years, worth $1.2 trillion.

Separately, President Trump riled up the EU when on Thursday, sitting next to Irish Prime Minister Leo Varadkar as part of the traditional St. Patrick’s Day gathering at the White House, he warned Brussels that his administration could inflict “pretty severe” economic pain on the EU if it did not engage in trade talks with Washington.  Trump lamented that the EU had been “very, very tough” to deal with on trade over the years.

“They were unwilling to negotiate with the Obama administration, and they were unwilling before that, to be honest.   I’m not just blaming President Obama,” Trump said.  “If they don’t talk to us, we’re going to do something that’s going to be pretty severe economically. We’re going to tariff a lot of their products,” he said.

The EU did in fact hold lengthy negotiations with the Obama administration, only they weren’t concluded by the time he left office. Talks between the EU and the U.S. are at a stalemate because Washington wants to include agriculture in the negotiations, which Brussels is resisting.

Meanwhile, the U.S. has slapped tariffs on EU steel and aluminum imports, and has threatened to impose more levies on EU automotive imports, actions which have diminished trust in the Trump administration across European capitals.

Thursday, the European Parliament voted against moving ahead with the negotiations with Washington.

Europe and Asia

Just one note on the overall eurozone economy.  Industrial production in January was up 1.4% over December, but only up 1.1% year-on-year.

Instead, it was all about....

Brexit:  After a frantic day of activity in Dublin, London and Strasbourg on Monday, as British Prime Minister Theresa May sought to secure a better deal on the Irish backstop, the government boasted of achieving “legally binding” changes that “strengthen and improve” the Withdrawal Agreement, but in fact there was no change to the backstop, which ensures no return to a hard Border on the island of Ireland, though there is a vision of an “alternative arrangement” being found by December 2020, the end of any transition period.

But then Tuesday...Mrs. May’s ‘new’ plan to quit the European Union, which looked remarkably like everything else she has presented, was again voted down, 391 to 242.

“Let me be clear,” said an exhausted and hoarse May, “that voting against leaving without a deal and for an extension does not solve the problems we face.  The EU will want to know what use we mean to make of such an extension, and the House will have to answer that question.”

EU Brexit negotiator Michel Barnier said after the Commons vote, “The EU has done everything it can to help get the Withdrawal Agreement over the line.  The impasse can only be solved in the UK.” 

European Council President Donald Tusk and the bloc’s executive European Commission said the EU had done “all that is possible to reach an agreement...it is difficult to see what more we can do.”

Wednesday...Parliament then voted 321 to 278 in favor of a motion that ruled out a potentially disorderly ‘no-deal’ Brexit under any circumstances.  While this has no legal force and ultimately may not prevent one, it carries considerable political force, especially as it passed thanks to a substantial rebellion by members of May’s own Conservative Party and her Cabinet.  May had insisted that it was not possible to completely rule out a no-deal Brexit, and said lawmakers would need to agree to a way forward before an extension could be obtained.

Former British Foreign Secretary Boris Johnson said Britain will leave the EU on March 29 after a deal is reached “at five minutes to midnight.”

Johnson, one of the most prominent Brexit campaigners, said that the vote to rule out a no-deal exit would not take no-deal off the table.

“It’s quite possible that parliament will vote symbolically to say that it doesn’t want a no-deal...but what happens then is that under the law, the UK will leave the EU on March 29 because that is what the law provides.”

The EU’s Michel Barnier questioned whether there was any point in delaying Britain’s departure from the EU beyond March 29, saying the British government would need to justify any request.

“Extend this negotiation – what for?”  Barnier asked in a speech to the European Parliament in Strasbourg.  “It’s over.”

Barnier said that whatever happened, the withdrawal treaty he had agreed with Prime Minister May would remain the only deal on offer.  He ruled out offering any more assurances on the Irish backstop beyond those given by the EU to May on Monday, before the British parliament rejected the deal.

“If the UK still wants to leave the EU in an orderly manner, this treaty is – and will remain – the only treaty possible,” he said.  Barnier stressed Britain would still need to honor its commitment to preserve a Border free of controls on this island.

Thursday...Parliament voted overwhelmingly to seek a delay to the March 29 exit date enshrined in law, 413-202, but how the divorce from the EU actually pans out remained up in the air.  And with the March 29 exit date legally binding, all 27 other EU countries must agree to any extension the UK requests.  That said, it was a win for Prime Minister May, after nothing but defeat, though its contingent on parliament agreeing to the deal that has already been knocked down twice.

So with days to go until March 29, it’s no clearer on what terms the UK would pull out.  There are serious concerns that leaving the EU without a deal in place could damage the economy and lead to shortages or price increases in food and medicine, among other consequences.

While the parliament agreed that Brexit could be delayed by three months, until June 30, that is only if MPs vote to agree to a deal by next Wednesday so there is enough breathing space before it’s implemented.

A short extension of a few weeks if May’s deal was passed next week would be granted by the other 27 EU members at the summit in Brussels on March 21.  A long delay would only be acceptable if Mrs. May put forward a clear alternative or proposed a second referendum or an election.

The bottom line is the EU wants the UK to demonstrate a real strategy, which has been lacking throughout the process.

And, again, the law has not changed, the votes this week were mere motions, meaning the UK is still set to leave on March 29 – with or without a deal.

French President Emmanuel Macron said Britain would need to come up with a clear reason for requesting an extension to the March 29 deadline, saying extra time could not be used to renegotiate the withdrawal.

Today, Dutch Prime Minister Mark Rutte, a key leader in the EU, reiterated the current withdrawal agreement was the “only deal on the table.”

A German government spokesman said Friday, “We have always stressed that a British exit without an agreement would be in nobody’s interest,” Steffen Seibert said. “Nonetheless, it is clear that the next proposal on how to take things forward must come from Britain.”

Theresa May’s de-facto deputy, David Lidington, told BBC radio today that Britain wants an orderly exit but the legal default is still to leave on March 29 unless an alternative solution is put in place.

“By the end of March we have to have an alternative in place, not just a resolution of the House of Commons, a preference, but a solution in place that enables us to have an extension so there isn’t crash out on Mach 29.”

Business leaders warn that tearing up 40 years of agreements with the EU and its market of 500 million people without a transition deal would cause chaos.

So another chaotic week to come...and I haven’t even brought up the European Parliament angle.

Turning to Asia...in his annual press conference following the National People’s Congress, Premier Li Keqiang said today that the government has additional monetary policy measures that it can take to support economic growth this year, and will even cut “its own flesh” to help finance large-scale tax cuts.

China has promised billions of dollars in tax cuts and infrastructure spending to help businesses and protect jobs, as economic momentum is expected to cool further due to softer domestic demand and the trade war with the United States.

With the target for growth in 2019 set at 6% to 6.5%, down from 6.6% in 2018, the slowest pace of growth since 1990, it is clear China is ready to roll out even more stimulus measures.  Look for more action such as a further reduction in reserve requirements for the banks to encourage lending and lower funding costs for small business in particular.

To finance the tax cuts, China would need to tighten its belt elsewhere, thus the cutting their “flesh” reference.

So there was a slew of data released this week by the National Statistics Bureau, adding ammunition to Premier Li’s comments on stimulating the economy.  Industrial production for the months of January and February (the NBS combining the two because of the annual distortions created by the Lunar New Year holiday, the date for which is different every year) was +5.3%, a 17-year low.

Fixed-asset investment was +6.1%, a little better than forecast, as the government fast-tracked road and rail projects.

Retail sales were +8.2%, which sounds good but is the slowest pace since June 2003.

Worrisomely, the unemployment rate rose to 5.3% from 4.9% end of December; further proof of the need for more measures, Beijing recognizing that any stimulus enacted has a lagged effect.

One more...China’s new home prices in February rose 0.5% from a month earlier, 10.4% year-over-year for the 70-city index.  There have been signs that some smaller Chinese cities are loosening restrictions on buyers, as authorities worry the cooling property market will further hurt the softening economy.

In Japan, core machine orders (a key metric here) for January fell 2.9% year-on-year, the fastest rate in four months.

Street Bytes

--As alluded to above, after a big down week that broke a long winning streak, stocks rebounded, with the Dow Jones up 1.6% to 25848, less than a 1,000 points from the all-time high of 26828, while the S&P 500 soared 2.9% and Nasdaq 3.8%.  I frankly don’t understand at all this last one.  Someone tell me how the tech story improved this week.

--U.S. Treasury Yields

6-mo. 2.50%  2-yr. 2.44%  10-yr. 2.59%  30-yr. 3.01%

The 10-year yield is the lowest ‘weekly’ close since Jan. 2018.

--U.S. oil prices climbed to a four-month high this week after domestic data showed a decline in inventories of oil and gasoline, unexpected for both, while U.S. production dipped slightly to 12 million barrels a day versus the prior week’s record high of 12.1 million. 

[The Energy Information Administration announced the other day that U.S. production hit a record 10.95m b/d during 2018, eclipsing supplies from Saudi Arabia and Russia as well as the previous 1970 U.S. peak.  The huge gains came largely from the Permian Basin in Texas and New Mexico, where output increased by more than 1m b/d between Dec. 2017 and Dec. 2018.]

U.S. sanctions on Iran and Venezuela have also contributed to limiting the world’s supply of crude oil, with the Trump administration eyeing a further reduction in Iranian crude of several hundred thousand barrels over the coming months.  Coupled with Venezuela’s severe issues, oil prices could rise further.

At the same time, Saudi Arabia said it was too early to change OPEC’s output policy at the group’s upcoming meeting in April and that China and the U.S. would lead healthy global demand for oil this year.  So the agreed upon cut in supply of 1.2 million barrels per day is likely to continue for the foreseeable future.

Separately, the International Energy Agency said today that the oil market will flip into a modest deficit from the second quarter of this year, the IEA keeping its forecast of growth in global oil demand this year unchanged at 1.4 percent, or 1.4 million barrels per day.

--Sunday, Ethiopian Airlines Flight 302 crashed on a flight from Addis Ababa to Nairobi, killing all 157 people on board. The aircraft, a Boeing 737 MAX 8, was the same model as in the Lion Air crash last October in which 189 were killed off the Indonesian coast.  Both jets crashed minutes after erratic takeoffs.

Officials immediately raised the possibility that a new flight-control system could have contributed to both the Lion Air and Ethiopian Airlines accidents, some citing concerns that pilots would be unable to handle the aircraft if they were given inaccurate signals from key flight instruments.

“We are facing uncertainties about whether pilots have the courage or the capability to fly” if an aircraft has difficulties, said Li Jian, the deputy director of China’s Civil Aviation Administration, the first to ground the 737 MAX.

Then nations like Australia, Austria, France, Germany, Singapore and the United Kingdom announced bans on flights of the aircraft, and the European Union overall.

David Soucie, a former FAA safety inspector, told CNN, “I’ve never said that it’s unsafe to fly a particular model of aircraft, but in this case, I’m going to have to go there.”

Ethiopian Airlines said that one of two pilots on Sunday’s flight reported “flight-control problems” to air traffic controllers minutes before the plane crashed and told controllers that he wanted to turn back to Bole International Airport in Addis Ababa.  The pilot was cleared to do so, three minutes before contact was lost with the cockpit, a spokesman for the airline said early Wednesday.

Canada’s transport minister then banned all Boeing 737 MAX jets from its airspace, saying that newly available satellite-tracking data suggests similarities between the two deadly crashes.  The transport minister, Marc Garneau, a former astronaut and engineer, said the similarities in the data exceed enough of a threshold to indicate a possible cause of the accident in Ethiopia.

“This is not conclusive, but it is something that points possibly in that direction, and at this point we feel that threshold has been crossed,” he said.

Garneau said the two flights showed similar “vertical fluctuations” and “oscillations.”

Finally, the FAA acted Wednesday after unspecified evidence found at the crash scene, which was reportedly the discovery of a screw-like device found in the wreckage that indicates the plane was configured to dive, the co-called jackscrew, used to set the trim that raises and lowers the plane’s nose.  But this is just a report...nothing definitive.

The black boxes were sent to Paris and a report from the investigation of same could take weeks.

After the FAA’s statement, Southwest Airlines said it was immediately complying with the order, removing its 34 737 MAX 8, the carrier having completed over 41,000 flights with the aircraft.  Southwest is the largest domestic operator of the 737 MAX, while American Airlines has 24, and United 14.  China, collectively, has over 90.

The 737 MAX is Boeing’s best-selling jet ever, with around 5,000 of the planes on order.  Needless to say, the company was on the defensive, saying Tuesday that it had “full confidence in the safety of the 737 MAX.”

But Thursday, Boeing paused deliveries of the jetliner and a U.S. Air Force official raised concerns about one of the company’s biggest military-plane programs.

The Washington Post reported that Boeing executives sat down last November with pilots at the Allied Pilots Association’s headquarters in Fort Worth, Texas, after the Lion Air crash.

After that accident, Boeing issued a bulletin disclosing that this line of planes was equipped with a new type of software as part of the plane’s automated functions, and some pilots were furious that they were not told about the new software when the plane was unveiled.

“Dennis Tajer, a 737 captain who attended the meeting with Boeing executives, recalled, ‘They said, ‘Look, we didn’t include it because we have a lot of people flying on this and we didn’t want to inundate you with information.’’

“ ‘I’m certain I did say, ‘Well that’s not acceptable,’’ said Tajer, a leader in the association representing American Airlines pilots.”

A Boeing spokesman said the company disputes that any of its executives made that statement.

But over the course of the week, Boeing has said it would take several steps to make the planes “even safer,” including updating the flight-control software as well as pilot displays, operating manuals and crew training, Boeing saying the changes would be implemented over the coming weeks.

The thing is, we heard this same message back in November after the Lion Air crash!

The announcement comes after years in which Boeing had trumpeted the new plane as offering a “seamless” transition from previous models, which would not require carriers to invest in extensive retraining.

The key to the 737 MAX fix was the software, “known as the Maneuvering Characteristics Augmentation System (MCAS), which in some rare but dangerous situations override pilot control inputs unless it is switched off.  This can interfere with pilots’ longtime training that pulling back on the control yoke raises a plane’s nose, putting the plane into climb.  That means that as a pilot tries to maneuver an airplane, the automated system may be counteracting that pilot’s inputs.”

Washington Post:

“(Two) pilots who attended the meeting with Boeing in November after the Lion Air crash said pilots had suggested that the company take these actions at that time.

“ ‘Whatever level of training they decided on [before the Lion Air crash], it resulted in an iPad course that I took for less than an hour,’ Tajer, the American Airlines pilot, said.  ‘A lot of pilots here at American did that course.’

“But he said the course did not cover the new MCAS system.  ‘There was nothing on the MCAS because even American didn’t know about that.  It was just about the display scenes and how the engines are a little different,’ he said.”

Boeing also met with pilots at Southwest Airlines, “hurriedly (arranging) a conference room at the Reno Airport the Sunday after Thanksgiving, said Jon Weaks, president of the Southwest Airlines Pilots Association.

“ ‘At that meeting, they told us that a software update would probably be forthcoming in the near future,’ Weaks said.  But no update came in the following two months.”

Again, I don’t know squat about this topic, but wrote of the software update in November, just assuming like every layman it was being issued rapidly.

I do understand that with any software modification you have to test, and retest, over and over, before issuing it but, still...this is kind of outrageous.

--The New York Times reported that federal prosecutors are conducting a criminal investigation into data deals Facebook struck with some of the world’s largest tech companies, a grand jury in New York having subpoenaed records from at least two prominent makers of smartphones and other devices.  Both companies, which the Times didn’t name, had entered into partnerships with Facebook, gaining broad access to the personal information of hundreds of millions of its users.

The companies were among more than 150 firms, including Amazon, Apple and Microsoft that had cut sharing deals with Facebook, which the social media giant has been phasing out.

“We are cooperating with investigators and take those probes seriously,” a Facebook spokesman said in a statement.

Facebook was already facing scrutiny by the Federal Trade Commission and the Securities and Exchange Commission.  The Justice Department’s securities fraud unit began investigating it after reports that Cambridge Analytica had improperly obtained the Facebook data of 87 million and used it to build tools that helped President Trump’s election campaign.

The Cambridge disclosures thrust Facebook into the worst crisis in its history, and then it only got worse with reports last June and December that Facebook had given business partners – including smartphone makers – deep access to users’ personal information, letting some companies override users’ privacy settings.

Separately, Facebook and Instagram were out for hours on Wednesday, into early Thursday, one of the longest the social network has ever experienced.  Business owners expressed exasperation, as well as others who rely on Facebook’s platforms to communicate.  The global outage was caused by “a server configuration change.”

Then Thursday, one of the company’s earliest employees, Chris Cox, announced he was leaving in a blog post.  Cox, 36, was chief product officer and longtime confidant of Mark Zuckerberg. Chris Daniels, who was in charge of WhatsApp, also announced he was leaving.

Zuckerberg said, “While it is sad to lose such great people, this also creates opportunities for more great leaders who are energized about the path ahead to take on new and bigger roles.”

Neither Cox or Daniels offered an explanation for their departures.

--The issue of Huawei isn’t going away.  Following is a disturbing story from CNN.

“Outside Malmstrom Air Force Base in central Montana, spread across 13,800 square miles of open plains, more than 100 intercontinental ballistic missiles stand at the ready, buried deep underground in missile silos. These Minuteman III rockets are capable of delivering nuclear warheads at least 6,000 miles away and are part of the U.S. Strategic Command, which oversees the country’s nuclear and missile arsenal.

“Nestled among these silos are clusters of cell phone towers operated by a small rural wireless carrier. According to FCC filings, those cell towers use Chinese technology that security experts warn could allow China to gather intelligence while also potentially mounting network attacks in the areas surrounding this and other sensitive military installations.

“Huawei, the Chinese company that makes the tower technology, is shunned by the major U.S. wireless carriers and the federal government over national security concerns.  Yet its technology is widely deployed by a number of small, federally-subsidized wireless carriers that buy cheaper Chinese-made hardware to place atop their cell towers.  In some cases those cellular networks provide exclusive coverage to rural areas close to U.S. military bases.”

Six major U.S. intelligence agencies testified before Congress last year, warning Americans against using Huawei devices and products, yet its technology is close to the nation’s arsenal of ICBMs!

“We know the Chinese are engaged in a massive espionage campaign against the U.S.,” said James Lewis, director  of the Technology Policy Program at the DC-based think tank The Center for Strategic and International Studies.  “We know that the Chinese engage in massive surveillance against their own population.  You put two and two together and say, how comfortable do I feel having Huawei on the phone systems around my most important military bases?”

Lewis adds: “The Chinese could decide to interfere with ICBM command and control, or with ICBM personnel, the people manning the silos. That’s not a risk that you can dismiss.  You have to say, it’s a new strategic capability for China.  Not one we expected.  It’s not military.  It’s not a weapon.  It’s not your traditional attack.”

Lewis admits it’s unlikely that an outside radio transmitter would be able to penetrate our encrypted systems that control the missile installations, “But that doesn’t mean our opponents won’t try and figure out if they can do it.”

Remember, some of the technology on our missile bases is relatively archaic.

Separately, and kind of hypocritically, the U.S. has told Germany it would curb intelligence sharing with Berlin if it allows Huawei to participate in its 5G mobile network.  The warning came in a recent letter from the U.S. ambassador, Richard Grenell, to Germany seen by the Wall Street Journal.

The U.S. has been lobbying its allies to boycott Huawei due to national security risks.  As I noted last week, Huawei has sued the U.S. government against its claims the company poses a security threat.

Amb. Grenell said secure communications systems are essential for defense and intelligence cooperation.

--According to reports, Uber Technologies Inc. announced Thursday that it was kicking off its initial public offering in April, putting it close on the heels of smaller rival Lyft Inc., which is slated to go public by the end of this month.  It was thought that Uber would hold off until later in the year.  Uber is far larger and more diverse than Lyft and was recently valued at $76 billion in the private market, though it is seeking a valuation as high as $120 billion.  Lyft is seeking a valuation of $20 billion to $25 billion, up from its $15 billion valuation as a private company.

The two would certainly energize an otherwise quiet start to the year for the IPO market.  A successful IPO for Lyft would benefit Uber, while by going first, Lyft is looking to take advantage of pent-up investor demand for high-growth tech companies.

Uber’s revenue last year was $11.3 billion on gross bookings of $50 billion, while Lyft’s was $2.2 billion on gross ride bookings of $8.1 billion.

Uber operates in more than 70 countries.  Lyft is focused on North America.

--Tesla said it’s backtracking, already, on plans to close most of its stores and hike prices for its costlier models. It was just a week ago it had decided to close almost all of its stores to focus solely online for sales, while keeping open a few in high-profile areas to serve as “galleries.”

But landlords fought back against the plan, showing no signs of giving Tesla an easy way out of long-term leases. For example, only a month ago, Tesla signed a new lease for a Santa Monica, Calif., location that extends through 2025.  By one estimate, the long-term lease obligations overall are about $1 billion.

So as a result of having to keep more of its stores open, Tesla has had to rein in some of the price cuts it doled out just last month.  While the Model 3 will keep its recently discounted price of $35,000, the price of the all Model S and Model X Teslas will rise 3 percent worldwide, the company said.

Thursday night, Elon Musk then unveiled the Model Y compact SUV with an eventual starting price of $39,000, though the car looks more like a hatchback, and resembles the Model 3.  Delivery is expected in fall 2020, with the $39,000 version not expected to roll out until spring 2021.

Ergo, in Tesla time, many of us will be dead by the time it really comes out.

--The Securities and Exchange Commission said it charged Volkswagen AG, two of its units and former CEO Martin Winterkorn with defrauding U.S. bond investors, raising billions through the corporate bond and fixed-income markets, while making deceptive claims about the environmental impact of the company’s “clean diesel” fleet.

During the period covered, April 2014 to May 2015, “VW issued more than $13 billion in bonds and asset-back securities in the U.S. markets at a time when senior executives knew that more than 500,000 vehicles in the U.S. grossly exceeded legal vehicle-emissions limits, exposing the company to massive financial and reputational harm.” [Wall Street Journal]

Meanwhile, Volkswagen plans to cut as many as 7,000 administrative positions over the next five years amid an industrywide race to slash costs and make room for intensive spending on electric and self-driving vehicles.

[The job cuts will be partially offset by 2,000 new hires suited for developing EVs.]

The above workforce reductions is on top of the company’s 2016 plan, “Pact for the Future,” that targets 23,000 jobs, about 19% of the VW brand’s head count in Germany, through attrition and early retirement.

The German automaker said the cuts will be at its namesake VW brand and would amount to about 6% of the domestic workforce.

The VW brand accounted for more than a third of Volkswagen’s total sales, but profit margins were meager and like every other car company in the world, it needs to funnel more funds toward innovative technology.

Ford Motor Co. has already announced a broad restructuring that aims to cut $11 billion in costs over the next three to five years, eliminating jobs and closing plants in Europe.

--Fiat Chrysler will recall more than 860,000 vehicles in the United States over findings from emissions investigators.  The issues, apparently unrelated to the company’s massive diesel emissions scandal, affect a range of vehicles, from passengers cars such as the Chrysler 200 to the Jeep Compass SUV.

The Environmental Protection Agency said this was a voluntary recall.

--A type of Takata air bag inflator once thought to be safe came under scrutiny following a crash and explosion in Maryland that injured the driver of a Honda minivan and, as a result, Honda was forced to recall about 1.2 million vehicles in North and Central America from the 2001 to 2016 model years that were not included in the previous massive string of recalls for air bags that can hurl shrapnel into the passenger compartment.  At least 23 people have been killed by the company’s inflators and hundreds more injured.

--Auto sales in China continued to fall in February, an eighth consecutive decline.  Vehicle sales in January and February – a period including the movable Lunar New Year holiday – totaled 3.85 million, down 15% from a year earlier, the government-backed China Association of Automobile Manufacturers said Monday.  Commercial vehicle sales rose 2%, but passenger-car sales were off 18%.

Sales for Ford’s main joint venture in China collapsed over the two months, down 75% from a year earlier.  State-run Chongqing Chang’an Automobile Co., the partner, said for all of last year, its sales were off 37%.

Most analysts, despite the doom and gloom, see a rebound in the second half of this year.

--Dick’s Sporting Goods Inc. announced it would stop selling firearms at 125 of its stores, further pulling back from the business after the retailer decided last year to tighten its policies around gun sales.

Dick’s has struggled with declining sales since CEO Ed Stack made the decision to stop selling guns to buyers under 21 and take assault-style weapons out of all stores after the Parkland, Fla., school shooting.

But now it’s removing guns and some hunting gear from 125 locations, after testing the concept in 10 stores last year, Stack told analysts and investors on a call Tuesday.  Dick’s has 729 locations overall.

Stack said that in the 10 gun-free test stores, comparable sales rose in the most recent quarter, while, overall, the company reported a 2.2% quarterly same-store sales drop.

For the fiscal year ending Feb. 2, same-stores fell 3.1%, the company forecasting comp sales would be flat to up 2% this year.  Earnings targets, however, were below the Street’s expectations and the stock fell.

--A strong dollar again weighed on revenue growth at Oracle in its third quarter, revenue down 1% at $9.6bn but ahead of expectations.  Adjusting for foreign exchange moves, revenue was up 3%.

Sales for its cloud services and license support, which represents 69% of group revenue, increased 1% from a year earlier, while sales from its cloud license and on-premise license, hardware and services divisions were all down.

But net income came in at $2.8bn, beating the Street.  CEO Safra Catz said she expects “another year of double-digit EPS growth.”

--More than two years after Wells Fargo & Co. erupted into scandals, CEO Tim Sloan returned to Congress to lay out his efforts to clean up the mess.  But Democrats and Republicans on the House Financial Services Committee grilled Sloan for four hours Tuesday, with several expressing doubts that Sloan should be running the firm.  Committee Chairwoman Maxine Waters, and some of her colleagues, raised the specter of a breakup by describing Wells as “too big to manage.”

The confrontation underscored how far the bank has yet to go to win back the public after it was fined for opening millions of bogus accounts for consumers.  Since then Wells has been working to address widespread abuses, prompting the Federal Reserve to impose an unprecedented ban on growth.

During the hearing, the Office of the Comptroller of the Currency issued a statement, saying it continues to be “disappointed” with the bank and “its inability to execute effective corporate governance and a successful risk management program.”

--Goldman Sachs has been laying off scores of employees, focusing on traders and salespeople in the equities and credit divisions, though far more are expected to receive pink slips out of the fixed income unit.

Every year around March, Goldman and other banks slash about 5 percent of their workforces, weeding out underperforming bankers and traders.

--John Aidan Byrne of the New York Post had a piece on New York City’s exploding debt, as in $81,100 per household, this as Mayor Bill de Blasio is ramping up spending another $3 billion.

“The city is running a deficit and could be in a real difficult spot if we had a recession, or a further flight of individuals because of tax reform,” said Milton Ezrati, chief economist of Vested.  “New York is already in a difficult financial spot, but it would be in an impossible situation if we had any kind of setback.”

City spending is up 32 percent since de Blasio took office – triple the rate of inflation – as the city’s long-term pension obligations have escalated, and the workforce has soared by more than 33,000 in the last five years.

As Mr. Byrne writes, among the other startling indicators:

“New York state – and city – are ranked No. 1 nationwide in state and local tax burden.

“Property taxes, almost half of the city’s revenue, is rising faster than any other revenue source – squeezing businesses and forcing homeowners, already hit by federal property tax deduction changes, to relocate to lower-tax states.

“The top 1 percent of New York City earners pay some 50 percent of Big Apple income tax revenue.

“ ‘New York City could go bankrupt, absolutely,’ said Peter C. Earle, an economist at the American Institute for Economic Research. ‘In that case, the city would get temporary protection from its creditors, but it would be very difficult for the city to take on new debt.’”

--The Wall Street Journal’s Jacob Bunge had a disturbing story that had some talking on Monday.

“Chicken companies spent decades breeding birds to grow rapidly and develop large breast muscles.  Now the industry is spending hundreds of millions of dollars to deal with the consequences ranging from squishy fillets known as ‘spaghetti meat,’ because they pull apart easily, to leathery ones known as ‘woody breast.’

“The abnormalities pose no food safety risk, researchers and industry officials say. They are suspected side effects of genetic selection that now allows meat companies to raise a 6.3-pound bird in 47 days, roughly twice as fast as 50 years ago, according to the National Chicken Council.”

Many are fighting back, such as in the fast-food industry, which can ill-afford to have customers screaming, no woody breasts!

--Mercer released its 2019 Quality of Living Ranking, the consulting firm considering 39 factors in categories such as “political and social environment” and “recreation” when developing its list, and for the tenth year running, Vienna was No. 1, with Zurich second, followed by Auckland, Munich and Vancouver tied in third – leaving the top five unchanged from last year’s rankings.

The 10 cities at the bottom were also unchanged from last year, with Baghdad ranked last, followed by Bangui in the Central African Republic and Yemen’s capital Sanaa.

I crossed Bangui off my bucket list a year ago.

New York is No. 44.

Foreign Affairs

North Korea: Kim Jong Un is considering suspending talks with the United States and may rethink a ban on missile and nuclear tests unless Washington makes concessions, according to reports from Pyongyang on Friday, quoting a senior diplomat, Vice Foreign Minister Choe Son Hui, who blames top U.S. officials for the breakdown of last month’s summit in Hanoi between President Trump and Kim.

“We have no intention to yield to the U.S. demands (at the Hanoi summit) in any form, nor are we willing to engage in negotiations of this kind,” Russia’s TASS news agency quoted Choe as telling reporters.

U.S. Secretary of State Mike Pompeo and national security adviser John Bolton “created the atmosphere of hostility and mistrust and, therefore, obstructed the constructive effort for negotiations between the supreme leaders of North Korea and the United States,” TASS quoted Choe as saying.

Kim is set to make an official announcement soon on his position on the denuclearization talks with the U.S. and his next move, the report added.

Choe said Washington threw away a golden opportunity at the summit and warned that Kim might rethink a moratorium on missile launches and nuclear tests, the AP reported.  “I want to make it clear that the gangster-like stand of the U.S. will eventually put the situation in danger,” Choe is quoted as saying. But she added: “Personal relations between the two supreme leaders are still good and the chemistry is mysteriously wonderful.”

South Korea said it was too early to tell what Choe’s comments might mean.

Bolton, who has argued for a tough approach to North Korea, said last week that President Trump was open to more talks but also warned of tougher sanctions if the North did not denuclearize.

Addressing his above-mentioned annual news conference, Chinese Premier Li Keqiang urged patience and further dialogue between North Korea and the United States.  “The peninsula problem can be said to be complicated and long-standing, and it cannot be solved overnight,” Li said.

Following the talks in Hanoi, U.S. officials said the North essentially demanded the lifting of all key sanctions, while North Korea said it only wanted the removal of sanctions that affected its civilian economy.

The Trump administration fears that any early lifting of sanctions would end up subsidizing the North’s weapons program.  UN sanctions currently ban all of the North’s key exports, including coal, and drastically cut back its fuel imports.

But, a UN Security Council report this week concluded North Korea has been punching holes in the web of UN and U.S. sanctions, “accelerating its import of petroleum products through illicit ship-to-ship transfers and stepping up coal exports.”  [Michael R. Gordon / Wall Street Journal]

The report notes: “These violations render the latest United Nations sanctions ineffective.  Global banks and insurance companies continue to unwittingly facilitate payments and provide coverage for vessels involved in ever-larger, multi-million-dollar, illegal ship-to-ship transfers of petroleum products, as well as an increasing number of ship-to-ship coal transfers and attempted transshipments,” it adds.

Meanwhile, North Korea’s intelligence service continues to carry out cyberattacks on financial institutions as a way of obtaining currency.

Such as in May 2018, when, as the UN report states, North Korean hackers stole $10 million from the Banco de Chile, transferring it to accounts in Hong Kong.  In August 2018, hackers stole an additional $13.5 million from Cosmos Bank in India and sent it to another Hong Kong-based company linked to North Korea.

China: Regarding Pyongyang, China is in the same diplomatic dilemma following the collapse of the talks in Hanoi.

On the one hand, Beijing needs things to stay as they are on the Korean peninsula to preserve its regional power; on the other, it is wary of the security risks created by any rising tension between Pyongyang and Washington.

China’s main goal is to keep the U.S. off balance, and preserve a relatively stable border in its northeast.

On a different issue, I didn’t have time last review to include some of Mark Helprin’s comments in a Wall Street Journal op-ed.

For years I have mused how the United States is basically clueless when it comes to China’s nuclear weapons program.

Helprin:

“First, it is astounding that China, the world’s third-ranking nuclear power, with 228 known nuclear missiles and a completely opaque nuclear-warfare establishment, unlike the U.S. and Russia is subject to no agreements, no inspection, no verification and no limits, while in this regard the U.S. remains deaf, dumb and blind. The U.S. should pressure China to enter a nuclear arms-control regime or explain to the world why it will not.

“Second, keeping in mind that America’s inadequate military sea and air lift make wartime supply of forces in Europe a well-known problem, the distance from San Francisco to Manila is twice that between New York and London, China has 55 attack submarines, and the U.S. Navy has long neglected antisubmarine warfare. This renders the diminished string of American bases on China’s periphery crucial for initial response and as portals for resupply.  But they are vulnerable, and little has been done to make them less so.

“Nothing can change the fact that whereas Chinese attacks on American bases in South Korea, Japan, and Guam would not strike the American homeland, response against bases in China would raise the specter of nuclear escalation. China understand that a knockout blow against our bases would banish the U.S. from its environs, condemning us to a long-distance campaign to which the U.S. Navy in its present state – overstretched, undertrained and half the size of the Reagan Navy – is inadequate.  And if China spikes the Panama Canal, which we abandoned and it took on, and used its six nuclear attack submarines to block the southern capes and choke points east of Suez, it would have to contend only with roughly half of our already diminished fleets.

“China has medium-range ballistic missiles, air-launched land-attack cruise missiles, air-refueled bombers and fighter bombers, sea-based missiles, and seaborne commandos.  To protect our bases from all this we need long-range anti-ship missiles, adequately defended, on outpost islands; deep, reinforced aircraft shelters rather than surface revetments and flimsy hangars; multilayered missile and aircraft defenses in numbers sufficient to meet saturation attacks; deeply sheltered command and control, runway repair, munitions, and stores; and radically strengthened base defense against infantry, special forces, and sabotage. It would be expensive, but essential...

“Failure (to take these measures) will lead to the moment when our regional allies, finding less reason to adhere to us than to appease China, remove their increasingly important military components of the de facto Pacific alliance, thus catastrophically breaking it.

“At present the U.S. is inexplicably blind to the fundamental power relations upon which China is intently focused.  As long as we remain vulnerable while China increases its military powers and ours decline, Beijing need not do anything but pretend to compromise.  This can change if we send the Chinese a message they cannot ignore. That is, if we take our eyes off the zero-sum game long enough to assure our strengths in depth.  Frankly, if we do not, the Pacific Coast of the United States will eventually look out upon a Chinese lake.”

Syria: On Thursday, U.S.-backed Syrian Democratic Forces said that the remaining Islamic State militants in the village of Baghouz in eastern Syria, had carried out two counterattacks.  But 1,300 ISIS militants and their families still fled the village and handed themselves over to the SDF, expanding the number of Islamic State prisoners that the SDF and U.S. are responsible for.  At this point, as I noted last review, the week started with about 3,000 prisoners in two parts of the country, 2,000 more than the Trump administration had told us for weeks, and now add this new group.  What it all means is that a more sizable U.S. force will need to stay in the theater until we are certain the prisoners can be secured, while it’s hoped many of the foreign militants will be repatriated to their original countries.

But at the same time, Syrian government and Russian airstrikes have been pounding the last rebel stronghold in Syria, raising fears of a final offensive that the UN has long warned would lead to another humanitarian catastrophe.

It was in September that Russia and Turkey reached agreement on a buffer zone in Idlib to forestall a Syrian regime offensive to recapture the northwest province.  Idlib is home to three million civilians, about half of them displaced from elsewhere in Syria, according to the UN.  It has described the province as the biggest refugee camp on Earth.

At a conference in Brussels on Thursday to help Syrians inside and outside the country, donor states pledged nearly $7 billion; the funds going towards a humanitarian response inside Syria, as well as help for host communities in neighboring countries.

The UN reported this week that conditions at a camp for those displaced in the Baghouz and other fighting in the area are dire.  The camp, designed to accommodate 20,000, is now sheltering nearly 70,000.  The World Health Organization said on Tuesday that 106 people, mainly infants, have died on the journey to the camp at al-Hol.  Many of the evacuees, particularly foreigners, still express fierce support for Islamic State, which poses major security issues, and moral questions for the countries of origin.  [These ‘supporters’ are different from ISIS ‘prisoners.’]

About a week ago, NBC’s Richard Engel had a report from the front lines in Baghouz, with Engel attempting to interview some of the women being displaced, and it was scary as hell.  They were vicious, hurling objects and insults at him...clearly hardened ISIS supporters.

As in these women, if they were repatriated to, say, France, are not about to then seek work as a sales person at Hermes.

Well, tonight I see the following cross the wires.  “Three suicide attackers in women’s clothing killed six people leaving the last Islamic State enclave in eastern Syria on Friday in simultaneous blasts...The attack appears to be the first to target the many thousands of people who have poured out of the enclave at Baghouz over the five weeks since the (SDF) began an offensive there.”

The caliphate may be dead, but the ideology more than survives.  This is what our generals know, and Trump doesn’t.

Iran: A senior Iranian security official on Wednesday accused regional powers of spending money on “suspicious nuclear projects,” and warned that such threats would force Tehran to revise its defense strategy.

Ali Shamkhani, the secretary of Iran’s Supreme National Security Council, while not naming countries, appears to be addressing a proposed transfer of U.S. nuclear technology to Saudi Arabia that has raised concerns in Tehran.

“Some countries in the region are spending their petro-dollars on suspicious nuclear projects that can endanger the security of the region and the world,” Shamkhani was quoted as saying by Fars news agency.

“New threats like this will force us to revise our strategy based on the nature and geography of new threats, and predict the requirements of our country and armed forces,” he added.

Meanwhile, Iraq and Iran signed several preliminary trade deals on Monday, Iraqi officials said, as Iranian President Hassan Rouhani began his first visit seeking to bolster Tehran’s influence and expand commercial ties to help offset renewed U.S. sanctions.

Yes, despite U.S. efforts to isolate the Islamic Republic, Iran still plays a dominant role in Iraq.

Rouhani was to meet top Iraqi Shiite cleric Grand Ayatollah Ali al-Sistani in Najaf, Iranian state media reported.

Iraq relies on Iranian gas imports to feed its power grid and has asked for extensions to a U.S. waiver to continue importing Iranian gas since President Trump restored sanctions on Iran’s energy sector in November.

Israel: Two rockets were fired at Tel Aviv from the Gaza Strip on Thursday night – the first time since 2014 that rockets had reached the area – with Israel retaliating hours later, hitting 100 targets across Gaza.

Israel’s Iron Dome missile-defense system detected the incoming rockets around 9 p.m. and sounded alarms.  No injuries or damage were reported.

The two militant Islamic factions with the capability of hitting Israel, Hamas and Islamic Jihad, both quickly denied responsibility and said they had no intention of escalating violence with Israel.  The Israeli military said it believed Hamas was behind the attack, and then today, offered that the rockets were probably launched mistakenly by Hamas.

Disturbingly, Iron Dome didn’t intercept either rocket, though they landed in open areas.

The brazen attack, even if accidental, comes with Prime Minister Benjamin Netanyahu up for re-election on April 9, facing pressure from right-wing rivals, and a serious challenge from a new party, Blue and White, led by three former army chiefs, chiefly Benny Gantz, who as the army chief led the 2014 Gaza war; Gantz urging “a significant and sharp response, otherwise it will be impossible to renew deterrence.”

Speaking of Gantz, he was recently told by the Shin Bet security service that Iranian intelligence has hacked into his phone and taken all its contents, including sensitive information, though no classified information was believed to be on it.

Sources in Blue and White said the timing of the leak of the report so close to the April 9 election was suspicious.

Today, there was a story that there was a sex tape on Gantz’s phone, which he denied.  Yes, I can’t help but say, signs of dirty tricks on the part of the Netanyahu gang.

Somalia: From Eric Schmitt and Charlie Savage / New York Times

“The American military has escalated a battle against the Shabab, an extremist group affiliated with Al Qaeda, in Somalia even as President Trump seeks to scale back operations against similar Islamist insurgencies elsewhere in the world, from Syria and Afghanistan to West Africa.

“A surge in American airstrikes over the last four months of 2018 pushed the annual death toll of suspected Shabab fighters in Somalia to the third record high in three years.  Last year, the strikes killed 326 people in 47 disclosed attacks, Defense Department data show.

“And so far this year, the intensity is on a pace to eclipse the 2018 record. During January and February, the United States Africa Command reported killing 225 people in 24 strikes in Somalia.  Double-digit death tolls are becoming routine, including a bloody five-day stretch in late February in which the military disclosed that it had killed 35, 20 and 26 people in three separate attacks.

“Africa Command maintains that its death toll includes only Shabab militants....The Times could not independently verify the number of civilians killed.”

Russia: For the first time, Russia’s Natural Resources and Environment Ministry estimated the value of all its resources – oil, gas and other stuff – at $844.58 billion in 2017, or 60 percent of Russia’s GDP that year, per Russian media.  These figures are now expected to be updated annually.

Venezuela: Secretary of State Mike Pompeo announced the U.S. was withdrawing all remaining staff from its embassy in Venezuela due to the “deteriorating situation” there after several days of power outages sent the country spiraling further into chaos.

But it’s another week where Nicolas Maduro remained in charge, the standoff with the opposition now months old when, let’s face it, Americans were led to believe the forces of good would rule the day.  Instead, Maduro, with support from Russia and China, hangs on.

Apparently, the blackout is largely over, Maduro accusing Washington, of course, of sabotaging the country’s power grid, while it’s clear the blames lies with the government for neglecting the energy system.

U.S. special envoy for Venezuela, Elliott Abrams, who has as much knowledge as anyone around in terms of diplomacy and foreign affairs, said this week, “From everything we have seen, Maduro’s tactic is to stay put.”

56 countries have recognized opposition leader Juan Guaido as Venezuela’s interim head of state, but, aside from the Russian and Chinese support, Maduro has somehow retained the support of the military.

Abrams is optimistic, however, that the Russians in particular will reach a point where they recognize Maduro is unsalvageable, and will engage in talks with the U.S. on a solution.

Abrams added that Cuba, which is taking Venezuela’s oil, while offering intelligence and other protections for Maduro, literally has thousands in the country securing the president. Cuba denies this.

As for Juan Guaido, his protest movement has gone nowhere.

New Zealand: 49 people were killed and more than 40 seriously wounded in shootings at two mosques in New Zealand on Friday, in what Prime Minister Jacinda Ardern said was a terrorist attack.

New Zealand was placed on its highest security threat level, Ardern said, adding that four people were in police custody, three men and one woman, who held extremist right-wing views but had not been on any police watchlists.

One gunman, who streamed the killings live on Facebook through his body cam, was charged with murder and it appears after the first attack, he drove three miles to resume shooting at the second mosque. 

“This is one of New Zealand’s darkest days,” Ardern said.

There were online accounts linked to the attacks that had been circulating in recent days, with white supremacist imagery and extreme right-wing messages celebrating violence against Muslims and minorities on social media and message boards.

On Wednesday, a Twitter account linked to Brenton Tarrant tweeted pictures of one of the guns later used in the attacks.  It was covered in white lettering, featuring the names of others who had committed race- or religion-based killings, as well as the phrase: “Here’s Your Migration Compact.”  The number “14” was written on the side of the rifle as well, a reference to the “fourteen words,” a white supremacist mantra.

A 74-page manifesto was posted online before the attack, citing people like Dylan Roof and Anders Breivik as inspirations. 

Random Musings

--Presidential tracking polls...

Gallup: 39% approval for President Trump’s job performance, 57% disapproval; 90% Republicans, 33% Independents (Mar. 15...polling Mar. 1-10)
Rasmussen: 48% approval, 51% disapproval (Mar. 15)

--Beto O’Rourke entered the race for president.  And former Vice President Joe Biden inched closer to doing the same.

Addressing a gathering of the International Fire Fighters Association in Washington, Biden heard them chant “Run Joe, Run,” so he told them to save the energy.

“I may need it in a few weeks.  Be careful what you wish for.”

Biden criticized Trump and Republicans for policies he said favored the wealthy, and he warned of the divisiveness in politics.

“We can’t be divided by race, religion, by tribe.  We’re defined by those enduring principles in the Constitution, even though we don’t necessarily all know them.  In America everybody gets a shot,” Biden said.  “That’s what I don’t think this current president understands at all.”

The latest Des Moines Register/CNN/Mediacom Iowa Poll found that 27 percent of Democratic caucus-goers say Biden is their first choice for president, but this is down from 32 percent in December, and will likely fall further with the entrance of O’Rourke.

Bernie Sanders is at 25%, no one else earning 10%; Sen. Elizabeth Warren (9%), Sen. Kamala Harris (7%),  Beto (5%) and Sens. Cory Booker and Amy Klobuchar (3%).

So this becomes part of the archives and we’ll see where we are a year from now.

By the way, note to New York Democratic Sen. Kirsten Gillibrand.  Just drop out.  You will never gain any traction.

As for Beto, he’s an empty suit.  He’ll eventually flame out.

--Karl Rove / Wall Street Journal

“Austin’s South by Southwest, or SXSW, began as a music, film and tech conference but has become a popular stop for left-of-center politicos. This year, Democratic presidential candidates Sens. Elizabeth Warren and Amy Klobuchar and former Housing and Urban Development Secretary Julian Castro all spoke, and soon-to-be White House hopeful Robert Francis O’Rourke premiered a documentary.

“But SXSW’s 2019 rock star was Rep. Alexandria Ocasio-Cortez, who filled 3,200 seats in the Convention Center Saturday.  Notably, the Green New Deal advocate didn’t arrive in a Prius or on one of the ubiquitous scooters that clog Austin’s streets during the festival. She came instead in a gas-guzzling SUV.

“Interviewed by Briahna (sic) Gray of the Intercept, a left-wing news site, Ms. Ocasio-Cortez’s attacks on racism and capitalism and pleas on behalf of ‘everyday working people’ were applauded by the attendees, who paid between $1,325 and $1,650 for their ‘primary access to ALL events’ passes.

“Ms. Ocasio-Cortez dealt at length with America’s pervasive racism, declaring, ‘The effort to divide race and class has always been a tool of the powerful to prevent everyday working people from taking control of the government.’ America’s leaders also helped ‘racial resentment to become legitimized as a political tool.’

“She and Ms. Gray agreed that Trump is a racist, of course.  But so was President Reagan, who in 1976 criticized a Chicago woman for bilking the welfare system for $150,000 a year. That attack was ‘rooted in racism,’ according to Ms. Ocasio-Cortez, even though the woman in question was white.

“Even more astonishing, the New York freshman representative declared Franklin D. Roosevelt a bigot, saying ‘the New Deal was an extremely economically racist policy that drew literal red lines around black and brown communities and basically it invested in white America.’

“According to Ms. Ocasio-Cortez, the New Deal ‘allowed white Americans to have access to home loans that black and brown Americans did not have access to.’  By doing so, it ‘accelerated...a really horrific racial wealth gap that persists today.’  Yet studies show that FDR’s Home Owners’ Loan Corp. did not discriminate against African-Americans, and the gap between black and white homeownership remained around 20% from 1900 to 1990, though ownership levels increased for both groups.”

Ms. Ocasio-Cortez also loves to dabble in conspiracy.

“For example, Ms. Ocasio-Cortez told the crowd America’s ‘norms and systems and electoral system’ are ‘dominated by special interests and dark money and rules of seniority.’  Because the rich have ‘taken away all the guardrails of a responsible society,’ Ms. Ocasio-Cortez said, ‘it doesn’t feel good to live in America today.’....

“She acknowledged that her policy responses – the Green New Deal, Medicare for All, guaranteed jobs, universal basic income – constitute socialism, but insisted ‘this isn’t radical.  This is what we’ve always been.’   America has always been socialist?  Believe it.  ‘It’s just that now,’ she told the SXSW crowd, ‘we’ve strayed so far from what has really made us powerful and just and good and equitable and productive.’

“Ms. Ocasio-Cortez implied that Democratic colleagues who oppose her are both cowards and hypocrites, complaining, ‘No one’s ever said to me, ‘I’ve got these really big donors and to be honest with you, this is why I can’t do that.’’  How lonely to be that rare righteous member of Congress!...

“(Ms. Ocasio-Cortez’s) hourlong interview (was) spent bludgeoning America, its values, history, leaders and accomplishments. That was what the SXSW crowd wanted. It will be far less attractive to the rest of America.”

--We note the passing of Birch Bayh, the liberal former senator from Indiana whose work in Congress had an enduring impact on American life.

Bayh, a Democrat in conservative Indiana, served in the Senate from 1963 to 1981 and drove some of the most historic legislation of his era.  He was the principal architect of two constitutional amendment: the 25th, which deal with presidential disability and vice-presidential vacancies, and the 26th, which gave 18-year-olds the vote in both state and federal elections.

Bayh was also a chief Senate sponsor of the failed Equal Rights Amendment, and he pushed through another amendment that would have abolished the Electoral College.

But the act that gave him the most satisfaction was his championing of Title IX, for which he was the prime architect of the landmark legislation that barred sex discrimination at schools and colleges and greatly expanded sports programs for women.

--The Justice Department on Tuesday charged 50 people – including actresses Felicity Huffman and Lori Loughlin – with being part of a long-running bribery scheme to get privileged children with sub-par grades into big-name colleges and universities.

The alleged crime included cheating on entrance exams, as well as bribing college officials to say certain students were coming to compete on athletic teams when those students were not in fact athletes, officials said.

Among the schools targeted were Yale, Stanford, Georgetown, the University of Texas, USC, UCLA and my alma mater, Wake Forest.

Boston’s U.S. attorney, Andrew Lelling, called it the largest-ever college admissions scam prosecuted by the Justice Department.  Of the 50 people charged as part of the FBI’s Operation Varsity Blues, 33 were parents, officials said, warning the investigation was ongoing and others would be charged.

None of the schools were charged with wrongdoing and none of the students because prosecutors said their parents were the scheme’s principal actors, though once you understand what went down, there is no way a single kid didn’t know what was happening.

“These parents are a catalogue of wealth and privilege,” said Lelling.  “This case is about the widening corruption of elite college admissions through the steady application of wealth combined with fraud.  There can be no separate college admission system for the wealthy, and I’ll add there will not be a separate criminal justice system, either.”

“For every student admitted through fraud, an honest, genuinely talented student was rejected,” Lelling added.

The central figure in the scheme is William Singer, a well-connected college admissions adviser/coach, who is accused of disguising the scam as a charity, enabling parents to deduct the bribes from their taxes.

Singer is charged with taking about $25 million from 2011 to 2018 – paying some of it to college coaches or standardized-testing officials for their help rigging the admissions process and pocketing the rest.  Singer, who pled guilty and is cooperating with federal officials, disguised the money using a nonprofit, the Key Worldwide Foundation, prosecutors said, characterizing it as a slush fund for bribes.

Actress Lori Loughlin and her husband, fashion designer Mossimo Giannulli, were accused of paying $500,000 in bribes so their two daughters would be admitted to USC.

The scam was so pathetic, Singer helped parents set up bogus pictures of their kids playing sports – and even Photoshopped teens’ faces onto stock photos of athletes to help them fraudulently get recruiting slots on teams at the schools.

In the case of Wake Forest, the women’s volleyball coach allegedly received a bribe of $100,000 to slot the kid into the university when she was wait-listed.

Needless to say, Louglin and Felicity Huffman should be toast in Hollywood, but, strangely, Huffman’s husband, actor William H. Macy, wasn’t charged even though he was on some of the calls with Singer.  [The evidence is incredibly detailed.  As in none of the defendants has a chance.]

Another of those charged is Gordon Caplan, the co-chairman of the prestigious, global law firm, Willkie Farr & Gallagher. He was “placed on a leave of absence.”  And another was Douglas Hodge, former CEO of PIMCO (I didn’t know him).

The FBI’s investigation came about almost by mistake, uncovered when evidence of a “large-scale elaborate fraud” cropped up while the bureau was working on an unrelated undercover case.

As the Wall Street Journal reported, the tipster, Morrie Tobin, is a Los Angeles financial executive who was being investigated in a securities fraud case; an alleged pump-and-dump investment scheme, when he offered a tip to federal authorities in an effort to obtain leniency.

Tobin, who attended Yale, told investigators about the head women’s soccer coach at the school who had sought a bribe in return for getting his daughter into Yale.  That led investigators to unravel a wide-ranging scheme.

All of us hope the parents, especially Loughlin and Huffman, are sent to prison, even if for just a month, to set an example.

As for the kids, I don’t feel sorry for them in the least, and the schools over the course of this week appear to be on the verge of booting them out, while saying the students will be handled on a case-by-case basis.

One of Lori Loughlin’s daughters, Olivia Jade Giannulli, has two million followers on social media and before she went off to college in 2018, said on her YouTube channel:

“I don’t know how much of school I’m gonna attend.  But I’m gonna go in and talk to my deans and everyone, and hope that I can try and balance it all. But I do want the experience of like game days, partying...I don’t really care about school, as you guys all know.”

This same kid, when she got to USC, partnered with Amazon for the décor in her dorm room.  Olivia Jade is also a “paid influencer and collaborator” for her own Sephora beauty line.

“I ended up ordering everything from Amazon’ college store – it was easy to find it all in one place and there were so many options to choose from.  I was also able to use my Prime Student membership and received all the items in two days with free shipping.  So the best part was that it was already waiting at my dorm for me when I got there.”

I’m biting my tongue.

Well, Loughlin was then dropped by the Hallmark Channel’s parent company, Crown Media, for whom she had done a number of popular movies and dramas.

Olivia Jade was dropped by Sephora.

Late Thursday, the son of Beverly Hills marketing CEO Jane Buckingham told the Hollywood Reporter that he’s upset he was “unknowingly involved” in the scheme; Jane Buckingham paying $50,000 for an ACT proctor to take the exam in Jack’s place in July 2018, Jack apparently at USC.

Jack said, “I am upset that I was unknowingly involved in a large scheme that helps give kids who may not work as hard as others an advantage over those who truly deserve those spots.”

I’m sorry, I don’t believe he didn’t know.  It’s also not clear if he ended up going to USC.

Editorial / Wall Street Journal

“The political left is predictably spinning this case as proof that college opportunity is rigged and that racial preferences are necessary to help applicants who can’t pay their way into schools.  It’s true that many parents shell out thousands of dollars for an SAT tutor or summer trips to build houses in Guatemala. This adds to the perception that elite admission can be bought even without committing crimes.

“Yet plenty of the competition in admissions is fueled by pitting applicants against each other based on race and not on the quality of test scores or thinking skills.  It isn’t enough to be intelligent or creative, but to stand out students now have to be a world-class fencer or have started a charity that does clean-water microfinance in Africa. Talented high-school students marinate in a pressure cooker of activities and achievements that do little to stimulate intellectual development.

“Progressives will also use the episode to claim that standardized tests can no longer be trusted. The SAT isn’t a perfect test but is perhaps the last semi-objective measure of student aptitude.  High schools have inflated grades to the point of meaninglessness.

“The college fraud ring is also a sign of the cultural times. Some of the children involved appear not to have known their parents were paying bribes to get them into college.  That suggests the scandal is about obsessive parents who view elite schools as a status symbol and networking opportunity, not merely a path to upward mobility or achievement.

“The schools know this and make prestige a large part of the product they’re peddling.  You’d think that kids admitted on false pretenses with junk test scores wouldn’t flourish at top schools.  No one seems to have worried about that. What does that say about the supposedly rigorous academics at these schools?

“The universities don’t seem to appreciate that they’re risking political backlash.  Republicans are already eager to go after the academy for its free-speech follies and high costs.  Universities are especially vulnerable since so much of their business model relies on student loans and other federal subsidies. They will have to clean up their own houses or face political intervention that could get uglier than even these fraud indictments.”

Maureen Callahan / New York Post

“What price delusions of grandeur?

“Tuesday’s shocking federal indictment of 33 parents...reads like a pulpy morality tale for the modern age: rich people scamming their not-very-special kids into elite schools, allowing them to enter the world and the workforce completely confident of their superior intelligence.  After all, if they went to Georgetown....

“We’ve all worked with people like this: Academically pedigreed yet not very smart, the ones in life who fail upward....

“The cost of admission to elite universities and colleges has long been an open secret, as has that old cliché: There’s one rule for the rich and one for everyone else.  George W. Bush was a C student yet was a legacy at Yale and went on to Harvard.  JFK Jr. was a lackluster student who made it into Brown.  Jared Kushner was admitted to Harvard after his father donated $2.5 million to the university.

“It’s cynical to say, but at least there’s a level of transparency to such cravenness.

“But this scandal, with its complications and obfuscations, shows just how far the elite will go to buy what they so often tell us should be earned without complaint – that our ostensible meritocracy makes everything right in the end.

“And you wonder why AOC’s call to eat the rich resonates.

“It also begs the question: When we send our kids to elite, increasingly expensive colleges, what exactly are we paying – or going into debt – for?  Is it entrée into the echelons of wealth and power, as ‘Hillbilly Elegy’ author JD Vance, himself an increasingly rare meritocratic Ivy Leaguer, has described?  Is it a sense of lifelong financial security? Or have our most esteemed halls of higher learning been degraded further, from status symbols no different from Hermes or Porsche to Instagram stories and co-branding opportunities?

“If you think that’s an exaggeration, look at Loughlin’s daughter Olivia Jade.”

--Gambino crime family boss Frank (Franky Boy) Cali was gunned down Wednesday night in a gruesome hit in front of his Staten Island home.  While officials aren’t confirming it as such, it seems highly likely it was the first hit on a mob boss since John Gotti ordered the murder of then-Gambino boss Paul Castellano in 1985 at Sparks steakhouse in midtown Manhattan.

Some observed how disrespectful it was to carry out such an assassination in front of Cali’s family.

[The suspect hit Cali’s parked car in the street, which seemed intended to draw him outside.  After a brief conversation, the suspect opened fire.]

--According to a poll from Gallup, 37% of U.S. Catholics said the abuse crisis had led them to question whether to remain part of the church.  That number is up from 22% of Catholics who said the same in 2002, when the Vatican last dealt with a major sex abuse scandal.

46% of Catholics who seldom or never attend church were most likely to question whether they should leave entirely, up from 29% in 2002.  22% of those who attend church every week were questioning whether to remain, up from 12% in 2002.

Ian Lovett / Wall Street Journal:

“After the Boston Globe did a series on the sexual abuse by Catholic priests and the church’s efforts to cover it up in 2002, ‘the average lay Catholic was able to accept that there were many bad apples and the church was going to need to clean them up,’ said Chad Pecknold, a professor at the Catholic University of America.  The revelations last year ‘deepened the original sense of betrayal’ among the faithful, he said, because bishops’ involvement in covering up the abuse became clear.

“ ‘It’s understandable that for people whose faith is weak, this is just enough to push them out,’ Mr. Pecknold said.”

On a related note, George Pell, an Australian cardinal who was the Vatican’s chief financial officer and an adviser to Pope Francis, was sentenced to six years in prison, with no chance for parole for 44 months, for molesting two boys after Sunday Mass in 1996; Pell the most senior Catholic official – and the first bishop – to be found guilty in a criminal court for sexually abusing minors.

The chief judge in the case in Melbourne, Australia, Peter Kidd, said during sentencing: “I would characterize these breaches and abuses as grave.  You had time to reflect on your behavior as you offended, yet you refused to desist.”

Pell, 77, says he is innocent and his lawyers say they will appeal.

--Italian children have been told not to turn up to school unless they can prove they have been properly vaccinated.

After months of national debate over compulsory vaccination, parents risk being fined up to 500 euro ($560) if they send their unvaccinated children to school.  Children under six can be turned away.

The new law came amid a surge in measles cases.  Good for Italy.  We are idiots for not doing the same thing here.

--I’ve been looking forward to CNN’s new documentary on Richard Nixon, “Tricky Dick,” which premieres this Sunday, 9 p.m. ET.  And then the Wall Street Journal’s Dorothy Rabinowitz gave it a sterling review.

This whole era is etched so indelibly in my mind, but what makes this series different is CNN unearthed all kinds of film and recordings never seen or heard before.

--Lastly, for the first time since 2011, California is 100% drought-free, no areas suffering from prolonged drought, with normal conditions in virtually the entire state.

“The reservoirs are full, lakes are full, the streams are flowing, there’s tons of snow,” said Jessica Blunden, a climate scientist with the National Climatic Data Center at the National Oceanic and Atmospheric Administration.  “All the drought is officially gone.”

Just a year ago, only 11% of the state was experiencing normal conditions while 89% was “abnormally dry,” according to the drought report. [Los Angeles Times]

---

Pray for the men and women of our armed forces....and all the fallen.

God bless America.

---

Gold $1302
Oil $58.39

Returns for the week 3/11-3/15

Dow Jones  +1.6%  [25848]
S&P 500  +2.9%  [2822]
S&P MidCap  +1.9%
Russell 2000  +2.1%
Nasdaq  +3.8%  [7688]

Returns for the period 1/1/19-3/15/19

Dow Jones  +10.8%
S&P 500  +12.6%
S&P MidCap  +14.0%
Russell 2000  +15.2%
Nasdaq  +15.9%

Bulls 52.4
Bears 21.4

Have a great week.

If your school is on the NCAA Tournament bubble, good luck. 

Brian Trumbore

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