S&P Futures Plunge 20 Points In Seconds On $3BN Sell Imbalance

S&P Futures Plunge 20 Points In Seconds On $3BN Sell Imbalance

Tyler Durden

Wed, 06/24/2020 – 15:59

It has been about three weeks since the market was so illiquid it would surge (or plunge) on news of the size of the daily market on close (MOC) imbalance. But it now appears that illiquidity is back with a vengeance because at exactly 350pm ET when the MOC closing imbalance is disclosed, the Emini puked 20 points in seconds when it was revealed that today’s imbalance was just over $3 billion for sale.

As a reminder, we have seen similar last 10 minute ludicrous action before, notably on June 2

 

… on April 8

… and on March 26

… when outsized MOCs forced a buying vacuum in the last 10 minutes of trading.

Regular readers will recall that the topic of the sudden plunge in liquidity at 3:50pm prompted none other than Goldman to highlight this curious phenomenon one month ago, when the bank said that “concerns remain centered around the final minutes of US equity trading sessions.”

Back in 2018, Goldman found that emini top of book depth was considerably stronger at the end of each trading day than earlier. However, in the past two months, ever since institutional investors stepped out of the market and left it to retail daytraders and systemic quants, this phenomenon has eroded considerably, leaving much less “extra” liquidity in the last half hour of trading, even before the coronacrisis. Weakened end-of-day liquidity was likely a potential contributor to the recent end-of-day volatility dislocation, Goldman concluded.

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Bonds Laugh At Today’s Idiotic Surge In Hertz Stock

Bonds Laugh At Today’s Idiotic Surge In Hertz Stock

Tyler Durden

Wed, 06/24/2020 – 15:45

After trying, and failing, to sell worthless Hertz stock to Gen-Z Robinhood traders, mid-bracket investment bank Jefferies has now become a used car salesman.

In a bizarre – and for now successful – attempt to pump HTZ stock, Jefferies analysts Hamzah Mazari and Bret Jordan wrote this morning that the bankrupt company could sell its roughly 150,000-car inventory and somehow pocket $3 billion in proceeds (roughly $20K per used car) as it looks to stay afloat after filing for bankruptcy.

According to the Mazari and Jordan, who probably did not know that one of their roles as a “research analyst” would be to moonlight as the world’s biggest used car salesmen, “channel checks” suggest used-car firms like CarMax and AutoNation could be among the firms looking to purchase used Hertz vehicles amid rise in demand for used cars. The very hypothetical move could, in theory, help ease some pressure for Hertz, as a sale of its used-car fleet would shore up some cash concerns and could fetch about $3 billion, the analysts said.

“Given what appears to be robust demand for inventory in a rapidly recovering used retail market, we see ~150k HTZ cars as an attractive option for retailers such as AN and KMX with strategic focus on expanding used volumes,” Mazari said.

“The most logical step would be to buy the fleet of cars which are available at a good price and shape … that’s where the value lies,” the Jefferies used car salesman noted, adding that the sale of cars – taking place at rather overinflated values – would help HTZ pay its lenders but also shore up some cash. As a reminder, in 2019, HTZ operated peak rental fleet in 567,600 vehicles in the U.S. and 204,000 vehicles in international locations.

The report did not address two very salient questions:1) why would anyone buy the cars for more than their book value on the HTZ balance sheet, and 2) how is any of this not already priced into the bonds which are still expected to be impaired by more than 70%, meaning that the stock is still a clear and total zero.

Unfortunately, those were not questions that any of the rabid Robinhood traders that had bid up the stock three weeks ago as high as $6 were asking, and as a result HTZ shares soared following the report like clockwork, at one point surging as much as 100%…

… even as bonds continued to laugh at the stupidity of retail investors who were merely doing a favor to institutional Jefferies clients who had bought up the stock in recent weeks in hopes the Initial Bankruptcy Offering would take place, and now needed to catalyst to sell at higher prices.

And yes, the fact that bonds did not even budge today confirms that HTZ stock remains a total loss, no matter what some used car salesman on Wall Street thinks.

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The TVIX ETF Is Getting Delisted: Here Are The Three Implications For Markets

The TVIX ETF Is Getting Delisted: Here Are The Three Implications For Markets

Tyler Durden

Wed, 06/24/2020 – 15:30

Back in February 2018, as a result of the staggering “Volmageddon” surge in the VIX, the market lost the retail favorite XIV ETN used to bet on continued declines in volatility, which was a fantastic strategy while it worked but then suddenly lost virtually all of its value in seconds. Now, it’s the turn of the XIV’s cousin, the TVIX.

Monday’s announcement that Credit Suisse will stop taking creations and delist the TVIX (VelocityShares Daily 2x VIX Short-Term ETN) comes at a time when the product is the largest VIX ETP in both AUM ($1.4bln) and vega ($80mm) terms, and the top-performing ETN or ETF in the US equity market in 2020 (+180%).

According to Goldman’s derivatives strategist Rocky Fishman, there are three takeaways for investors:

  • Reduced vol-of-vol. While far smaller than the rebalancing done by the SVXY or XIV around the 2018 VIX spike, the TVIX also buys VIX futures when they are going up and sells them when going down, a short gamma phenomenon that can exacerbate VIX future moves in both directions. Much lower VIX liquidity metrics than we had prior to 2018 leaves this impact material, even though the vega amount is lower than it was.
  • Reduced VIX futures activity and liquidity. The TVIX has VIX futures exposure equivalent to roughly 1/3 of the open interest of VIX futures (80k out of 245k contracts). Given the economic similarity between the TVIX and existing long (e.g. VXX) and 1.5x levered long products (UVXY), we expect investors to switch some of their positions to comparable products, though if done on a dollar-for-dollar basis there will be a drop in total vega exposure. The activity generated by hedging of the TVIX itself (10k futures on average if fully hedged by VIX futures), and by secondary trading of ETP shares (equivalent to 90k futures/day in 2020, 60k/day in 2019) have been a significant source of volume and VIX futures markets (which have traded around 250k contracts/day in 2019-20). VIX futures liquidity has already been weakened, and this is a further negative development for VIX product liquidity.
  • Vega to sell in the coming days. To the extent investors close long TVIX positions before they are delisted, there could be some pressure on volatility in the coming days.

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Appeals Court Panel Rules in Favor of Michael Flynn’s Release

michaelflynn_1161x653

A federal judge can and should agree to the Department of Justice’s request to drop charges against former national security adviser Michael Flynn, a federal appeals court panel ruled today.

The Justice Department in May moved to get charges against Flynn dismissed. Flynn pleaded guilty to lying to the FBI in 2016 about his communications with Russian Ambassador Sergei Kislyak as Trump’s campaign was being investigated over concerns that they were being influenced by the Russian government.

Flynn later attempted to retract his guilty plea, and then earlier this year, representatives from the Department of Justice submitted a motion agreeing with Flynn, stating that they now believe that the intelligence investigation against Flynn lacked a legitimate basis and that his lies to the FBI were not actually material to an investigation.

This was a rather unusual move from the Department of Justice, which has a lengthy record of vociferously defending the prosecution of individuals who have lied to investigators. Rather than accepting the request, U.S. District Judge Emmett Sullivan brought in former federal judge John Gleeson to analyze the case and make an independent recommendation. Gleeson blasted the way the Justice Department was handling the case, arguing that Flynn was being treated differently by the Justice Department due to his relationship with Trump. He recommended that Sullivan move forward and sentence Flynn for his guilty plea. Sullivan had scheduled a hearing in July for attorneys to make their cases.

Flynn’s attorneys turned to the D.C. Circuit of the U.S. Court of Appeals to attempt to force Sullivan to accept the Justice Department’s request to dismiss the charges. Today, a panel of judges agreed, 2–1, with Flynn and the Justice Department.

Judge Neomi Rao, a Trump appointee, wrote the majority opinion, and its focus was on the many longstanding court precedents giving prosecutors and the executive branch (not judges) the discretion to determine whether to drop a case.

“These clearly established legal principles and the Executive’s ‘long-settled primacy over charging decisions,’ foreclose the district court’s proposed scrutiny of the government’s motion to dismiss the Flynn prosecution,” Rao wrote. “A hearing may sometimes be appropriate before granting leave of court…however, a hearing cannot be used as an occasion to superintend the prosecution’s charging decisions, because ‘authority over criminal charging decisions resides fundamentally with the Executive, without the involvement of—and without oversight power in—the Judiciary.'”

Judge Robert Wilkins, appointed by President Barack Obama, dissented, writing that it was extremely unusual for the Court of Appeals to force a ruling requiring Sullivan to rule a certain way rather than waiting for Sullivan to issue his own ruling and then deciding whether or not that ruling was legally correct.

This ruling is not the end of the matter. Sullivan can request for a full en banc hearing by the full D.C. Circuit of the U.S. Court of Appeals rather than just a panel, and a judge in the court could also call for a vote for such a hearing.

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As COVID-19 Infections Rise, Patients Are Getting Younger

Greg-Abbott-6-23-20-Newscom

Texas Gov. Greg Abbott (R) is officially alarmed by the continuing rise in his state’s daily tally of confirmed COVID-19 cases, which yesterday totaled nearly 5,500, a new record. Nationwide, newly detected infections have been rising this month, but the upward trend in Texas is especially striking. Abbott warns that new restrictions may be necessary to curb the outbreak, which he says is driven largely by young people who are flouting social distancing guidelines.

That explanation highlights a conflict between the interests of Texans who face very little personal risk from the COVID-19 virus and the interests of Texans who are especially vulnerable to the disease. But it also highlights the conflict between preventing virus transmission and achieving herd immunity, which would ultimately protect high-risk groups from a potentially deadly threat.

The shifting age distribution of COVID-19 infections in Texas and several other states suggests that herd immunity might be achieved without a big increase in deaths, assuming that people in high-risk groups can be adequately protected in the meantime. Opponents of that strategy, which involves trading more deaths now for fewer deaths later, argue that it’s reckless because we can’t be sure what the net effect will be. They add that preventing transmission buys time to develop better treatments and deploy an effective vaccine, an approach that could reduce the ultimate death toll.

As a Texas resident whose wife takes an immunosuppressive medication for a neurodegenerative disease, I have a personal stake in this debate. Given my age and health status, my own risk of dying from COVID-19 is low. It is even lower for our three daughters, who range in age from 14 to 27. Our oldest daughter, who had symptoms consistent with COVID-19 in March, may already be immune; she is waiting for the results of an antibody test. But because we are trying not to kill my wife (we are very considerate that way), we have been extra cautious about limiting our interactions with other people, even as legal restrictions on movement and economic activity have been lifted.

At the same time, I can understand the perspective of young, healthy people who chafe at social distancing rules of uncertain duration. Abbott notes that Texans younger than 30 account for a growing share of new infections. “There are certain counties where a majority of the people who are tested positive in that county are under the age of 30, and this typically results from people going to bars,” he said during a press conference last week. He suggested that the dramatic increase in cases that Texas has seen since late May can be traced to gatherings on Memorial Day weekend, when people who might not have seen each other for months got together in close proximity.

Those people have been widely portrayed as reckless idiots who do not consider the danger they could pose to their grandparents or other vulnerable people by picking up and transmitting the virus. While their own symptoms are apt to be mild or nonexistent, that may not be true of people they subsequently encounter, and their own resilience makes it more likely that they will carry the virus without realizing it. If they are not scrupulous about avoiding close contact with vulnerable people, they could unwittingly endanger their lives.

All of that is true, which is why I am especially keen to keep my wife from interacting with young people who behave the way that young people tend to behave. But it may be too much to expect them to indefinitely suspend their social lives because of a disease that poses very little risk to them or their friends. And while I doubt they are motivated by a prosocial desire to protect high-risk individuals through herd immunity, that could be an unintentional side effect of their self-interested defiance. Over the short term, they are raising the risk to vulnerable people by increasing the prevalence of the virus. But over the longer term, they could be protecting those people by increasing the prevalence of immunity and cutting chains of transmission.

I am not at all sure that’s a risk worth taking, since the answer depends on how many more infections are necessary to achieve herd immunity and how soon effective treatments and vaccines will be available. But we may not have a choice.

If rising infections in states such as Texas, California, Arizona, and Florida (which yesterday saw a record increase in new confirmed cases) represent a new normal rather than a one-time jump tied to social gatherings on Memorial Day weekend, it will be hard to put the genie back in the bottle, regardless of any legal restrictions politicians decide to reimpose. Given the impracticality of mass enforcement, social distancing has always required voluntary compliance, and the willingness to comply seems to be waning, partly because of sheer impatience but also because the experience with ham-handed, economically devastating, and frequently arbitrary lockdowns has left many people bitter and disinclined to follow official recommendations.

Assuming that large numbers of Americans are not willing to sit tight until vaccines and/or better treatments can be deployed, what will that mean for the COVID-19 death toll? On that score, there is some reason for (relative) optimism.

While I could not find data breaking down new Texas cases by age, the changing distribution of total cases confirms Abbott’s point that newly infected people are younger now than they were earlier in the epidemic. As of yesterday, people older than 65 accounted for 15 percent of total confirmed cases in Texas, down from 22 percent on April 21. The share of cases involving people younger than 40 rose from 32 percent to 41 percent during the same period. Consistent with Abbott’s gloss, the biggest jump was in 20-to-29-year-olds, whose share of all confirmed cases rose from 13 percent to 17 percent.

Those comparisons understate the change in recently detected infections, which is the relevant consideration in projecting COVID-19 deaths. In Florida, the median age of newly identified patients plummeted from 65 in early March to 35 last week. In California, according to an analysis released last week, 44 percent of newly diagnosed cases involved people 34 or younger, up from 29 percent a month earlier. The share of new cases involving people older than 50, meanwhile, fell from 46 percent to 30.5 percent.

Why is that good news? Last month the U.S. Centers for Disease Control and Prevention (CDC) estimated that the risk of death for people with COVID-19 symptoms is just 0.05 percent among patients younger than 50. That risk rises to 0.2 percent among 50-to-64-year-olds and 1.3 percent among people 65 or older. In other words, those reckless idiots getting together in bars are correct in thinking that the risk for them is negligible, even if they overlook the fact that the risk for the oldest age group is much higher—26 times as high, according to the CDC’s estimate.

While recent increases in COVID-19 infections can be expected to result in some additional deaths in the next few weeks, the consequences will not be nearly as bad as they would be if the new patients were older. The changing age distribution of cases helps explain why the nationwide tally of daily COVID-19 deaths, which has fallen dramatically since April, continued to decline long after states began lifting their lockdowns at the end of that month. Youyang Gu’s epidemiological model, which has a good track record of predicting COVID-19 fatalities, currently projects that daily deaths in the United States will continue to decline until early July, then rise through mid-August, exceeding the current level by late July, before declining again through September, dropping below the current level by the middle of that month.

“With younger age of recent infections in at least some places such as Florida,” former CDC Director Tom Frieden tweeted this week, “expect a lower death rate in this wave…until the 20-40-year-olds who are infected today go on to infect others.” The implication is that we will eventually see a big surge in COVID-19 deaths as younger, healthier Americans relatively unscathed by the virus pass it on to others who are more vulnerable. But that is not a foregone conclusion. As always, it depends on the precautions that people take, and the onus for those seems to be shifting from the population at large to people in high-risk groups. We can debate whether or not that is fair, but it will not change the reality.

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Appeals Court Panel Rules in Favor of Michael Flynn’s Release

michaelflynn_1161x653

A federal judge can and should agree to the Department of Justice’s request to drop charges against former national security adviser Michael Flynn, a federal appeals court panel ruled today.

The Justice Department in May moved to get charges against Flynn dismissed. Flynn pleaded guilty to lying to the FBI in 2016 about his communications with Russian Ambassador Sergei Kislyak as Trump’s campaign was being investigated over concerns that they were being influenced by the Russian government.

Flynn later attempted to retract his guilty plea, and then earlier this year, representatives from the Department of Justice submitted a motion agreeing with Flynn, stating that they now believe that the intelligence investigation against Flynn lacked a legitimate basis and that his lies to the FBI were not actually material to an investigation.

This was a rather unusual move from the Department of Justice, which has a lengthy record of vociferously defending the prosecution of individuals who have lied to investigators. Rather than accepting the request, U.S. District Judge Emmett Sullivan brought in former federal judge John Gleeson to analyze the case and make an independent recommendation. Gleeson blasted the way the Justice Department was handling the case, arguing that Flynn was being treated differently by the Justice Department due to his relationship with Trump. He recommended that Sullivan move forward and sentence Flynn for his guilty plea. Sullivan had scheduled a hearing in July for attorneys to make their cases.

Flynn’s attorneys turned to the D.C. Circuit of the U.S. Court of Appeals to attempt to force Sullivan to accept the Justice Department’s request to dismiss the charges. Today, a panel of judges agreed, 2–1, with Flynn and the Justice Department.

Judge Neomi Rao, a Trump appointee, wrote the majority opinion, and its focus was on the many longstanding court precedents giving prosecutors and the executive branch (not judges) the discretion to determine whether to drop a case.

“These clearly established legal principles and the Executive’s ‘long-settled primacy over charging decisions,’ foreclose the district court’s proposed scrutiny of the government’s motion to dismiss the Flynn prosecution,” Rao wrote. “A hearing may sometimes be appropriate before granting leave of court…however, a hearing cannot be used as an occasion to superintend the prosecution’s charging decisions, because ‘authority over criminal charging decisions resides fundamentally with the Executive, without the involvement of—and without oversight power in—the Judiciary.'”

Judge Robert Wilkins, appointed by President Barack Obama, dissented, writing that it was extremely unusual for the Court of Appeals to force a ruling requiring Sullivan to rule a certain way rather than waiting for Sullivan to issue his own ruling and then deciding whether or not that ruling was legally correct.

This ruling is not the end of the matter. Sullivan can request for a full en banc hearing by the full D.C. Circuit of the U.S. Court of Appeals rather than just a panel, and a judge in the court could also call for a vote for such a hearing.

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As COVID-19 Infections Rise, Patients Are Getting Younger

Greg-Abbott-6-23-20-Newscom

Texas Gov. Greg Abbott (R) is officially alarmed by the continuing rise in his state’s daily tally of confirmed COVID-19 cases, which yesterday totaled nearly 5,500, a new record. Nationwide, newly detected infections have been rising this month, but the upward trend in Texas is especially striking. Abbott warns that new restrictions may be necessary to curb the outbreak, which he says is driven largely by young people who are flouting social distancing guidelines.

That explanation highlights a conflict between the interests of Texans who face very little personal risk from the COVID-19 virus and the interests of Texans who are especially vulnerable to the disease. But it also highlights the conflict between preventing virus transmission and achieving herd immunity, which would ultimately protect high-risk groups from a potentially deadly threat.

The shifting age distribution of COVID-19 infections in Texas and several other states suggests that herd immunity might be achieved without a big increase in deaths, assuming that people in high-risk groups can be adequately protected in the meantime. Opponents of that strategy, which involves trading more deaths now for fewer deaths later, argue that it’s reckless because we can’t be sure what the net effect will be. They add that preventing transmission buys time to develop better treatments and deploy an effective vaccine, an approach that could reduce the ultimate death toll.

As a Texas resident whose wife takes an immunosuppressive medication for a neurodegenerative disease, I have a personal stake in this debate. Given my age and health status, my own risk of dying from COVID-19 is low. It is even lower for our three daughters, who range in age from 14 to 27. Our oldest daughter, who had symptoms consistent with COVID-19 in March, may already be immune; she is waiting for the results of an antibody test. But because we are trying not to kill my wife (we are very considerate that way), we have been extra cautious about limiting our interactions with other people, even as legal restrictions on movement and economic activity have been lifted.

At the same time, I can understand the perspective of young, healthy people who chafe at social distancing rules of uncertain duration. Abbott notes that Texans younger than 30 account for a growing share of new infections. “There are certain counties where a majority of the people who are tested positive in that county are under the age of 30, and this typically results from people going to bars,” he said during a press conference last week. He suggested that the dramatic increase in cases that Texas has seen since late May can be traced to gatherings on Memorial Day weekend, when people who might not have seen each other for months got together in close proximity.

Those people have been widely portrayed as reckless idiots who do not consider the danger they could pose to their grandparents or other vulnerable people by picking up and transmitting the virus. While their own symptoms are apt to be mild or nonexistent, that may not be true of people they subsequently encounter, and their own resilience makes it more likely that they will carry the virus without realizing it. If they are not scrupulous about avoiding close contact with vulnerable people, they could unwittingly endanger their lives.

All of that is true, which is why I am especially keen to keep my wife from interacting with young people who behave the way that young people tend to behave. But it may be too much to expect them to indefinitely suspend their social lives because of a disease that poses very little risk to them or their friends. And while I doubt they are motivated by a prosocial desire to protect high-risk individuals through herd immunity, that could be an unintentional side effect of their self-interested defiance. Over the short term, they are raising the risk to vulnerable people by increasing the prevalence of the virus. But over the longer term, they could be protecting those people by increasing the prevalence of immunity and cutting chains of transmission.

I am not at all sure that’s a risk worth taking, since the answer depends on how many more infections are necessary to achieve herd immunity and how soon effective treatments and vaccines will be available. But we may not have a choice.

If rising infections in states such as Texas, California, Arizona, and Florida (which yesterday saw a record increase in new confirmed cases) represent a new normal rather than a one-time jump tied to social gatherings on Memorial Day weekend, it will be hard to put the genie back in the bottle, regardless of any legal restrictions politicians decide to reimpose. Given the impracticality of mass enforcement, social distancing has always required voluntary compliance, and the willingness to comply seems to be waning, partly because of sheer impatience but also because the experience with ham-handed, economically devastating, and frequently arbitrary lockdowns has left many people bitter and disinclined to follow official recommendations.

Assuming that large numbers of Americans are not willing to sit tight until vaccines and/or better treatments can be deployed, what will that mean for the COVID-19 death toll? On that score, there is some reason for (relative) optimism.

While I could not find data breaking down new Texas cases by age, the changing distribution of total cases confirms Abbott’s point that newly infected people are younger now than they were earlier in the epidemic. As of yesterday, people older than 65 accounted for 15 percent of total confirmed cases in Texas, down from 22 percent on April 21. The share of cases involving people younger than 40 rose from 32 percent to 41 percent during the same period. Consistent with Abbott’s gloss, the biggest jump was in 20-to-29-year-olds, whose share of all confirmed cases rose from 13 percent to 17 percent.

Those comparisons understate the change in recently detected infections, which is the relevant consideration in projecting COVID-19 deaths. In Florida, the median age of newly identified patients plummeted from 65 in early March to 35 last week. In California, according to an analysis released last week, 44 percent of newly diagnosed cases involved people 34 or younger, up from 29 percent a month earlier. The share of new cases involving people older than 50, meanwhile, fell from 46 percent to 30.5 percent.

Why is that good news? Last month the U.S. Centers for Disease Control and Prevention (CDC) estimated that the risk of death for people with COVID-19 symptoms is just 0.05 percent among patients younger than 50. That risk rises to 0.2 percent among 50-to-64-year-olds and 1.3 percent among people 65 or older. In other words, those reckless idiots getting together in bars are correct in thinking that the risk for them is negligible, even if they overlook the fact that the risk for the oldest age group is much higher—26 times as high, according to the CDC’s estimate.

While recent increases in COVID-19 infections can be expected to result in some additional deaths in the next few weeks, the consequences will not be nearly as bad as they would be if the new patients were older. The changing age distribution of cases helps explain why the nationwide tally of daily COVID-19 deaths, which has fallen dramatically since April, continued to decline long after states began lifting their lockdowns at the end of that month. Youyang Gu’s epidemiological model, which has a good track record of predicting COVID-19 fatalities, currently projects that daily deaths in the United States will continue to decline until early July, then rise through mid-August, exceeding the current level by late July, before declining again through September, dropping below the current level by the middle of that month.

“With younger age of recent infections in at least some places such as Florida,” former CDC Director Tom Frieden tweeted this week, “expect a lower death rate in this wave…until the 20-40-year-olds who are infected today go on to infect others.” The implication is that we will eventually see a big surge in COVID-19 deaths as younger, healthier Americans relatively unscathed by the virus pass it on to others who are more vulnerable. But that is not a foregone conclusion. As always, it depends on the precautions that people take, and the onus for those seems to be shifting from the population at large to people in high-risk groups. We can debate whether or not that is fair, but it will not change the reality.

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Alexandria Ocasio-Cortez Had a Big Night in New York’s Primary. Hillary Clinton Fell Flat.

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This year’s primary season has been a mixed bag for the insurgent progressives within the Democratic Party’s ranks, but Tuesday’s results in and around New York City seem to have cemented Rep. Alexandria Ocasio-Cortez’ (D–N.Y.) status as more than a fluky upstart.

Ocasio-Cortez easily won her congressional primary election on Tuesday night, a result that effectively ensures a second term for the 30-year-old. Then, she may have delivered a knockout blow to a 16-term incumbent who had been endorsed by Hillary Clinton and other long-time Democratic leaders. It’s too soon to call her a kingmaker within Democratic politics, but two-years after she beat an 11-term incumbent, Ocasio-Cortez—with help from the vast sums of money she’s been able to raise in the past two years—appears to have scored another victory in the proxy war between leftists and centrists.

This time, the victim was Rep. Eliot Engel (D–N.Y.), chairman of the House Foreign Affairs Committee and a noted hawk, who appears to be on course to lose to Jamaal Bowman, a middle school principal whose candidacy was endorsed by Ocasio-Cortez. With 91 percent of precincts reporting and absentee ballots still waiting to be counted in the 16th district—which includes parts of Bronx and Westchester counties—Bowman had a whopping 25 point lead over Engel on Wednesday afternoon.

In addition to Ocasio-Cortez, Bowman was endorsed by Sens. Bernie Sanders (I–Vt.) and Elizabeth Warren (D–Mass.), while the longtime incumbent Engel picked up an endorsement from Hillary Clinton last week to go along with support from Speaker of the House Nancy Pelosi (D–Calif.) and Senate Minority Leader Chuck Schumer (D–N.Y.).

But Clinton, Pelosi, and Schumer couldn’t save Engel, who seems likely to become just the second incumbent Democrat to lose a primary this year after Rep. Dan Lipinski (D–Ill.).

Bowman, a 44-year old teacher-turned-principal, used his campaign to call for a “third Reconstruction” to build on the legal and social advances made by black Americans in the wake of the Civil War and again during the civil rights movement. He’s called for removing military weaponry from police departments and repealing the 1994 federal crime bill that caused America’s prison population to skyrocket.

In the neighboring 14th district, Ocasio-Cortez saw off a trio of primary challengers with relative ease. With only absentee ballots left to be counted on Wednesday afternoon, she had won more than 72 percent of the vote.

The most serious challenge to Ocasio-Cortez came from Michelle Caruso-Cabrera, a former CNBC anchor and self-described fiscal conservative who criticized the first-term progressive’s expensive agenda. But she was no match for AOC’s campaign spending.  Ocasio-Cortez has raised more than $10 million since 2019, and she spent more than $2.4 million on Facebook ads alone since January—far more than any other member of Congress has, The New York Times reported last week—as the COVID-19 pandemic effectively halted traditional campaigning in her district.

We should not overstate the success of progressives during this campaign cycle. In the presidential race, most obviously, candidates who tried to raise their profile by competing in the “woke primary” were rejected by voters and an old white guy with a track record that’s anything but progressive eventually emerged as the party’s presumptive nominee. With Engel being only the second centrist incumbent to lose a primary this year suggests that 2020 is not exactly a bloodbath for moderate Democrats.

That the party establishment has limited the losses is probably good for the Democrats’ chances in November. If the party wants to expand its House majority, flip the Senate, and take the White House, it has to appeal to voters in purple and red districts—not just those in the Bronx or at Berkeley.

Still, Congress could be a better institution with more outsiders who are willing to challenge their party’s leadership, as Ocasio-Cortez has done on occasion. And, if nothing else, at least we get to enjoy the defeat of a Clintonite interventionist like Engel.

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The D.C. Circuit’s Dubious Decision Ordering the Flynn Case Dismissed

Today the D.C. Circuit granted Michael Flynn’s petition for a writ of mandamus, ordering District Judge Sullivan to grant the government’s motion to dismiss the criminal case against Flynn. Judge Rao, joined by Judge Henderson, concluded that District Judge Sullivan erred in appointing an amicus to defend continuation of the Flynn prosecution and in scheduling a hearing on the Government’s motion.  For more background on the case, see my post here and Jonathan’s post here.

The critical legal issue is the district judge’s role, under Federal Rule of Criminal Procedure 48(a), in deciding whether to grant “leave of court” for the Government to dismiss a criminal case.  Judge Sullivan had taken an expansive view of his role, even appointing an amicus (distinguished retired District Judge John Gleeson) to argue against the Government’s unopposed motion to dismiss. The majority found this appointment a “troubling indication” of the district court’s “mistaken understanding” of its role in ruling on an unopposed Rule 48(a) motion:

Whatever the extent of the district court’s “narrow” role under Rule 48(a), see Fokker Servs., 818 F.3d at 742, that role does not include designating an advocate to defend Flynn’s continued prosecution. The district court’s order put two “coequal branches of the Government … on a collision course.” Cheney, 542 U.S. at 389. The district court chose an amicus who had publicly advocated for a full adversarial process. Based on the record before us, the contemplated hearing could require the government to defend its charging decision on two fronts—answering the district court’s inquiries as well as combatting Gleeson’s arguments. Moreover, the district court’s invitation to members of the general public to appear as amici suggests anything but a circumscribed review. This sort of broadside inquiry would rewrite Rule 48(a)’s narrow “leave of court” provision.

The majority’s conclusion on the impropriety of appointing an amicus seems correct to me. In discharging his leave-of-court obligations, the district judge had no need to enlist advocates for a particular conclusion, particularly where the judge was well familiar with the details of the case.

The majority, however, stands on weaker footing in concluding that the district judge could not even hold a hearing on the dismissal motion.  As Judge Wilkins explained in his dissent,

it is not inconsistent with the separation of powers for a district court to conduct regular proceedings and afford consideration to a motion, even if the eventual grant or denial of the motion might intrude on the Executive’s exercise of his prosecutorial discretion. Again, this is not a case where we are being asked to decide whether the district judge may call the prosecutor to the stand or whether a Rule 48(a) motion may lead to an evidentiary hearing. This is a case about whether a district judge may even hold a hearing on a Rule 48(a) motion. While the selective-prosecution context is admittedly different than Rule 48(a), these cases nonetheless contradict the majority’s conclusion that holding a hearing, in and of itself, is a per se improper intrusion upon executive power. If the presumption of regularity does not prevent holding a hearing or independently examining prosecutorial discretion in the selective-prosecution context, there is no good reason why the presumption of regularity precludes a hearing on a motion to dismiss under Rule 48(a), disallowing any consideration whatsoever and forbidding the district court from expressing its views on the record with respect to its previous findings on materiality and guilt—all in the name of the separation of powers.

The majority rebutted this conclusion, arguing that “[t]his is not a case about whether ‘a district judge may even hold a hearing on a Rule 48(a) motion.’ Rather, it is about whether, after the government has explained why a prosecution is no longer in the public interest, the district judge may prolong the prosecution by … probing the government’s motives. On that, both the Constitution and cases are clear: he may not.”

The Constitution and the cases are not “clear” on this subject. Indeed, the majority’s reading of Rule 48(a) essentially turns it into a dead letter. Rule 48(a) specifically envisions some role–albeit a limited one–for the district court in evaluating motions to dismiss. It is hard to understand how the mere holding of a hearing on whether to grant leave of court is such an extraordinary abuse of power to warrant granting a writ of mandamus. On this point, I agree with former Judge Michael Luttig, who wrote in a prescient op-ed last month in the Washington Post that “[i]f the court of appeals were to order Sullivan to dismiss the case now, the full appeals court or, if not, the Supreme Court, should reverse that error.”

In venturing my conclusion that the district judge should have been allowed to hold a hearing, I don’t mean to comment on the ultimate merits of the underlying motion to dismiss from the Government. Indeed, if anything it sounds like the arguments favoring dismissal may have only grown stronger since the Government filed its motion. News reports yesterday suggest that additional exculpatory notes from Peter Strzok have surfaced recently that only further undercut the Government’s criminal case.

But the process is important here. Rule 48(a) requires “leave of court” before the Government can dismiss a case.  And that leave-of-court requirement exists not only for protecting defendant’s interests (as the majority opinion discusses) but also for protecting other interests, such as those crime victims (as the majority does not substantively discuss). As I explained in my earlier post on this case,

for the reasons I wrote about long ago in my earlier law review article, I continue to believe that judges should always be required to consider a crime victim’s views before dismissing a case. It may well be that most Government dismissal motions continue to be granted, even when a victim objects. But as a procedural matter, consideration of the victim’s view ensures greater fairness–and certainly greater perceived fairness–in the process.

This conclusion is reinforced by the drafting history of Rule 48(a), recently summarized nicely in a short, on-line piece by Thomas Frampton. As he explains, “Rule 48(a)’s ‘principal object’ was never ‘to protect a defendant against prosecutorial harassment,’ Rinaldi v. United States, 434 U.S. 22, 30 n.15 (1977) (per curiam). Rather, it was implemented to give district judges a modest means of safeguarding the public interest when evaluating a motion like the one that has been filed in United States v. Flynn.”

Other circuits have taken a more expansive view of the role of district judge’s under Rule 48(a) than did the D.C. Circuit today. I wouldn’t be surprised to see further review of this divided opinion–which essentially reads Rule 48(a)’s long standing leave-of-court requirement out of the rules of criminal procedure.

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“Where’s The Police When You Need Them”: D.C. Delegate Asks The Right Question After Bizarre Incident Near White House

“Where’s The Police When You Need Them”: D.C. Delegate Asks The Right Question After Bizarre Incident Near White House

Tyler Durden

Wed, 06/24/2020 – 15:10

Authored by Jonathan Turley,

NBC correspondent Andrea Mitchell and Delegate Eleanor Holmes Norton (D-D.C.) had a bizarre encounter yesterday when a man dressed only in a bra and panties rushed then near Black Lives Matter Square and the area claimed earlier as the “Black House Autonomous Zone.”

Mitchell immediately asked “where’s the police” and Norton added “where’s the police when you need them?” It is a question that many of us have been asking D.C. officials for weeks as police have stood by and watched statues destroyed and defaced around the city. 

This week, D.C. Chief of Police Peter Newsham stated that his department has made the “tactical decision” not to intervene as certain statues have been torn down in front of them. I have been highly critical of both this destruction and the failure of D.C. officials to act, including the iconic bust of George Washington on my own campus at George Washington University.

Thankfully no one was injured in this encounter:

The answer to the question however is equally troubling. Police are often around when violence and destruction occurs in these protests.

The question came up when reporters asked Newsham why officers stood around as mere pedestrians on Friday night as a mob pulled down the statue of Albert Pike in Judiciary Square. There have been good-faith calls for the removal of the statue, including by Norton.  I have participated in this debate for years on determining what public art should be removed and what standards we should apply to the preservation of historical monuments, including a discussion organized by the Smithsonian Institution a few years back.  Some monuments should be removed but this should be done with the consent and deliberation of the communities.  Indeed, such acts hold greater meaning when done through legitimate and consensual means.  This is not part of that debate, this is destruction by mobs who unilaterally determine what public art will be allowed and what will be destroyed.

After a mob was allowed to attach ropes and work to pull down the statue of Andrew Jackson, there was a belated response from federal and district officers. The statue however was defaced and was only saved from toppling by its sheer size.  Media reported that Mayor Muriel Bowser and her office declined any comment on the mob scene that was scene on every network. That was what one might call a “tactical political decision.”

The “tactical decision” made by the Newsham is a convenient and widely used approach around the country.  Leaders are allowing art to be destroyed rather than confront these mobs — not on the inherent value of the monuments but the right of society to make such decisions as a whole.  This is nothing new. Such tactical decisions have been made by universities for years as they watched their art destroyed without any action or discipline.  At the same time, police have been ordered to give mobs free range in destroying public art.  Even when arrests are made, prosecutors have dropped charges under pressure from the public. 

This same tactical decision has been made in other cities by leaders.  Just yesterday, a legislator was attacked and sent to the hospital for taking a picture of the destruction. Both journalists and pedestrians have also been attacked for filming such scenes by protesters. Democratic senator Tim Carpenter told the Milwaukee Journal Sentinel that he was beaten after taking a photo last night as two statues being toppled.

The protesters tore down the statue of Col. Christian Heg, who fought and died during the Civil War on the Union side

As noted earlier, the spectrum of action from cities and universities seems to range from deafening silence to cringing compliance in the face of such destruction.  At the University of Oregon, famous statues of the Pioneer and Mother Pioneer were torn down. The University condemned the destruction and then promptly promised that the statues would be carted away and not returned.

Thus, the answer to D.C. Delegate Norton’s question is that the police is often present, but remain mere pedestrians by design.  Call it “tactical” or consensual, but destruction of public art and historical monuments is occurring with the acquiescence of the city leaders.

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