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SCOTUS Drives a Stake Through The Heart of Rule 33.1

The Supreme Court imposes a byzantine policy for submitting printed briefs. Rule 33.1. provides that almost all submissions must be printed on in a “6⅛- by 9¼-inch booklet. And not just any paper will do. The Court requires “opaque, unglazed, and not less than 60 pounds in weight.” And the documents must use “saddle stitch or perfect binding.” Plus “[e]very booklet-format document shall have a suitable cover consisting of 65-pound weight paper in the color indicated on the chart in subparagraph 1(g) of this Rule.” There are thirteen separate colors. Make sure you don’t confuse a light green cover (Amicus brief in support of Petitioner) from a dark green cover (Amicus brief in support of Respondent) Oh, and you have to submit 40 copies of each booklet–enough for the Justices, the clerk, and court staff.

These rules are very expensive to comply with. Most printing companies charge several thousand dollars for a cert petition. And it is extremely difficult to print it on your own. If you make a mistake, it may be necessary to reprint the entire lot and start from scratch. Recently, the clerk’s office gave me the option of putting a piece of white tape over a minor error, rather than reprinting the entire brief. I gladly accepted the option. (Kudos to the clerk’s office for maintaining efficient operations during this difficult time).

Rule 33.1 may have made sense decades ago when word processing and desktop publishing was cost prohibitive. But today, these particular requirements merely create unneeded costs. And they limit access to justice for many litigants who can’t afford to hire a printing firm.

Several of the Justices have indicated that they read briefs on their iPads. (Many circuit judges use iPads during oral arguments). I am fairly confident that law clerks are comfortable reading briefs on a screen. Rule 33.1 is a vestige of a long-ago time, and should be radically altered.

Tempora mutantur, nos et mutamur in illis.

COVID-19 has brought another unexpected, but welcome change to the Court. Today, the Supreme Court put a stake through the heart of Rule 33.1. The brief order provides:

IT IS ORDERED that with respect to every document filed in a case prior to a ruling on a petition for a writ of certiorari or petition for an extraordinary writ, or a decision to set an appeal for argument, a single paper copy of the document, formatted on 8½ x 11 inch paper, may be filed. The document may be formatted under the standards set forth in Rule 33.2, or under the standards set forth in Rule 33.1 but printed on 8½ x 11 inch paper. The Court may later request that a document initially submitted on 8½ x 11 inch paper be submitted in booklet format.

Rule 33.2 is much, much easier to comply with. Litigants can use normal 8½ x 11 inch paper, of any weight. And there is no requirement to bind the document in booklet form. A staple in the “upper-left hand corner” works.

This policy should be the new normal. There is no reason to require litigants to jump through hoops to submit a cert petition that will almost certainly be denied. If cert is granted, funds are more likely to be available to cover the intricacies of Rule 33.1. But at the cert-stage, litigants should be able to quickly and easily file briefs using normal paper size. Rule 33.2 should be the norm. I hope this rule is maintained indefinitely.

Today’s order also exempted certain filings from paper submission altogether:

IT IS FURTHER ORDERED that the following types of documents should not be filed in paper form if they are submitted through the Court’s electronic filing system: (1) motions for an extension of time under Rule 30.4; (2) waivers of the right to respond to a petition under Rule 15.5; (3) blanket consents to the filing of amicus briefs under Rules 37.2(a) and 37.3(a); and (4) motions to delay distribution of a cert petition under the Court’s Order of March 19, 2020.

The Supreme Court’s electronic filing system is excellent–far better than CM/ECF, which the lower courts use. And it is free to the public. Kudos to the Court for developing this system. These changes should be permanent as well. No one will miss these antiquated rules.

On Monday, the Court announced that it would live-stream telephonic oral arguments. Bravo! I wrote an Op-Ed on this topic that was scheduled for Tuesday morning. I argued that the Court should set a special September sitting for the unargued cases. I did not think the Court would even consider telephonic arguments. Glad I was wrong. I hope this change persists for the future.

It will be difficult for the Court to go back to normal. I like the new normal.

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After Pennsylvania Closed All Liquor Stores, Residents Crossed State Borders To Buy Booze. Now Ohio Is Shutting Down Out-of-State Sales.

No state has done a worse job regulating the sale of alcohol during the pandemic than Pennsylvania.

When the state closed all of its liquor stores in March, officials cited health and safety concerns stemming from the COVID-19 pandemic. (Liquor stores in Pennsylvania are all state-run; the government has a monopoly.)

“The health and safety of our consumers and employees is our top priority, and we take our responsibility very seriously,” reads a notice on the Pennsylvania Liquor Control Board (PLCB) website. State liquor regulators were aware of the disruption the closure would cause. But “mitigation of the public health crisis must take priority over the sale of wine and spirits, as the health and safety of our employees, customers and communities is paramount.”

The liquor store closures have certainly been disruptive. But, if anything, they have exacerbated the public health crisis, even in other states.

With few legal options for purchasing spirits inside state borders, residents have flooded liquor stores in other states, with one in New Jersey choosing to temporarily shut down last month because the influx of customers made social distancing impossible.

The boom in out-of-state business has been so large, and so dangerous to public health, that out-of-state governments are now prohibiting purchases by Pennsylvania residents.

Yesterday, Ohio’s Republican Gov. Mike DeWine signed an order requiring six Ohio counties near the Pennsylvania border to require proof of local residency for the purchase of alcohol. “This is necessary because of repeated instances of persons from Pennsylvania coming into these counties for the sole or main purpose of purchasing liquor,” he said, according to a local Fox affiliate. “Any other time, we’d love to have visitors from Pennsylvania, but right now this creates an unacceptable public health issue.”

DeWine’s order follows a similar closure in a West Virginia county, which specifically prohibited the sale of liquor to anyone presenting a Pennsylvania ID. In that instance, as well, local health officials specifically cited health and safety concerns resulting from an increase in cross-border purchases due to liquor store closures.

Pennsylvanians who wanted to purchase spirits had essentially no other place to go. Not even online.

The state’s online liquor sales portal, which reopened this month, has proven barely functional. Even with a reduced selection, a limit on the number of bottles per order, and a cap of one order per day, the site has been unable to cope with demand. Two weeks after reopening, most customers are greeted with a message saying the site is down.

During the first week of online sales, PennLive reports, about 7,800 people successfully placed online orders—out of 1.9 million people who tried. By the following week, sales data showed 16,825 sales from roughly 2.9 million active users.

“Consumer interest and site traffic far exceeded our ability to accept orders,” a spokesperson said earlier this month, following initial reports of crashes.

In response to the demand spike, the liquor board has instituted an inscrutable system by which successful access to the site is randomized, and the number of orders it fills each day is not disclosed. Presumably, it did not occur to the state’s liquor regulators that a completely opaque system in which it’s unclear how many orders can be filled, or at what times, would lead to an increase in users checking the site throughout the day, further overloading the system’s capacity.

One way of looking at Pennsylvania’s liquor sales travails is as a failure of bureaucratic competence: Other states that control liquor sales have managed the pandemic lockdowns with far less disruption or danger.

Another way of looking at it, however, is as a failure of the state control model. The fundamental reason why Pennsylvania has so thoroughly botched its liquor sale management is that the state has a near-monopoly on liquor sales within its borders. That means residents can’t order out-of-state spirits to their homes. It means that private alternatives cannot fill in the gaps created by the state’s poor decision-making and technological incompetence. It means that liquor sales are almost entirely dependent on the whims of the state, and threatened by its foibles, which have been plainly evident over the past month.

I say “almost,” because the best option for Pennsylvania residents who want to purchase spirits right now is probably to purchase liquor from one of the state’s many craft distilleries. (I recommend Dad’s Hat, which makes a delicious rye now available online for direct delivery.) Craft producers won’t sell you your favorite national brand, but they will safely and conveniently do what private producers typically do—and what the state, despite its financial interest in the sale of liquor, seems determined not to do: sell you booze when you want it.

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“Overstated?” – Laying Out The Bullish & Bearish Stock Arguments From Here

The somewhat unprecedented bounce back in stocks – after the fastest collapse on record – has as many bulls as bears frothing at the bit to add to their positions one way or another as either “the buying opportunity of a lifetime” or “the end of the beginning of the greatest bear market ever.”

So which is it? Bull or Bear from here?

Bloomberg strategist Mark Cudmore has surveyed his colleagues, his clients, and his own experience to lay out the arguments both ways… and which is “overstated.”

The vast majority of the MLIV team believe stocks will have another major decline in the months ahead. However, we have received reasonable feedback that, for the first time in more than three years, the blog may not be providing a sufficiently diverse set of perspectives.

As a team, we cannot afford to fall into our own echo chamber. So we have tried to collate the best bullish and bearish arguments that we may be underestimating one way or another.

Here is the bulls’ case on equities…

“Don’t fight the Fed.” In fact, almost every government has your back: they are providing record stimulus. There is effectively a buyer of first and last resort for most financial assets and that makes economic fundamentals irrelevant
The Fed buying junk specifically is a game-changer. This will maintain an orderly corporate bond market and prevent the wave of defaults that many bears were counting on
Money is so cheap that equity multiples should rocket higher; any comparison to the past is useless
That animal spirits will conquer all. If the biggest names in finance, such as JPMorgan and Goldman, say the bottom is in for stocks, that will help suspend belief in economics for as long as necessary. It’s about cheerleading and fist-pumping and it can work if enough people buy into it. It’s not a Ponzi scheme as reality only needs to be suspended long enough for the pandemic to abate and the economy to recover
Too many people are excessively long cash and that is now as worthless as trash. They will be forced to buy no matter the fundamentals
Virus optimism such that global economic activity will be back to almost-normal very soon — versions of either it’s contained already, peak threat has passed or belief in the imminent mass distribution of retrovirals/vaccines
The resilience of humanity. The ability of labor, capital and management to work together is being underestimated. For example, New York City shut down and there was no surge in crime. Companies are doing amazing stuff. People quickly figure out how to use Zoom and order food for delivery
The positive impact of substantially cheaper oil
That Trump will do and spend whatever it takes to get the market higher by November

There are bearish stocks arguments that may be the most overstated…

Here are reasons for pessimism that we see at most risk of being wrong:

That asset prices will reflect economic pain — has central bank policy entirely broken the connection between economics and financial markets?
That earnings matter — maybe the crisis makes such numbers irrelevant and brand name and responsive management matter more?
That stock valuations matter — who cares how expensive a stock is when more money is being pumped into the system at such pace?
That the economic damage will be deep — maybe the lockdowns haven’t restricted economic activity nearly as much as we think?

We acknowledge these risks.

But I will restate that the majority of us remain bearish for all the reasons that we are accused of citing too often on the blog – just a few of which are:

The scale of the economic contraction that will be seen
That virus fears will prevent business resuming as normal for many months
That the impacts of the unemployment and consumption shocks are being understated
Dividends being slashed and buybacks disappearing

Most importantly, we don’t buy the idea that no matter how bad 2020 gets, it’s irrelevant just because it’s hopefully temporary. Try telling your risk-manager to just ignore your 2020 P/L, no matter how bad your losses are, as it’s just one year and to instead pay you on the theoretical promise of trading profits you optimistically aim to deliver in 2021.

The whole concept of buying companies with negative cash flow will look flawed when survival becomes the main objective, which we would argue will be the case for many businesses later this year.

Tyler Durden

Wed, 04/15/2020 – 12:06

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Frontier Agrees On Debt Restructuring, Files For Bankruptcy

Frontier Communications Corporation filed for bankruptcy on Tuesday night, as it has entered into a Restructuring Support Agreement (RSA) with bondholders representing 75% of the high-speed internet company’s $11 billion outstanding unsecured bonds.

The company has spent the last months warning about its going concern and recently had discussions with lenders on restructuring options. And the CDS market has been on top of it…

Under the RSA, the bondholders agreed on a plan “to reduce the Company’s debt by more than $10 billion and provide significant financial flexibility to support continued investment in its long-term growth.” The company said the only way to “implement the plan” is to proceed with “Chapter 11 of the US Bankruptcy Code in the Southern District of New York.”

“With this agreement with our bondholders, we can now focus on executing our strategy to drive operational efficiencies and position our business for long-term growth,” President and CEO Bernie Han said.

“At the same time, the COVID-19 pandemic continues to impact the entire business community, and our team is focused on ensuring the health and safety of our employees and customers. The services we provide to our customers keeps them connected, safe and informed, and I would like to thank our team for their continued dedication, especially in light of the current environment,” said Han.

The Connecticut-based company estimates it has assets and liabilities at around $10 billion to $50 billion. The filing also said it would sell telecommunication assets in Washington, Oregon, Idaho, and Montana to Northwest Fiber for $1.352 billion in cash on April 30.

This year could turn out to be the year of bankruptcies. Not just in the oil and gas patch but across the board.

Tyler Durden

Wed, 04/15/2020 – 11:55

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After Pennsylvania Closed All Liquor Stores, Residents Crossed State Borders To Buy Booze. Now Ohio Is Shutting Down Out-of-State Sales.

No state has done a worse job regulating the sale of alcohol during the pandemic than Pennsylvania.

The liquor store closures have certainly been disruptive. But, if anything, they have exacerbated the public health crisis, even in other states.

The boom in out-of-state business has been so large, and so dangerous to public health, that out-of-state governments are now prohibiting purchases by Pennsylvania residents.

Pennsylvanians who wanted to purchase spirits had essentially no other place to go. Not even online.

“Consumer interest and site traffic far exceeded our ability to accept orders,” a spokesperson said earlier this month, following initial reports of crashes.

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Over 25% of Michigan Workforce Filed For Unemployment

Authored by Mike Shedlock via MishTalk,

Michigan is one of the hardest hit states when it comes to Covid19 layoffs. Let’s take a look at the stats.

Michigan Live reports Over 1 Million Michigan Residents Have Filed for Unemployment.

More than 1 million people – over a quarter of Michigan’s workforce – have filed for unemployment during the COVID-19 pandemic, the state’s top labor official said Monday.

Last week, Michigan reported more than 828,800 unemployment claims filed in the state from March 8 to April 4. Michigan’s pre-coronavirus record for new unemployment claims occurred during the Great Recession in January 2009, when there were 77,000 claims in a week.

Website Crashes

Also note Michigan unemployment website crashes again, delaying state update on expanded benefits.

In an embarrassing twist Monday morning, Michigan’s unemployment website crashed – again – but this time just as the head of the state labor department was expected to outline how the state would apply benefits for self-employed workers.

Just hours earlier, the unemployment website announced “self-employed workers, gig workers, 1099-independent contractors and low-wage workers can now apply for federal benefits online,” but, when attempting to file, an error message popped up: “This site can’t be reached.”

This is at least the second time the site has crashed since the coronavirus outbreak, as an overwhelming number of Michiganders attempt to file for benefits. More than a million claims — more than a quarter of the state’s workforce — have been filed, the director said.

Michigan Labor Force

The above table courtesy of the BLS. Numbers are in thousands except for the unemployment rate.

Crunching the New Unemployment Rate

1 million new + 180,000 existing / 4.95 million = 23.8%.

Unfortunately, the servers crashed from overload just yesterday. There is a new pool of eligible workers who need to file a claim but can’t. There are likely hundreds of thousands more more yet to apply.

If we estimate 250,000 such claims, we can calculate as follows:

1 million new + 250,000 expanded + 180,000 existing / 4.95 million = 28.9%.

National Unemployment

Michigan provides strong evidence that my calculations of 20-22% national unemployment is in the ballpark, if not outright conservative.

I came up with those numbers two ways.

April 9: 16.78 Million Unemployment Claims in Last 3 Weeks
April 6: How High Will the Unemployment Rate Rise in April?

Judging from unemployment claims I came up with 20%.

On April 6, I looked at high risk areas including food and drinking pace employment and came up with 21-22%.

Click on the above links for details and assumptions.

Official Determination

Bear in mind that the official unemployment rate does not come from unemployment claims. Rather it comes from the Household Survey.

The reference period week for determining the unemployment rates is the week that that contains the 12th of the month. That means the reference period is now: April 12-18.

The better the unemployment rate looks in the May report (for April), the more likely hours will be reduced across the board somewhere else.

The U-6 unemployment rate which counts people working part-time who want a full time job can easily top 30%.

What’s Next?

For a 20-point discussion of what to expect, please see Nothing is Working Now: What’s Next for America?

The huge fear now is How Do I Pay the Bills?

This is the second crisis in 12 years. These scars will last.

No V-Shaped Recovery

Add it all up and you should quickly arrive at the correct viewpoint: The Covid-19 Recession Will Be Deeper Than the Great Financial Crisis.

Tyler Durden

Wed, 04/15/2020 – 11:40

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AOC: ‘Let’s Talk About Joe Biden’s Sexual Assault Claim’

Rep. Bernie Sanders (I-VT) may have sold out and endorsed a credibly accused sexual predator after his pie-eyed supporters emptied their pockets to chase a pipe dream, but fellow socialist Rep. Alexandria Ocasio-Cortez (D-NY), has not.

On Tuesday, AOC opened the door to discussing a sexual assault allegation against former Vice President Joe Biden, which the entire #MeToo, “believe all women” crowd suddenly can’t seem to find their voices over.

On Tuesday evening during an online conversation with The Wing, AOC was asked about the accusation against Biden by a former staffer, Tara Reade, who claims Biden forcibly penetrated her with his fingers in 1993 in the halls of the Capitol. Members of Reade’s family say she told them about the allegation at the time.

“What you’re voicing is so legitimate and real. That’s why I find this kind of silencing of all dissent to be a form of gaslighting,” AOC told the questioner, who opposes Trump’s reelection but also “really resent[s] the fact that the other choice is someone who has a really long history of being creepy to women” (and children).

“I think it’s legitimate to talk about these things. And if we want, if we again want to have integrity, you can’t say, you know — both believe women, support all of this, until it inconveniences you, until it inconveniences us,” AOC continued, according to CBS News.

“A lot of us are survivors, and it’s really, really hard and uncomfortable,” she said, adding that not discussing allegations is the “exact opposite of integrity.”

Ocasio-Cortez also said that it’s “not okay” to prioritize winning against Trump over addressing a #MeToo allegation because they are “very legitimate thing[s].”

“I think a lot of us are just in this moment where it’s like, how did we get here? You know, it almost felt like we started this cycle where we had kind of moved on from, you know, from all of this. And now it feels like we’re kind of back in it,” she said. “And, you know, the most diverse field that we’ve ever seen — that we’re kind of back kind of replaying old movies in a way.”

Reade responded to AOC’s support, telling CBS News “I’m very humbled and honored because she is literally the only politician that has spoken up on my behalf.”

CBS News then spends the rest of the article casting doubt on Reade’s story (the ‘reverse Blasey-Ford’ strategy) – pointing out that Reade’s former co-workers say she never told them about the alleged assault, and suggesting that she ‘changed her accusation’ because she first told the Washington Post that Biden ‘inappropriately touched her’ without sharing the graphic details of the encounter.

CBS also notes that AP refused to publish Reade’s story in April, 2019 because they couldn’t corroborate her allegations – which is the same excuse ABC used for not publishing allegations against Jeffrey Epstein.

So, while the MSM and Bernie Sanders are busy supporting an accused sexual predator – revealing themselves to be virtue-signaling shills who will sell their ‘convictions’ in a heartbeat for the chance to unseat Trump, AOC has chosen to stick to her guns.

Tyler Durden

Wed, 04/15/2020 – 11:25

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What Is The Stock Market Telling Us?

Authored by Bill Blain via MorningPorridge.com,

“Shoebox in middle of road? Luxury… You had it lucky..”

What is the stock market telling us?

It believes in the Central Bank Put….?
It buys the story the recent slew of positively-trending Coronavirus numbers means a swift economic reopening and sharp recovery is around the corner?
Surely every sane, rational and competent asset manager understands the virus is long-term, and sees the coming depression, job losses, crashing incomes, demand and deflationary shocks, zero returns, defaults, bankruptcies and slashed real asset values from aircraft, factories and property, mean long term crisis?

Yep. They probably do.

But their job is to generate returns. 2020 will be an economic write off – but if state interventions, and hopes of an early end to lockdown, can keep pushing markets higher, they have to play it. They know tumbling and zero dividends will cripple returns this year – therefore they need to lock in returns now – hence the scramble for assets by investment managers, even as corporates desperately seek cash to get them through the next 3-9 months of lockdown. The risk is the mirror cracks and the market splinter…

Investors seek returns from some very unlikely places. AirBnB raised another $1 bn from investors to shore up its crumbling balance sheet – based on being back in full business by January 2021. (Note I did not say profit.. that’s still a filthy word for “tech” marvels.) But perhaps it makes sense if we see a travel and spending rebound as social distancing winds down. It’s a risk – some virus modellers say social distancing could be necessary for up to 2 years!

And talking of unlikely assets, Investors are apparently all over Softbank offering funding and acquisition packages.

Tesla stock is up another bazillion points (20% in two days) after investment banks slathered over each other to slap buy-recommendations on it because of “revenue growth” expectations. Sure… if every other car company dies… Tesla will do swimmingly well… But… it makes a kind of bizarre sense.. As a chum asked this morning:

“Would you rather take the red pill and go for an exciting all or nothing Tesla ride, or would you take the blue pill and remain with zero-dividend, dull, boring and badly managed HSBC?”

He has a point.

Global Growth

Some scary growth numbers were being banded about yesterday. As expected the IMF came out with some choice negativity – predicting Global GDP falling 3% (a 6.1% percentage point decline from its previous estimate of 3% global growth in 2020.) That exceeds the downturn following the GFC in 2008 – and is the worst since the 1930s. There will be a rebound, but output will still be 5% down in 2021. Unemployment will rise and incomes will drop.

Aside from a few centenarians, it looks like we’re in for the worst recession in living memory. Therefore, it might be worth recalling some quotes from the definitive book on the Great Depression, JK Galbraith’s The Great Crash of 1929 – see how many boxes you tick.

“The fact was that American enterprise in the twenties had opened its hospitable arms to an exceptional number of promoters, grafters, swindlers, imposters and frauds..”

“At best, in such depression times, monetary policy is a feeble read on which to lean.”

“In the autumn of 1929 the mightiest of Americans were, for a brief time, revealed as human beings.”

“The values of a society totally preoccupied with making money are not altogether reassuring.”

“The autumn of 1929 was, perhaps, the first occasion when men succeeded on a large scale in swindling themselves.”

“Wall Street’s crime… was less its power than its morals.”

“Financial capacity and political perspicacity are inversely correlated…Here at least equally with communism, lies the threat to capitalism. It is what causes men who know that things are going quite wrong to say that things are fundamentally sound.”

There are lessons to learn – the main one being not to roll back stimulus too early.

The IMF is calling for global coordination on recovery stimulus – but there is a rising protectionism risk there. I expect the tensions between China and US to escalate as the virus panic recedes.

Stepping up the dial to 11, even more shocking was the UK’s Office for Budget Responsibility which issued a scenario analysis where UK output tumbles 35% in Q2 following a three-month lockdown. The deficit will rise to 14% of GDP, and unemployment surge to over 2 million. The OBR is not some flaky bunch of doomsters, but calm, sober, rational economists. One of my smarter chums is among them. She doesn’t panic. She says it like it is.

Interestingly the IMF predicts positive growth in China and India – fuelling many of the conspiracy theories about China’s responsibility for the crisis. As the wise and all-seeing leader of the West halts payments to the WHO because it trusted China, there is all kinds of conspiracy stuff on the internet about how the virus must have been genetically engineered, specifically targeted to weaken the west by collapsing our health services.

Like most things we desperately want to find someone to pin the blame on, the likely explanation is the virus was an accident waiting to happen. China would be wise to fess up and admit the fault of wet markets, and be open about how dodgy the numbers it has published look.

I will accept the US Chair of Joint Chiefs of Staff when he said a natural origin is the most likely explanation for the genesis of the virus. (I can guarantee I’ll be trolled and get a screed of emails providing irrefutable proof it was the Chinese, but after burning down all our local G5 phone masts last night, I’m really too tired to care…)

Banks

JP Morgan and Wells Fargo reported their expected shocking Q1 numbers. Both hiked credit loss provisions, anticipating major losses from consumer lending and credit cards, and SMEs. Less than 4% of JPM’s mortgages had missed payments in Q1 – but with US unemployment likely to hit 23 million in the next few weeks (and its beginning to bite the middle classes), where do bank losses go next?

If it’s bad in the US – where the banks were fixed post 2008 – how bad is it going to get in Europe. Ouch.

Tyler Durden

Wed, 04/15/2020 – 11:11

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Bracing For Impact: US Banks Set Aside $27 Billion For Credit Losses From The Coronacession

According to Rabobank (paraphrasing the Simsons Cartoon Guy), this may be the worst recession ever, although judging by bank earnings – now that most big banks have already reported results – that realization will take some time to filter through.

As of this morning, the Big 7 US banks – JPM, Citi, BofA, Wells, US Bancorp, Goldman And PNC, have already set aside some $27 billion in credit loss provisions, a number which is 4x greater than the total provisions set aside a year ago, and the most since the financial crisis. Alas, the number won’t be nearly sufficient by the time the corona-cession is over.

As a reminder, these provisions are nothing more than a shot in the dark: as of this moment, not a single bank has any idea just how bad it could get since delinquencies and writeoffs in the quarter were barely changed. Still, it is certainly foreboding that JPM has seen the biggest jump in its provisions, which soared by 5.5x from last year, while all other banks have at most seen a 4x increase. If Dimon is right, the losses facing other US banks will be far worse than they expect, resulting in even greater profit declines.

Which is pretty much a given: as we previously reported there has already been a 1,500% increase in mortgage forbearance requests – i.e., people telling their mortgage company they can’t or won’t pay – in just the past six weeks. Expect that surge to soon hit credit cards…

… and auto loans, and when it does it will be fast and furious, with tens of billions in loans suddenly going delinquent overnight.

As such, the only question here is not if $27 billion in loss provisions is too low – it is – but how many orders of magnitude will the final number end up being.

Tyler Durden

Wed, 04/15/2020 – 10:55

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The Pandemic Brings Out Americans’ Inner Snitches

In the time of the pandemic the world’s snitches are in their glory, pointing fingers at “non-essential” businesses struggling to keep the lights on and at neighbors brazenly standing too closely together. Rarely have entitled scolds been so empowered to tattle on people doing stuff of which they disapprove. Lockdown commandments hand them the opportunity not just to publicly shame violators—an annoying hobby, yet one to which they have every right—but to inform to the authorities, with all that entails.

As an epidemic, snitching seems to be competing with the virus itself in its spread.

“Snitches are emerging as enthusiastic allies as cities, states and countries work to enforce directives meant to limit person-to-person contact amid the virus pandemic that has claimed tens of thousands of lives worldwide,” reports the AP. “They’re phoning police and municipal hotlines, complaining to elected officials and shaming perceived scofflaws on social media.”

As always, informers are encouraged in their excess by many government officials. Los Angeles Mayor Eric Garcetti promised that “snitches get rewards,” and his sentiments are shared by rules-makers and enforcers elsewhere.

A certain segment of the public has eagerly embraced the role of social-distancing Stasi, recording perceived violations of safe practices and not just reprimanding the supposed violators for exercising independent judgment, but handing their details off to the authorities.

“Pickup games of basketball. Co-workers enjoying lunch together. A child blowing bubbles while strolling down the sidewalk with family … are drawing looks of disgust, shame on social media, and a flood of complaints to police and local authorities, who are fielding a surge of reports of supposed social distancing violations,” notes the Boston Globe.

To their credit, some police departments aren’t so enthusiastic about the flood of helpful tips. Police in Las Vegas and Michigan asked locals to please stop clogging 911 with calls about construction workers continuing to build things and people out for runs.

That’s understandable when you realize just how motivated many Americans are to fink on their friends and neighbors. Between March 23 and April 8, a dedicated tip line in Kentucky received roughly 30,000 calls from people concerned about the alleged social-distancing faux pas of individuals and businesses. They called “to report everything from fraternity brothers hanging out by a pool to factories that allegedly aren’t spacing out employees,” according to the Lexington Herald-Leader.

Tip lines aren’t the only means by which Americans turn each other in.

Jurisdictions around the country have launched online forms so people can set the cops on “non-essential” businesses that continue to serve customers and people who stand too close together. Most are meant only for reporting violations by commercial establishments, but New York State’s form accepts complaints about all claimed breaches of the state’s restrictive social-distancing guidelines.

Of course, social-distancing guidelines exist for a reason: there’s a pandemic on, and people are getting sick and dying. Nobody wants to end up on a ventilator and we all want to minimize the harm done by COVID-19. That motivates some people to personally confront those engaging in what seems to be unsafe behavior, or to publicly shame them on social media. Others, though, bypass the personal touch and instead report violators to the powers that be.

Reporting violations to the authorities, in most cases, results in a police response. And there are very few circumstances in which police interactions with the public make things better.

The risks inherent in setting the cops on social-distancing violators are summed up all too well by the story of a Brooklyn woman arrested for violating social-distancing rules by “hanging out” with friends in public. She was then jammed into a jail cell with two dozen other women for 36 hours. It was a situation guaranteed to increase the chance of infection and further spread of disease.

“The tactics that law enforcement officials frequently use to protect people—arrests and detention—are more likely to put people in harm’s way,” the ACLU warns, calling jails “‘petri dishes’ for the spread of COVID-19.”

Yet that’s exactly what people are asking for when they turn to tip lines and reporting forms that have government authorities on the other end.

Snitch culture is dangerous in a larger way, too, since it erodes the structure of a free society by breaking community bonds.

“Denunciations provide the means by which individuals can harm others whom they dislike and gain relative to them within their communities,” wrote the University of Chicago’s Patrick Bergemann in “Denunciation and Social Control,” published in 2017 in American Sociological Review. “Ultimately, this can lead to a reorientation of society away from cooperation and trust, and toward hierarchy and obedience.”

So pandemic snitches may preen and pat themselves on the back as guardians of public health, but they’re doing long-term damage to the society in which they live. The virus will pass, but distrust of nosy neighbors who peer through the curtains looking for violations of one petty rule or another to report to the authorities will persist for years to come.

Does that mean you have to just grin and bear it if a business designated as “non-essential” opens its back door to customers, or if the people across the street gather for a party in disapproved numbers?

Well, you should probably give it some thought; you don’t have to join them, after all. But if your sense of outrage is such that you feel compelled to do something, scolding in person is generally better than sending the cops to do the dirty work. Yes, that might be uncomfortable, but such is the reality of disagreements.

Or you could take a couple of photos and share a suitably outraged post on social media in a good, old-fashioned public shaming. People would then be free to react as they choose.

But, in the absence of immediately dangerous behavior like a violent crime, the worst possible reaction is turning to the authorities as a tattletale. You really can’t claim to be morally superior to the subjects of your ire if you get them abused by cops or infected in a crowded jail cell. And you certainly have no moral standing if you erode our society with your snitching.

Who knows? Maybe snitches will come to find themselves on the receiving end of some public shaming by neighbors who prefer tolerating some deviation from the rules to a culture of tattling and fear.

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