The NSA’s effort to use call detail records to spot cross-border terror plots has a long history. It began life in deepest secrecy, became public (and controversial) after Edward Snowden’s leaks, and was then “reformed” in the USA Freedom Act. Now it’s up for renewal, and the Privacy and Civil Liberties Oversight Board, or PCLOB, has weighed in with a deep report on how the program has functioned – and why NSA has suspended it.
In this episode I interview Travis LeBlanc, a PCLOB Member, about the report and the program. Travis is a highly effective advocate, bringing me around on several issues, including whether the program should be continued and even whether the authority to revive it would be useful. It’s a superb guide to a program whose renewal is currently being debated (against a March 15 deadline!) in Congress.
And, uh, asking for a friend: Do the early stages of covid-19 infection make you more susceptible to persuasion?
As always, The Cyberlaw Podcast is open to feedback. Be sure to engage with @stewartbaker on Twitter. Send your questions, comments, and suggestions for topics or interviewees to CyberlawPodcast@steptoe.com. Remember: If your suggested guest appears on the show, we will send you a highly coveted Cyberlaw Podcast mug!
The views expressed in this podcast are those of the speakers and do not reflect the opinions of their institutions, clients, families or friends.
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The Roberts Court has been on a tear in church-and-state cases lately. Last term, the Court decided an important case on public religious displays, The American Legion v. American Humanist Association. This term, the Court will decide a case on Blaine Amendments, Espinoza v. Montana Dep’t of Revenue (which I discussed in an earlier post); yet another case on the Contraception Mandate, Little Sisters of the Poor v. Pennsylvania; a pair of cases on the ministerial exception, St. James School v. Biel and Our Lady of Guadalupe School v. Morrissey-Berru; and a case on the personal liability of government officials under RFRA, Tanzin v. Tanvir. For a purportedly minimalist bench, the Court seems quite ready to rule on controversial law-and-religion issues.
Late last month, the Court granted cert in another church-and-state case, Fulton v. City of Philadelphia, which has the potential to overshadow all the others. In Fulton, Catholic Social Services (CSS) challenges Philadelphia’s decision to exclude the charity from the city’s adoption program because of CSS’s policy of refusing to place children with same-sex and unmarried heterosexual couples. Philadelphia argues, among other things, that CSS’s policy violates the city’s non-discrimination ordinance. In response, CSS argues that the city’s action violates the First Amendment’s Free Exercise Clause. In essence, CSS maintains that its religious convictions make compliance with the anti-discrimination ordinance impossible and that the city should grant it an exemption, or accommodation, for that reason.
What makes Fulton so significant, potentially, is this. The cert petition specifically asks the Court to revisit its landmark 1990 decision in Employment Division v. Smith, which held that the Free Exercise Clause does not entitle religious believers to exemptions from “neutral” and “generally applicable” laws. Under Smith, religious believers have an obligation to comply with such laws, just like everybody else. Only where laws are not “neutral” and “generally applicable”—where, for example, laws target religious believers for disparate treatment—can religious believers make claims for accommodations. Even then, accommodations are not assured. The state can still burden the exercise of religion if it passes the so-called “compelling interest” test: The state can burden the exercise of religion where it has a compelling reason for doing so and has chosen the least restrictive means.
Smith is widely understood to have narrowed the circumstances in which religious believers can claim accommodations under the Free Exercise Clause. The fact that the Court has granted a petition that specifically asks the justices to reconsider the case is thus very significant. Even more: in a statement last term, four justices—Alito, Thomas, Gorsuch and Kavanaugh—hinted strongly that they were ready to revisit Smith, which, they said, had “drastically cut back on the protection provided by the Free Exercise Clause.” Quite possibly, the Court’s grant in Fulton signals that the Court is ready to overrule Smith.
If the Court were to overrule Smith, it would most likely hold that the compelling interest test applies to all claims for religious accommodations, including CSS’s. (This was, in fact, the law for decades before Smith). This, too, makes Fulton a significant case. The Court would have to decide whether Philadelphia’s interest in ending discrimination based on sexual orientation, in this context, outweighs the right of CSS to conduct itself according to its sincere religious convictions. So far, the Court has carefully avoided such questions, which could take the Court where it would rather not go. The Court had a chance to address a similar issue two years ago in Masterpiece Cakeshop v. Colorado Civil Rights Commission, the wedding vendor case, but ultimately ruled on narrow grounds that made resolution of the issue unnecessary.
The Court might find a way to avoid the issue in Fulton as well. In that event, Fulton will be another one of the Court’s narrow, fact-bound church-and-state rulings. But it’s also possible that the case will be a major decision that makes other Roberts Court church-state cases pale in comparison. The Court won’t hear the case until next term, so there’s plenty of time to speculate! Meanwhile, for more on what the Fulton grant may mean, have a listen to the latest Legal Spirits podcast I recorded this week with my colleague at the St. John’s Center for Law and Religion, Marc DeGirolami.
from Latest – Reason.com https://ift.tt/38CuaRe
via IFTTT
The NSA’s effort to use call detail records to spot cross-border terror plots has a long history. It began life in deepest secrecy, became public (and controversial) after Edward Snowden’s leaks, and was then “reformed” in the USA Freedom Act. Now it’s up for renewal, and the Privacy and Civil Liberties Oversight Board, or PCLOB, has weighed in with a deep report on how the program has functioned – and why NSA has suspended it.
In this episode I interview Travis LeBlanc, a PCLOB Member, about the report and the program. Travis is a highly effective advocate, bringing me around on several issues, including whether the program should be continued and even whether the authority to revive it would be useful. It’s a superb guide to a program whose renewal is currently being debated (against a March 15 deadline!) in Congress.
And, uh, asking for a friend: Do the early stages of covid-19 infection make you more susceptible to persuasion?
As always, The Cyberlaw Podcast is open to feedback. Be sure to engage with @stewartbaker on Twitter. Send your questions, comments, and suggestions for topics or interviewees to CyberlawPodcast@steptoe.com. Remember: If your suggested guest appears on the show, we will send you a highly coveted Cyberlaw Podcast mug!
The views expressed in this podcast are those of the speakers and do not reflect the opinions of their institutions, clients, families or friends.
from Latest – Reason.com https://ift.tt/3cQiT36
via IFTTT
The Roberts Court has been on a tear in church-and-state cases lately. Last term, the Court decided an important case on public religious displays, The American Legion v. American Humanist Association. This term, the Court will decide a case on Blaine Amendments, Espinoza v. Montana Dep’t of Revenue (which I discussed in an earlier post); yet another case on the Contraception Mandate, Little Sisters of the Poor v. Pennsylvania; a pair of cases on the ministerial exception, St. James School v. Biel and Our Lady of Guadalupe School v. Morrissey-Berru; and a case on the personal liability of government officials under RFRA, Tanzin v. Tanvir. For a purportedly minimalist bench, the Court seems quite ready to rule on controversial law-and-religion issues.
Late last month, the Court granted cert in another church-and-state case, Fulton v. City of Philadelphia, which has the potential to overshadow all the others. In Fulton, Catholic Social Services (CSS) challenges Philadelphia’s decision to exclude the charity from the city’s adoption program because of CSS’s policy of refusing to place children with same-sex and unmarried heterosexual couples. Philadelphia argues, among other things, that CSS’s policy violates the city’s non-discrimination ordinance. In response, CSS argues that the city’s action violates the First Amendment’s Free Exercise Clause. In essence, CSS maintains that its religious convictions make compliance with the anti-discrimination ordinance impossible and that the city should grant it an exemption, or accommodation, for that reason.
What makes Fulton so significant, potentially, is this. The cert petition specifically asks the Court to revisit its landmark 1990 decision in Employment Division v. Smith, which held that the Free Exercise Clause does not entitle religious believers to exemptions from “neutral” and “generally applicable” laws. Under Smith, religious believers have an obligation to comply with such laws, just like everybody else. Only where laws are not “neutral” and “generally applicable”—where, for example, laws target religious believers for disparate treatment—can religious believers make claims for accommodations. Even then, accommodations are not assured. The state can still burden the exercise of religion if it passes the so-called “compelling interest” test: The state can burden the exercise of religion where it has a compelling reason for doing so and has chosen the least restrictive means.
Smith is widely understood to have narrowed the circumstances in which religious believers can claim accommodations under the Free Exercise Clause. The fact that the Court has granted a petition that specifically asks the justices to reconsider the case is thus very significant. Even more: in a statement last term, four justices—Alito, Thomas, Gorsuch and Kavanaugh—hinted strongly that they were ready to revisit Smith, which, they said, had “drastically cut back on the protection provided by the Free Exercise Clause.” Quite possibly, the Court’s grant in Fulton signals that the Court is ready to overrule Smith.
If the Court were to overrule Smith, it would most likely hold that the compelling interest test applies to all claims for religious accommodations, including CSS’s. (This was, in fact, the law for decades before Smith). This, too, makes Fulton a significant case. The Court would have to decide whether Philadelphia’s interest in ending discrimination based on sexual orientation, in this context, outweighs the right of CSS to conduct itself according to its sincere religious convictions. So far, the Court has carefully avoided such questions, which could take the Court where it would rather not go. The Court had a chance to address a similar issue two years ago in Masterpiece Cakeshop v. Colorado Civil Rights Commission, the wedding vendor case, but ultimately ruled on narrow grounds that made resolution of the issue unnecessary.
The Court might find a way to avoid the issue in Fulton as well. In that event, Fulton will be another one of the Court’s narrow, fact-bound church-and-state rulings. But it’s also possible that the case will be a major decision that makes other Roberts Court church-state cases pale in comparison. The Court won’t hear the case until next term, so there’s plenty of time to speculate! Meanwhile, for more on what the Fulton grant may mean, have a listen to the latest Legal Spirits podcast I recorded this week with my colleague at the St. John’s Center for Law and Religion, Marc DeGirolami.
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Antifa and the Far Right…with their routine street fights, role-playing and dress-ups are participants in a weirdly erotic, violent and mutually self-sustaining marriage, propped up entirely by the blind, inflexible convictions of each other’s belief systems. It is good for nothing, except inflaming their own self-righteousness.
This time I want to quote him in a discussion with a fan who asks the (good) question, “Do you ever feel the need to change lyrics, when performing live, which may be problematic in 2020, for example ‘a fag in a whalebone corset dragging his dick across my cheek’? Or are you happy to preserve the lyric as a product of its time, and respect the original content?”
Cave publishes a monthly newsletter, The Red Hand Files, in which he answers questions from his audience. In the new edition, he responds to the above query with a direct statement that should be a model for other creatives who are feeling weak-kneed in the face of rapidly changing standards of acceptability.
What songwriter could have predicted thirty years ago that the future would lose its sense of humour, its sense of playfulness, its sense of context, nuance and irony, and fall into the hands of a perpetually pissed off coterie of pearl-clutchers? How were we to know?
Perhaps we writers should have been more careful with our words—I can own this, and I may even agree—however, we should never blame the songs themselves. Songs are divinely constituted organisms. They have their own integrity. As flawed as they may be, the souls of the songs must be protected at all costs. They must be allowed to exist in all their aberrant horror, unmolested by these strident advocates of the innocuous, even if just as some indication that the world has moved toward a better, fairer and more sensitive place. If punishment must be administered, punish the creators, not the songs. We can handle it. I would rather be remembered for writing something that was discomforting or offensive, than to be forgotten for writing something bloodless and bland.
Cave is not some reactionary rock star whose best years are behind him or whose oeuvre is packed with worn-out rock-star cliches about feminine pulchritude. The song referenced above, “Papa Won’t Leave You, Henry,” the opening track to an acclaimed 1992 album with his band The Bad Seeds, is a “kind of a nasty fucked-up lullaby” (in his own words) that Cave says he used to sing to his young son. It’s a hauntingly surrealistic tormented ballad that defies any easy categorization. The Australian native is a long-lived, hard-thinking observer of modern life who has been in the public eye since the early 1980s and whose output includes dozens of albums, novels, screenplays, and nonfiction pieces. His interests, modes of expression, and style have all evolved over time but one constant is his defense of free speech and artistic independence.
In 2017, he pushed back against calls from musicians such as Roger Waters and Brian Eno to respect the Boycott, Divestment, and Sanctions (BDS) movement’s demand that no musical act perform in Israel. Besides making it harder for critics of the Israeli government to plead their case directly from the stage, Cave wrote in an open letter, BDS supporters were also trying to “bully, shame and silence musicians” into adopting a party line. Last fall, he insisted that “free speech was a clear-cut and uncontested virtue.”
We live in a world where the old guard often cowers to pressure, especially from the young, out of fear or forgotten principles. As a musician, Cave works in an industry that rewards groupthink, especially when it comes to politically sensitive issues and sensibilities. His willingness to speak his beliefs is doubly notable, first because he is doing it at all and second because he does it without acrimony or aversion. As a rule, rock stars age with all the grace of jack-o’-lanterns left out on the porch for way too long, but Nick Cave is teaching a master class in aging gracefully and seriously.
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Antifa and the Far Right…with their routine street fights, role-playing and dress-ups are participants in a weirdly erotic, violent and mutually self-sustaining marriage, propped up entirely by the blind, inflexible convictions of each other’s belief systems. It is good for nothing, except inflaming their own self-righteousness.
This time I want to quote him in a discussion with a fan who asks the (good) question, “Do you ever feel the need to change lyrics, when performing live, which may be problematic in 2020, for example ‘a fag in a whalebone corset dragging his dick across my cheek’? Or are you happy to preserve the lyric as a product of its time, and respect the original content?”
Cave publishes a monthly newsletter, The Red Hand Files, in which he answers questions from his audience. In the new edition, he responds to the above query with a direct statement that should be a model for other creatives who are feeling weak-kneed in the face of rapidly changing standards of acceptability.
What songwriter could have predicted thirty years ago that the future would lose its sense of humour, its sense of playfulness, its sense of context, nuance and irony, and fall into the hands of a perpetually pissed off coterie of pearl-clutchers? How were we to know?
Perhaps we writers should have been more careful with our words—I can own this, and I may even agree—however, we should never blame the songs themselves. Songs are divinely constituted organisms. They have their own integrity. As flawed as they may be, the souls of the songs must be protected at all costs. They must be allowed to exist in all their aberrant horror, unmolested by these strident advocates of the innocuous, even if just as some indication that the world has moved toward a better, fairer and more sensitive place. If punishment must be administered, punish the creators, not the songs. We can handle it. I would rather be remembered for writing something that was discomforting or offensive, than to be forgotten for writing something bloodless and bland.
Cave is not some reactionary rock star whose best years are behind him or whose oeuvre is packed with worn-out rock-star cliches about feminine pulchritude. The song referenced above, “Papa Won’t Leave You, Henry,” the opening track to an acclaimed 1992 album with his band The Bad Seeds, is a “kind of a nasty fucked-up lullaby” (in his own words) that Cave says he used to sing to his young son. It’s a hauntingly surrealistic tormented ballad that defies any easy categorization. The Australian native is a long-lived, hard-thinking observer of modern life who has been in the public eye since the early 1980s and whose output includes dozens of albums, novels, screenplays, and nonfiction pieces. His interests, modes of expression, and style have all evolved over time but one constant is his defense of free speech and artistic independence.
In 2017, he pushed back against calls from musicians such as Roger Waters and Brian Eno to respect the Boycott, Divestment, and Sanctions (BDS) movement’s demand that no musical act perform in Israel. Besides making it harder for critics of the Israeli government to plead their case directly from the stage, Cave wrote in an open letter, BDS supporters were also trying to “bully, shame and silence musicians” into adopting a party line. Last fall, he insisted that “free speech was a clear-cut and uncontested virtue.”
We live in a world where the old guard often cowers to pressure, especially from the young, out of fear or forgotten principles. As a musician, Cave works in an industry that rewards groupthink, especially when it comes to politically sensitive issues and sensibilities. His willingness to speak his beliefs is doubly notable, first because he is doing it at all and second because he does it without acrimony or aversion. As a rule, rock stars age with all the grace of jack-o’-lanterns left out on the porch for way too long, but Nick Cave is teaching a master class in aging gracefully and seriously.
from Latest – Reason.com https://ift.tt/38Jo5lW
via IFTTT
Treasury Secretary Steven Mnuchin says he’s hoping to provide $200 billion or more in liquidity by delaying tax payments. He added that while he isn’t looking for broad bailouts, there may be specific industries that are highly impacted which may receive assistance, according to Bloomberg.
Mnuchin added that the Trump administration is looking to increase lending to small and medium businesses.
Oil’s modest rebound from its biggest crash in decades on Saudi-Russia price war escalations has faded notably overnight as OPEC now sees a whopping 94% drop in 2020 global oil demand growth in response to the economic impact of the coronavirus even as global oil supply is set to explode.
Prices are not plunging yet, but in order for prices to move even lower and stay there, “we need to see storage tanks being filled at a greater level than we originally thought following the coronavirus outbreak,” said Edward Marshall, commodities trader at Global Risk Management.
So all eyes are on this morning’s official inventory data as today’s report is likely to give the first view into the effects of the virus and how crude export weakness ripples through the markets (though keep in mind this does not include the effect of the very recent price war plunge in prices).
API
Crude +6.407mm (+1.9mm exp)
Cushing +364k
Gasoline -3.091mm (-2.1mm exp)
Distillates -4.679mm (-1.8mm exp)
DOE
Crude +7.664mm (+1.9mm exp, whisper +3.25m) – biggest build since Oct 2019
Cushing +704k
Gasoline -5.049mm (-2.1mm exp) – biggest draw since Apr 2019
Distillates -6.404mm (-1.8mm exp) – biggest draw since 2004
API reported bigger than expected builds for crude and draws for products and the official DOE data shoiwed it was even more extreme with crude inventories jumping most since Oct 2019, and massive product draws…
Source: Bloomberg
Overall crude stockpiles are back at their highest since July 2019…
Source: Bloomberg
US Crude production dipped extremely modestly last week from record highs…
Source: Bloomberg
The effect from the coronavirus may be starting to kick in for crude sellers overseas. Crude exports fell by nearly 20% this week, the lowest in about a month.
Source: Bloomberg
WTI was trading around $33.50 ahead of the print and is accelerating losses after the major crude build…
Meanwhile, the spread between WTI and Brent is collapsing…
As Bloomberg notes, should this continue, WTI will soon fetch a premium to Brent as shale output has come under threat from the latest price route, although U.S. government is considering a bailout for the industry. Crude exports are under pressure from the coronavirus, even as U.S. sellers optimize on sales to unaffected areas.
An authoritative disguise can be used to try and overpower the logical capabilities of people, as they are being told how to deal with the COVID-19 situation. Facts are being projected out to the world and a collage of predictions and statements being made by figures with larger than life personas. Country to country, the results in a pandemic situation would probably look a whole lot different. We saw draconian measures take place in China. Italy is also desperately trying to contain the spread.
If this gets worse, everybody will be met with a personal choice.
Will they decide for themselves what measures they want to take, what they want to listen to, and who they will believe? Or will they do whatever they are told without following the steps of logic? If a person takes the route of asking “why” at every turn, every time the authorities want them to do something, issues could certainly arise for them.
How do we ascertain the accuracy of a COVID-19 test?
A glaringly obvious question will inevitably be asked by many: how do we know a test for the virus will be accurate?
What if the test is wrong, and somebody is quarantined or forcibly treated when they don’t even have COVID-19? What if the test is wrong and somebody with the virus unknowingly goes out into the world, travels, goes to work, and infects others?
Many would be surprised to learn that flaws exist in virus detection. Some say these are massive flaws, in multiple techniques from ELISA tests to RNA detection.
The ELISA test can give false positives
One simple, standardized test for the detection of a virus is known as the ELISA test, which stands for enzyme-linked immunosorbent assay.
Most cases of the false-positive ELISA tests seem to be a result of technical problems, such as mouth swabs being improperly handled.
However, plenty of stories can be found online about people who were horrified to discover they had diseases such as HPV, HIV, Hepatitis C, West Nile Virus or herpes. Then, eventually, they learned that they were, in fact, clean, shocked by a false result.
“Herpes is a lifelong infection, but Lauren had it only for six tumultuous months. Or rather, she believed she did, after a request for sexually transmitted disease testing returned a positive result. But after weeks of Googling, chatting with members of online herpes forums, and reading scientific papers, she asked for a different test, which eventually confirmed her suspicion — her herpes diagnosis was wrong.” (source)
Imagine if you started taking dangerous antiviral drugs as a result of a false-positive ELISA test.
Do authorities have enough trust with the people of their area, to perform COVID-19 tests properly? Will people take it at face value and say “ok, the test says I have it, now I will follow your instructions?”
Will additional testing be required to fully confirm a person is infected? Perhaps the occasional test will be wrong due to mishandling, and it will make people more skeptical. It’s possible that more fundamental problems could exist within the realm of virus detection that is even less understandable to the layperson.
Technically the ELISA test simply detects an antibody response. A specific, detectable antibody is said to be produced when a certain virus infects the body. Are people willing to take the accuracy of this test at face value?
This field of science certainly is complicated, and those with understandable skepticism must wade through a complex series of logical steps to follow.
What if some chemical agent caused the body to produce antibodies that misleadingly trigger the ELISA test?
It has been suggested that inflammation-triggering substances, even alcohol, could throw off the accuracy of an ELISA test.
What about the RNA test?
To find out if people have a virus, there is also the potential for an RNA test, which is considered to be more accurate.
Typically the blood of an individual is obtained for an RNA test, and then using a process known as a polymerase chain reaction (PCR), an estimate is made for how much of the virus is present in the bloodstream. They call it a “viral load,” which refers to the amount of a virus that is detected in the blood.
Again an uncomfortable gap between the medical community and the population seems to emerge when following this chain of logic.
The danger resulting from a person being falsely declared positive is multifaceted.
What if you tested positive, and in the quarantine area you actually got infected by someone in the vicinity?
What if a person has a weak immune system, drinks an unusual amount of alcohol, and then sneezes next to a TSA agent at the airport? Perhaps they would be detained, tested for the virus, and falsely declared positive.
On a more conspiratorial note, what if specific, “undesirable” individuals were dosed with agents, to specifically give them an antibody response capable of producing a false positive, just to put them in quarantine?
If you’re reading this, you probably would think twice before accepting some mandatory medical treatment for the virus. Whatever they try to inject people with en masse, it would be wise to harbor suspicion. There is hardly a large NGO, charitable organization, medical authority or pharmaceutical company that could be considered free of a shady history.
These are the possibilities that should circulate through the mind of a skeptical, survival-oriented individual. People who know how to survive the world don’t take everything at face value.
Then there are the false negatives.
The first batch of tests sent out by the Centers for Disease Control was flawed, resulting in inaccurate testing. This caused the United States to miss its window for containment. The CDC failed to follow guidelines laid out by the World Health Organization and developed its own test. Unfortunately, that test was faulty, putting the nation weeks behind in detected cases.
When someone suspected to have the virus tests negative, they go on their merry way, unknowingly infecting those in their path. Daisy has already written about why she doesn’t trust the official numbers in the United States, and false negatives have a lot to do with that.
Who stands to benefit?
An incomprehensibly massive sum of money is circulating among people with power in this world, as it is being “allocated” to fight the virus from country to country.
With all this money, all this power in the mix, people can be certain that shady dealings will be concocted. It’s like a precise chemical equation for greed.
It is being reported in the mainstream that the Zuckerberg and Gates charities both helped sequence the COVID-19 genome, possibly influencing the creation of the more accurate RNA test.
An employee of the Zuckerberg Chan Initiative tested positive for the virus this week. The West Coast and Pacific Northwest seem to be areas of focus so far in this limited outbreak, with Silicon Valley and Seattle both in close proximity to it.
Ironically Bill Gates warned the world that a global flu pandemic could kill over 30 million people almost 3 years ago, resembling the Spanish Flu. People who follow the topic no doubt remember that. Gates is currently trying to position himself as an authoritative figure in this crisis, calling it a “once in a century pathogen.”
It’s important to take note of the tone present in the mainstream coverage of the virus’s spread. It’s objectively true that when you notice people of this magnitude and power all putting their focus on a topic, it means something to their agenda. Therefore it’s going to be probably something the general population has to understand and deal with.
One thing is for certain. Authority figures will continue trying to steer people a certain direction during this time, and they do want tocrush dissenting opinions.
Boeing To Drawdown Full $13.8 Billion Revolver, Hinting At Bank Lending Freeze
For that generation of traders out there who were following the market back in 2007/2008, instead of their high school or college GPA, they will recall that one of the key inflection points in the global financial crisis 12 years ago was when banks started pulling revolvers to preserve liquidity.
Moments ago Boeing suggested that a similar moment is coming again: according to Bloomberg, the struggling aerospace giant which just a few weeks ago obtained an upsized revolver from various Wall Street sources to shore up its liquidity in the aftermath of the 737 MAX crisis, was planning to draw down the full amount of a $13.825 billion loan as early as Friday.
Why is Boeing taking this unprecedented step: after all, the cash is already committed and is far safer if held on bank balance sheets instead of Boeing’s?According to Bloomberg, the full drawdown takes place as Boeing grapples with worldwide travel disruptions from the coronavirus, and “plans to draw the rest of the loan as a precaution due to market turmoil.” That however doesn’t explain why Boeing needs the cash on its balance sheet instead of its lender banks’. The answer – especially for those who recall what happened in 2008 all too well – is simple: Boeing is worried that banks will pull their committed funding, which in turn means that Boeing is either now worried that a 2008-style financial crisis is imminent, or that the company’s own prospects are about to implode, forcing banks to breach their delayed draw credit facility document terms
As Bloomberg reminds us “Boeing obtained the loan from a group of banks last month to help it deal with cash burn while it prepares to return its 737 Max plane to the skies. It initially tapped about $7.5 billion of the debt, and is now expected to draw the rest.” Ironically, while banks scrambled to lend to Boeing, they will now be ruing the day they expanded the revolver facility, because while Boeing may be worried about banks pulling funding, the banks will be just as worried about Boeing’s soaring default probability as the company’s CDS have exploded in recent days.
Another reason why the banks may soon kiss the $14BN goodbye: the loan was made the Covid-19 coronavirus became a global crisis. As such, in addition to its 737 Max woes, the company now faces lost revenue amid falling demand for planes as passengers cancel flights and airlines pull back orders on new jets.
Unfortuantely for the banks, they can’t just turn around and withdraw their commitment. Or rather they can, it would be a scandal, but they can certainly do it. And that’s precisely what Boeing is seeking to anticipate by transfering the cash from bank balance sheets to its own, even as it will be charged the full revolver usage fee (which thanks to the Fed is negligible).
In other words, now that Boeing – one of America’s most valuable companies – has shown which was the wind blows, expect thousands of less creditworthy companies to follow suit as they scramble to cash in on every dollar in available revolver funding before the banks pull it.
