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The Next Financial Crisis Won’t Be Caused By Fraud: This Time Will Be Different

Authored by Charles Hugh Smith via OfTwoMinds blog,

Extreme levels of debt and overvaluation characterize the entire global economy, and are not limited to any one nation or sector.

Financial crises come in two flavors: fraud and credit-valuation over-reach. Fraud-based financial crises may differ in particulars, but they share many traits: perverse incentives are institutionalized; the perverse incentives reward figuring out how to evade oversight via fraud, embezzlement, masking risk, etc. which are soon commoditized; regulations are gutted by insider-funded lobbying; regulators fail to do their job in hopes of getting lucrative positions in the industry they’re supposed to be regulating; reports of systemic, commoditized fraud are ignored because everyone’s getting rich, and so on.

The resolution has to 1) eliminate the perverse incentives that fueled the crisis; 2) institutionalize oversight that actually functions to limit dangerous excesses and 3) all the malinvestment / bad debt must be liquidated and the losses taken / distributed.

Correspondent David E. recently sent me this insightful outline of how the Texas Savings & Loan financial crisis arose and was slowly and painfully resolved in the 1980s:

“The S&L crisis provides an excellent example of both how to make a problem worse and how to resolve it in the end. (note: I watched this play out in Texas; some of your readers may have a different perspective).

1. Prior to the mid-1970s, S&Ls lived by the 3-6-3 rule – pay depositors 3%; make home loans at 6%; and be on the golf course at 3 o’clock. This cozy little world had been in place since the 1950s.

2. Inflation in the 70s wrecked this calculation. The loans (long term home mortgages) still paid 6%, but the S&L’s were having to pay the depositors more – often more than the 6% they were making on the loans. Bankruptcy loomed.

3. The S&L owners were some of the more prominent local business people, especially in smaller towns scattered across the US – and more importantly, in Congressional districts scattered across the US.

4. They went to Congress and said, “we’re in trouble, but if we could only invest in commercial real estate, we could grow our way out of this mess, and it won’t cost the taxpayer a dime.”

5. Congress, faced with a $50 billion problem as well as the prospect of alienating multitudes of prominent local citizens, agreed, and thus kicked the can down the road.

6. At least in Texas, this is when the “cowboys” moved in. The smarter S&L owners saw what was happening and realized the game was up. They sold their institutions to the cowboys (and the smart ones took the highest cash offer, ignoring any stock or profit-sharing).

7. The predictable and well documented abuses took off (“fiduciary pornography” in the words of one regulator afterward).

8. Things went on for a few years but were beginning to unravel even before the Saudis flooded the oil market in early 1986 and drove the price of crude down to $9.

9. Now for what was done right – if only by accident. Texas was the first to tumble, and people in other states remembered our oil boom bumper stickers. “Drive 90 and freeze a Yankee” among others. As a result, there was ZERO sympathy for Texas’ economic problems.

10. Federal regulators thus had a free hand to clean house. Even large banks were declared insolvent. Shareholders lost everything. Over 1000 bank executives went to prison. I personally know at least two who slithered free in the end, but many did not. A lawyer friend spent a couple of years in the late 1980s doing little other than foreclosing houses in Highland Park (old money Dallas).

11. It was a rough 3-4 years in Texas, but two decades of accumulated rot had been burned away, setting the stage for the economic boom that followed.

The other big factor was the tax reform of 1986. People today need to be more cognizant of what really happens when marginal rates go up to 70%. Do the rich pay more tax? NO. Instead the world becomes infested with tax shelters and other avoidance schemes, which produce tremendous waste.

In late 70s/early 80s Texas, a lot of this tax shelter money intersected with the S&L pirates in the form of commercial real estate, especially apartment complexes, in an orgy of malinvestment. I still remember the TV ads in Houston marketing yuppie-villes: gorgeous women in bikinis by the pool, and one unending party. After the bust, these complexes turned into Section 8 housing almost overnight and many remained blighted for a couple of decades before they were finally torn down.

If the next bust starts out affecting only one region, there may be a chance to do the right thing (basically, let her rip and things will settle out on their own). But that didn’t happen in 2008, and probably won’t happen next time.”

Thank you, David, for a very insightful summary of how financial crises arise and how the scale of the crisis affects the resolution: in 2008, banking had become so centralized and the fraud/leverage so extreme that the implosion of a relatively marginal slice of the mortgage market (subprime mortgages) triggered a loss of faith and liquidity that very nearly brought down the entire global financial system.

Rather than clean house, politicos bailed out the banks and regulators added new regulations that left the system essentially unchanged. As was easily predictable, the regulations increased the banks’ costs and created incentives to move mortgage origination into non-bank (and thus less regulated) entities.

Interestingly, modern financial crises seem to oscillate between fraud and over-reach: the S&L crisis resulted from the commoditization of mortgage fraud, the 2000 dot-com crash resulted from extremes of over-valuation and margin debt, the 2008 Global Financial Meltdown resulted from the globalized commoditization of securitization fraud, and now the pins are being set up for the next financial crisis triggered by extremes of credit and overvaluation.

The dot-com meltdown arose from unprecedented extremes of overvaluation for tech companies profitable and unprofitable alike. High levels of margin debt ensured that the sell-off would gather steam as punters were forced to liquidate portfolios to meet margin calls.

The dot-com meltdown was famously concentrated in the tech sector: while certainly a major part of the economy, tech and the Internet high-flyers were still a relatively modest share of total assets: all stocks, all bonds, all real estate, etc.

Sector rotation enabled capital to be preserved. As the Federal Reserve slashed interest rates, the value of bonds rose and real estate got a boost as assets flowed from stocks to housing. Simply put, not every asset crashed in unison.

The brewing financial crisis will be different: the twin sins of extreme levels of debt and extreme overvaluation of assets now characterize corporate bonds, many sovereign bonds, stocks and real estate. Pretty much the only traditional assets that aren’t at nosebleed levels are precious metals and bat guano. (Cryptocurrencies are as yet non-traditional assets, though this may change in the next financial crisis.)

Extreme levels of debt and overvaluation characterize the entire global economy, and are not limited to any one nation or sector. When this crisis gathers steam, there will be few avenues of escape. Adding regulations won’t stop it, adding liquidity won’t stop it, waving chicken entrails and dancing the humba-humba around the MMT/Keynesian campfire won’t stop it.

Attempting to force extremes to even more extended extremes won’t stop it.

*  *  *

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com. New benefit for subscribers/patrons: a monthly Q&A where I respond to your questions/topics.

via ZeroHedge News http://bit.ly/2UJfqhl Tyler Durden

President Trump’s Post-Mueller Report Tweets, Scored

Love him or hate him, President Trump’s Twitter presence is impossible to ignore. And with something as exciting as the Mueller report dropping today, the thumb-thugging bar was exceptionally high.

We’re spending some time analyzing the president’s Twitter feed today.

Trump’s first post-Mueller report tweet was this bad boy right here. The video is strong. You get to hear Trump repeat “no collusion” for nearly an entire minute. The clip is set to some dramatic—patriotic, even—music in the background. If you got the sense that Trump was about to interrupt the clip to say, “This is our Independence Day,” then you aren’t alone.

The words in the tweet also get straight to the point. “No Collusion—No Obstruction!” captures the essence of Trump. 

Overall score: 8/10

I admire the attempt at relevancy, but would personally advise against it. For one thing, pop culture references are subject to all sorts of blowback from hardcore fans. Trump may think he’s referring to himself as Jon Snow, but that won’t stop millions of Twitter users from getting into his mentions and insisting he’s actually Joffrey.

How does HBO feel about Trump sharing yet another Game of Thrones meme? Welp, the company said that they “still prefer” to not have their intellectual property “used for political purposes” in a statement.

Overall score: 4/10

Trump uses other people to convey what he’s insisted all this time. A popular late night comedian? A flustered CNN panel? Trump is using their own words to drag them for filth and prove his point.

However, I’m docking points for wordiness and repetition. Not only is this essentially his first tweet, but it would have had more impact without any sort of introduction.

There are also concerns about pacing. Considering the previous tweets were posted before lunchtime, this new video would have made for good post-work traffic/pre-dinner discussion.

Overall score: 7.5/10

Bonus Links: Interested in the Mueller report but don’t know where to start? Get your “Ctrl+F” ready and try this searchable version. Have questions about collusion? Read an overview here, or some other takes here.

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Trump May Not Be Guilty of Obstruction, but He Is Guilty of Arrogant Stupidity

In detailing 10 episodes that could be viewed as evidence that Donald Trump obstructed justice as president, Special Counsel Robert Mueller’s report suggests several promising lines of defense, stronger in some cases than others, that call into question one or more of the three elements required for a conviction: an obstructive act, a nexus to an official proceeding, and a corrupt intent. A jury might very well conclude that the case has not been proven beyond a reasonable doubt.

But it’s not up to a jury, since the Justice Department, per its longstanding policy, was never going to prosecute a sitting president. It’s up to Congress, which in deciding whether a president has committed “high crimes and misdemeanors” is unconstrained by statute or by the standard of proof that applies in a criminal trial. Democrats will be inclined to conclude that the amorphous standard for impeachment has been satisfied, while Republicans will say that Mueller’s decision not to reach a firm conclusion about the criminality of the president’s conduct amounts to an exoneration.

To any fair-minded reader who is not blinded by partisan bias, however, one thing is clear: Donald Trump, if he is guilty of obstructing justice, is really bad at it. Over and over again, he opened his mouth when he should have kept it shut, lied clumsily and transparently, ignored warnings from multiple advisers that his public and private actions could be construed as obstruction, and did everything he could to reinforce the impression that he was a man with something to hide.

Attorney General William Barr, who unlike Mueller has announced that there is no provable obstruction case against Trump, today emphasized that “the President took no act that in fact deprived the Special Counsel of the documents and witnesses necessary to complete his investigation.” But as the Mueller report points out, you can be guilty of obstruction even if your efforts are unsuccessful, and Trump’s failure was due largely to his subordinates’ resistance.

You can also be guilty of obstruction even if you did not commit an underlying crime that you are trying to cover up. That is how Trump came to be credibly accused of obstructing an investigation of a crime (conspiring with Russia to influence the presidential election) that never happened, then obstructing the investigation of his obstruction. And in the end, has no one to blame but himself.

Trump alternately cajoled and condemned potential witnesses against him (his former national security adviser, Michael Flynn; his former personal lawyer, Michael Cohen; and his former campaign chairman, Paul Manafort) and subordinates he thought should be doing more to protect him from the Russia investigation (FBI Director James Comey, Attorney General Jeff Sessions, White House Counsel Donald McGahn). He did this publicly as well as privately.

“Many of the President’s acts directed at witnesses, including discouragement of
cooperation with the government and suggestions of possible future pardons, occurred in public view,” Mueller notes. “While it may be more difficult to establish that public-facing acts were motivated by a corrupt intent, the President’s power to influence actions, persons, and events is enhanced by his unique ability to attract attention through use of mass communications. And no principle of law
excludes public acts from the scope of obstruction statutes. If the likely effect of the acts is to intimidate witnesses or alter their testimony, the justice system’s integrity is equally threatened.”

Trump publicly denied making requests or issuing instructions aimed at containing or stopping the Russia investigation, such as asking Comey to leave Flynn alone or telling McGahn to fire Mueller. In almost every such case, the report concludes that “substantial evidence” favors the subordinate’s account.

Trump fired Comey for refusing to publicly clear his name, even while acknowledging that the decision would look bad and probably would prolong the investigation he was trying to contain. (Mueller was appointed a week later.) He offered a completely implausible cover story for Comey’s dismissal that he admitted was not true a couple of days later.

Trump deliberately misled the public about his efforts to build a Trump Tower in Moscow, a deal that was still being pursued as late as July 2016. He deliberately misled the public about the nature of a meeting between his son and a Russian lawyer who had promised dirt on Hillary Clinton. He whined endlessly, publicly and privately, about the unfairness of the “witch hunt” that Mueller was conducting and Sessions’ failure to protect him from it. He ignored his lawyers’ entreaties to stop commenting on the investigation because it was hurting his case.

Although it turned out that Trump was telling the truth when he denied illegal “collusion” with the Russians, that does not mean his attempts to undermine the investigation could not qualify as obstruction. “Obstruction of justice can be motivated by a desire to protect non-criminal personal interests, to protect against investigations where underlying criminal liability falls into a gray area,
or to avoid personal embarrassment,” Mueller notes. “The injury to the integrity of the justice system is the same regardless of whether a person committed an underlying wrong. In this investigation, the evidence does not establish that the President was involved in an underlying crime related to Russian election interference. But the evidence does point to a range of other possible personal motives animating the President’s conduct. These include concerns that
continued investigation would call into question the legitimacy of his election and potential uncertainty about whether certain events-such as advance notice of WikiLeaks’s release of hacked information or the June 9, 2016 meeting between senior campaign officials and Russians could be seen as criminal activity by the President, his campaign, or his family.”

On the question of whether a president’s obstruction of justice can include the exercise of his Article II powers, such as the hiring and firing of executive branch officials, Mueller firmly disagrees with Barr, saying a corrupt motive can make such acts criminal. Barr, by contrast, argues that Trump legally could have fired Mueller or ordered an end to the investigation, regardless of his motive, because the Constitution gives him that authority. But Barr says he did not evaluate the obstruction case against Trump based on the premise, and much of Trump’s suspicious conduct—including his public lies and his apparent efforts to influence what Flynn, Cohen, and Manafort told investigators—does not fall into this category.

The obstruction case against Trump is not conclusive. In fact, his indiscretion and ineptness could be seen as evidence that he did not think he was breaking the law. But at the same time, he recklessly created the appearance that he was guilty of something, disregarding sound legal advice from people who knew better. If arrogant stupidity were a crime, Trump would be guilty beyond a reasonable doubt.

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Trump Pumps, Dow Jumps, Small Caps Slump, Healthcare Dumps

Fun-durr-mentals…

Just seemed timely…

 

For the second day in a row, Chinese markets flatlined…

 

Volatile day in European stocks to end the short-week as PMIs hit. Italy was weaker on the day and Germany best on the week…

 

Small Caps suffered on the week as Trannies and The Dow managed gains ahead of the long weekend…

 

This was the 2nd worst week for Small Caps relative to Mega Caps in 5 months…

 

Technology’s role as the best-performing equity sector during this year’s ferocious rally has it trading at more than 19.2 times forward 12-month earnings, a level it hasn’t reached since 2007.

As Bloomberg notes, valuations are a notoriously poor tool for market timing, and forward earnings estimates could prove to be too low, so this alone shouldn’t necessarily serve as a sell signal. However, notice the divergence in fortunes between tech and health care that’s left the former trading at almost 1.4 times the forward valuation of the latter. That’s a rather extreme divergence that seems like a good candidate for mean reversion.

 

The Healthcare sector continued to puke today, making it the worst week since 2018, but we note that it found support at the 100DMA…

 

Breadth is starting to fade and yesterday was an outside day closing lower…

 

Treasuries round-tripped early week losses with yields tumbling the last 24 hours back to unchanged on the week…

 

The Dollar Index (DXY) surged today (by the most in a month) bouncing off the 97.00 level once again as German Manufacturing disappointed sending the EUR tumbling…

 

Crytpos continue to have a good week with Ethereum and Litecoin best today…

 

Gold had an ugly week as silver broke-even, copper tumbled today…

 

Gold’s 3rd worst week in 5 months (Silver best week relative to gold since the start of the year), back in the red for 2019…

 

WTI has traded sideways for almost two weeks – unable to break the Fib61.8% retracement…

 

Gas prices are up a record 65 days in a row…

 

Finally, US economic is the worst in the world as China’s soars…

Probably nothing!!

via ZeroHedge News http://bit.ly/2KP45b7 Tyler Durden

Parents Punch Back: College Admission Scandal Defendants Mount Aggressive Defense, Preparing For “War”

On the same day that it was reported that Lori Loughlin’s daughter may be the first student facing criminal charges in the college admissions scandal, it’s also looking increasingly like many parents involved are preparing to fight the charges against them vigorously, according to Bloomberg. Some of the parents, including former TPG executive Bill McGlashan, ex-Pimco chief Douglas Hodge and TV sitcom veteran Lori Loughlin are assembling aggressive defenses, while others have already punched back. Many of the parents have the money to put up a serious legal fight on multiple fronts, which could make the case more than an open-and-shut formality for the government. 

Peter Henning, a former federal prosecutor who teaches at Wayne State University Law School in Detroit said: “When you take on well-heeled clients, you’re inevitably inviting a battle. This is not going to be easy for the government.”

As a start, many of the defendants’ lawyers have already complained that prosecutors had engaged in judge-shopping for the case. They also added that their clients should not be tried with others whom they have never met. 

Ilene Jaroslaw, former NY federal prosecutor, called the defense lawyers’ letter “a declaration of war.”

This past Monday, lawyers for Gregory and Amy Colburn of Palo Alto sought a dismissal of the two charges against them of a mail and wire fraud conspiracy and a money-laundering conspiracy. Among the couple’s arguments was the notion that the government’s case is deficient.

They invoked a Supreme Court case from 1946 to argue their point. Kotteakos v. U.S. was a case where a broker was accused of conspiring with 32 loan applicants to defraud the government. The court reversed the convictions, ruling that the defendants had only the broker in common, not one another, and that there were more than eight separate conspiracies, instead of just one. 

Henning continued: “This is where conspiracy law gets nebulous. It’s not clear any of the other parents knew anyone else was doing it.”

The couple argued that the government failed to allege enough facts to prove their case because test scores aren’t “property” covered by the governing statute. They also argued that the test proctors didn’t have a fiduciary duty to the exam companies. They added that if the court finds that there’s no “actionable fraud” that counts of money laundering should be dismissed, as well. 

Patric Hooper, of Hooper Lundy & Bookman PC, said: “The Colburns did not participate in the sprawling conspiracy alleged by the government, or any other conspiracy. They are putting their trust in the judicial system to clear their names.”

But not all criminal defense lawyers are as optimistic. “I expect a lot more guilty pleas,” Diane Ferrone, a criminal defense lawyer in New York who isn’t involved in the case, told Bloomberg. 

Another parent fighting the charges is Robert Zangrillo, accused of paying $250,000 to get his daughter into USC as an athletic recruit. His lawyer, Martin Weinberg, says that the allegations don’t amount to a money laundering conspiracy case. 

Randall Eliason, a former federal prosecutor who teaches at George Washington University’s law school commented: “The parents’ payments are not unlawful proceeds of criminal activity. The money doesn’t become ‘proceeds’ of a criminal activity, which is required for money laundering, until it is in the hands of the bribe recipients.”

If the parents fail to win a dismissal, they will push for individual trials so that they’re not lumped together in a way that could give a jury an appearance of a conspiracy. Experts say that if there are multiple trials, witnesses like Singer could have troubling keeping their story straight under repeated questioning. Defense lawyers are expected to hone in on Singer’s credibility, using him as a scapegoat. 

Brad Bailey, a former federal prosecutor in Boston, asked: “Can somebody in Texas who might be accused of having someone sit for a test for their daughter be properly joined at trial with an individual in California who’s accused of paying more than $500,000 in bribes?”

He continued: “Defense lawyers will come hard after Mr. Singer. He has a reason to take down as many people as he can by lying.” 

Ferrone concluded: “It’s a defendant-specific thing. You have people who said initially, ‘I didn’t do anything illegal,’ but as they start reading emails and see the evidence and context, they may contemplate a conviction and have what we defense lawyers call the ‘come to Jesus’ moment and decide, ‘I don’t really want to risk going to trial or begging for mercy from the court.’”

via ZeroHedge News http://bit.ly/2Xp1l5K Tyler Durden

Sears Sues Ex-CEO Lampert, Steven Mnuchin For Looting The Company

Sears, or rather the company that formerly owned Sears and Kmart, has sued its ex-CEO, chairman and iconic investor Eddie Lampert and his hedge fund alleging they illegally stripped the retailer of assets in the years leading up to its Chapter 11 bankruptcy. The lawsuit accuses Lampert that while he headed the recently bankrupt company, he directed the transfer of billions of dollars in assets “for grossly inadequate consideration or no consideration at all” for the benefit of himself, his hedge fund ESL Investments and others, Reuters reported. In other words, Lampert allegedly “asset stripped” Sears of most of its attractive assets and personally benefited from the transfers.

The lawsuit, filed by Sears Holdings, targets about two dozen defendants, including Treasury Secretary Steven Mnuchin, who was previously an investor and board member of ESL and has been friends with Lampert for decades.

Sears Holdings – a bankrupt zombie company in every sense of the word –  of which Lampert was formerly CEO, chairman and the largest investor, alleged that Lampert’s moves “were unmistakably intended to hinder, delay and defraud creditors and/or occurred when the Company was insolvent and had insufficient capital to continue its operations and to repay its billions of dollars in debt.”

Had Lampert been prevented to syphon off assets, “Sears would have had billions of dollars more to pay its third-party creditors today and would not have endured the amount of disruption, expense and job losses resulting from its recent bankruptcy filing,” the lawsuit continue, and also alleges that Lampert “knew the Company had no plan to return to profitability” and worked “to create a false record to cover up their asset stripping, at Lampert’s personal direction,” including “bad-faith predictions” of a “dramatic turn-around.”

Two months ago, Lampert struck a last-minute deal to buy Sears assets out of bankruptcy, avoid a liquidation that would leave tens of thousands without a job, and keep about 400 stores open under a new entity called Transform Holdco.

Alleged asset stripper

However, as part of the deal, Sears Holdings, which sold assets Lampert, is still dealing with angry creditors who say that Lampert exploited them and profited from the retailer’s descent.

ESL countered, saying in a statement that it “vigorously disputes” the lawsuit, calling them “baseless allegations and fanciful claims” that “are misleading or just flat wrong.” According to the hedge fund, under Lampert’s leadership, Sears used more than $2 billion in proceeds from asset sales to reduce the retailer’s debt and fund its operations. The hedge fund said it did not receive favorable treatment, adding that the Sears board and independent directors authorized the deals in question.

“We are confident that the processes we followed for each of these transactions are unimpeachable,” ESL said.

It was not immediately clear whether the lawsuit could disrupt the operations, or what’s left of them, of the so-called New Sears.

Lampert came under fire over the past several years for his leadership, such a 2015 decision to sell certain valuable stores to a real estate investment trust called Seritage Growth Properties, where he had a significant ownership stake. Seritage is also targeted in the lawsuit. Lampert also faced scrutiny for loading Sears up with debt from his hedge fund.

Last June, USA Today reported that Lampert and ESL were collecting at least $200 million annually in debt payments from Sears and that Lampert had personally directed the company not to reinvest in major store upgrades.

Ahead of its October 2018 bankruptcy, Sears closed more than 3,500 stores and cut about 250,000 jobs in roughly the last 15 years as sales cratered.

The full filing is below.

via ZeroHedge News http://bit.ly/2GwVo12 Tyler Durden

DHS Considers Classifying Fentanyl As ‘Weapon Of Mass Destruction’

An internal government memorandum attained by Task & Purpose reveals that the Department of Homeland Security (DHS) is considering labeling fentanyl as a weapon of mass destruction (WMD).

Dated Feb. 22, 2019, under the title “Use of counter-WMD authorities to combat fentanyl,” the memo said the toxic painkiller would be identified as a WMD “when certain criteria are met,” and that DHS officials have “long regarded fentanyl as a chemical weapons threat.”

Fentanyl is one of the most potent synthetic opioids out there, is considered to be 100 times more potent than morphine. Pain management physicians prescribe fentanyl to patients who experience severe pain but is also sold illegally.

The illegal form of fentanyl has been responsible for a massive spike in opioid-related deaths from 2011 to 2018. In 2017, approximately 28,000 Americans fatally overdosed on the drug.

James McDonnell, an assistant secretary at DHS, detailed in the memo that the drug’s high toxicity and widespread availability “are attractive to threat actors seeking nonconventional materials for a chemical weapons attack.”

“In July 2018, the FBI Weapons of Mass Destruction Directorate assessed that ‘…fentanyl is very likely a viable option for a chemical weapon attack by extremists or criminals,” he wrote.

McDonnell wrote that “as little as two to three milligrams of fentanyl can induce respiratory depression, respiratory arrest, and possible death.” He said some fentanyl analogs are even more dangerous.

Video: Fentanyl overdose caught on camera 

Dan Kaszeta, a chemical and nuclear defense expert, spoke with Task & Purpose about the fentanyl threat being used as a WMD as a “fringe scenario” since there are “literally dozens” of other chemical substance that could be weaponized.

“It reads like somebody is laying the administrative background for trying to tap into pots of money for detecting WMD and decontaminating WMD,” Kaszeta told Task & Purpose after viewing the memo. “It’s an interdepartmental play for money, that’s all it is.”

At the end of the memo, McDonnell said his office will brief government officials on combatting the fentanyl WMD threat.

“I think an interagency planning event is a good idea,” a senior defense official told Task & Purpose on condition of anonymity in order to discuss sensitive matters, though the official concluded it was far more feasible for a threat actor to manufacture sarin or mustard gas. “Anybody with a college level degree in chemistry can manufacture chemical weapons agents.”

Read the full memo below:

 

via ZeroHedge News http://bit.ly/2GtuAOW Tyler Durden

Trump May Not Have Obstructed the Mueller Investigation, But It Sure Looks Like He Tried

The Mueller report, a redacted version of which was released today, doesn’t conclude that President Trump obstructed justice. But it also doesn’t conclude that he didn’t. Instead, it strongly suggests that he tried—and was foiled by a staff that refused to carry out his instructions.

Attorney General William Barr’s initial summary of the report quoted it as saying that “while this report does not conclude that the President committed a crime, it also does not exonerate him.”

The full paragraph is even more explicit about leaving open the possibility that Trump may have acted in a criminal manner.

“If we had confidence after a thorough investigation of the facts that the President clearly did not commit obstruction of justice, we would so state,” the report says. “Based on the facts and the applicable legal standards, however, we are unable to reach that judgment.” The evidence collected during the investigation “presents difficult issues that prevent us from conclusively determining that no criminal conduct occurred.” Is Trump a criminal? The Mueller report answers that question by saying, essentially, that the Special Counsel’s office can’t rule it out.

Even if Trump did not obstruct the investigation, the report provides evidence that he tried to—and failed only when his staffers refused to carry out his instructions.

The report identifies several instances in which the president apparently attempted to influence the investigation, by narrowing its scope in some way or by removing Robert Mueller. Trump, for example, pushed former FBI Director James Comey to end an investigation into former National Security Adviser Michael Flynn. Trump also directed former White House counsel Don McGahn to tell Rod Rosenstein of the Department of Justice that Mueller should be taken off the investigation. Trump later told McGahn to lie about being ordered to take Mueller off the case.

Yet none of these things actually happened. Trump’s staff declined to follow his orders. 

As the report says:

The President’s efforts to influence the investigation were mostly unsuccessful, but that is largely because the persons who surrounded the President declined to carry out orders or accede to his requests. Comey did not end the investigation of Flynn, which ultimately resulted in Flynn’s prosecution and conviction for lying to the FBI. McGahn did not tell the Acting Attorney General that the Special Counsel must be removed, but was instead prepared to resign over the President’s order. Lewandowski and Dearborn did not deliver the President’s message to Sessions that he should confine the Russia investigation to future election meddling only. And McGahn refused to recede from his recollections about events surrounding the President’s direction to have the Special Counsel removed, despite the President’s multiple demands that he do so.

There’s a parallel here to the infamous Trump Tower meeting during the campaign, in which Trump’s son and campaign associate, Donald Trump, Jr., met with a Russian national who promised to share embarrassing material on Trump’s Democratic rival, Hillary Clinton. Informed about the potential for political dirt, the younger Trump wrote in an email, “if it’s what you say, I love it.” But the meeting was a bust, and none of the promised dirt ever materialized. (The Mueller report is similarly coy on this matter, stating that “although the evidence of contacts between Campaign officials and Russia affiliated individuals may not have been sufficient to establish or sustain criminal charges, several U.S. persons connected to the Campaign made false statements about those contacts and took other steps to obstruct” related investigations.)

The Trump campaign didn’t collude with Russia—but it tried. Trump may not have obstructed the Mueller investigation—but it sure looks like he tried.

In contrast to suggestions that Trump is the ringleader of some sort of wide-ranging conspiracy, the picture emerging from the report is one of a temperamental and inexperienced president whose managerial bumbling and self-destructive instincts are kept at least partly in check by more experienced staff.

In some ways, it is a vindication of Trump’s campaign trail argument that Washington is a swamp populated by politics-and-government lifers who hold much of the real power.

At the same time, it suggests that far from draining the swamp, Trump has become part of it, subsumed into its muck, and, if not completely powerless, consistently limited in his ability to change the political ecosystem around him. That ecosystem, meanwhile, has served as a protective buffer, preventing Trump from carrying out acts that might threaten his political future. In the end, the swamp may be what saved Trump’s presidency.

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Here’s a Searchable Version of the Mueller Report

If you’re a close follower of the news, you might have heard that the Justice Department released Special Counsel Robert Mueller’s long-awaited report this morning on potential obstruction of justice by President Donald Trump, as well as alleged collaboration with the Russian government by the Trump campaign during the 2016 presidential election.

Of course, the nation’s highest law enforcement agency released the report as a non-searchable PDF image. However, The Washington Post uploaded a searchable version, so you can quickly look for “pee tape.” (Spoiler: It’s not there.)

The Justice Department promised the report would be”lightly redacted,” trying to allay fears that the most important findings of the Mueller report would be hidden from the public. The federal government is notorious for using unhelpful document formats, outdated technology, and abusing Freedom of Information Act (FOIA) exemptions to hide information.

But the redactions at least do not appear as bad as they could have been. Executive privilege, which grants the office of the president broad power to withhold documents, does not appear to have been used. The bulk of the redactions appear to be related to ongoing investigations and grand jury materials, which are almost never released.

The fight over the Mueller report is just beginning, though. As I wrote earlier this year, Democrats in Congress, who now control the House, will be using their power to press for more information from the Justice Department. And transparency groups and journalists, such as the Electronic Privacy Information Center and BuzzFeed News, have already filed Freedom of Information Act lawsuits for the full report. They will try and convince a federal judge to peel back as many of the redactions as they can.

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Top Mueller Report Takeaways So Far

Now that the redacted 448-page Mueller report has been released to the public, people on both sides of the aisle have been madly poring over the results of the special counsel’s 22-month Russia probe. 

Prosecutors closely examined whether Donald Trump or members of his 2016 campaign conspired with Russia to release emails which were damaging to Hillary Clinton’s campaign and the DNC, and/or any involvement with the Kremlin’s social media disinformation campaigns. 

The investigation also covered whether Trump associates operated as unregistered Russian (and in one case Israeli) agents, and whether the infamous June 9, 2016 Trump Tower meeting with a Russian attorney violated campaign finance laws as a “thing-of-value” offered by foreign governments, or crossed any other legal boundaries. 

At the end of the day, Mueller and his team did not find that any Trump campaign associates were operating on behalf of a foreign government in connection with the 2016 election. Mueller did, however, find Trump campaign manager Paul Manafort and his deputy Rick Gates guilty of crimes connected to their work for the Ukrainian government prior to their involvement with Trump. 

There are a mountain of pages and footnotes to go through, but here are some takeaways so far: 

  • Mueller was unable to establish that Trump committed any underlying crimes. 

“Unlike cases in which a subject engages in obstruction of justice to cover up a crime, the evidence we obtained did not establish that the president was involved in an underlying crime related to Russian election interference,” the report reads. 

  • Mueller considered pressing charges in connection with the Trump Tower meeting. 

The special counsel’s office considered prosecuting the Trump Tower meeting as a campaign-finance violation, however declined because they didn’t have “admissible evidence” likely to prove that Trump officials “wilfully” acted, or that the information offered by the Russians exceeded the threshold for prosecution. 

Interestingly – the Mueller report completely omits the involvement of Fusion GPS in the Trump tower meeting – as the Russian attorney involved in it, Natalia Veselnitskaya, was a Fusion GPS associate and met with founder Glenn Simpson before and after the Trump Tower meeting. 

Also noteworthy is that the Trump Tower meeting investigation “did not identify evidence connecting the events of June 9 & the GRU’s hack-and-dump operation. 

  • Mueller looked at charging Trump aide George Papadopoulos as an agent of Israel. 

  • Trump worried that the Special Counsel investigation would end his presidency. 

According to the Mueller report, when then-Attorney General Jeff Sessions let Trump know about the appointment of a special counsel, Trump replied: “Oh my God. This is terrible. This is the end of my presidency. I’m fucked,” adding “How could you allow this to happen, Jeff?” 

  • Former White House attorney Don McGahn threatened to resign.

McGahn was ready to hand in his resignation as White House counsel in June 2017 when Trump directed him to tell Deputy Attorney Rod Rosenstein that “Mueller has to go,” per the report. 

“In response to that request, McGahn decided to quit because he did not want to participate in events that he described as akin to the Saturday Night Massacre,” during the Nixon administration. McGahn would stay on as White House counsel for for another 16 months. 

More takeaways: 

via ZeroHedge News http://bit.ly/2VdXlHy Tyler Durden