Merrick Garland’s Worrying Record on Criminal Justice Reform

covphotos113125

The Senate Judiciary Committee will kick off confirmation hearings today for Merrick Garland, the former federal prosecutor and long-serving federal judge tapped by President Joe Biden to serve as the next U.S. attorney general. In an open letter to the nominee, Cynthia W. Roseberry of the American Civil Liberties Union urges Garland to use his hearings as an opportunity “to make clear, on-the-record commitments” to various criminal justice reform efforts, such as vowing to “reduce mass incarceration,” “unwind the War on Drugs, starting with marijuana,” and hold “police departments and officers accountable for misconduct.”

That is certainly a welcome agenda for the next attorney general. Unfortunately, Garland’s judicial record suggests that he might not always satisfy the high hopes of criminal justice reform advocates.

Take the Fourth Amendment. In 2003, the U.S. Court of Appeals for the District of Columbia Circuit issued its decision in a case known as United States v. Brown. At issue was whether a warrantless car search violated the Fourth Amendment. Judge Garland wrote the opinion that ruled for the cops. In dissent, one of his colleagues charged Garland with “cobbling together innocent circumstances, and drawing inferences in favor of the government that are unsupported by the evidence.”

The matter originated with reports of gunfire in the parking lot of a Washington, D.C., apartment building on the night of April 13, 2001. Several hours after the reports came in, two officers from the Metropolitan Police Department arrived on the scene. A building resident told the officers that the occupants of a parked white car might be involved. According to the officers’ account, while questioning the folks in the white car, they became suspicious about the occupants of a black car that was parked nearby, claiming that one of the black car’s occupants seemed to be “sizing us up.”

The officers approached the black car. After knocking on a rear window, Officer Joshua Branson opened a rear door to get a better look inside. He spotted a handgun on the floor. That led him to pull Rocky Lee Brown out of the car and place him in handcuffs. Officer Branson then took the keys out of the ignition, opened the trunk, and discovered an AR-15 rifle and several rounds of ammunition.

In Terry v. Ohio (1968), the U.S. Supreme Court held that police officers must have a “particularized suspicion” of criminal wrongdoing before conducting that sort of investigatory stop. An officer’s “inchoate and unparticularized suspicion or ‘hunch,'” the Court stressed, is not enough to create an exception to the Fourth Amendment’s guarantee against unreasonable searches and seizures.

Garland’s opinion in U.S. v. Brown, however, granted Officer Branson exactly the sort of hunch-based leeway that Terry prohibited. Indeed, as Judge Judith Rogers complained in her dissent from Garland’s judgment, “there was no evidence that the police had any grounds to think the occupants of the black car, which was lawfully parked in a residential lot, were guilty of a traffic violation or engaged in any criminal activity….So far as the government’s evidence indicated, the occupants of the black car were innocent, uninvolved bystanders and nothing more.”

During his long stint on the D.C. Circuit, Garland tended to tip the scales in favor of law enforcement in these sorts of disputes, practicing a style of judicial deference that gave police and prosecutors the benefit of the doubt. Time will tell if Attorney General Garland will follow suit.

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The Texas Blackout Blame Game

zumaamericasthirty047153

“If I owned Texas and Hell,” Gen. Philip Sheridan once said, “I would rent out Texas and live in Hell.” He probably was thinking about our hot summers, but after last week Hell’s central heating is starting to seem appealing. Millions of Texans were left without electricity, heat, and in some cases water service.

The Texas blackouts are shaping up to be the costliest disaster in state history, and the loss of life remains unknown. People are justifiably very angry. And when people are angry, politicians look around for someone to blame. Many have trotted out their favorite villains for the occasion. Many on the right have picked Don Quixote’s old enemy, the windmill, while many on the left jumped at the chance to blame deregulation. Neither explanation really holds up. While it will be some time before all the specifics are known, what we do know doesn’t support any easy political narrative.

The central fact about the chain of events that led to the blackouts is deceptively simple: It got super cold.

In order to keep the lights on, electric generation must match demand on a minute-by-minute basis. For that reason, the system’s planners and forecasters focus their attention on the times of the year when demand is typically highest. In Texas, that’s the heat of summer. Many features of our electric grid are designed to work optimally during the summer, with the understanding that in the winter we will usually have far more electric capacity that we need.

The state was not prepared for record cold temperatures stretching across all 254 Texas counties. This generated summer levels of electric demand, and it also caused significant amounts of generation to become unusable. Because really cold temperatures are rare in Texas, many plants contain components that are not protected from the elements. This is true for generators of all fuel types, from wind to nuclear. In addition, Texas typically relies heavily on natural gas to meet its peak electric demand, as natural gas plants are easier to ramp up or down on short notice. During the summer that’s not a problem. In the winter, though, gas is also used for heating, and many gas plants did not have firm contracts to deliver fuel and had trouble buying it on the open market. Finally, the winter is a time when some plants shut down for scheduled maintenance.

The result: In the early morning hours of February 15, the state’s grid operator—the Electric Reliability Council of Texas, or ERCOT—found itself facing a supply shortfall with more than a third of the grid’s thermal generation capacity (natural gas, coal, and nuclear) unusable. To prevent total system failure, ERCOT ordered utilities to curtail service, plunging millions of homes into darkness and cold.

The sheer size of the supply hole makes it hard to blame either wind or deregulation for the failure. While pictures of frozen wind turbines may be evocative, ERCOT’s forecasts do not rely on a large amount of wind to sustain the system—and wind ended up meeting those expectations. Some have argued that the low cost of wind power over the last decade has forced the retirement of more reliable power plants that could have helped make up the gap had they been there. I’ve addressed those arguments at length elsewhere; here I’ll add that many of the recently retired Texas plants were rendered unprofitable not by wind but by the fracking-induced fall in natural gas prices. And given how many thermal plants failed, it doesn’t seem plausible that having a few more of them would have made the difference.

Similarly, there is little reason to think that Texas’ competitive electric system is to blame. ERCOT’s most recent winter forecast included a worst-case scenario for the grid that roughly predicted the needed demand but underestimated the amount of generation that would be unusable by almost half. A more centralized or state-run electric system almost certainly would have relied on the same forecast and ended up in the same situation. In retrospect, it’s easy to blame generators for not doing more to protect their plants from cold. But if a plant had known that unprecedented cold was coming and had weatherized, it would now be reaping millions in benefits. The problem was not a lack of incentives but a lack of imagination.

One outstanding question has to do with the fact that Texas maintains its own separate electric grid (the rest of the continental United States is split between an eastern and western grid). This has given the state more control over electric policy, and the state is large enough that historically not being part of a larger grid has not been a problem. Would Texas have been able to avoid its problems if it had been part of one of these larger interconnects? So far I don’t think we have the data to answer this question one way or the other. In theory, a larger geography should help, and while neighboring states also had to resort to rolling blackouts, they did not do so on nearly the same scale. However, I’ve yet to see any detailed analysis of whether being part of a larger system would have reduced the overall number of outages or simply spread them out over a greater area.  

That’s not a very satisfying answer, and I’m sure that there are many decisions made in the days and years leading up to the blackouts that will and should be second-guessed. But fundamentally the blackouts happened because across the entire system, people did not anticipate how bad things could get. It was a failure to expect the unexpected.

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The Journal of Free Speech Law, a New Faculty-Edited Law Journal

logo

I’m delighted to announce the founding of the Journal of Free Speech Law, a new faculty-edited law journal. (Motto: It is an experiment, as all life is an experiment.“) The journal will publish in print as well as electronically; the first issue—a symposium on regulation of social media removal decisions—will come out in Summer 2021. (Many thanks to the Stanton Foundation for a generous multiyear grant that will allow all this to happen.)

Future articles will be selected by our “robe & gown” editorial board, which currently consists of:

Prof. Jane Bambauer
Prof. Ashutosh Bhagwat
Judge Stephanos Bibas
Prof. Vincent Blasi
Judge José A. Cabranes
Prof. Clay Calvert
Dean Erwin Chemerinsky
Prof. Alan Chen
Justice Mariano-Florentino Cuéllar
Judge Douglas H. Ginsburg
Prof. Jamal Greene
Prof. Andrew Koppelman
Prof. Ronald J. Krotoszynski, Jr.
Prof. Toni Massaro
Prof. Michael McConnell
Prof. Helen Norton
Prof. Robert Post
Judge A. Raymond Randolph
Judge Neomi Rao
Prof. Jennifer Rothman
Judge Robert Sack
Prof. Frederick Schauer
Dean Rodney A. Smolla
Judge David R. Stras
Judge Jeffrey S. Sutton
Prof. Rebecca Tushnet
Prof. Eugene Volokh
Prof. James Weinstein

 

The executive editors will be Jane Bambauer, Ashutosh Bhagwat, and me, and I will also serve as the editor-in-chief. If you’re interested in seeing links to our articles, as well as the occasional other announcement, follow us on Twitter at @JournalSpeech.

We plan to publish:

  1. Articles that say something we don’t already know.
  2. Articles with all sorts of approaches: doctrinal, theoretical, historical, empirical, or otherwise.
  3. Articles dealing with speech, press, assembly, petition, or expression more broadly.
  4. Generally not articles purely focused on the Free Exercise Clause or Establishment Clause (which we leave to other publications, such as the Journal of Law & Religion), except if they also substantially discuss religious speech.
  5. Articles not just about the First Amendment, but also about state constitutional free speech provisions, federal and state statutes and regulations protecting or restricting speech, common-law rules protecting or restricting speech, and private organizations’ speech regulations.
  6. Articles about U.S. law, foreign law, comparative law, or international law.
  7. Both big, ambitious work and narrower material.
  8. Articles that are useful to the academy, to the bench, or to the bar (and if possible, to all three).
  9. Articles arguing for broader speech protection, narrower speech protection, or anything else.

We also plan to publish quickly, without interfering with the author’s style, voice, or perspective.

Our submission guidelines: You can submit to the journal via Scholastica, at https://‌freespeechlaw.scholasticahq.com/.

  1. As with many other faculty-edited journals, we require exclusive submission. Any article you submit to us must not be under consideration elsewhere.
  2. In exchange, we expect to give you an answer within two weeks.
  3. Instead of a cover letter, please submit at most one page (and preferably just a paragraph or two) explaining how your article is novel. If there is a particular way of showing that (e.g., it’s the first article to discuss how case X and doctrine Y interact), please let us know.
  4. Please submit articles single-spaced, in a proportionally spaced font.
  5. Please make sure that the Introduction quickly and clearly explains the main claims you are making.
  6. Please avoid extended background sections reciting familiar Supreme Court precedents or other well-known matters. We prefer articles that get right down to the novel material (if necessary, quickly explaining the necessary legal principles as they go).
  7. Each article should be as short as possible, and as long as necessary.
  8. Like everyone else, we like simple, clear, engaging writing.
  9. We are open to student-written work, and we evaluate it under the same standards applicable to work written by others.

If your article is accepted:

  1. We will give you whatever editing feedback we came up with as we were reviewing your article. We will generally not offer line editing.
  2. We will assign a starting page number, which you can use for future citations even before it is published, and we willbe prepared to immediatelypublish the article online and on Westlaw and likely Lexis, once the article is suitably revised and polished. (We will publish in print every several months, as enough articles are finished to form an issue.)
  3. We will defer to your authorial judgment on editing questions, except when we think accuracy or attention to counterarguments requires changes (in which case we will of course not make any changes without your approval).
  4. We expect authors who are professors at American law schools to have cite-checking and proofreading done by their own research assistants. If that is a hardship for you, please let us know.
  5. We will have the article proofread near the end of the publishing process, just to catch any remaining glitches.

Please submit your new articles to us, if you have written something that would fit our mission; and please follow us on Twitter at @JournalSpeech.

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Merrick Garland’s Worrying Record on Criminal Justice Reform

covphotos113125

The Senate Judiciary Committee will kick off confirmation hearings today for Merrick Garland, the former federal prosecutor and long-serving federal judge tapped by President Joe Biden to serve as the next U.S. attorney general. In an open letter to the nominee, Cynthia W. Roseberry of the American Civil Liberties Union urges Garland to use his hearings as an opportunity “to make clear, on-the-record commitments” to various criminal justice reform efforts, such as vowing to “reduce mass incarceration,” “unwind the War on Drugs, starting with marijuana,” and hold “police departments and officers accountable for misconduct.”

That is certainly a welcome agenda for the next attorney general. Unfortunately, Garland’s judicial record suggests that he might not always satisfy the high hopes of criminal justice reform advocates.

Take the Fourth Amendment. In 2003, the U.S. Court of Appeals for the District of Columbia Circuit issued its decision in a case known as United States v. Brown. At issue was whether a warrantless car search violated the Fourth Amendment. Judge Garland wrote the opinion that ruled for the cops. In dissent, one of his colleagues charged Garland with “cobbling together innocent circumstances, and drawing inferences in favor of the government that are unsupported by the evidence.”

The matter originated with reports of gunfire in the parking lot of a Washington, D.C., apartment building on the night of April 13, 2001. Several hours after the reports came in, two officers from the Metropolitan Police Department arrived on the scene. A building resident told the officers that the occupants of a parked white car might be involved. According to the officers’ account, while questioning the folks in the white car, they became suspicious about the occupants of a black car that was parked nearby, claiming that one of the black car’s occupants seemed to be “sizing us up.”

The officers approached the black car. After knocking on a rear window, Officer Joshua Branson opened a rear door to get a better look inside. He spotted a handgun on the floor. That led him to pull Rocky Lee Brown out of the car and place him in handcuffs. Officer Branson then took the keys out of the ignition, opened the trunk, and discovered an AR-15 rifle and several rounds of ammunition.

In Terry v. Ohio (1968), the U.S. Supreme Court held that police officers must have a “particularized suspicion” of criminal wrongdoing before conducting that sort of investigatory stop. An officer’s “inchoate and unparticularized suspicion or ‘hunch,'” the Court stressed, is not enough to create an exception to the Fourth Amendment’s guarantee against unreasonable searches and seizures.

Garland’s opinion in U.S. v. Brown, however, granted Officer Branson exactly the sort of hunch-based leeway that Terry prohibited. Indeed, as Judge Judith Rogers complained in her dissent from Garland’s judgment, “there was no evidence that the police had any grounds to think the occupants of the black car, which was lawfully parked in a residential lot, were guilty of a traffic violation or engaged in any criminal activity….So far as the government’s evidence indicated, the occupants of the black car were innocent, uninvolved bystanders and nothing more.”

During his long stint on the D.C. Circuit, Garland tended to tip the scales in favor of law enforcement in these sorts of disputes, practicing a style of judicial deference that gave police and prosecutors the benefit of the doubt. Time will tell if Attorney General Garland will follow suit.

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The Texas Blackout Blame Game

zumaamericasthirty047153

“If I owned Texas and Hell,” Gen. Philip Sheridan once said, “I would rent out Texas and live in Hell.” He probably was thinking about our hot summers, but after last week Hell’s central heating is starting to seem appealing. Millions of Texans were left without electricity, heat, and in some cases water service.

The Texas blackouts are shaping up to be the costliest disaster in state history, and the loss of life remains unknown. People are justifiably very angry. And when people are angry, politicians look around for someone to blame. Many have trotted out their favorite villains for the occasion. Many on the right have picked Don Quixote’s old enemy, the windmill, while many on the left jumped at the chance to blame deregulation. Neither explanation really holds up. While it will be some time before all the specifics are known, what we do know doesn’t support any easy political narrative.

The central fact about the chain of events that led to the blackouts is deceptively simple: It got super cold.

In order to keep the lights on, electric generation must match demand on a minute-by-minute basis. For that reason, the system’s planners and forecasters focus their attention on the times of the year when demand is typically highest. In Texas, that’s the heat of summer. Many features of our electric grid are designed to work optimally during the summer, with the understanding that in the winter we will usually have far more electric capacity that we need.

The state was not prepared for record cold temperatures stretching across all 254 Texas counties. This generated summer levels of electric demand, and it also caused significant amounts of generation to become unusable. Because really cold temperatures are rare in Texas, many plants contain components that are not protected from the elements. This is true for generators of all fuel types, from wind to nuclear. In addition, Texas typically relies heavily on natural gas to meet its peak electric demand, as natural gas plants are easier to ramp up or down on short notice. During the summer that’s not a problem. In the winter, though, gas is also used for heating, and many gas plants did not have firm contracts to deliver fuel and had trouble buying it on the open market. Finally, the winter is a time when some plants shut down for scheduled maintenance.

The result: In the early morning hours of February 15, the state’s grid operator—the Electric Reliability Council of Texas, or ERCOT—found itself facing a supply shortfall with more than a third of the grid’s thermal generation capacity (natural gas, coal, and nuclear) unusable. To prevent total system failure, ERCOT ordered utilities to curtail service, plunging millions of homes into darkness and cold.

The sheer size of the supply hole makes it hard to blame either wind or deregulation for the failure. While pictures of frozen wind turbines may be evocative, ERCOT’s forecasts do not rely on a large amount of wind to sustain the system—and wind ended up meeting those expectations. Some have argued that the low cost of wind power over the last decade has forced the retirement of more reliable power plants that could have helped make up the gap had they been there. I’ve addressed those arguments at length elsewhere; here I’ll add that many of the recently retired Texas plants were rendered unprofitable not by wind but by the fracking-induced fall in natural gas prices. And given how many thermal plants failed, it doesn’t seem plausible that having a few more of them would have made the difference.

Similarly, there is little reason to think that Texas’ competitive electric system is to blame. ERCOT’s most recent winter forecast included a worst-case scenario for the grid that roughly predicted the needed demand but underestimated the amount of generation that would be unusable by almost half. A more centralized or state-run electric system almost certainly would have relied on the same forecast and ended up in the same situation. In retrospect, it’s easy to blame generators for not doing more to protect their plants from cold. But if a plant had known that unprecedented cold was coming and had weatherized, it would now be reaping millions in benefits. The problem was not a lack of incentives but a lack of imagination.

One outstanding question has to do with the fact that Texas maintains its own separate electric grid (the rest of the continental United States is split between an eastern and western grid). This has given the state more control over electric policy, and the state is large enough that historically not being part of a larger grid has not been a problem. Would Texas have been able to avoid its problems if it had been part of one of these larger interconnects? So far I don’t think we have the data to answer this question one way or the other. In theory, a larger geography should help, and while neighboring states also had to resort to rolling blackouts, they did not do so on nearly the same scale. However, I’ve yet to see any detailed analysis of whether being part of a larger system would have reduced the overall number of outages or simply spread them out over a greater area.  

That’s not a very satisfying answer, and I’m sure that there are many decisions made in the days and years leading up to the blackouts that will and should be second-guessed. But fundamentally the blackouts happened because across the entire system, people did not anticipate how bad things could get. It was a failure to expect the unexpected.

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via IFTTT

The Journal of Free Speech Law, a New Faculty-Edited Law Journal

logo

I’m delighted to announce the founding of the Journal of Free Speech Law, a new faculty-edited law journal. (Motto: It is an experiment, as all life is an experiment.“) The journal will publish in print as well as electronically; the first issue—a symposium on regulation of social media removal decisions—will come out in Summer 2021. (Many thanks to the Stanton Foundation for a generous multiyear grant that will allow all this to happen.)

Future articles will be selected by our “robe & gown” editorial board, which currently consists of:

Prof. Jane Bambauer
Prof. Ashutosh Bhagwat
Judge Stephanos Bibas
Prof. Vincent Blasi
Judge José A. Cabranes
Prof. Clay Calvert
Dean Erwin Chemerinsky
Prof. Alan Chen
Justice Mariano-Florentino Cuéllar
Judge Douglas H. Ginsburg
Prof. Jamal Greene
Prof. Andrew Koppelman
Prof. Ronald J. Krotoszynski, Jr.
Prof. Toni Massaro
Prof. Michael McConnell
Prof. Helen Norton
Prof. Robert Post
Judge A. Raymond Randolph
Judge Neomi Rao
Prof. Jennifer Rothman
Judge Robert Sack
Prof. Frederick Schauer
Dean Rodney A. Smolla
Judge David R. Stras
Judge Jeffrey S. Sutton
Prof. Rebecca Tushnet
Prof. Eugene Volokh
Prof. James Weinstein

 

The executive editors will be Jane Bambauer, Ashutosh Bhagwat, and me, and I will also serve as the editor-in-chief. If you’re interested in seeing links to our articles, as well as the occasional other announcement, follow us on Twitter at @JournalSpeech.

We plan to publish:

  1. Articles that say something we don’t already know.
  2. Articles with all sorts of approaches: doctrinal, theoretical, historical, empirical, or otherwise.
  3. Articles dealing with speech, press, assembly, petition, or expression more broadly.
  4. Generally not articles purely focused on the Free Exercise Clause or Establishment Clause (which we leave to other publications, such as the Journal of Law & Religion), except if they also substantially discuss religious speech.
  5. Articles not just about the First Amendment, but also about state constitutional free speech provisions, federal and state statutes and regulations protecting or restricting speech, common-law rules protecting or restricting speech, and private organizations’ speech regulations.
  6. Articles about U.S. law, foreign law, comparative law, or international law.
  7. Both big, ambitious work and narrower material.
  8. Articles that are useful to the academy, to the bench, or to the bar (and if possible, to all three).
  9. Articles arguing for broader speech protection, narrower speech protection, or anything else.

We also plan to publish quickly, without interfering with the author’s style, voice, or perspective.

Our submission guidelines: You can submit to the journal via Scholastica, at https://‌freespeechlaw.scholasticahq.com/.

  1. As with many other faculty-edited journals, we require exclusive submission. Any article you submit to us must not be under consideration elsewhere.
  2. In exchange, we expect to give you an answer within two weeks.
  3. Instead of a cover letter, please submit at most one page (and preferably just a paragraph or two) explaining how your article is novel. If there is a particular way of showing that (e.g., it’s the first article to discuss how case X and doctrine Y interact), please let us know.
  4. Please submit articles single-spaced, in a proportionally spaced font.
  5. Please make sure that the Introduction quickly and clearly explains the main claims you are making.
  6. Please avoid extended background sections reciting familiar Supreme Court precedents or other well-known matters. We prefer articles that get right down to the novel material (if necessary, quickly explaining the necessary legal principles as they go).
  7. Each article should be as short as possible, and as long as necessary.
  8. Like everyone else, we like simple, clear, engaging writing.
  9. We are open to student-written work, and we evaluate it under the same standards applicable to work written by others.

If your article is accepted:

  1. We will give you whatever editing feedback we came up with as we were reviewing your article. We will generally not offer line editing.
  2. We will assign a starting page number, which you can use for future citations even before it is published, and we willbe prepared to immediatelypublish the article online and on Westlaw and likely Lexis, once the article is suitably revised and polished. (We will publish in print every several months, as enough articles are finished to form an issue.)
  3. We will defer to your authorial judgment on editing questions, except when we think accuracy or attention to counterarguments requires changes (in which case we will of course not make any changes without your approval).
  4. We expect authors who are professors at American law schools to have cite-checking and proofreading done by their own research assistants. If that is a hardship for you, please let us know.
  5. We will have the article proofread near the end of the publishing process, just to catch any remaining glitches.

Please submit your new articles to us, if you have written something that would fit our mission; and please follow us on Twitter at @JournalSpeech.

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via IFTTT

Petrobras, Brazil Markets Crash After Bolsonaro Appoints Retired Army General To Lead State Oil Giant

Petrobras, Brazil Markets Crash After Bolsonaro Appoints Retired Army General To Lead State Oil Giant

Chaos erupted in Brazil over the weekend following Friday’s shock decision by president Bolsonaro to appoint Joaquim Silva e Luna, a retired army general and former defense minister overseeing the state-run Itaipu hydroelectric dam on the border with Paraguay and Argentina since 2019, to be the next chief executive of Petróleo Brasileiro SA, aka Petrobras. Bolsonaro’s decision on Friday to replace Roberto Castello Branco, the University of Chicago-educated economist at the helm of Petrobras, who suffered withering criticism for ignoring the complaints of truckers as he hiked diesel prices 15% this week, surprised even his inner political circle.

As Bloomberg reports, there was no room to discuss the move “that shows a president increasingly impatient with the government’s inability to appease his political base, including truckers who have been threatening a strike over rising diesel costs.”

The following day, the president justified his decision by saying the oil company’s current management has shown “zero commitment to Brazil.” Without elaborating, he added that he’s preparing to replace other parts of his administration that “may not be working,” including in the nation’s power sector. On Monday, he told supporters in front of the residential palace that he’s not interfering in the company, but rather demanding “predictability and transparency” from it.

Brazil’s President Jair Bolsonaro.

Roberto Castello Branco, Petrobras’s CEO officer, had won investor praise by reducing the company’s debt and advocating its independence from the government. All that is set to change with the appointment of General Joaquim Silva e Luna, whose nomination needs to be approved by the state-controlled company board, and whose experience is limited to say the least: he has been in charge of the Itaipu hydroelectric dam for the past two years, and served as a defense minister in the previous administration.

“It’s certainly an indication policy could be headed in the wrong direction,” said Brendan McKenna, a currency strategist at Wells Fargo in New York.

Indeed, Bolsonaro’s stunning decision rattled confidence in local risk assets and triggered a cascade of selling in Brazil linked assets: the real fell 2.2% at open, breaching the key 5.5 per dollar level that had been serving as support for the currency. Petrobras’s shares plunged over 20% as analysts from Credit Suisse to JPMorgan cut their recommendations for the stock over the weekend.

Brazil’s Ibovespa index crashed more than 6%, with state-run companies leading losses.

The transition threatens to undermine investor confidence in Latin America’s largest economy at a time its recovery falters amid a second wave of Covid-19. With his popularity dropping to near record lows after a program of cash handouts to the poor expired in December, the president looks increasingly eager to please his political base to the detriment of the austerity agenda of Economy Minister Paulo Guedes.

According to Reuters, Bolsonaro’s approval rating slumped to 32.9% in February, from 41.2% in October, a poll by transport confederation CNT disclosed on Monday. The poll was conducted between Thursday and Saturday last week and would thus partially include reaction to Bolsonaro’s Friday decision to install a retired general with no oil and gas experience as chief executive of state oil company Petroleo Brasileiro SA.

As Bloomberg adds, Guedes has kept silent since Bolsonaro’s announcement on Petrobras because there’s nothing he can say about the decision to make it look better, according to three government officials close to him, although “he’ll try to minimize investor concerns about political intervention by speeding up the approval of austerity measures in congress, the people said, asking for anonymity because the discussions aren’t public.”

Guedes has spent the past few days negotiating with lawmakers on the approval of a constitutional amendment that would make room for the government to provide another round of Covid aid to poor Brazilians in exchange for cuts in public spending in coming years. The bill will ensure fiscal credibility and predictability, and talks are going well as there’s an understanding that the country has no time to waste, the people said.

Despite losing several political battles recently, Guedes doesn’t intend to step down before leaving an economic legacy he can be proud of, the people added.

“That reminds us of other moments of government meddling in economic policy,” said Caio Megale, chief economist at XP Investimentos, recalling a 2013 decision by former President Dilma Rousseff to reduce electricity prices. “The market wants to know if the president’s decision is a new guideline for economic policy.”

Adding insult to risk asset injury, economists surveyed by the central bank lifted their 2021 inflation forecasts above target and also raised their year-end interest rate estimate for the second straight week. Meanwhile, they cut their 2021 economic growth forecast for the third straight week, hinting at a painful stagflationary episode.

James Gulbrandsen, chief investment officer for Latin America at NCH Capital, which has about $3 billion in assets under management, said the uncertainty leaves Brazil at risk of being shunned by investors.

“If Bolsonaro interferes with electricity pricing, it’s probably game over for his ability to attract foreign capital,” he said.

And judging by the collapse in Brazilian risk assets, foreign capital is already well on its way out.

Tyler Durden
Mon, 02/22/2021 – 10:20

via ZeroHedge News https://ift.tt/2NKatSO Tyler Durden

Watch Live: Merrick Garland Confirmation Hearing

Watch Live: Merrick Garland Confirmation Hearing

Merrick Garland is finally getting his Senate confirmation hearing – more than four years after Republican lawmakers blocked his nomination to the Supreme Court following the death of Justice Antonin Scalia.

Garland, President Biden’s nominee for Attorney General, is expected to face pointed questions over various issues, however comments by Sen. Chuck Grassley (R-IA) praising Garland suggests he’s going to be a shoo-in.

In his opening statement, Garland said that “battling extremist attacks on our democratic institutions” is “central” to the DOJ’s mission, and that if he is confirmed he’ll oversee the prosecution of those who participated in the Jan. 6 Capitol Riot (and presumably not those who participated in violent BLM riots last year).

When asked early on in the hearings about ‘equal justice,’ Garland replied: “We do not yet have equal justice. Communities of color and other minorities still face discrimination in housing, in education, in employment and in the criminal justice system. And they bear the brunt of the harm caused by a pandemic, pollution and climate change.”

We would note that black incarceration rates dropped under President Trump, continuing a trend which began over a decade ago.

Watch:

Tyler Durden
Mon, 02/22/2021 – 10:13

via ZeroHedge News https://ift.tt/3dCPGeW Tyler Durden

Fed’s Rate Hikes Storm Back Into The Spotlight As Scorching Economy Overheats

Fed’s Rate Hikes Storm Back Into The Spotlight As Scorching Economy Overheats

US money markets are starting to show signs of anxiety about the stimulus-squared flood into the US economy, bringing forward expectations of the timing of the start of The Fed’s next rate-hike cycle.

Fed funds futures markets now imply a 70% chance of a 25bps Fed rate hike by the end of 2022 (compared to 50% last week)…

Source: Bloomberg

And March 2023 is almost a certainty…

Source: Bloomberg

BofA highlights the central planners’ dilemma as short-run gain opens the door for long-run potential pain.

This is illustrated by the rapid closing and then overshooting of the output gap.

Normally, BofA notes that this happens many years into the recovery and is followed by a recession as the Fed puts on the brakes. This time around the Fed has more breathing room as inflation and inflation expectations are low and they are willing to allow a modest overshoot. This gives them time to gradually hit the brakes.

But, the market is painting a story of optimism: strong growth and rising, but not troublesome, inflation.

BofA sees upside risk to our 6.0% forecast for GDP growth this year, owing to stronger 1Q GDP tracking and prospects for a larger stimulus in March.

Consensus growth expectations are soaring…

There is a delicate balance: strong growth could prompt a faster rise in rates, driving up borrowing costs and weighing on risky assets, limiting economic growth upside.

And further out in time, that balance is quickly pivoting against risk assets as the pace of rate-hikes accelerates further

Source: Bloomberg

As Deutsche’s Jim Reid notes, we basically saw nearly one incremental 25bps hike priced into the Dec 24 contract over the last week.

Tyler Durden
Mon, 02/22/2021 – 10:05

via ZeroHedge News https://ift.tt/37CEevO Tyler Durden

Supreme Court Hands Trump Monday Losses On Tax Returns, PA Election Challenge

Supreme Court Hands Trump Monday Losses On Tax Returns, PA Election Challenge

The Supreme Court on Monday denied former President Trump’s request to halt the release of tax and other financial records to Manhattan District Attorney Cyrus Vance.

In their ruling, the justices refused to block a subpoena to Trump’s accounting firm, Mazars USA, while he continues to push for a Supreme Court appeal, according to Bloomberg.

The high court had deferred acting in the case for more than three months, waiting until Trump again became a private citizen to take a step that could boost Manhattan District Attorney Cyrus Vance’s probe. Vance’s investigators have already gotten hold of some of the tax records from other sources, according to people familiar with the matter. The investigation looms as one of the biggest legal threats to Trump, though its exact parameters are unclear. – Bloomberg

In August, Manhattan prosecutors indicated in court filings that they were investigating tax fraud, insurance fraud and falsification of business records. DA Cyrus Vance agreed to hold off on enforcing the subpoena while Trump’s Oct. 13 motion to stay was under consideration by the Supreme Court.

Trump’s challenge to the subpoena – which claims it’s too broad and issued in bad faith – was rejected by two lower courts prior to Monday’s rejection at the Supreme Court. Mazars, meanwhile, isn’t contesting the subpoena and says it will comply with all legal obligations.

While Trump’s tax records will technically be shrouded in grand jury secrecy, Trump’s lawyers told the Supreme Court that he will suffer “irreparable harm” if the materials are turned over, “Even if the disclosure of his papers is limited to prosecutors and grand jurors, the status quo can never be restored once confidentiality is destroyed.

Vance’s office countered, saying that Trump “has had multiple opportunities for review of his constitutional and state law claims, and at this juncture he provides no grounds for further delay,” adding “His request for extraordinary relief should be denied, and the grand jury permitted to do its work.”

The court on Monday also denied Trump’s challenge to the Pennsylvania 2020 election results as moot. Dissenting from the decision were Justices Alito, Gorsuch and Thomas.

The court also formally rejected separate appeals by Trump and his allies seeking to overturn President Biden’s victory. 

Tyler Durden
Mon, 02/22/2021 – 09:49

via ZeroHedge News https://ift.tt/3umCSPG Tyler Durden