My new essay in the Atlantic on the Articles of Impeachment

The Atlantic published my new essay on the two articles of impeachment.

Here is the introduction:

Today the House Judiciary Committee announced two articles of impeachment. The first article alleges that President Donald Trump abused his power by asking the Ukrainian President to publicly announce investigations into his political opponent, Joe Biden, and a “discredited theory” that Ukraine, not Russia, had interfered in the most recent presidential election. The second article charges that President Trump obstructed Congress by refusing to comply with impeachment-related subpoenas. In opting for these two offenses—and in excluding three others that had all been plausible—House Democrats have narrowed their charges to the allegations that are the easiest to see, if you see the world, and this presidency, as they do.

Here is the conclusion, which addresses some of the issues Orin raised in his earlier post.

The Senate is heading into uncharted territory. Once articles of impeachment are completely decoupled from any clearly-articulated offenses, the burden of charging a president with “abuse of power” is significantly reduced. Moreover, any president who refuses to comply with what he sees as an improper investigation can be charged with “obstruction of Congress.” This one-two punch can be drafted with far greater ease than were the articles of impeachment presented against Presidents Andrew Johnson, Richard Nixon, or Bill Clinton.

Without question, Congress can convict a president for conduct that is not criminal. This process is not bound by the strictures of the United States Code. Moreover, Congress can begin impeachment proceedings for conduct that is inconsistent with the president’s duty to faithfully execute the laws. This inquiry, though subjective, is a necessary feature of the American constitutional order. But the predicates of the Trump articles will set a dangerous precedent, as impeachment might become—regrettably—a common, quadrennial feature of our polity.

I hope to have much more to say about these issues in due course.

 

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Three Major Imbalances – Financial, Trust and Geopolitical

But greed is a bottomless pit
And our freedom’s a joke
We’re just taking a piss
And the whole world must watch the sad comic display
If you’re still free start running away
Cause we’re coming for you!

– Conor Oberst, “Land Locked Blues”

It’s hard to believe 2020 is just around the corner. If the last ten years have taught us anything, it’s the extent to which a vicious and corrupt oligarchy will go to further extend and entrench their economic and societal interests. Although the myriad desperate actions undertaken by the ruling class this past decade have managed to sustain the current paradigm a bit longer, it has not come without cost and major long-term consequence. Gigantic imbalances across multiple areas have been created and worsened, and the resolution of these in the years ahead (2020-2025) will shape the future for decades to come. I want to discuss three of them today, the financial system imbalance, the trust imbalance and the geopolitical imbalance.

Recent posts have focused on how what really matters in a crisis is not the event itself, but the response to it. The financial crisis of ten years ago is particularly instructive, as the entire institutional response to a widespread financial industry crime spree was to focus on saving a failed system and then pretending nothing happened. The public was given no time or space to debate whether the system needed saving; or more specifically, which parts needed saving, which parts needed wholesale restructuring and which parts should’ve been thrown into the dustbin. Rather, unelected central bankers stepped in with trillions in order to prop up, empower and reward the very industry and individuals that created the crisis to begin with. There was no real public debate, central bankers just did whatever they wanted. It was a moment so brazen and disturbing it shook many of us, including myself, out of a lifetime of propaganda induced deception.

continue reading

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Schiff Blew It – Support For Impeachment Peaked In October

Schiff Blew It – Support For Impeachment Peaked In October

Authored by Mike Shedlock via MishTalk,

Support for impeachment, regardless of political affiliation, peaked in October.

For a Brief Moment

Polls courtesy of FiveThirtyEight, anecdotes mine.

Partisan Brawl

The New York Times reports With White House Absent, Impeachment Devolves Into Partisan Brawl.

President Trump is refusing to engage and Democrats have concluded they will press ahead anyway, rendering a historic undertaking little more than a foregone conclusion.

Excuse me for pointing out the result was a foregone conclusion whether the White House was present or not.

“That is a tragedy,” said Philip Bobbitt, a Columbia University law professor and a leading expert on the history of impeachment. The framers of the Constitution were careful to design a process for removing a president from office that they hoped would rise above the nation’s petty political squabbles, he said.

Tragedy?

Yes, witch hunts are a tragedy. Republicans found that out when they foolishly went after Bill Clinton.

Boycott the Process

Neal Katyal, the former acting solicitor general under President Barack Obama, called it “deeply dangerous” for the target of an impeachment like Mr. Trump to simply boycott the entire process.

Does the law prohibit a boycott? Does the law require the president to testify against himself? Is it dangerous to accept the advice of legal council?

Rule Book

“The fact is that the House Democrats are essentially giving Trump the same process as previous presidents have received, and it’s Trump who is trying to throw out the rule book” and attack the process at every turn, he said. “Our founders put impeachment in the Constitution as a critical safeguard for the people, and what Trump is trying to do with these baseless attacks is read the impeachment clauses out of the Constitution.”

His response has been an all-out attack on the process itself. He has ordered administration officials not to testify or hand over documents. And he is urging Republicans not to cooperate with their counterparts the way they did during Mr. Clinton’s impeachment.

Excuse me for pointing out that the law is the rule book.

What law has trump violated by boycotting the process?

Shocking?

Of course it is.

Trump continually followed the advice of legal council instead of sticking his foot in his mouth and Tweeting about it.

Quite shocking.

Hijacking the Committee

Here’s an interesting take.

Business Insider reports Republicans Hijacked the House Judiciary Committee’s Impeachment Hearings and Turned them Into a Circus.

I expect better from the Business Insider than that kind of mushy nonsense.

The only way Republicans could “hijack” the hearings is if inept Democrats called on inept witnesses and Republican made them look like fools.

That is precisely what happened.

Democrat Impeachment Star Witnesses Useful as Dust

In case you missed it, please consider Democrat Impeachment Star Witnesses Useful as Dust

Click on that link for an amusing video and transcript.

Comments on the Unreal World

Back in the real world, or do I mean unreal world, I get accused of having TDS every time I attack Trump’s idiotic trade policy.

I also get accused of being an extreme Left-Wing nutcase when I defend Trump.

The fact is, I don’t like Trump but I voted for him and would again vs Hillary.

I am a staunch anti-war, fiscal conservative, Libertarian, who does not give a damn about anyone’s race, religion, sex, or age. I believe in equal rights. I also believe in the right to choose. If two women or two men want to get married, I believe it’s none of my business.

I believe that’s a winning platform.

Alas, one cannot get nominated on that platform. Thus, I always have extreme voting compromises to make.

Independents the Key

The 2020 election will depend on independents.

Democrats may make the choice easy, as explained in How to Re-Elect Trump in One Easy Lesson.


Tyler Durden

Tue, 12/10/2019 – 12:55

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Exxon Mobil Prevails Over “Politically-Biased” New York AG In Major Climate-Change Case

Exxon Mobil Prevails Over “Politically-Biased” New York AG In Major Climate-Change Case

Exxon Mobil has triumphed over New York State and its crusading Attorney General Letitia James in the largest climate-change-related case ever brought against a major energy company in the US.

That Exxon Mobil prevailed is hardly a surprise. Rather than being inspired by investors with genuine complaints, the case was tainted by politics from the beginning. It was brought by New York State’s crusading Attorney Generals, Barbara Underwood and her successor, Letitia James (the current New York State AG), centrist Democrats clearly hoping to punish one of the world’s largest energy companies for purportedly suppressing and misconstruing research about the environmental impact of fossil fuels. Unfortunately, the Manhattan judge who handed down the ruling must have missed Greta Thunberg’s UN speech.

When the case was filed in October of last year, the AG’s office had already been investigating the energy giant for nearly four years. Perhaps James’s office believed they had simply invested too many resources and too much time into the case to let Exxon Mobil walk.

The lawsuit alleged that Exxon Mobil was responsible for $1.6 billion in investor losses by lying to them about the impact of future climate change regulation on its business. Specifically, the company was accused of fabricated a “proxy cost” metric upon which Exxon Mobil based its projections, Reuters reports.

First of all, these “projections” are merely that – estimates, informed guesswork at best. Even these “proxy cost” figures probably won’t be exactly accurate. But the AG’s office thought it had evidence that the company had crossed a legal line by distributing one set of numbers, while using another “more conservative” set of forecasts internally.

By the last day of the trial, it had become clear that the AG’s case was crumbling. During closing their closing statement, the AG dropped the two most damning of four charges without explanation – these were the charges claiming that Exxon’s misstatements were part of a deliberate scheme to mislead investors, and that the data were critical to investors’ decision-making when deciding whether to buy ExxonMobil stock (we’re not lawyers, but having purchased securities before, we can say with some authority that these seems extremely doubtful).

After those charges were dropped, the judge in the case, New York Supreme Court Justice Barry Ostrager, was left to decide whether Exxon had violated New York State’s Martin Act by issuing public statements (in this case, disclosures of the “proxy costs”) that were misleading. Clearly, the judge disagreed.

Here’s a summary of the judge’s comments courtesy of Bloomberg.

“The office of the Attorney General failed to prove, by a preponderance of the evidence, that ExxonMobil made any material misstatements or omissions about its practices and procedures that misled any reasonable investor,” Ostrager wrote in a 55-page ruling. James “produced no testimony either from any investor who claimed to have been misled by any disclosure,” while the company disclosed its use of both the proxy cost and the greenhouse gas metrics no later than 2014, the judge said.

On Oct. 30, former Exxon CEO Rex Tillerson took the stand (many might not remember this; it was easily overshadowed by the latest Brexit deadline delay and the media circus on Capitol Hill). During his testimony, Tillerson alleged that the case was politically motivated, and that the AG’s office was deliberately misleading Exxon Mobil’s intentions. But it shouldn’t take a CEO to understand what’s happening here. Anybody with a background in corporate strategy or finance would probably find the notion that developing a range of internal-only projections is illegal to be disturbing. It’s a widely used practice.

As we’ve mentioned in the past, though it’s commonly applied to insider-trading cheats and embezzlers, ‘securities fraud’ is, in reality, much more vague: Any kind of corporate wrongdoing – or even normal behavior – can be construed as securities fraud if it wasn’t explicitly disclosed to investors.

Read the judge’s 55-page ruling below:

Decision by Zerohedge on Scribd


Tyler Durden

Tue, 12/10/2019 – 12:40

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Investment Grade Credit Faces Party Hangover In 2020

Investment Grade Credit Faces Party Hangover In 2020

Authored by Bloomberg macro commentator, Sebastian Boyd

Rising corporate leverage will shut down the investment-grade credit party in 2020 after posting a whopping 14% return in 2019. Making money in this space was easy after the 4Q 2018 sell-off and the Fed’s dovish shift at the start of January. Next year will be a very different story.

At the end of 3Q, the spread on the Bloomberg Barclays U.S. Corporate index was 115 bps, or 53 bps per median turn of leverage for the non-financial borrowers in it. That’s the lowest in 10 years. Muted expectations for corporate earnings suggest companies may struggle to deleverage.

Spreads haven’t returned to the lows they reached in 2018, but investment-grade yields tumbled. The last time they fell as steeply as they did this year was in 2009 and 2010, just after the Lehman Brothers bankruptcy.

Modified duration in the Bloomberg Barclays index is the highest since the late 1970s, and convexity is the highest in at least two decades. That’s a result of falling coupons and lower yields, and taken together it means high-grade debt is very sensitive to shifts in Treasury yields.

The amount of U.S. corporate bonds maturing in the next 12 months is greater than at any point since 2017, according to the Bloomberg Barclays Short Term U.S. Corporate index — 97% of which is due in a year or less. Supply based on refinancing isn’t necessarily bad news for bondholders, except that it will likely come with lower yields.

While there has been spread decompression in high yield, we haven’t seen the same in investment grade. The gap between BBB and AA spreads is in line with the three-year average. But that’s not necessarily a good thing, since the last three years have been a time of exuberance and spread compression.

On the other hand, the flow story remains solid. In these days of low yields and rising risk, investment- grade credit appeals. Taiwanese life insurers are big buyers of Yankee bonds and are likely to remain a source of demand unless the Taiwan dollar significantly appreciates versus the greenback.

Despite rising leverage among investment-grade companies, cash flow has improved and credit-raters are being generous. The ratio of upgrades to downgrades has risen in recent quarters, which is hard to correlate with either growth or leverage.

The famous BBB time bomb hasn’t blown up yet. There are reasons to think it might not explode at all, helped by the benign attitude of ratings firms. The chart below shows how the leverage of companies currently rated BBB has been rising. A number of those were downgraded to BBB specifically because of rising leverage, so the picture may not be as bad as it looks. But what it does suggest is that those companies haven’t been deleveraging.

The BBB index paid 62 bps per median turn of leverage at the end of 3Q. That’s low historically but pretty much in line with where it has been since 2Q 2017. You’re not getting paid enough to own that risk, but you haven’t been for a while. On the other hand, the widening of BBBs versus BBs means the higher-grade bonds appear relatively cheap.

Taken together, it’s clear that the story of high-grade debt next year will be told through deleveraging. Yields tumbled in 2019, which helped spur a great year for investors, and borrowing likely will remain relatively cheap in 2020. Some will be able to profit from that. But leverage levels are elevated — and it doesn’t look like companies will have the cash to substantially reduce their debt loads. Without a substantial deleveraging push, it’s hard to see what would enable the market to sustain it’s high.


Tyler Durden

Tue, 12/10/2019 – 12:25

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“It’s About To Get Very Bad” – Repo Market Legend Predicts Market Crash In Days

“It’s About To Get Very Bad” – Repo Market Legend Predicts Market Crash In Days

For the past decade, the name of Zoltan Pozsar has been among the most admired and respected on Wall Street: not only did the Hungarian lay the groundwork for our current understanding of the deposit-free shadow banking system – which has the often opaque and painfully complex short-term dollar funding and repo markets – at its core…

… but he was also instrumental during his tenure at both the US Treasury and the New York Fed in laying the foundations of the modern repo market, orchestrating the response to the global financial crisis and the ensuing policy debate (as virtually nobody at the Fed knew more about repo at the time than Pozsar), served as point person on market developments for Fed, Treasury and White House officials throughout the crisis (yes, Kashkari was just the figurehead); played the key role in building the TALF to backstop the ABS market, and advising the former head of the Fed’s Markets Desk, Brian Sack, on just how the NY Fed should implement its various market interventions without disrupting and breaking the most important market of all: the multi-trillion repo market.

In short, when Pozsar speaks (or as the case more often is, writes), people listen… and read.

And since Pozsar moved from the public sector to Credit Suisse in February 2015 to write his market moving (at least for those who can understand it) periodical, “Global Money Notes”, it has been relatively easy to keep track of his thoughts and observations on the repo market as they change over time.

Which brings us to his latest Global Money Notes, #26, published overnight, and in which Pozsar delivers his scathing assessment of the Fed’s latest intervention to stabilize repo markets since the September 16 repocalypse, that sent overnight repo rates as high as 10% in what was previously seen as an impossible event. Of course, as we saw three months ago, not only was the event possible, but it led to a shockwave of confusion as to what caused it, prompting even the BIS to chime in over the weekend with a fascinating theory, discussed previously, that hedge funds were among the causes for the repo fireworks as they scrambled to procure funding to prevent their massively levered relative value trades in which they bought TSYs and sold ‘equivalent’ derivatives contracts, from collapsing.

While Pozsar does not focus as much on the causes of the repocalypse, having previously covered them in depth in his prior Money Notes (and he would know: as noted above, Pozsar is the de facto architect of the modern US repo system), what he does do in his latest note, titled ominously “Countdown to QE4” is explain why the Fed’s interventions to date have failed to reverse the underlying plumbing issues in the banking system, manifesting themselves in a dramatic increase in Treasurys at the biggest US bank, JPMorgan…

… offset by a decline in reserves, i.e. cash…

… at the largest US banks, something we addressed previously when we discussed how JPMorgan gamed the financial system to trigger “NOT QE”, and a topic that Bloomberg touches on overnight in “Repo Firepower Reduced by Falling Cash Levels at Big U.S. Banks.”

As Pozsar cautions, the core problem at the heart of the repo blockage is that as banks shifted from owning reserves to collateral (mostly Treasuries), for reasons we will address shortly, large U.S. banks like J.P. Morgan that are central to year-end flows spent some $350 billion of excess reserves on collateral since the beginning of the Fed’s balance sheet taper, leaving banks (and especially JPMorgan) dangerously low on reserves.

And while one can debate why banks shifted away from reserves to “collateral”, Pozsar has a simple theory: “dealers and banks loaded up on collateral as a trade – a trade they were supposed to be taken out of by eventual coupon purchases by the Fed.” In other words, here is a former Fed official admitting that banks were purchasing Treasuries as nothing more than a QE frontrunning ploy, something which the Fed has previously sworn was never the intention behind QE. After all, if it emerges that the Fed is essentially facilitating taxpayer-funded and perfectly legal frontrunning, making bank execs even richer in the process, the US central bank would have even fewer fans. And yet, here is arguably the most respected ex-Fed staffer explaining that one of the core roles of QE is just that.

Alas, here a problem emerged, because “the Fed never did that, and for the first time we’re heading into a year-end turn without any excess reserves.”

Indeed, instead of buying coupon bonds as Dealers have been quietly demanding behind close doors, a process which would allow them to sterilize their massive Treasury holdings, the Fed announced in October it would only buy T-Bills in order to not freak out the market that it is officially launching QE 4 (as a reminder, the only semantic distinction between whether the Fed is doing QE or not doing QE is whether it is soaking up duration; the Fed’s argument is that since Bills don’t have duration, it’s not QE. However once Powell starts buying 2Y, 3Y, 5Y and so on Treasuriess, the facade cracks and the Fed will have no more defense that what it is doing is precisely QE 4). And by buying Bills, it is not allowing commercial banks to exchange their coupon holdings for reserves (cash), but merely results in recirculation of sterilized Bill purchases.

Now most people don’t understand this, and instead repeat the old maxim “don’t fight the Fed” which they claim is adding liquidity through repos and bill purchases, and what’s not in the system now will be there on year-end, and the turn will be just fine.

Only as Pozsar says “Not so fast!” and explains:

What we need for the [year-end] turn to go well are balance sheet neutral repo operations, or asset purchases aimed at what dealers bought all year: coupons, not bills – the former to get around foreign banks’ balance sheet constraints around year-end, and the latter to ensure that excess reserves accumulate with large banks like J.P. Morgan. Unfortunately, the Fed is doing neither.

He goes on:

Repo operations are done through the tri-party system which means they aren’t nettable, which in turn means that once balance sheet constraints start to bind around year-end, foreign dealers will take less liquidity from it to lend it to those in need on the periphery: central bank liquidity is useless unless primary dealers have balance sheet to pass it on, and that they’ve been passing it on since September does not mean they will at year-end.

Bill purchases are also ill conceived because banks and dealers don’t own any bills and so don’t have anything to sell to the Fed to boost their excess reserves ahead of year-end. In our view, the notion that bill purchases will force money funds down the yield curve to buy short coupons from primary dealers who would then pay off their repos with banks so that banks build up some excess reserves into year-end involves too many moving parts

Which brings us to the first of the key observations made by Pozsar: since the Fed’s repos and T-Bill monetizations have done virtually nothing to boost prevailing reserve levels on a sustained basis, “year-end balance sheet constrains will preclude primary dealers from bidding for reserves from the Fed through the repo facility or through repos from money funds. The slope of money market curves suggest that excess reserves won’t build up at banks, and so U.S. banks will not be able to fill the market making vacuum left by foreign banks.”

In other words, the already thin liquidity at year end (which as a reminder, last December 31 sent repo rates soaring even though excess reserves were about $100 billion more than they are now) could get far worse as a result of the Fed’s inability to properly address the reserves (cash) shortage plaguing banks.

There is another reason why year-end liquidity is likely to get far worse, and it has to do with bank year-end G-SIB surcharges imposed by regulators on US banks on the last day of the quarter and year. As we discussed two weeks ago,  and as Pozsar explains, “running low on excess reserves is only one factor that determines how bad the vacuum
in market making can get around year-end turns. G-SIB scores are the other, as they determine what banks can do with whatever excess reserves they have at year-end: lend them through repos, spend them on Treasuries, or lend them through FX swaps, – in that specific order as repos are less punitive for banks’ G-SIB score than FX swaps.”

We previously provided a simple schematic of how bank G-SIB scores are calculated in the following chart…

… but the bottom line is the following: banks seek as low as GSIB score as possible at year end to minimize their period end surcharge:

As Pozsar further notes, “U.S. banks are particularly sensitive to their G-SIB scores this year, as they all moved up to a higher surcharge bucket due to bigger Treasury holdings and a heavier repo footprint: every U.S. bank except Morgan Stanley has an incentive to shrink its score into year-end.

It is here that a unique paradox emerges: the highest stock prices rise, the higher the implied score (a negative). Some more observations from the repo guru:

G-SIB scores are a moving target as they are influenced by markets. The themes pushing G-SIB scores in the wrong direction this year are the equity market rally and the flat curve:

(1) the rally in equities is inflating scores through G-SIBs’ market capitalization and the value of equities G-SIBs hold as trading assets or available for sale securities;
(2) the flat yield curve is inflating scores through G-SIBs’ bloated Treasury portfolios, which, given auction supply and the equities rally, may grow further into year-end.

While G-SIBs can’t do a thing about the equity market, and, as the largest primary dealers, they also can’t not take down more Treasuries at auctions if there are insufficient bids; but they can do two things to offset some of the factors that are pushing their scores up:

  1. collateral upgrades where they repo equities out to raise some excess reserves, or repo or outright sell some of their Treasuries to raise some excess reserves.
  2. clamping down on market making in the FX swap or sponsored repo markets whereby they’d add to the vacuum in market making triggered by foreign banks

Which brings us to the other key year-end dynamic: when G-SIB scores are too high and banks need to reduce them, they do so by swapping assets for excess reserves. In other words, when banks hold lots of excess reserves their G-SIB scores are relatively low and they have room to lend their excess reserves through repos and FX swaps, and conversely, when banks are low on excess reserves their G-SIB scores are high and that may force them to clamp down on market making.

Well, as we know from the discussion in the first part above, bank excess reserves have collapsed and as a result G-SIB scores are high, “and banks are lowering their scores by swapping assets for reserves to scrape together some excess reserves ahead of the year-end turn – and those scraps are all U.S. banks will have to lend into the market making vacuum left by foreign banks around year-end.”

In the best case scenario envisioned by Pozsar, bank will lend mostly via repos and not FX swaps given their G-SIB scores. “But these flows will be scraps of excess reserves, not bursts.”

As for the worst case scenario, it is one where “collateral upgrades aren’t sufficient and U.S. banks stop making markets in FX swaps and so exacerbate the vacuum triggered by foreign banks.” 

Which brings us to the first of Pozsar’s ominous conclusion: “We are on track to realize the worst case scenario, and the market doesn’t price for that.”

Here, Pozsar offers a brief detour offering some practical observations as we enter the year-end period, in which he notes that “according to our conversations with market participants, U.S. G-SIBs rely heavily on Canadian pensions for equity upgrades to accumulate some excess reserves for the turn. Furthermore, some large U.S. banks are selling Treasuries to lower their G-SIB scores and scrape together some excess reserves to harvest higher repo rates over year-end.”

Finally, and most shockingly, the Credit Suisse strategist writes that “at least one large U.S. bank appears to be pricing some of its FX swaps trades such that it misses those trades – a polite way of clamping down market making activities.”

Here some readers may have a “lightbulb” moment because what Pozsar just described is that “at least one large US bank” appears to be gearing for a collapse in the FX swap market, with a very specific intention: to force a market crisis in the coming days and force the Fed to launch full blown QE 4, not just a monetization of T-Bills.

More on that momentarily.

But first, some more observations from Pozsar on how a year-end crisis may play out: “if markets won’t let G-SIBs reduce their scores, G-SIBs will retort to scale back market making, like the one U.S. bank that’s already pricing FX swap trades to miss them. We do not see the pressure from this in FX swap markets yet as foreign banks still have balance sheet to pick up the slack, but pressures will come as we get closer to year-end.”

Pozsar’s point is that the realized year-end turn in FX swap markets “will be worse than what is priced by the market regardless of whether we end up in the best case or worst case scenario.”

This literally means that no matter what the market does from now until year end, there is simply not enough cash and/or liquidity to allow the plumbing of the market to cross into 2020 without a crisis, or as Pozsar puts it, “in our view, the FX swap market is expecting too much similarity between the current year-end turn to last year’s turn. That’s a mistake as last year’s dynamics were different” for the following reasons:

  1. large U.S. banks still had excess reserves to lend, but this year they do not; and
  2. they got a G-SIB relief from a 20% fall in equities, but this year end they do not

One other key difference from the brief meltup in repo rates last year end: back then, lower G-SIB scores allowed large U.S. banks to spend their hoards of excess reserves on more complex trades like FX swaps, and the year-end turn went down as a non-event – in FX swaps, but not repos. Recall that repo printed at 6.5% on December 31st spot.

This year, Zoltan warns,  may be the opposite, as higher G-SIB scores will favor repos over FX swaps when deploying excess reserves, but while FX swaps will be a disaster, repos may still print as bad as last year-end. As for FX swaps, well we’ll leave Pozsar to explain what may happen there:

“FX swaps could end up as the orphaned asset class without an obvious backstop, and that may force banks in some parts of the world to the edge of the proverbial abyss

As a reminder, this dire warning comes from the man who probably knows the nuances of the US repo market better than anyone else in the world.

But wait, there’s more.

Recall that in its BIS’s recent take on the fireworks in the repo market, the central banks’ central bank pointed the finger at massively levered hedge funds engaging in Treasury relative value trades (think of these as a modern twist on the LTCM trade) as the catalyst for the Sept 16 repo explosion,

“High demand for secured (repo) funding from non-financial institutions, such as hedge funds heavily engaged in leveraging up relative value trades,” was a key factor behind the chaos, said Claudio Borio, head of the monetary and economic department at the BIS.

The BIS’s finding was novel, and surprising, as it highlighted the “growing clout of hedge funds in the repo market” echoing notes something we pointed out one year ago: hedge funds such as Millennium, Citadel and Point 72 are not only active in the repo market, they are also the most heavily leveraged multi-strat funds in the world, taking something like $20-$30 billion and levering it up to $200 billion. They achieve said leverage using repo.

And, as we further discussed, the hedge fund strategy in question involves buying US Treasuries while selling equivalent derivatives contracts, such as interest rate futures, and pocketing the arb, or difference in price between the two. While on its own this trade is not very profitable, given the close relationship in price between the two sides of the trade. But as LTCM knows too well, that’s what leverage is for. Lots and lots and lots of leverage.

We took this detour into how repo affects the hedge fund world, because Pozsar had a rather gloomy prediction about the fate of hedge funds should his dismal forecast materialize. As he writes, “the relative value (RV) hedge fund community is certain that they will have balance sheet to fund their bond basis trades at reasonable rates over the year-end turn. Why?

“Because we have locked up forward settling sponsored repos with dealers over the turn, and market making in sponsored repos is less likely to be scaled back than in FX swaps.”

Well, not so fast:

Forward settling sponsored repos are meant to substitute for the balance sheet that the RV hedge funds will lose from foreign banks around year-end, but their risk is that RV hedge funds don’t know the rate at which they’ll get balance sheet at year-end – forward settling sponsored repos only lock in balance sheet capacity, but not the rate and with all due respect, RV funds are ignoring the incentives of repo dealers.

Fast forwarding to the punchline, the problem is that without having intelligence about the balance between forward settling sponsored repos and banks’ progress to scrape together excess reserves to fund those forward repos, Pozsar warns that relative value funds “don’t know where the rate on their forward settling sponsored repos will print. And given that there are no signs of excess reserves accumulating into year-end, it is likely that the RV community will be taxed excessively to get over the year-end turn.

The bolded means that massively levered hedge funds may be in for a shock in the coming days, as bank sponsors are woefully low on the reserves that the hedge funds need to perpetuate their RV trades (and leverage) into the new year.

This, too, is a problem. Here’s why:

As the excess reserves missing from bank portfolios will be filled by a small cadre of primary dealers that do not have balance sheet constraints and they’ll fill the hole and keep a lid on repo rates. Sure, let’s assume for a moment that those primary dealers that are not subject to Basel III – Amherst Pierpont Securities LLC, Cantor Fitzgerald & Co. and Jefferies LLC – and three Canadian dealers whose year-end was on October 31st – the Bank of Nova Scotia, BMO Capital Markets Corp. and TD Securities (USA) LLC – will save the day by borrowing enough from the Fed to bridge your needs in repo markets.”

Pozsar’s snarky conclusion to this? “Maybe, maybe not.” We’ll take the latter.

Putting all of the above together, and for those unfamiliar with the nuances of the repo market this summary may be a critical catch up, the risk to the “benign and optimistic view” currently prevailing among market participants, is mostly as related to the FX swap market: given that i) excess reserves are gone and ii) the G-SIB scores bind, “the FX swap market, unlike last year-end, may end up without a lender of next-to-last resort, and so it will likely trade at implied rates far worse than anything that we’ve seen in recent year-end turns.”

If that will indeed be the case, Pozsar envisions a last few weeks of the years in which the handful of Canadian dealers you expect to lend to you to fund your bond basis trades, will instead lend in the FX swap market instead “and you’ll end up short… and you may end up as a forced seller of Treasuries.”

What is even more stunning is that banks themselves may have an incentive to cause this lock up in the FX swaps market: Pozsar’s overarching point is that “a dealer is a hedge fund’s enabler, not its friend, and dealers that co-exist with large bank operating subsidiaries have an incentive to introduce imbalances the repo market to boost the value of their banks’ excess reserves, and dealers that have the balance sheet to take liquidity from the Fed’s repo operations will not necessarily do repos with RV hedge funds if FX swaps offer a much better value.

* * *

With us so far? Good, because we are finally getting to the punchline.

In this dystopian world described by Pozsar, in which banks have too much “collateral” (Treasuriess) on their books, and not enough “reserves” (cash), where big commercial banks are unable to lend out to the rest of the banking system as they themselves don’t have enough reserves, and where there will be an added pressure to boost reserves in the last days before Dec 31, Pozsar’s big picture conclusion is that “the safe asset – U.S. Treasuries – is being funded o/n and therefore it depends on balance sheet to be held and printed. Balance sheet for the safe asset isn’t guaranteed around year-end and if balance sheet won’t be there, the safe asset will go on sale.”

Translated: “Treasury yields will spike”, Pozsar warns,  identifying the trigger of forced sales of Treasuries around year-end as the FX swap market. It gets worse, because the selloff that is triggered by a freeze in the FX swap market will promptly lead to a crash in the bonds market, and spread from there, or as Pozsar puts it, “these funding market stresses will likely pull away capital and hence balance sheet from equity long-short strategies which could spill over into a broader equity selloff… during a Treasury selloff – that’s not the right kind of risk parity Christmas.

Which brings us to punchline #1: the dismal liquidity situation within the US commercial bank sector is so dire, that the shortage of reserves will start a cascade of liquidations beginning in the FX swap market, progressing to Treasurys, and culminating in stocks… and a full-blown market crash.

When these pressures will show up and how long they will last is the last big question asked by Pozsar and as he answers, “here it’s hard to have a definitive answer: it depends. It depends on how equities do, which depends on the trade deal and other random tweets. It depends on how auctions go, which depends on the equity market and the curve slope relative to actual funding costs.”

One especially ironic development is that higher stock prices in the coming weeks will only make the matter worse! “If the equity market rallies and auctions go poorly, G-SIB scores will keep going higher and the risk that funding market pressures from managing G-SIB scores will show up starting the last two weeks of the year and will last longer than just the spot turn are rising.

Said otherwise, the dire warning from arguably the top expert on the repo market is that the adverse cascade will begin in the last two weeks of the year meaning that… traders have about a few days to take preventative measures.

That said, there is one potential “out” – the Fed steps in.

Just in case anyone still has a rosy outlook on what the next three weeks may bring, Pozsar repeats his devastating conclusion: “Year-end in the FX swap market is thus shaping up to be the worst in recent memory, and the markets are not pricing any of this. Prices don’t seem to discount the facts that excess reserves are gone and the Fed’s operations still have not added any, and that G-SIB scores are binding and risk large U.S. banks clamping down on market making.”

Worse, another prevailing consensus idea is that the Fed will not cut one more time in December “to deliver slope in the money market curve so that reserves from bill purchases flow up to banks… or that the Fed will actively encourage the use of FX swap lines around year-end to get around G-SIB bottlenecks; or that the Fed will start buying coupons from dealers to inject excess reserves in a balance sheet neutral and G-SIB score-reducing manner.”

What Pozsar is stating in not so many words, is that as has happened on every other previous occasion, the Fed will have no choice but to intervene to reverse the coming crash, only this time with its ammo severely limited, there is just one thing that Fed can do, or as Pozsar says, “something will have to give and the turn has to get very bad before something gives.”

But will things get “very bad”? Well, if Pozsar is right and the Fed loses control over the overnight rate complex, yes, they will, and as we tweeted some practical advice yesterday…

… The question then is what will the Fed do. Here is Pozsar’s answer: “If we are right and the Fed loses control over the o/n rates complex going into year-end – not just around the spot turn but the weeks leading up to it – what else can the Fed do?”

  1. encourage foreign central banks to use of the FX swap lines;
  2. start QE4 by switching from buying bills to buying coupons;

Of the two options, Pozsar believes #2, the Fed launching QE4 (in the next fed days), would be the proper decision:

QE4 would help through the backdoor: by reversing the mistake of balance sheet taper. QE4 would mean buying back from dealers and banks the Treasuries they were forced to buy during balance sheet taper and giving back the reserves they gave up in the process.

QE4 would re-liquefy HQLA portfolios by trading Treasuries for excess reserves: the excess reserves that were always needed to get through to year-ends seamlessly, and which the system’s liquidity profile and U.S. banks G-SIB scores need desperately.

QE4 would re-fill the “Bakken Shale” in an instant: as primary dealers stuck with Treasuries would pay off their repos with J.P Morgan, and that would bring us back to the natural state of the token system, that is, a state, where the distribution of excess reserves is uneven once again, and where J.P. Morgan is the system’s lender of next-to-last resort once again.

That said, as Pozsar concedes in his conclusion “QE4 – as much as it makes sense – won’t happen unless the Fed’s hands are forced.” By which he means there has to be a market crash for the Fed to do the one thing that can alleviate the banks’ terminal reserve problem.

The Credit Suisse strategist admits as much:

“not responding to potential stresses in the FX swap market with the swap lines, may be what forces the Fed’s hands. If it will take the swap lines to help RV hedge funds to roll their positions without the risk of fire sales, not encouraging their use preemptively can lead to fire sales where QE4 goes live as a clean-up “operation” with the Fed buying what the RV funds are forced to sell – and what they could have bought from dealers under normal circumstances as dealers have been politely asking the Fed since September, just like they were asking for a repo facility before that – and we know how that ended…”

In conclusion all we can say here is that 11 years ago, on September 5, 2008, ten days before Lehman filed, there were massive marketwide repo problems (recall the repo market froze in Sept 2008 and only a multi-trillion bailout by the world’s central banks prevented civilization collapse) and almost nobody understood them… with one exception: Citi’s Matt King did and he laid out all the problems in his iconic Sept 5, 2008, piece “Are the Brokers Broken” in which he predicted the collapse of Lehman. Ten days later he was right. Will Zoltan Pozsar be this generation’s Matt King?

Pozsar’s full “Countdown To QE4″ can be read here.


Tyler Durden

Tue, 12/10/2019 – 12:09

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“We Totally Failed As A Business”: Unicorn Scooter Impales Investors After Company Goes Hooves-Up

“We Totally Failed As A Business”: Unicorn Scooter Impales Investors After Company Goes Hooves-Up

It was a stupid idea at a terrible time; startup company Unicorn thought they could convince people to spend $699 on an electric scooter – as opposed to simply paying a few bucks each time they use one of the ubiquitous e-scooters littering cities across the country.

After blowing all the cash they raised from investors and pre-orders on Facebook and Google ads, CEO Nick Evans said in an email that the company had “totally failed as a business” and would “spread the cost of this failure to you, the early customers that believed in us.”

In total, the company received just 350 pre-orders for the glossy white e-scooters, according to The Verge. And nobody is getting a refund, as “we are completely out of funding.”

Unicorn emerged six months ago as part of a new crop of scooter startups hoping to capitalize on the popularity of dockless rental services like Bird and Lime, while also pitching itself as an affordable alternative to shared scooters. In addition to having a striking profile — the all-white look was really something — the scooter was loaded with a lot of high-tech bells and whistles, like GPS tracking and smartphone-enabled locking. Naturally it included integration with Tile, Evans’ other company, which uses Bluetooth to track lost items, like a wallet, keys, or phone. –The Verge

Evans’ email reads;

We could have continued moving forward and taking more orders and that would continue to fund the business, and if we did that might have been able to deliver the product, but we also may have not been able to sell enough Unicorns, so by doing that we would be risking more people’s orders. So we made the very, very difficult decision to stop.

A large portion of the revenue went toward paying for Facebook ads to bring traffic to the site. A portion also went to our manufacturer in the form of a down payment to build the scooters, but unfortunately that down payment cannot be redeemed for a portion of the scooters that we were planning to order.

Unfortunately, the cost of the ads were just too expensive to build a sustainable business. And as the weather continued to get colder throughout the US and more scooters from other companies came on to the market, it became harder and harder to sell Unicorns, leading to a higher cost for ads and fewer customers.

“We are so, so very sorry,” Evans concludes.

Not good enough, say some investors.

“I am upset he basically robbed everyone of his customers and is closing without delivering any scooters,” wrote hopeful customer Rebecca Buchholtz to The Verge. “This was my daughters Christmas gift and now I cannot get her any gift.”

“I find it shocking that someone like Nick Evans who has name recognition and clout in the tech community due to Tile, would operate in such a fraudulent way,” wrote customer Matt Furhman, who said he’s lost $998 after placing pre-orders for two scooters. He calls Evans a “thief.”

Customers are advised to contact their credit card companies and dispute the charges from Unicorn.

In an email to The Verge, Evans said the company had received only around 350 orders. “I feel horribly guilty that we left people with no scooters and no refunds,” he said. “We are working on something, but, yes, this seems unlikely.” -The Verge

Unicorn is far from alone when it comes to e-scooter fails. Santa Cruz-based Inboard Technology is currently liquidating its assets and IP after trying their hand at electric scooters – laying off all 24 of their employees.


Tyler Durden

Tue, 12/10/2019 – 11:44

via ZeroHedge News https://ift.tt/2Yz39e2 Tyler Durden

Seattle Public Library “Considering” Whether to Cancel Meeting of Trans-Skeptical Feminist Group

The Seattle Times (Crystal Paul) reports:

Community members including transgender locals and trans allies have inundated the Seattle Public Library with calls and emails, asking the library system to cancel an upcoming event hosted by the Women’s Liberation Front— a self-described “radical feminist organization” that has publicly espoused what critics call anti-trans views.

The group’s event, titled “Fighting the New Misogyny: A Feminist Critique of Gender Identity,” is publicized as “a critical analysis of gender identity” that will “make powerful arguments for sex-based women’s rights,” according to the event page. The event, scheduled to be held Feb. 1 in the Microsoft Auditorium at the Seattle Public Library – Central Branch, has placed the library at the center of a firestorm over how it can maintain its commitment to evolving ideas of intellectual freedom, provide access to information for the entire community, and be an inclusive space where all patrons feel safe and welcome.

Here’s an excerpt from the Chief Librarian’s statement:

A nonprofit group called the Women’s Liberation Front made a booking last month for space at the Central Library to hold a private event labeled as a women’s rights talk and presentation. It appeared to be a very simple booking request that was processed like any other. Our Event Services staff followed Library protocol, as always. Per our Intellectual Freedom and Meeting Room Booking policies, any group can book meeting spaces; and any group that books a private event at the Central Library can charge for the event.

Library leadership became aware of this booking and its controversial nature just yesterday. Similar events held at two other public libraries this year have been met with significant community protest in relation to the group’s views on transgender rights. We have been working to get up to speed on the implications of this event as they relate to our legal responsibilities, our role as a public institution, and our role as a safe, socially conscious space.

We have heard from patrons who believe we should not let this event happen in a Library space due to the group’s views. We have heard from others who say that not allowing this event to happen will endanger the Library’s founding principle of intellectual freedom. As a library valuing intellectual freedom, inclusivity, and community respect, our leadership is considering every option to ensure we respond to concerns about this event thoughtfully and in line with our values.

Controversial groups like these can test our limits as democratic centers of free speech and intellectual freedom, as well as our limits as a united community and organization. I hope you can recognize the difficult situation this has created for us. We are exploring every option we have in response to this moment, talking to other libraries who have been through it, scheduling discussions with our transgender staff and community, and consulting with the City of Seattle’s legal department on our options.

The law here is clear: When a library opens space for private groups to meet, it creates a “limited public forum,” in which the library may “not discriminate against a speaker’s viewpoint.” Ninth Circuit precedent (Faith Center Church Evangelistic Ministries v. Glover (9th Cir. 2006)) so holds, dictated by the Supreme Court’s broader First Amendment law, which has dealt with such programs in public schools and universities.

Viewpoint-neutral content discrimination in such limited public fora may be constitutional; for instance, the Ninth Circuit controversially held that a library may decline to open up its property to “pure religious worship” (though it may not exclude religious viewpoints on topics on which secular viewpoints are allowed). But viewpoint-based discrimination, such as the exclusion of messages that convey supposedly hateful or offensive or dangerous ideas, is unconstitutional (see Matal v. Tam (2017), which makes clear that discrimination against supposedly disparaging ideas or language is viewpoint-discrimination).

There is a hot debate in America about how the law and society should deal with people who identify as a gender that doesn’t match their anatomical or chromosomal gender. Should there be antidiscrimination laws that bar discrimination against transgender people? Should existing laws be interpreted as already barring such discrimination? How should various single-sex policies, whether for single-sex bathrooms, single-sex locker and shower facilities, or single-sex sports teams be applied when a person’s self-identification, anatomy, and chromosomes don’t fully match (a topic that arises especially often for transgender people, but may arise for others as well)? One side shouldn’t be able to block the other side from speaking in places that the government has opened up to a wide variety of private views. And indeed First Amendment law forbids the government from engaging in such discriminatory exclusion of views that some communities may oppose.

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The FBI Will Be Audited to See How Frequently They Screw Up Other FISA Warrants

Yesterday’s report detailing problems with how the FBI requested and pursued warrants to secretly wiretap a former Donald Trump aide didn’t stop with just describing concerns. Justice Department Inspector General Michael Horowitz also announced in the report plans to conduct an additional audit to determine how well (or poorly) the FBI follows proper procedures when requesting permission from the secretive Foreign Intelligence Surveillance Act (FISA) Court to surveil American citizens.

Buried amid all the descriptions within the 400-plus pages that documented the many ways the FBI improperly omitted or inaccurately described the information they submitted in their warrant application, the Office of the Inspector General (OIG) warned:

“Given the extensive compliance failures we identified in this review, we believe that additional OIG oversight work is required to assess the FBI’s compliance with Department and FBI FISA-related policies that seek to protect the civil liberties of U.S. persons. Accordingly, we have today initiated an OIG audit that will further examine the FBI’s compliance with the Woods Procedures in FISA applications that target U.S. persons in both counterintelligence and counterterrorism investigations.”

(Hat tip to Patrick Eddington of the Cato Institute, who noticed the passage and pointed it out on Twitter Monday afternoon.)

The Woods procedures describe the lengthy process FBI officials are supposed to go through when submitting a request for a FISA application to make sure every factual piece of information has been properly vetted and verified. It is supposed to be a painstaking process of dotting every i and crossing every t to get permission to use the FISA court to secretly surveil an American citizen on American soil. Former FBI agent Asha Rangappa explained in 2017 how difficult it was supposed to be to get a FISA warrant to wiretap Carter Page, in the service of arguing the FBI didn’t just casually get permission and couldn’t just decide to snoop on Page for political purposes to dig up dirt.

But nevertheless, it turned out that the FBI failed on several occasions to properly follow the Woods procedures. And if this hadn’t happened in such a high-profile case involving the current president of the United States, would we have even known?

Speaking of Trump, the American Civil Liberties Union (ACLU) is no fan. It has been turning to the courts to challenge the administration left and right, fighting his harsh policies on immigration and deportations. The ACLU brags on its site that it has filed 140 lawsuits against the Trump administration.

Some of those lawsuits are also connected to unwarranted domestic surveillance of American citizens, like border searches of tech devices. And while the ACLU may loathe Trump as a president, they’re still deeply concerned about the potential privacy violations highlighted by the OIG report. Monday afternoon they released comments by Hina Shamsi, director of the ACLU’s National Security Project, that probably are not showing up in the Twitter feeds of #Resistance folks:

“When the Justice Department’s Inspector General finds significant concerns regarding flawed surveillance applications concerning the president’s campaign advisors, it is clear that this regime lacks basic safeguards and is in need of serious reform. While the report found that there wasn’t an improper purpose or initiation of the investigation, it also found significant problems that are alarming from a civil liberties perspective. For instance, the litany of problems with the Carter Page surveillance applications demonstrates how the secrecy shrouding the government’s one-sided FISA approval process breeds abuse. The concerns the Inspector General identifies apply to intrusive investigations of others, including especially Muslims, and far better safeguards against abuse are necessary.

The system requires fundamental reforms, and Congress can start by providing defendants subjected to FISA surveillance the opportunity to review the government’s secret submissions. The FBI must also adopt higher standards for investigations involving constitutionally protected sensitive activities, such as political campaigns.”

It’s good to see that the ACLU’s strong concerns about unwarranted surveillance are not affected by their opinions about who is affected. More people should take note of the ACLU’s concerns rather than, as Robby Soave noted Monday evening, mistakenly thinking that the OIG report somehow clears the FBI.

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“The Court Granted All of the Relief Requested … Without … Knowing if the Respondent Even Had Notice of the Proceedings”

From the Colville Tribal Court of Appeals in Antonie v. Marchand, 2019 WL 5419957 (decided Sept. 30 but just summarized in the Westlaw Bulletin):

On August 20, 2018 the Petitioner filed a Summons and Complaint and a [request for an emergency restraining order seeking] permission to enter the parties previously shared residence to retrieve her and her son’s personal property (including an attachment identifying the property). In the ex parte motion, the Petitioner requested the Respondent be ordered to vacate the premises so she could enter the home and collect all of the identified personal property. She disclosed that she had already removed some personal property from the home, but she did not specifically identify the property. Within an hour of the filing, the Court entered an order without the benefit of a hearing and without notice to the Respondent that:

  1. Denied the Petitioner’s “motion for emergency restraining order”;
  2. sua sponte, ordered “the non-requesting party is restrained from contacting Petitioner and her son in any way at any location”;
  3. ordered that the “Petitioner is allowed to retrieve her personal property August 25, 2018 from 9:00 a.m. to 3:00 p.m.”; and
  4. set a show cause hearing for September 4, 2018.

The record does not indicate how, when or if the Respondent received service of the Order or the Complaint, but on August 22, 2018 he filed a “Motion and Affidavit” requesting a continuance on the grounds he was unprepared and needed to go through the personal property in the shared residence. He also requested a hearing on the ex parte motion indicating that he contested the ownership of the personal property identified in the list attached to the Complaint. That same day, without a hearing, the Court denied the Respondent’s Motion for Continuance, and affirmed the Petitioner’s ability to enter the home on August 25, 2018.

On August 23, 2018 the Respondent filed a second motion, requesting a hearing before the Petitioner was allowed to enter the home to remove property. In this filing the Respondent informed the Court there was a criminal matter pending in federal court in which it was alleged the Petitioner assaulted the Respondent and the federal court entered a restraining order prohibiting the Petitioner from contacting him. It appears from the Trial Court’s order, issued the same day without hearing, the Court did not fully address the Respondent’s requests and simply allowed the previous order and denial of a hearing to stand without amendment.

On August 24, 2018 the Office of the Tribal Prosecutor brought a Motion to Intervene and on behalf of the Respondent seeking to have the civil standby order quashed. In support of the motion the prosecutor noted that (among other things);

  1. there was no emergency warranting distribution of property;
  2. the Petitioner was not candid with the court;
  3. the Petitioner failed to inform the court that she was subject to a restraining order issued by a federal court;
  4. The federal court’s order was subject to full faith and credit;
  5. the Respondent was the alleged victim of a crime perpetrated by the Petitioner and he was contesting ownership of the personal property being sought by the Petitioner;
  6. Due process required a hearing to allow the Respondent to offer testimony to the court;
  7. The items requested by the Petitioner were not critical and could be distributed after a hearing; and
  8. The Respondent’s property was subject to damage if the Petitioner was allowed entry to the home.

On the day the prosecutor’s motion was filed, the Court, without a hearing, denied the prosecutor’s motion on the grounds that the prosecutor was not a party to the case and “no application to Accept a foreign judgment was filed,” and that the Court “had no proof” of any restraining order entered against the Petitioner. A subsequent Motion to Reconsider was also denied.

The Petitioner did not enter the residence on August 25 as allowed by the prior order. On August 30 she filed another ex parte motion requesting the Respondent be ordered from the home on September 1 from 9-4 to allow her to remove the previously identified personal property. The request was immediately granted, again without a hearing. A civil standby was allowed “if available.” There is no affidavit that the Respondent was served the order, but he apparently received notice as he vacated his home the next day.

On September 1, 2018 the Petitioner entered the home with other private citizens and without a civil standby and removed personal property from the home. It appears from the record she removed at least everything on the list attached to her Complaint and the Respondent later asserted to the Court that she removed more than was identified in the Complaint and damaged property left in the home….

The procedure followed in this matter is troubling and shines a light on the vital importance of due process protections built into our law and procedures. Parties must have reasonable notice to any substantive hearing to allow the parties time to prepare their respective cases. In this case the Trial Court made many decisions and entered crucial orders without the benefit of a hearing and without affording the Respondent the opportunity to be heard before relief was granted to the Petitioner….

When a court is presented with an ex parte motion requesting emergency relief it is constrained by the accuracy and completeness of the information contained in the pleadings offered by a single party. Within reason, the court presumes the truth of what is presented and grants or denies relief based on that information and this presumption. Because the initial pleadings may not accurately convey the complete facts of the situation, the court must be cautious about any ex parte relief granted. The court may only grant relief that is aimed at preventing imminent and irreparable injury to the requesting party.

In this case … the Court granted ALL of the relief requested in the Complaint without conducting a single hearing or knowing if the Respondent even had notice of the proceedings…. This Court makes no findings as to the disputed facts, but there was sufficient credible evidence before the Trial Court to put it on notice that there was a dispute as to the events that occurred between the Petitioner and Respondent and as to the relief that should be granted. The Court should have been alerted to the need to protect the due process rights of everyone involved, yet the Court maintained the ex parte emergency order granting the Petitioner all of the relief she requested in her complaint without the benefit of any hearings.

It is common for a court to grant emergency relief to a party to recover clothing, medications, toiletries and other important personal items from a home they’ve been forced to vacate. The court may also enter temporary restraining orders preventing either party from transferring, removing, encumbering, or concealing or in any way disposing of any property. There is no way, however, to find that the Petitioner or her son would be irreparably injured if the Court denied her the right to collect most of the items identified in her attachment until after the Court heard from all the parties. Granting the Petitioner the ability to collect furniture, art, kitchen items, holiday decorations and the like without a hearing is clearly erroneous.

There were multiple requests made and ample opportunity for the Court to hear from the Respondent before allowing the Petitioner to remove property from the home. The only hearing scheduled by the court was for September 4, 2018, AFTER the Petitioner was to be permitted to enter the Respondent’s home on August 25. Any hearing giving the Respondent the ability to address the Complaint that occurs AFTER the Petitioner is granted the relief requested in the Complaint is meaningless….

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