A Ringside Seat to the Debt Ceiling Fight

LewIf most lawmakers had their way, there would be fewer rules to restrain them from growing spending and the national debt. Case in point: the 2015 suspension of the debt limit—the maximum amount of money the government may borrow—as part of a deal to increase spending above the previously agreed-upon spending caps.

Now that the debt ceiling’s suspension is set to expire in March, outgoing Treasury Secretary Jacob Lew is making the case for scrapping the constraint altogether. He just wrote an essay for the Harvard Journal on Legislation. The Wall Street Journal summarized his argument thus: “It isn’t an effective device for imposing fiscal discipline and instead provokes partisan standoffs that threaten economic calamity.”

On the surface, he seems to have a point. First, we’ve witnessed during the past few years some serious fights between those who want to raise the limit with no questions asked and those who demand that an increase be paired with spending restraints. Second, since 1993, the limit has increased almost 20 times—and the federal debt has ballooned from less than $5 trillion to almost $20 trillion, providing ammunition for the argument that it’s inefficient at controlling spending.

But this wasn’t always the case, writes Veronique de Rugy.

View this article.

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RBC Explains Why The Market Is Dumping, Adds “This Is Not The Big Short”… Yet

Having yesterday revealed what he believes is the single biggest risk to the buyside in general, and hedge funds in particular, in today's market (the answer, for those who missed it, is the strong dollar suddenly turning weak, as it is continues to do today), here is the follow-up note from RBC's Charlie McElliggott, explaining where we stand now.

* * *

Where We Stand

As laid-out in yesterday’s Big Picture note “THE SINGLE LARGEST MACRO INPUT RISK TO THE BUYSIDE,” as asymmetrically ‘long US Dollar’ positioning ‘tips over,’ so too should we expect a drawdown on consensual macro and thematic-equity trades.

Tactical cases are everywhere for an extension / acceleration of mean-reversion trades, largely based-upon positioning excess and reversing technicals.

As the case has been built over the past month and a half in the “RBC Big Picture,” reversal strategies are a regular feature in the January landscape—especially after such clear trend developed in the back half of ’16 with regards to ‘reflation—those being:’

  • Long USD, stocks, small cap / domestically levered, value factor, cyclicals beta, inflation, high tax rate, HY / high beta credit (CCC over BB), CNH, curve steepeners, copper
  • Short USTs / ED$ / duration, euro, yen, EMFX / EM eq / EM bonds, growth, defensives, low beta / low vol, VIX, gold

As some of the reversion was ‘pre-traded’ in the back-half of Dec, it made sense to us that this January wouldn’t be an outright repeat of the violent VaR shocks experienced in a number of recent Januarys as ‘momentum’ reversed hard and everything from ‘bonds vs stocks’ to equity factors turned upside-down.

That said…the driver for the acceleration of ‘reversal trades’ yesterday into the overnight was the Barnum-esque circus of a press conference yesterday from President-elect Trump

Expectations were built for a more “Presidential” tone, with more granular ‘policy talk’–especially as it pertained to the nuances of the tax plan, fiscal stimulus, and the Obamacare unwind.  Needless to say, we got a “goat rodeo” instead, and it spooked a lot of the TACTICALLY long reflation crowd.

Reflationary growth expectations have clearly been a significant driver of the USD ‘bull case’—but the tax component (overseas profits $ repatriation / border-adjusted tax (BAT) system theoretically driving ~15% currency appreciation) has been a massive-input as well.  As stated yesterday, any resetting of expectations there (“watering down” of the BAT) will see a lower Dollar concurrently.

Sure, spec net Dollar positioning is at 1 year highs.  But even more than ‘just’ the cumulative FX positioning itself is the observation that the Dollar is the “grand unifying asset” of the “domestic growth / reflation” trade theme.  So in that sense, “long USD” is a factor embedded in nearly every one of the aforementioned popular macro longs and shorts.

The idea I have to again stress here is this: nearly all of the gains from these “reflation” trades were “last year’s business.”  Point being, YTD, most of these trades are moving from “not great” to now approaching “REAL negative PNL.”  As risk-managers are highly-sensitive to such start of year drawdowns and we near the ever-present “tight stops,” you have to BOLO for capitulatory flows (perhaps as best expressed by yesterday’s mega-impressive $20B 10 year UST reopening auction which saw a blistering 70% indirect bid, which caused a very significant squeeze in USTs across boards).

It should be noted that thus far, the ‘least’ relatively effected trades have been the thematic and factor trades within the equities-complex.  Reasons for this are ‘three-fold’:

  1. The very tactical nature of discretionary macro (making generalizations here but…) is concentrated on the FX, rates and commods side of the ledger as opposed to equities per se.  Thus, we’re seeing much of the reversal ‘profit-taking’ or ‘unwind’ concentrated in those ‘pure macro’ assets. 
  2. Equities flows are still being largely dictated by the slow-moving rotation of ‘real money’ as they reallocate portfolios after living under the old “slow growth / slow inflation” narrative.  Now we currently see said ‘sticky long-term money’ reallocation into cyclical sectors like financials, industrials and energy, as again evidenced by yesterday’s NYSE MOC with the largest notional sector buys being #1 Financials and #2 Industrials… by a wide margin (“pros on the close”), and has been that way a majority of days in ’17 YTD. 
  3. From a more tactical perspective, with the USD at the center of this unwind, the Dollar weakness has driven WTI higher, which in turn has kept the Energy sector and more importantly inflation-expectations “BID” (per the Quant-Insight macro factor PCA model, higher “inflation-expectations” continue to show as the largest positive price input driving SPX).

The US Dollar index (DXY) has now cracked lower through its 50DMA for the first time since the immediate period post- Election.  The 100 ‘psychological level’ also has some technical significance and is very much ‘in play’ now.  From there, we would have a looooong way to go down to the 100DMA (98.94) and the 200DMA (97.03). 

What can arrest this unwind from ‘metastasizing’ further?  The thing that drove the “true” basis for the “reflation trade” long before Trump won in the first place—the continued-ascension of cold hard global data.  As listed yesterday, the collective trajectory higher of the data has been nothing short of breath-taking, from global PMIs to Chinese inflation to US average hourly wages and ‘animal spirits’ confidence metrics. 

The data still makes a very real case for higher rates in the longer-term, and with it, more US hikes / quicker exits from say the ECB than the market is currently anticipating. Obviously this would be USD- positive.

Tactically-speaking in the ‘now,’ the Dollar reversal lower in this case is helping reignite the commodities bid as well, and with it, inflation expectations remain very strong (see Breakevens ‘strong like bull’).

And of course too, flow will be a massive driver of this: still being told that some in both the ‘overseas real money’ crowd and leveraged fund community would look to fade the rates move at say ~ 2.20 level.  In conjunction with the US varietal of real money rotating “growthier” in equities as well (‘turning the Titanic’ slowly), stocks can remain bid over the coming months (not for nothing, but I’ve had discussions with 3 large distressed credit funds in recent weeks who are concentrating much of the ‘going-forward’ within the equities universe—point being stocks continue to have that ‘best place to be’ perception). 

It still feels like there is another meaningful stocks rally to come, especially after the “positioning excess” is cleared through this “mean-reversion wobble” period.

* * *

Only then can we begin talking about “the big short” around say a “stagflation” or “real rates” financial-tightening trade.



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New Report Highlights Horrific Impact of Solitary Confinement on Inmates with Disabilities

The effects of solitary confinement on inmates can be long-lasting and destructive, but they can be even more devastating to inmates with disabilities, according to a new report released Thursday by the American Civil Liberties Union.

Over the past several years, there has been a growing outcry to limit or abolish the use of solitary confinement, which critics say amounts to torture and can have permanent psychological impacts on inmates. The Obama administration, for instance, banned the use of solitary confinement on juvenile inmates in the federal prison system. The ACLU report, “Caged In: Solitary Confinement’s Devastating Harm on Prisoner’s With Physical Disabilities,” sheds light on the unique challenges that inmates with disabilities face in solitary.

“The current and formerly incarcerated people with disabilities who we spoke with described their experiences of enduring extreme isolation for days, months, and even years,” the report says. “They shared the pain and humiliation of being left to fend for themselves in solitary confinement without wheelchairs, prosthetic limbs, or other necessary accommodations to carry out life’s basic daily tasks. Without these vital accommodations, many of them were left without the means to walk, shower, clothe themselves, or even use the toilet.”

Despite the passage of the federal Americans with Disabilities Act (ADA) in 1990, which guarantees equal access and protections to those with disabilities, the report says inmates with disabilities are sometimes placed in solitary confinement for no other reason than a lack of other adequate housing.

One case cited in the report is former Oregon inmate Dean Westwood, who is paralyzed from the chest down and relies on a motorized wheelchair for mobility. Westwood pled guilty in 2014 to Medicaid fraud and tax evasion and was sentenced to a year and a half in prison. During Westwood’s sentencing, prosecutors assured the court that Oregon prisons were ADA compliant and had adequate facilities to house him.

Westwood says he was placed in isolation at the infirmary of Coffee Creek Correctional Facility in Wilsonville, Oregon for 22 to 23 hours a day for 17 days. He says the staff were unprepared to deal with his needs, and for the first 48 hours of his imprisonment he was not given his prescribed medications to prevent painful muscle spasms and control his bowels. He ended up soiling himself.

“Shit, I just figured that’s how it was,” Westwood says in an interview with Reason. “You get thrown in prison, and they can do whatever the fuck they want to you. I suppose I should have known better, but I was just scared and trying to wrap my head around all this. The walls were white cinder block. I don’t know if you’ve ever been inside, but in a small space like that you can physically feel the walls caving in on you. At one point I remember thinking that if I beat my head on this wall really hard, it will either knock me out, or maybe I’d hit it hard enough that I wouldn’t wake up. That was constant. To this day I don’t know how I got through. I don’t know what stopped me from beating my head on those bright, white walls.”

He was later transferred to another facility where he says he was isolated in an infirmary with no access to the law library, the rec yard, or any of the programs that offer chances for reduced sentences.

According to the ACLU report, inmates with disabilities placed in solitary, even if for no punitive reason, have little access to the programs and social interaction that inmates in the general population enjoy. And they can often be denied physical therapy and other regimens that keep their bodies from deteriorating further.

Westwood sent a “kite”—prison slang for a written message—to his case manager, asking why he was being kept in isolation. The response he says he eventually received: “We can put you wherever we want, whenever we want.”

He was later transferred to the Oregon State Penitentiary, where other inmates act as assistants to those with disabilities.

“Here I am as a level one, the lowest security risk, with level four and fives providing my assistance. Murderers, rapists, and arsonists,” Westwood says. “Just because they didn’t have accessible housing they jammed me in with criminals way above my security ranking. Then I was vulnerable. I was assaulted by a guy who took a disliking to me. He was down for murder. I took two beatings. When you’re caught in the wrong spot, there’s no staff around. I was fortunate I lived.”

Inmates with disabilities, especially in facilities where they are assigned other inmates as assistants, can become targets. A 2013 report on the Tomoka Correctional Institution in Florida by HEARD, an advocacy group for deaf prisoners, documented numerous allegations of sexual assault, rape, theft, retaliation by staff, and general cruelty against inmates with disabilities.

The Oregon Department of Corrections and the prosecutor in Westwood’s case did not immediately return requests for comment.

Westwood’s case is only one of many documented by the ACLU in the report. The ACLU located one inmate who said he was placed in solitary confinement for two weeks for not responding to a command he could not hear.

In 2016, a judge ordered Washington, D.C. Department of Corrections to pay a deaf inmate, William Pierce, $70,000 in damages for failing to provide adequate accommodations. Pierce claimed he was not provided with a sign language interpreter and could not communicate with corrections or medical staff. When he persisted in trying to obtain an interpreter, he said he was thrown in solitary confinement as retaliation.

In 2014, Los Angeles County settled a lawsuit brought by disabled inmates who described soiling themselves because the jail bathrooms were not wheelchair accessible and had no grab bars. They also claimed they were given wheelchairs with non-functioning brakes.

And for those with hearing or visual impairments, the ACLU says the profound isolation of solitary confinement can become almost total. Reading and finding inventive ways to communicate with each other are some of the only ways inmates can pass time in solitary, but deaf or blind inmates might have neither.

“Deaf and blind prisoners reported that prison officials failed to provide them with access to hearing aids, Braille materials, certified sign language interpreters, or other auxiliary aids and services that are necessary to facilitate meaningful communication,” the report says. “As a result, many prisoners reported being left completely isolated without any ability to communicate with other prisoners, staff, family members, and other visitors.”

There is no publicly available data on the number of inmates with disabilities placed in solitary confinement, but the significant percentage of inmates with disabilities in the system overall suggest they are similarly represented in solitary confinement. For example, around 20 percent of Florida state prison inmates have some sort of assistive device or require special accommodations, according to the report. About 1 in 10 inmates in California have a hearing, visual, or mobility-related impairment.

The ACLU recommends that corrections officials ban the placement of inmates with disabilities in solitary for lack of other adequate housing and track the use of solitary for such inmates. It also recommends that the Justice Department audit state prisons to ensure they are ADA compliant.

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Fiat Chrysler Shares Crash After EPA Accuses Automaker Of Using Software To Cheat Diesel Emissions Laws

It appears they were all doing it. Fiat Chrysler shares are collapsing following EPA accusations that the automaker used cheating software to beat diesel emissions tests, and this violated pollution laws.

The U.S. Environmental Protection Authority will accuse Fiat Chrysler of using software that allowed excess diesel emissions in about 100k U.S. vehicles, Reuters reports in tweet, citing people familiar.


The stock is down over 10%…


As AP reports,

Two people briefed on the matter say that the U.S. government is accusing Fiat Chrysler of violating the Clean Air Act on some of its diesel engines.
The Environmental Protection Agency has scheduled a news conference for Thursday morning to release details of the matter. The people briefed on the matter didn’t want to be identified because the formal announcement hasn’t been made.
The move comes one day after federal prosecutors announced that Volkswagen would plead guilty to criminal charges and pay a record $4.3 billion penalty for cheating on emissions tests.

EPA to make announcement on major automaker today at 11am ET/

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Beijing Not Amused After Tillerson Says US Will Block Chinese Access To South China Sea Islands

While Rex Tillerson’s confirmation hearing as Trump’s Secretary of State was for the most part uneventful, several hours into his back and forth with the Senate Foreign Relations Committee, Tillerson compared China’s actions to those of Russia in Crimea, saying a failure to respond had allowed it to “keep pushing the envelope” in the South China Sea. “We’re going to have to send China a clear signal that first the island-building stops and second your access to those islands is also not going to be allowed” and that putting military assets on those islands was “akin to Russia’s taking Crimea” from Ukraine.

With that statement, America’s likely next secretary of state “has set a course for a potentially serious confrontation with Beijing” according to Reuters, which added that his comments are “expected to enrage Beijing.” 

Tillerson, the former Exxon chairman and CEO, did not elaborate on what might be done to deny China access to the islands it has built up from South China Sea reefs, equipped with military-length airstrips and fortified with weapons. Trump’s transition team did not immediately respond to a request for specifics on how China might be blocked from the artificial islands.

Tillerson said he considered China’s South China Sea activity “extremely worrisome” and that it would be a threat to the “entire global economy” if Beijing were able to dictate access to the waterway.

“This is the sort of off-the-cuff remark akin to a tweet that pours fuel on the fire and maybe makes things worse,” Malcolm Davis, a senior analyst at the Australian Strategic Policy Institute in Canberra told Bloomberg. “Short of going to war with China, there is nothing the Americans can do.”

He blamed the current situation on what he termed an inadequate U.S. response. “The failure of a response has allowed them just to keep pushing the envelope on this,” Tillerson said.

China responded when its Foreign Ministry spokesman Lu Kand said China has been acting within the limits of its sovereignty. “Like the U.S., China has the right within its own territory to carry out normal activities,” he said at a regular briefing in Beijing. When asked repeatedly about Tillerson’s comments on blocking access to islands, China’s foreign ministry spokesman said he couldn’t make any guesses as to what Tillerson was referring to and would not answer hypothetical questions, Reuters reported.

China’s right to carry out ‘normal activities’ in its sovereign territory in the South China Sea is ‘indisputable’, Lu said, speaking at a daily briefing on Thursday. He did not elaborate.

Tillerson also said he would stand by U.S. defense treaties with Japan and South Korea. These had been in doubt after Trump said in an interview last March that he would consider withdrawing U.S. troops if allies didn’t pay more for their upkeep. Asked whether he agreed with Trump’s assertion that it wouldn’t be a bad thing for the U.S. if Japan and South Korea acquired nuclear weapons, Tillerson said he “did not agree.”

“We have long-standing ally commitments with Japan and South Korea in the area and I think we would respond in accordance with those accords,” he said. “Certainly we have made commitments to Japan in terms of a guarantee of their defense.”

Pouring more gasoline on US-Sino relations, Tillerson called China’s South China Sea island-building and declaration of an air defense zone in the East China Sea it contests with Japan “illegal actions.” “They’re taking territory or control, or declaring control of territories that are not rightfully China’s.”

Tillerson also said Washington needed to reaffirm its commitment to Taiwan, which Beijing regards as a renegade province, however he stopped short of Trump’s questioning of Washington’s long-standing policy on the issue.  “I don’t know of any plans to alter the ‘one China’ position,” Tillerson said.

Curiously, Tillerson’s words went beyond Trump’s own tough rhetoric on China. Regional military sources said while the U.S. navy had extensive capabilities in Asia to stage blocking operations with ships, submarines and planes, any such move against China’s growing naval fleets would risk dangerous escalations.

Tillerson’s criticism of China was not confined solely to geopolitics: he accused China of failing to live up to global agreements on trade and intellectual property, echoing past remarks by Trump, who has threatened to impose high, retaliatory tariffs on China.

But Tillerson also stressed the “deeply intertwined” nature of the world’s two biggest economies. “We should not let disagreements over other issues exclude areas for productive partnership.”

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Judge William Pryor, ‘No Friend of Criminal Defendants,’ Is Said to Top Trump’s SCOTUS Short-List

Yesterday President-elect Donald Trump said he plans to announce his Supreme Court pick sometime shortly after taking the oath of office. “I’ll be making the decision on who we will put up … that will be probably within two weeks of the 20th,” Trump said. The president-elect also reiterated his promise to choose his nominee from the “list of 20” prospective candidates that he released during the campaign. “We’ve met with numerous candidates. They’re outstanding in every case,” Trump said.

One name on that list in particular keeps cropping up: Judge William H. Pryor of the U.S. Court of Appeals for the 11th Circuit. Writing today at The Hill, for example, Alexander Bolton reports that “influential conservatives are pressing [Trump] to nominate Bill Pryor, a judge feared and disdained by liberals but loved by conservatives because of his ‘titanium spine.'” Many conservatives seem especially enamored by the fact that Pryor once described Roe v. Wade as the “worst abomination in the history of constitutional law.”

Pryor is also the subject of a lengthy profile published this week by SCOTUSblog’s Kevin Russell and Charles Davis, who examined the judge’s rulings in a variety of cases. Of particular note is their conclusion that Pryor “is no friend of criminal defendants. He very consistently sides with the government in criminal cases on issues both big and small.”

I reached a similar conclusion when I profiled Pryor back in November, arguing that Pryor “has a troubling record of favoring broad judicial deference towards law enforcement.”

Since Pryor is now rumored to be one of the favorites to replace the late Justice Antonin Scalia on the Supreme Court, it’s worth comparing their respective records on criminal justice. Whereas Pryor has proven himself to be a dependable vote in favor of law enforcement, Scalia frequently ruled against the aggressive tactics employed by police and prosecutors. Indeed, Scalia himself liked to joke that he “ought to be the darling of the criminal defense bar” thanks to his opinions in favor of broad Fourth Amendment protections. “I have defended criminal defendants’ rights—because they’re there in the original Constitution—to a greater degree than most judges have,” Scalia said.

Unfortunately, the same thing cannot be said for the pro-government jurisprudence of Judge William Pryor. If Donald Trump does end up nominating Pryor to replace Scalia on SCOTUS, the Senate Judiciary Committee should devote serious attention to this fundamental disagreement between the two conservative judges.

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Trump Bump Dumps – Confidence Collapses As Inauguration Looms

Despite the latest Small Business Optimism explosion of confidence (in December), the most up-to-date surveys of US consumer confidence appear to be crumbling after the 'Trump Bump'…

The headline confidence index has erased all its post-Trump gains…


"Buying Climate" has plunged…


And 'Personal Finances' are tumbling…


It appears the rose-colored glasses of hope are starting to turn grey.

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Amazon To Create 100,000 New Jobs In The US

With Amazon having an exponentially growing (if mostly part-time) work force, which as of Q3 amounted to just shy of 320,000 employees…

… not to mention a surging robotic support base, on Thursday the rapidly growing internet retailer issued a press release stating it “plans to create an additional 100,000 full-time, full-benefit jobs in the U.S. over the next 18 months.”  Of course, it is likely that Amazon would have added that number of jobs anyway, simply by extrapolating its current growth rate.

The announcement by Trump’s nemesis, Jeff Bezos, coming just over a week ahead of Trump’s inauguration, is hardly a coincidence, as Trump’s insistence on creating US jobs is by now well-known to most US CEOs.

These new job opportunities are for people all across the country and with all types of experience, education and skill levels—from engineers and software developers to those seeking entry-level positions and on-the-job training. Many of the roles will be in new fulfillment centers that have been announced over the past several months and are currently under construction in Texas, California, Florida, New Jersey and many other states across the country. In addition to direct job creation, Amazon businesses like Marketplace and Amazon Flex will continue to create hundreds of thousands of jobs for people across the U.S. who want the flexibility to start their own business, work part-time or set their own schedule.

Also, perhaps to appease members of the military, Amazon added that it “already employs over 10,000 military veterans, and last year pledged to hire and train an additional 25,000 veterans and military spouses over the next five years. In addition, the company committed to training 10,000 active duty service members, veterans and military spouses not employed by Amazon in cloud computing through AWS Educate.”

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Trump Blasts CNN’s “FAKE NEWS”, Says “Credibility Will Soon Be Gone!”

One day after totally shutting down CNN’s Jim Acosta at his first press conference as President-elect, Trump continues to hammer CNN saying they’re “in a total meltdown with their FAKE NEWS because their ratings are tanking since election and their credibility will soon be gone!”

* * *

For those who missed it, here are the epic exchanges from yesterday.

In an epic (mutual) trolling between president-elect Trump on one hand and BuzzFeed and CNN, on the other, the two media organizations which issued yesterday’s unsubstantiated report about Russia having compromising information on the president-elect, Trump first addressed the question of why he referred to Nazi Germany, saying it is “disgraceful” that intelligence communities would allow the release of any information. “That’s something Nazi Germany would have done and did do,” he says.

He then unleashed on Buzzfeed which alone published the 35-page memo behind the Russian allegations, saying “Buzzfeed which is a failing pile of garbage… will suffer the consequences” 

And then, in an even more stunning episode, Trump slammed CNN reporter Jim Acosta, who he also called out during the presser over their report on a two-page synopsis they claim was presented to Trump.

With Trump looking to call on other reporters, Jim Acosta yelled out, “Since you are attacking us, can you give us a question?”

“Not you,” Trump said. “Your organization is terrible!”

Acosta pressed on, “You are attacking our news organization, can you give us a chance to ask a question, sir?” Trump countered by telling him “don’t be rude.” 

“I’m not going to give you a question,” Trump responded. “Don’t be rude. I’m not going to give you a question. You are fake news!” Trump responded, before calling on a reporter from Breitbart.


A snubbed Jim Acosta then tweeted the following: “Fortunately ABC’s Cecilia Vega asked my question about whether any Trump associates contacted Russians. Trump said no.”


Trump also had some “kind words” for the BBC:

* * *

These exchanges followed an initial statement by Trump spokesman Sean Spicer who said that “for all the talk lately about ‘fake news,’ this political witch hunt by some in the media…is frankly shameful & disgraceful…. Highly irresponsible for a left-wing blog… to drop highly salacious and flat out false information on the Internet.”

Following this, we expect the war between Trump and the media in general, or at least CNN in particular, to reach biblical proportions.

*  *  *

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Live Stream: Russia, Iran and International Alliances To Take Center Stage At Mattis Confirmation Hearing

With two days of grueling confirmation hearings in the books, it’s time for Retired Marine General James “Mad Dog” Mattis, Trump’s pick for Secretary of Defense, to field some questions.  In his prepared remarks, Mattis is expected to emphasize the importance of international alliances and bringing “business reforms to the Department of Defense by instilling budget discipline.”  Per The Hill:

“We must embrace our international alliances and security partnerships. History is clear: nations with strong allies thrive and those without them wither,” he is expected to say.


The statement is somewhat of a departure from the rhetoric President-elect Donald Trump used on the campaign trail, where he called into question the value of alliances such as NATO.


Mattis will also list strengthening alliances as one of his priorities, along with strengthening military readiness and reforming the Pentagon.  “If you confirm me, my watchwords will be solvency and security in providing for the protection of our people and the survival of our freedoms,” he will say.


“My priorities as secretary of Defense will be to strengthen military readiness, strengthen our alliances in league with our diplomatic partners, and bring business reforms to the Department of Defense by instilling budget discipline and holding our leaders accountable.”

Mattis retired from the military in 2013, and entered the business world as a board member of General Dynamics and Silicon Valley start-up Theranos.  He resigned from Theranos earlier this month and will step down from General Dynamics if confirmed.  Only three years removed from his military post, Mattis will need a waiver from Congress exempting him from a law requiring a Defense secretary to be out of uniform for at least seven years, a waiver the Congress hasn’t granted since 1950.

Senators will undoubtedly focus questioning today on how Mattis will approach Iran’s growing influence in the Middle East and his views on Russia’s alleged interference in the U.S. election process. Per Reuters:

Senators are expected to ask Mattis how he would grapple with Iran’s influence in Iraq, Syria, Yemen and beyond. Officials who knew him before he retired in 2013 said Mattis clashed with top Obama administration officials when he headed Central Command over his desire to better prepare for potential threats from Tehran.


His support for stiffer responses to Russia could endear him to Republicans. Senior Republicans on the committee are pushing for a harsher response to what U.S. spy agencies say was the Kremlin’s meddling in the U.S. presidential election.

As background, here is Mattis’ bio courtesy of Bloomberg:

Mr. James N. Mattis, also known as Jim, was a Commander at the U.S. Joint Forces Command (USJFCOM) from November 2007 to August 2010. Mr. Mattis served as U.S. Marine Corps General and served as Commander of the U.S. Central Command from August 2010 to March 2013. He served as NATO Supreme Allied Commander Transformation from November 2007 to September 2009.


He served in many leadership roles during more than 40 years of service with the U.S. Marine Corps. As a lieutenant colonel, Mr. Mattis commanded the 1st Battalion, 7th Marines, an assault battalion in Operations Desert Shield and Desert Storm. He was a Brigadier General, where he commanded the 1st Marine Expeditionary Brigade and Task Force 58 during Operation Enduring Freedom in southern Afghanistan. He was a Major General and commanded the 1st Marine Division during the initial attack and subsequent stability operations in Iraq during Operation Iraqi Freedom.


Mr. Mattis holds a Bachelor’s Degree from Central Washington State University and is a graduate of the Amphibious Warfare School, Marine Corps Command and Staff College and the National War College.


He served for more than 41 years of service to the nation. He retired from the Marine Corps in May 2013.

And here are a couple of “Mad Dog’s” famous one-liners to help set the stage for a day of hearings:

“The first time you blow someone away is not an insignificant event. That said, there are some assholes in the world that just need to be shot.”


“Find the enemy that wants to end this experiment (in American democracy) and kill every one of them until they’re so sick of the killing that they leave us and our freedoms intact.”


 “Be polite, be professional, but have a plan to kill everybody you meet.”


“The most important six inches on the battlefield is between your ears.”


“I’m going to plead with you, do not cross us. Because if you do, the survivors will write about what we do here for 10,000 years.”

With that, here is a live stream of the festivities:

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