Tag: news

Fed’s Actions Have Obliterated True Price Discovery Mechanism

Fed’s Actions Have Obliterated True Price Discovery Mechanism

Tyler Durden

Sat, 06/20/2020 – 12:10

Authored by Bruce Wilds via Advancing Time blog,

The Federal Reserve continues to destroy true price discovery in this market by executing short squeeze after short squeeze. Moral hazard be damned, the Fed’s desire to support the market has overruled common sense. We have seen this time after time with well-timed announcements being made simply to fire up bullish enthusiasm and spark a rally. We recently observed this when a Fed announcement resulted in a dramatic intraday reversal causing the S&P500 to surge more than 100 points from session lows and closing above its 200-day moving average.

Fed’s Action Obliterates True Price Discovery

This time it was because the Fed announced it would start to buy corporate bonds the next day. A late Bloomberg report that Trump was seeking a $1 trillion infrastructure proposal to stimulate the economy also added fuel to the fire. Trump’s proposal focused on 5G and rural broadband. The report added it was still under discussion and would need the backing of Congress to move forward. Still, this is an indication the false economy continues to ramp up. Government stimulus has been a key feature of the global equities rally even as unemployment has soared and signs that a second wave of the virus has started to emerge.

Until now, the size and pace of Fed balance sheet expansion have put a floor under global equity markets and driven equities higher. Yet Powell is going out of his way to signal that more economic support is on the way. The problem with market manipulation is that once it starts, where does it end? This is an area of moral hazard that once breached is difficult to turn back. Another issue is that the Fed is not alone in playing this game, the Trump administration also has invested a great deal in keeping markets moving higher. In recent years we have witnessed more central banks and government intervention in markets. This supports the argument that true price discovery has been massively distorted.

The BOJ Buying ETFs Is Distorting Markets

In many ways, government entities investing in or buying stock, are transferring part of industry or commerce from the private-sector to state ownership or control. While the state may not choose to exercise control over various decisions a company makes the entity that owns the stocks can control perceived valuations by being the market maker that sets prices. True price discovery and properly pricing assets are the bedrock of free markets. The feedback loops between asset prices and input signals are critical in determining value, this is especially true when we focus on assets such as stocks, bonds, currencies, or paper promises that carry no utility value and can perform no useful task.

The Federal Reserve was intended to act as the “lender of last resort” but as Nomi Prins says, “As if the Fed hasn’t done enough to destroy honest markets, now it plans to start buying individual corporate bonds. It’s just another step closer to the Fed deciding the winners and losers in the market.” This has forced even the most bearish of us to finally concede that, for whatever reason you want to claim, the Fed under the leadership of its Chairman J. Powell has crossed the Rubicon and the point of no return. 

Crossing the Rubicon means the point of no return. This high-level idiom comes from an event in ancient Roman history. In 49 BC Julius Caesar’s army crossed the Rubicon River, this was forbidden. It was an event from which he knew  there is no way back. When Julius Caesar crossed the Rubicon, he started a five-year Roman civil war. At the war’s end, Julius Caesar was declared dictator for life. Putting the Fed’s recent actions into context and what it means for investors, the miserable policies adopted by the Fed, which has allowed other central banks to do the same, has created a new environment redefining risk and value. This highlights the fact there is nothing normal about what is happening, this is far from normal.

Savers, investors, and a new wave of speculators as a result of Central banks expanding balance sheets while reducing interest rates are now embracing any investment that promises yield. This combined with rising government spending has disaster written all over it, not just in America but across the globe. This and a slew of other horrible moves have created a bubble in bond and equities. Only the claim that no inflation exists and this is the only way to halt deflation allows this reckless policy to continue, however, when people realize the fallacy of this assertion it will be to late too stop the economic and financial carnage it will create.

The Shrinking Private Sector

Unfortunately, the money flowing from the Government-Financial complex is not reaching the parts of the economy where it is most needed. For a small business, the economy remains a disaster. Investors should remember the true unemployment picture has yet to reveal itself. As the government grew larger it seems to have become oblivious to the importance and fragility of many small businesses or how much it cost a community when they close. Small business has been the big loser over the last several months and hundreds of thousands will soon have to close.  With so many tenants looking at foregoing rent small landlords that don’t have deep pockets also face huge problems.

The idea we are about to experience a “V-shaped recovery” is rubbish. Many people are afraid to fly, travel, or eat out at a restaurant. The government’s solution to give the masses just enough to silence their outrage is a bizarre extension of crony capitalism. It feeds large businesses with access to cheap capital are the winners and the big losers are the middle-class, small businesses, and social mobility. All those people that want a higher minimum wage can forget that ever happening as tens of millions remain out of work. It is difficult to argue true price discovery exists and risk is not being discounted when prices fail to reflect unemployment at around 20% and ignore news of a sharp escalation in Korean tensions or the deadly clashes between Indian and Chinese border troops.

Bubbles always pop, this time is not different. Exacerbating the current situation, many of those invested in paper promises have become over-leveraged putting themselves at great risk if a sudden decline in the value of these assets occurs. The disconnect that has taken place between Wall Street and the economy is not logical. We are in uncharted waters and should consider the possibility the destruction of true price discovery will only add to the demise of fiat currencies across the world. I contend this will fuel the desire of people to once again hold tangible assets rather than trusting the promises now being made. To say things are messed up is an understatement.

via ZeroHedge News https://ift.tt/2NhL3IC Tyler Durden

US ‘Answers’ Russian Flights Near Alaska In Rare B-52 Mission Over Sea Of Okhotsk

US ‘Answers’ Russian Flights Near Alaska In Rare B-52 Mission Over Sea Of Okhotsk

Tyler Durden

Sat, 06/20/2020 – 11:45

Clearly we’ve reached the level of an advancing tit-for-tat ‘intercept war’ over waters near Alaska as well as off Russia’s far east, now that we’re now approaching a dozen intercept incidents (8 off Alaska alone) in the remote region this year alone.

This week’s tensions began Tuesday night when NORAD F-22 Raptors were scrambled in order to chase off a pair of long-range Tu-95 nuclear-capable bombers along with their Russian fighter jet escorts, which came within about 30 miles of US territory. 

And now on Friday, Russia has announced its armed forces answered the prior US intercept with its own aerial intervention against two US Air Force B-52H bombers flying over the Sea of Okhotsk off Russia’s coast, according to a defense ministry statement.

Illustrative file image of US B-52 Bomber escorted by F-15 fighters, via Pacific Air Forces

“On June 19, 2020, the air defense quick reaction alert forces of the Eastern Military District spotted and started tracking a pair of US Air Force B-52H bombers over the Sea of Okhotsk,” Russia’s defense ministry said.

Multiple reports say, however, that the incident occurred Thursday night. The US aircraft stayed over neutral waters the whole time while moving near Russian territory.

The Sea of Okhotsk is the northwestern section of the Pacific Ocean off Russia’s eastern coast, surrounded on three sides by Russian coastline, with Japanese islands to the south – and next to the Bering Sea which separates North America from the vast land mass of the Russian Federation.

Russia’s military published cockpit video of the US-52 mission while making the intercept:

“At a considerable distance from the state border of the Russian Federation, the US Air Force planes were continuously tracked by Russian monitoring capabilities,” the MoD statement added. “Su-30, Su-35 and MiG-31 fighters from the air defense quick reaction alert forces of the Eastern Military District were scrambled to intercept the targets.”

Like with the Bering Sea area incident from earlier in the week, Russia released cockpit video of a Russian fighter tracking one of the US bombers off Russia’s coast. 

Via The Drive

Significantly, this particular US bomber route is said to be a “first”. The Drive reports:

This the first time B-52Hs have flown into this body water, which is surrounded on three sides by Russian territory and where American combat aircraft typically have not ventured in the past, in recent memory. This flight also comes nearly a month after a B-1B conducted a long-range training mission along a similar route as part of the implementation of a new concept of operations for U.S. heavy bomber sorties earlier this year.

The tense encounters are becoming more frequent of late, not only over the Bering Sea, but over the Mediterranean, Baltic, and Black Sea regions as well.

via ZeroHedge News https://ift.tt/2Vjj5Rt Tyler Durden

Audio of Federalist Society Teleforum on My Book “Free to Move: Foot Voting, Migration, and Political Freedom”

Free to Move—Final Cover

The Federalist Society has posted the audio of their recent teleforum on my book Free to Move: Foot Voting, Migration, and Political Freedom, recently published by Oxford University Press. Professor John McGinnis (Northwestern University) provided some excellent questions and commentary.

For what it is worth, I thought this was one of my best talks about the book, so far. My thanks to the organizers for arranging it, and to John McGinnis for his insights.

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Audio of Federalist Society Teleforum on My Book “Free to Move: Foot Voting, Migration, and Political Freedom”

Free to Move—Final Cover

The Federalist Society has posted the audio of their recent teleforum on my book Free to Move: Foot Voting, Migration, and Political Freedom, recently published by Oxford University Press. Professor John McGinnis (Northwestern University) provided some excellent questions and commentary.

For what it is worth, I thought this was one of my best talks about the book, so far. My thanks to the organizers for arranging it, and to John McGinnis for his insights.

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Did John Roberts Just Put an End to Remand-Without-Vacatur?

Amidst the various commentary on the Supreme Court’s decision to prevent the Trump Administration from rescinding DACA in Dept. of Homeland Security v. Regents of the University of California, Professor Christopher Walker notes a potential implication of the Court’s refusal to consider the justifications for the Trump Administration’s actions offered in the Nielsen memo. Among other things, Chief Justice Roberts’ opinion may have undercut the basis for the occasional practice of remand-without-vacatur—leaving a contested agency action in place while requiring the agency to provide additional explanation or analysis.

In an essay on the Notice & Comment blog, (which you should be be reading regularly if you care about administrative law), Professor Walker explains why the lawfulness of remand-without-vacatur could now be at issue.

As Ron Levin explores in the seminal article on the subject, remand without vacatur is a remedial innovation that has developed in the circuit courts over the last few decades, largely driven by the D.C. Circuit in the 1990s and 2000s. This remedial doctrine allows courts to declare an agency action arbitrary and capricious yet still keep it in place while the agency cures the procedural infirmities on remand. Once the agency has attempted to remedy those procedural errors, challengers can then bring the modified action back to the court for further judicial review. If the agency action returns to court, the agency’s post-remand reasoning and actions are considered part of the administrative record for Chenery I purposes.

In 2014, the Administrative Conference of the United States documented that remand without vacatur has been used more than 70 times by the D.C. Circuit and recommended that, despite that the APA does not expressly provide the remedy, it “should continue to be recognized as within the court’s equitable remedial authority.” In making this recommendation, the Administrative Conference noted that “remand without vacatur is not without controversy. Some scholars argue that it can deprive litigants of relief from unlawful or inadequately reasoned agency decisions, reduce incentives to challenge improper or poorly reasoned agency behavior, promote judicial activism, and allow deviation from legislative directives. Critics have also suggested that it reduces pressure on agencies to comply with APA obligations and to respond to a judicial remand.”

If this remedial device sounds familiar, that’s because it is essentially the remedy Judge Bates utilized in this case, by staying his order vacating the DACA action for 90 days to allow DHS to remedy the procedural errors by providing additional reasons for the DACA rescission. . . .

If remand without vacatur were a permissible administrative law remedy, the Supreme Court here should have had no trouble considering the nonenforcement policy rationales included in the Nielsen memo as part and parcel of the agency’s decision to rescind DACA. . . .

Does this mean that Chenery I, as applied in the DACA rescission case, prohibits remand without vacatur? Roberts certainly does not say so explicitly. Yet it is hard to escape the conclusion in how Chenery I was applied to bar the agency head’s supplemental memo. It will be interesting to see how lower courts (and litigants) interpret Roberts’ opinion when considering whether they can or should remand without vacatur in future cases.

Maybe courts will limit this rejection of remand without vacatur to the unique aspects of this case. After all, as Levin explains, remand without vacatur is most commonly used in the notice-and-comment rulemaking process, perhaps as a form of judicial modesty to not delay the substance of a regulation for perhaps years as the agency goes through another rulemaking process. Here, by contrast, the Supreme Court’s remand with vacatur does not require the DHS to spend years to go through another rulemaking to achieve its purported substantive regulatory objectives. To the contrary, the DHS Secretary could issue a new DACA rescission memo hours or days after the Court’s decision that addresses the two procedural flaws Roberts notes and perhaps also incorporates and expands on the policy rationales included in the Nielsen memo.

As Professor Walker notes, it will be interesting to see how lower courts interpret and apply this aspect of the Court’s decision.

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iAddiction: “I Was A F**king Mess Yesterday”

iAddiction: “I Was A F**king Mess Yesterday”

Tyler Durden

Sat, 06/20/2020 – 11:20

Authored by Scott Galloway via ProfGalloway.com,

Addiction is the inability to stop consuming a chemical or pursuing an activity although it’s causing harm.

I engage with almost every substance or behavior associated with addiction: alcohol, drugs, coffee, porn, sex, gambling, work, spending, devices, and social media. I’ve abused all of them, but don’t think I’m addicted. On a balanced scorecard, these substances and behaviors, abuse and all, have been a net positive in my life, even @twitter.

Most disease and hardship for our species has been a function of scarcity — too little salt, sugar, fat, approval, safety, opportunities to mate. As a result, when we find these things, our brain produces the ultimate reward, the pleasure hormone dopamine. And it makes sense. Nature rewards behaviors that ensure the propagation of the species.

The assembly line, processing power, and Amazon Prime have not only met the minimum thresholds for survival but created a new threat to our species: superabundance. Diabetes, income inequality, and fake news — all are a function of our belief that more is better. Jeff Bezos capturing and hoarding the GDP of Norway doesn’t make sense for the species, but his instincts (fear of starvation, wielding power) reign supreme.

Survival, propagation, and consumption should result in a next generation that’s smarter, faster, and stronger. Where things have come off the rails is a function of our innovation economy moving faster than our instincts. Historically, humans have engaged in activities that have natural stopping cues — the end of a chapter, the end credits. Platforms like Facebook, Instagram, and Netflix have systematically eradicated stopping cues. Even casinos are deliberately laid out without hard angles, so it’s all one continuous space and you keep moving through it, on to the next game.

Technological progress lapping the calibration of our instincts culminates in endless scroll. We’re unable to find the off switch. Unlike our parents and grandparents, for us dopamine release no longer depends on sacrifice, engagement, or grit, but on sitting still, as in 15, 14, 13 seconds episode 5 of Killing Eve will begin. There are more filtered photos, more porn, more equities, more margin, more dopa … more time without the nuisance of needing to engage in … life.

The most recent crack dealers are online trading platforms (OTPs). What does endless scroll look like on a trading platform?

  • Confetti falls to celebrate transactions

  • Colorful candy crush interface

  • Gamification: users can tap up to 1000x per day to improve their position on the waitlist for Robinhood’s cash management feature (essentially a high-yield checking account on the app)

The Ratio

Our institutions (courts, Congress, the SEC) are supposed to slow our thinking so our reflexive instincts are checked and we can decide not to discriminate, not to pour mercury into the rivers, and not to let a bankrupt car rental firm (Hertz) issue shares bound to be worthless. You lose, they win.

Technological change is vastly outpacing our species’ ability to adapt to an endless barrage of stimuli. This discrepancy in modulation has exploded our levels of teen depression and social chaos. We are in a Supermarine Spitfire, accelerating every day, hoping the fuselage holds together as we approach the sound barrier — streaming 31 seasons of The Simpsons, lifelike video games, ubiquitous porn of increasing extremes, high-def documentation in real time of the party your 15-year-old daughter wasn’t invited to, social media algorithms fueled on emotion vs. veracity, and immediate approval of margin for a “bull put spread.”

A Mess

I was a fu**ing mess yesterday after learning of the suicide of Alexander Kearns, a 20-year-old from Naperville, IL, who was interested in the markets and began trading stocks. Alex mistakenly believed he was down $730,000 after trading options on the Robinhood app and took his own life. We don’t know what other factors were at play here, and young men taking their own lives after losing money in the market is not a new phenomenon.

Facebook and Twitter do what CNN and Fox have been doing for decades, but better. I’m afraid Robinhood might become an addictive platform — Instagram for trading. Robinhood users skew young (32% of visitors are between 25-34). The firm reported 3 million new accounts in Q1 2020. Half were first-time traders. In addition, with Vegas and sports wagering all but shut down, OTPs have become the place where emerging gambling addiction can take root and/or a rehab facility where your sponsor is a dealer.

Learning to invest and understanding the markets are good things, as is connecting with friends online … to a point. Social media and gambling have the same addictive psychological mechanism: variable rewards — when you keep performing an action in hopes of getting a possible but unlikely reward. This is the type of behavior that’s the “most addictive and hardest to stop.” Robinhood management and investors have taken cues from big tech, and made a conscious decision to disregard the well-being of our youth for personal enrichment.

Some additional data on the surge in online trading:

  • Excessive trading may be triggered by an addictive process.

  • 12% of all trading activity is from day-traders, yet day-traders are only 1.6% of all profitable traders. 

  • Men trade more than women, and unmarried men trade more than married men.

  • Stock market crashes have been linked to upticks in suicide. 

  • Investors with a large differential between their existing economic conditions and their aspiration levels hold riskier stocks in their portfolios.

Most articles will focus on what we, Americans, view as the profound risk with the surge in rookie online traders … that the markets might go down. Most market tops coincide with retail investors entering. We haven’t, to my knowledge, seen the scale of a market crash driven by twentysomethings investing government rescue funds, levered up via preapproval on their smartphones.

Our elected officials and gross idolatry of money and innovators have overrun the institutions charged with slowing our thinking and keeping our kids safe. Joe Scarborough put it well: “Mark, Sheryl, and Jack, you have revealed yourselves to be vapid vulgarians who put at risk Americans’ health, racial justice, fair elections, and basic truths.”

Where do we turn? The bulk of the pressure to protect kids from device addiction falls on parents — limiting use (severely) and getting other parents at school to limit use as well, so kids don’t feel they are an exception. It’s difficult, and it needs to be done. An “electronics fast,” perhaps for the whole family, can allow the nervous system to reset. Lowering your dopamine threshold allows a smaller amount of pleasure to be satisfying.

The threat of addiction has been slowing our household down. One of our sons demonstrates behavior consistent with device addiction. It’s terrifying. Everything he does, says, and works toward, is in pursuit of the dopa hit waiting on his iPad. His mom and I are doing what most parents would do — reading, seeking outside help, limiting use. But more than anything, we’re trying to slow things down. Time with him, especially outdoors or with books. Time in bed with him telling him stories about his grandfather becoming a frogman in the Royal Navy. Slowing everything down. It appears to be working.

I see Alex Kearns, and I see my oldest son. A nerd, with a big smile, fascinated by the markets and seeking dopa hits. I can’t imagine the pain of that family. I can’t imagine how we’ve lost the script, letting the meaningful, innovation and money, trump the profound, our kids. The youth suicide rate has increased 56% in a decade. Girls between 10 and 14 had a tripling of self-harm episodes between 2009 and 2015. Teens who are on social media for 5+ hrs a day are twice more likely to be depressed than those who are on for less than an hour.

Is it any wonder Tim Cook doesn’t want his nephew on social media? If he wasn’t Tim Cook, would he also say, I don’t want him to have an iPad either?

The weapons are our phones and tablets, and the bullets are social media firms headed by sociopathic oligarchs. And now, we may have a new menace preying on young men: online trading platforms.

We are a virus-ravaged nation where curfew alerts are sent to our phones. Innovation has become synonymous with exploitation. We find solace in the market being high, but the market is not a reflection of the economy or progress, but increasingly of a few firms’ ability to arbitrage the gap between the pace of technology and regulation.

It’s depressing. What to do? I’ll check my likes, mentions, and stocks.

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BLM Co-Founder Admits: “Our Goal Is To Get Trump Out”

BLM Co-Founder Admits: “Our Goal Is To Get Trump Out”

Tyler Durden

Sat, 06/20/2020 – 10:55

While massive protests continue to rage across the country (and beyond) in the name of George Floyd, Black Lives Matter co-founder Patrisse Cullors admitted during a Friday night interview with CNN that “our goal is to get Trump out.”

Cullors, who described BLM organizers in 2015 as “trained Marxists,” compared Trump to Hitler after refusing to meet with him, and referred to Immigration and Customs Enforcement (ICE) as the Gestapo, told CNN‘s Jake Tapper (via Breitbart‘s Josh Caplan):

JAKE TAPPER: I’ve heard a lot of criticism of former Vice President Joe Biden from civil rights activists. The election, obviously, will be a choice. How do you think Biden matches up compared to President Trump when it comes to these issues that are important to you?

PATRISSE CULLORS: Trump not only needs to not be in office in November but he should resign now. Trump needs to be out of office. He is not fit for office. And so what we are going to push for is a move to get Trump out. While we’re also going to continue to push and pressure vice president Joe Biden around his policies and relationship to policing and criminalization. That’s going to be important. But our goal is to get Trump out.

In 2015, Cullors said that BLM would take “any opportunity we have to shut down a Republican convention.”

Was Tucker Carlson right when he said (and was punished with an advertiser walkout from the ‘cancel’ crew at Sleeping Giants) that Black Lives Matter is now a political party?

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Did John Roberts Just Put an End to Remand-Without-Vacatur?

Amidst the various commentary on the Supreme Court’s decision to prevent the Trump Administration from rescinding DACA in Dept. of Homeland Security v. Regents of the University of California, Professor Christopher Walker notes a potential implication of the Court’s refusal to consider the justifications for the Trump Administration’s actions offered in the Nielsen memo. Among other things, Chief Justice Roberts’ opinion may have undercut the basis for the occasional practice of remand-without-vacatur—leaving a contested agency action in place while requiring the agency to provide additional explanation or analysis.

In an essay on the Notice & Comment blog, (which you should be be reading regularly if you care about administrative law), Professor Walker explains why the lawfulness of remand-without-vacatur could now be at issue.

As Ron Levin explores in the seminal article on the subject, remand without vacatur is a remedial innovation that has developed in the circuit courts over the last few decades, largely driven by the D.C. Circuit in the 1990s and 2000s. This remedial doctrine allows courts to declare an agency action arbitrary and capricious yet still keep it in place while the agency cures the procedural infirmities on remand. Once the agency has attempted to remedy those procedural errors, challengers can then bring the modified action back to the court for further judicial review. If the agency action returns to court, the agency’s post-remand reasoning and actions are considered part of the administrative record for Chenery I purposes.

In 2014, the Administrative Conference of the United States documented that remand without vacatur has been used more than 70 times by the D.C. Circuit and recommended that, despite that the APA does not expressly provide the remedy, it “should continue to be recognized as within the court’s equitable remedial authority.” In making this recommendation, the Administrative Conference noted that “remand without vacatur is not without controversy. Some scholars argue that it can deprive litigants of relief from unlawful or inadequately reasoned agency decisions, reduce incentives to challenge improper or poorly reasoned agency behavior, promote judicial activism, and allow deviation from legislative directives. Critics have also suggested that it reduces pressure on agencies to comply with APA obligations and to respond to a judicial remand.”

If this remedial device sounds familiar, that’s because it is essentially the remedy Judge Bates utilized in this case, by staying his order vacating the DACA action for 90 days to allow DHS to remedy the procedural errors by providing additional reasons for the DACA rescission. . . .

If remand without vacatur were a permissible administrative law remedy, the Supreme Court here should have had no trouble considering the nonenforcement policy rationales included in the Nielsen memo as part and parcel of the agency’s decision to rescind DACA. . . .

Does this mean that Chenery I, as applied in the DACA rescission case, prohibits remand without vacatur? Roberts certainly does not say so explicitly. Yet it is hard to escape the conclusion in how Chenery I was applied to bar the agency head’s supplemental memo. It will be interesting to see how lower courts (and litigants) interpret Roberts’ opinion when considering whether they can or should remand without vacatur in future cases.

Maybe courts will limit this rejection of remand without vacatur to the unique aspects of this case. After all, as Levin explains, remand without vacatur is most commonly used in the notice-and-comment rulemaking process, perhaps as a form of judicial modesty to not delay the substance of a regulation for perhaps years as the agency goes through another rulemaking process. Here, by contrast, the Supreme Court’s remand with vacatur does not require the DHS to spend years to go through another rulemaking to achieve its purported substantive regulatory objectives. To the contrary, the DHS Secretary could issue a new DACA rescission memo hours or days after the Court’s decision that addresses the two procedural flaws Roberts notes and perhaps also incorporates and expands on the policy rationales included in the Nielsen memo.

As Professor Walker notes, it will be interesting to see how lower courts interpret and apply this aspect of the Court’s decision.

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Who Can Fire the US Attorney for the Southern District of New York?

Today brings word that President Trump, having summarily disposed of a number of pesky Inspectors General who had the temerity to do their jobs, has now had enough of his own appointment to the position of US Attorney for the SDNY, Geoffrey Berman. Berman, AG William Barr tells us, is “stepping down” (having done “an excellent job”), to be replaced by Jay Clayton of the SEC.

No reasons have been given for the removal; apparently, Berman himself got no word of it until Barr’s press release appeared. Surely Trump and Barr are not motivated by a desire to suppress Berman’s on-going investigation of Rudy Giuliani, nor is the removal connected in any way with the charge, newly-revealed in John Bolton’s forthcoming book, that Trump offered to get SDNY prosecutors to drop their investigation of a Turkish bank (Halkbank) at the request of Turkish president Erdogan.

Putting aside questions about the president’s motives for the firing, and the the possibility that it’s more than his usual mafioso stuff and might actually constitute obstruction of justice, one might think, at least as far as Geoffrey Berman is concerned, that that’s that.  The president hires, the president fires.

But not so fast. Berman says that he’s not going anywhere.

Here’s his position. He was named to the US Attorney position by then-AG Sessions in January 2018, to succeed Preet Bahrara (whom Trump had just fired). For some reason, though, Berman’s name was never formally put forward for required Senate confirmation.

So in April 2018 the federal district court judges voted unanimously to appoint him to the job.

My first reaction, when I read about this, was:  What?!?!  Federal judges appointing Officers of the United States?  Can they really do that? I felt a little bit like I had just found out that Mike Pompeo, say, hadn’t ever actually been confirmed by the Senate, but had been appointed by the Supreme Court to be Secretary of State.

It turns out that they can really do that—or at least, they have been given the express authorization by statute to do that.  28 USC 546 reads:

Vacancies. 
(a) Except as provided in subsection (b), the Attorney General may appoint a United States attorney for the district in which the office of United States attorney is vacant.
(b) The Attorney General shall not appoint as United States attorney a person to whose appointment by the President to that office the Senate refused to give advice and consent.
(c) A person appointed as United States attorney under this section may serve until the earlier of—  
   (1) the qualification of a United States attorney for such district appointed by the President under section 541 of this title; or
   (2) the expiration of 120 days after appointment by the Attorney General under this section.
(d) If an appointment expires under subsection (c)(2), the district court for such district may appoint a United States attorney to serve until the vacancy is filled. The order of appointment by the court shall be filed with the clerk of the court.

Berman was appointed under 546(d); his original appointment was coming to the end of its 120-day lifespan (under sec. (c)(2)), so the court exercised its authority to appoint him to the position “to serve until the vacancy is filled.”

So Berman now says: I don’t serve at the president’s pleasure, like the ordinary US Attorney, because the president didn’t appoint me—the judges did.  The appointment lasts until “the vacancy is filled.” That can’t happen until a presidential nominee to the position has been confirmed by the Senate.

It’s not enough for the AG to appoint a temporary successor (Barr has purported to name Jay Clayton of the SEC to the position) and to say: “There—your appointment has ended because ‘the vacancy is filled’.  Clean out your desk and begone.” That won’t work because the statute gives the AG the authority to appoint a temporary US Attorney only where “the office of United States attorney is vacant.”  But the office of US Attorney for the SDNY is currently not vacant—Berman is in it, duly appointed by the court.

Whether Trump and Barr want to submit Clayton’s name for Senate confirmation is an open question.  But until they do so, Berman’s the US Attorney for the SDNY.

Chaos and dysfunction are likely to prevail in the office unless Trump/Barr back off. My guess is that if both Berman and Clayton show up on Monday morning, the staff of the office will continue to take their orders from Berman. Perhaps we’ll find out.  In any event, it’s another small milestone in the war on the federal prosecutors and the federal judiciary.

 

 

 

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Who Can Fire the US Attorney for the Southern District of New York?

Today brings word that President Trump, having summarily disposed of a number of pesky Inspectors General who had the temerity to do their jobs, has now had enough of his own appointment to the position of US Attorney for the SDNY, Geoffrey Berman. Berman, AG William Barr tells us, is “stepping down” (having done “an excellent job”), to be replaced by Jay Clayton of the SEC.

No reasons have been given for the removal; apparently, Berman himself got no word of it until Barr’s press release appeared. Surely Trump and Barr are not motivated by a desire to suppress Berman’s on-going investigation of Rudy Giuliani, nor is the removal connected in any way with the charge, newly-revealed in John Bolton’s forthcoming book, that Trump offered to get SDNY prosecutors to drop their investigation of a Turkish bank (Halkbank) at the request of Turkish president Erdogan.

Putting aside questions about the president’s motives for the firing, and the the possibility that it’s more than his usual mafioso stuff and might actually constitute obstruction of justice, one might think, at least as far as Geoffrey Berman is concerned, that that’s that.  The president hires, the president fires.

But not so fast. Berman says that he’s not going anywhere.

Here’s his position. He was named to the US Attorney position by then-AG Sessions in January 2018, to succeed Preet Bahrara (whom Trump had just fired). For some reason, though, Berman’s name was never formally put forward for required Senate confirmation.

So in April 2018 the federal district court judges voted unanimously to appoint him to the job.

My first reaction, when I read about this, was:  What?!?!  Federal judges appointing Officers of the United States?  Can they really do that? I felt a little bit like I had just found out that Mike Pompeo, say, hadn’t ever actually been confirmed by the Senate, but had been appointed by the Supreme Court to be Secretary of State.

It turns out that they can really do that—or at least, they have been given the express authorization by statute to do that.  28 USC 546 reads:

Vacancies. 
(a) Except as provided in subsection (b), the Attorney General may appoint a United States attorney for the district in which the office of United States attorney is vacant.
(b) The Attorney General shall not appoint as United States attorney a person to whose appointment by the President to that office the Senate refused to give advice and consent.
(c) A person appointed as United States attorney under this section may serve until the earlier of—  
   (1) the qualification of a United States attorney for such district appointed by the President under section 541 of this title; or
   (2) the expiration of 120 days after appointment by the Attorney General under this section.
(d) If an appointment expires under subsection (c)(2), the district court for such district may appoint a United States attorney to serve until the vacancy is filled. The order of appointment by the court shall be filed with the clerk of the court.

Berman was appointed under 546(d); his original appointment was coming to the end of its 120-day lifespan (under sec. (c)(2)), so the court exercised its authority to appoint him to the position “to serve until the vacancy is filled.”

So Berman now says: I don’t serve at the president’s pleasure, like the ordinary US Attorney, because the president didn’t appoint me—the judges did.  The appointment lasts until “the vacancy is filled.” That can’t happen until a presidential nominee to the position has been confirmed by the Senate.

It’s not enough for the AG to appoint a temporary successor (Barr has purported to name Jay Clayton of the SEC to the position) and to say: “There—your appointment has ended because ‘the vacancy is filled’.  Clean out your desk and begone.” That won’t work because the statute gives the AG the authority to appoint a temporary US Attorney only where “the office of United States attorney is vacant.”  But the office of US Attorney for the SDNY is currently not vacant—Berman is in it, duly appointed by the court.

Whether Trump and Barr want to submit Clayton’s name for Senate confirmation is an open question.  But until they do so, Berman’s the US Attorney for the SDNY.

Chaos and dysfunction are likely to prevail in the office unless Trump/Barr back off. My guess is that if both Berman and Clayton show up on Monday morning, the staff of the office will continue to take their orders from Berman. Perhaps we’ll find out.  In any event, it’s another small milestone in the war on the federal prosecutors and the federal judiciary.

 

 

 

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