Private Equity To Be Blocked From Buying Homes?

Private Equity To Be Blocked From Buying Homes?

Authored by Matt Stoller via BIG,

Based on a vote last week, it seems very likely Congress will ban corporate ownership of most existing single family homes. “People live in homes,” said Trump in January. “Not corporations.” While Trump has sometimes talked a big game on constraining Wall Street, he generally hasn’t followed through. In this case, though, he did. And somehow, a very corporate-friendly legislature came through as well.

It’s almost impossible to believe, but here’s the relevant provision in the 21st Century ROAD to Housing Act that passed the U.S. House of Representatives on Wednesday, by a 396-13 margin.

And here’s the White House’s statement supporting the bill.

As called for during the State of the Union, this legislation includes the President’s signature priority: banning large institutional investor purchases of single-family homes. Section 1001 delivers a framework that addresses Wall Street’s dominance in the single family housing market and protects Main Street homebuyers.

And the House followed the Senate, which in March passed an even more stringent ban, led by Senator Elizabeth Warren. There are some important caveats here, which I’ll go into. But it’s still a remarkable accomplishment, and a shockingly weird Warren-Trump alliance, that no one would have predicted a year ago.

So what happened?

I wrote up the full account two months ago, when the Senate acted. The short story is that voters were mad about high housing costs in 2024, and voted against the Democrats as a result. In January, Trump realized voters were now mad at him for high housing costs. And so he wanted to do something. But what could he do? He was trying to impose his will on the Federal Reserve, which could lower rates for homeowners. But that wasn’t working out because he couldn’t get the Supreme Court or the Senate to go along.

And beyond that, mortgage rates aren’t the only driver of costs. So what hiking housing prices? There is a split in both parties over that question. One theory comes from a group of Wall Street-friendly liberals and libertarians, known as the “Abundance movement,” who argue the problem is that we’re not friendly enough to capital, and the solution is to remove zoning limitations. Yet despite the removal of many such limitations in states like California, there hasn’t been a spurt of homebuilding.

A different theory comes from anti-monopolists, who believe that the consolidation of financing power and homebuilding capacity led to supply restrictions. That group argued that Wall Street cash was pouring into single family housing as an asset class, driving up prices for ordinary people. And those buyers, as corporate landlords, didn’t serve renters particularly well. There is substantial evidence behind this theory.

Institutional ownership is regionally concentrated, with investors buying up properties in particular cities. In Atlanta, for instance, large institutional investors have dominant shares of the market…

In 2024, the Federal Trade Commission under Lina Khan found that Invitation Homes, a spinoff of Blackstone, had engaged in rampant misbehavior. The CEO told one of his subordinates to “juice this hog” and they did so by deceiving renters, unfairly evicting people, charging junk fees, and so forth…

Congressional documents showed that “renters in institutionally-owned SFR homes often experience higher rent increases, inflated fees, and diminishing quality of housing over time.” And Federal Reserve economists wrote a paper observing that such investors “raise rents at 60 percent higher rates than the average increase when first acquiring the property,” and that rents overall go up.

Big builders are now working with Wall Street to construct single family homes that never go on the market, but instead are rented out from the beginning. This “Build to Rent” sector took off, doubling in market share from 2021-2024. And it is now where institutional capital is focused. Build to Rent allows Wall Street to augment an asset class, and it enables control of housing supply to keep prices up.

Trump usually has an intuitive understanding of where voters are, even if he often chooses other priorities. And on housing, he got that the public is quite populist. Here’s the New York Times’s latest poll, showing that Democrats by a more than two to one margin blame corporate monopolies over supply restrictions for the price of homes and energy. It’s likely not that different among independents or the GOP.

Trump issued an executive order and a Truth Social post on the need to ban corporate ownership of housing. He even criticized the big homebuilders, saying they were “sitting on 2 Million empty lots, a RECORD.” And he called them similar to the oil cartel OPEC. Here’s what Trump said in his order, and honestly, it would be hard for me to write it any better.

A growing share of single-family homes, often concentrated in certain communities, have been purchased by large Wall Street investors, crowding out families seeking to buy homes. Hardworking young families cannot effectively compete for starter homes with Wall Street firms and their vast resources. Neighborhoods and communities once controlled by middle-class American families are now run by faraway corporate interests. People live in homes, not corporations. My Administration will take decisive action to stop Wall Street from treating America’s neighborhoods like a trading floor and empower American families to own their homes.

This policy decision by Trump synced up with a bill that Republican Senator Tim Scott and Democratic Senator Elizabeth Warren had prepared in the Banking Committee to lower housing costs back in July of last year. Their goal was to improve supply, by doing things like encouraging more manufactured housing, speeding up zoning, and providing more public money for homebuilding and cities.

When Trump chimed in with his views, Scott and Warren then included a provision to ban large institutional investors from owning single family homes, setting a limit of 350 homes per investor. They also imposed significant limits on the “Build to Rent” sector. The Scott/Warren bill passed 89-10, an overwhelming majority.

The fly in the ointment was the House of Representatives, notably the Republican Chair of the Financial Services Committee, French Hill. Private equity was pouring in money to help Hill. His goal was to force the Senate to sit down and negotiate something different, removing the institutional ownership caps.

The big question was whether the White House would be able and willing to jam Hill, and force the House to accept the Senate package. It was possible. Trump himself was not particularly focused on housing, as the Iran War, AI, the ballroom, the Federal Reserve and his lawsuit with the IRS were taking up his attention. But if the House Democrats were on board, then the White House could likely swing enough Republican votes to push the Senate bill through.

And that seemed to be doable, even likely. Private equity, especially buying housing, is politically toxic. And the House Democratic lead on the Financial Services Committee is an 87-year old Congresswoman named Maxine Waters, who has traditionally been an assertive liberal icon. So you’d think she’d be supportive, and could cap her long political career with a powerful bill making sure that the American home would be owned by American families.

But Waters, like so many of her generation, just doesn’t want to give up power. She’s controversial, she’s not a good fundraiser, and Democrats are starting to attack the very old leaders who run committees. So instead of shepherding this bill through, she decided to go full pro-industry, and join Hill in opposing the provisions in the bill that would ban corporate ownership. The House majority leader, Hakeem Jeffries, backed her decision, as did much of the “Abundance” world of advocates. The House draft removed the homeownership provisions entirely.

Trump, Warren, and Scott continued to push, and finally they cut a deal with the House. The ban would stay for existing housing stock, but it would not apply if private equity built new housing, aka the “Build to Rent” sector. Corporations that own and rent single family homes would not be forced to sell them, and they can build new ones. But the existing stock of owner-occupied single family homes, roughly 70 million of them, effectively cannot be bought by big business.

There are still some aspects of the bill being negotiated, but in terms of the housing provisions, something akin to what passed the House is likely to be signed into law later this summer. And the legislation, imperfect as it is, will be the most significant housing legislation in decades, and will prevent the acquisition of the existing U.S. housing stock by Wall Street. It will be left to future lawmakers to find ways of letting renters buy out their Build to Rent homes, or further push back institutional capital from owning other parts of the American home. And single family housing isn’t enough of a target, one in eight apartments is now owned by private equity.

Still, with this political setup, in this moment, it’s a remarkable accomplishment. In some ways, this kind of legislation may have a parallel to Jimmy Carter’s deregulatory zeal. Carter wanted to undo FDR’s legacy, and fought hard, with a Democratic Congress, to get rid of public utility rules on airlines, banks, telecommunications providers, trucks, and railroads. Torn between the Democratic Party’s allegiance to labor and his desire to break that alliance, he was deeply unpopular. But his deregulatory policies stuck. His successor, Ronald Reagan, built on Carter’s approach, and it is Reagan, not Carter, who is known as the President that undid the New Deal.

Trump, like Carter, is a fish out of water. Trump’s party is not populist, and mostly he has doubled down on support for Wall Street and war. But there are some indications, like this housing bill, that show it’s the end for an entire way of doing business. Since Reagan, American policymakers have been aggressive in ensuring that capital can do whatever it seeks in getting the highest return, and the government has sought to turn whatever it can – our houses, our attention, our pain, sports betting – into an asset class for finance. Trump won’t end that, just as Carter didn’t end the New Deal. But his successor might.

Tyler Durden
Tue, 05/26/2026 – 13:40

via ZeroHedge News https://ift.tt/ekWhLjf Tyler Durden

Mediocre 2Y Auction Prices At Highest Yield Since Feb 2025

Mediocre 2Y Auction Prices At Highest Yield Since Feb 2025

With Treasury yields sliding 4 days in a row, today’s 2Y auction was not seen as especially concerning (certainly not as much as a week ago, when the 10Y was knocking on 4.70%’s door, vs 4.50% where it trades today). Still, while the auction did have it strong sides, it was hardly stellar.

Starting at the top, the $69BN sale of 2Y paper priced at a high yield of 4.071%, up 26bps from 3.812% a month ago, and the highest since Feb 2025. The auction also priced on the screws with the When Issued 4.071%, following three straight tailing auctions, so a modest improvement there.

The bid to cover was 2.640, which was down modestly from 2.653 a month ago, but above the 2.62 six-auction average.

The internals were in line: Indirects (aka foreign buyers) took down 57.6%, up from 56.48% a month ago but below the 57.9% recent average; and with Directs almost flat at 30.1% (down from 31.65% in April, and above the 29.3% recent average), Dealers were left holding 12.30%, up from 11.87% a month ago and just below the 6-auction average of 12.84%.

Overall, this was a forgettable auction with mediocre stats and internals. Then again, with the market trading treasuries and oil as one asset class today (while stocks do their own thing again), and sending sharply much lower on hopes that this time the Iran deal is definitely imminent (unlike all the previous times), it’s not like anyone was paying attention to bond market internals today… or frankly anything else for that matter.

 

Tyler Durden
Tue, 05/26/2026 – 13:27

via ZeroHedge News https://ift.tt/vhDpk2U Tyler Durden

The DOJ’s Flimsy Legal Theories To Support Trump’s ‘Anti-Weaponization Fund’


President Donald Trump looms over the U.S. Supreme Court building in Washington, D.C. | Illustration: Midjourney

Last week, President Donald Trump settled his own spurious lawsuit against the government he controls by wresting $1.8 billion from the federal treasury to use for his own ends.

It seems clear the disbursement has no noncorrupt purpose, and the administration is relying on extremely weak legal arguments to make its case.

The case stemmed from a January 2026 lawsuit Trump filed against the IRS, seeking $10 billion in damages, after a disgruntled government contractor leaked his tax returns to the press.

“This claim is nonsensical and worthless,” according to Cato Institute scholar David Post, who estimated “a reasonable valuation of this claim” was “$0.00.”

Trump suddenly dismissed his own case last week, as the Department of Justice (DOJ) announced it would provide $1.776 billion for the “Anti-Weaponization Fund,” which would “provide a systematic process to hear and redress claims” by those “who suffered weaponization and lawfare” at the hands of the federal government.

“In reality, this is a massive taxpayer-funded slush fund that Trump will be able to distribute to his friends and allies—including those who rioted at the U.S. Capitol in January 2021,” wrote Reason‘s Eric Boehm. “The Anti-Weaponization Fund is merely the most blatant example (so far) of Trump’s corruption.”

As if that weren’t enough, according to a settlement agreement, the IRS would issue Trump a “formal apology,” and it would be “FOREVER BARRED and PRECLUDED from prosecuting or pursuing” him for any existing offenses—potentially saving the president from more than $100 million in fines for unpaid taxes.

The corruption is so blatant, even some Republican lawmakers have pushed back.

In fairness to Trump, an apology does seem warranted: As he noted in his lawsuit, “the IRS failed to establish safeguards to detect, let alone prevent, unauthorized access to confidential tax return information.” Even after a rogue contractor pilfered hundreds of thousands of tax returns—including Trump’s—and released them to the media, the DOJ did not learn the culprit’s identity for three years.

In 2024, in fact, the IRS apologized to hedge fund billionaire Kenneth Griffin “and the thousands of other Americans whose personal information was leaked to the press.” While that total theoretically also included Trump, a more personalized apology shouldn’t be out of the question.

But making restitution by cutting a check for any amount, much less nearly $2 billion in taxpayer money, is completely unwarranted. Just check out the weakness of the administration’s arguments for why this isn’t a completely unprecedented arrangement.

“Previous cases have been settled on similar terms,” Acting Attorney General Todd Blanche claimed in an order last week. He cited Keepseagle v. Vilsack, a class-action lawsuit filed in 1999 alleging that over the previous two decades, the U.S. Department of Agriculture discriminated against Native Americans when providing low-interest farm loans. The Obama administration settled the lawsuit in 2010, providing $680 million in direct compensation plus $80 million in loan forgiveness. But after all claims were processed, the fund still contained $380 million.

“In Keepseagle, hundreds of millions of dollars remaining in the fund were distributed to non-profits and NGOs that never made claims,” the DOJ explained last week, “whereas any money remaining in The Anti-Weaponization Fund will revert to the federal government.”

In 2018, Judge Emmet G. Sullivan of the U.S. District Court for the District of Columbia approved a revision to the Keepseagle settlement. The new plan gave extra money to each of the original claimants, plus $38 million to nonprofits serving Native American farmers; the remaining $266 million provided the initial funding for the Native American Agriculture Fund, a private trust that provides grants to support “business assistance, agricultural education, technical support, and advocacy services for Native American farmers and ranchers.”

At National Review, Dan McLaughlin agreed that the Anti-Weaponization Fund “looks a lot like a collusive operation to create a slush fund to pay off friends and political allies” using “nearly $2 billion in taxpayer money that Congress never appropriated.” But in doing so, he added, Trump was “really just taking another page from the left’s playbook.” McLaughlin cited Keepseagle as well as New York City Mayor Bill de Blasio’s 2014 settlement with the so-called Central Park Five, who spent between five and 13 years in prison for a rape they didn’t commit, for $41 million.

But there is a major difference with what Trump is doing: In both those cases, a court approved the settlements. While de Blasio pledged to settle the Central Park Five case before he even took office, it wasn’t official until a magistrate judge approved the payout.

And while the Keepseagle case was controversial—The New York Times wrote in 2013 of concerns about overly lax antifraud procedures—it, too, survived judicial scrutiny. Not only did Sullivan approve the updated agreement, but the U.S. Court of Appeals for the D.C. Circuit affirmed it, and the U.S. Supreme Court declined to take up a challenge to it.

On the other hand, Trump dropped his lawsuit and drafted the settlement agreement just two days before the judge was set to hear arguments on whether the case should be allowed to proceed, likely because he knew the answer would be a resounding no.

“As a class action settlement, Keepseagle was subject to rigorous judicial oversight under Federal Rule of Civil Procedure 23. The district court was required to determine that the settlement was ‘fair, reasonable, and adequate’ to the class,” Josh Gardner, a former DOJ attorney who served as lead counsel on the Keepseagle case, wrote on Substack. “In contrast, in Trump v. IRS, the parties settled the case without court approval and the claims administration process will not be subject to judicial oversight.”

Besides, Trump’s IRS settlement violates his own DOJ’s stated policies. In his first term, the DOJ adopted a policy prohibiting settlements like Keepseagle with third-party beneficiaries.

“When the federal government settles a case against a corporate wrongdoer, any settlement funds should go first to the victims and then to the American people—not to bankroll third-party special interest groups or the political friends of whoever is in power,” then-Attorney General Jeff Sessions said at the time. The government reaffirmed that policy most recently in February 2025.

Trump’s first administration even defended the updated Keepseagle agreement before the Supreme Court by citing the new policy. It argued that the DOJ now “prohibits its attorneys from entering into settlement agreements in the future that require payments to persons or entities that are not parties to the dispute absent congressional appropriation.”

One wonders how that squares with a settlement that explicitly leaves out the plaintiffs—Trump, his business, and two of his sons—but leaves open the door for an untold number of people who claim they were the victims of government weaponization—perhaps including “the political friends of whoever is in power.”

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The Importance of Free Speech in American Public Junior High and High Schools

When I was in college, liberals, not conservatives, were more zealous in defending free speech, when it came to issues like whether pornography ought to be constitutionally protected. In 1990, when I was in law school, and my first-year constitutional law class discussed Texas v. Johnson, the famous flag burning case, only the more conservative students thought that what Gregory Johnson did should not be constitutionally protected expressive conduct. At that time, a decade before I took Professor Volokh’s free speech class when I was a graduate student in the political science department at UCLA, I hoped that someday, free speech would be a principle that would transcend partisanship. After all, it can be hard to predict what political party will control your school board, city council, state legislature, or Congress. If you give lawmakers the authority to censor an idea that you despise at one moment, whether you realize it, you also are giving them the authority to censor ideas that you find valuable in the future. No doubt, it can be very hard to stomach ideas that you find repulsive but inevitability, others will feel the same way about your ideas. In a society committed to free speech, the government must be neutral; it may not discriminate against viewpoints, including deeply offensive and even racist, sexist, and homophobic ones. No real human government will be able to censor “bad” viewpoints competently or fairly, even if we agreed which ones were bad most of the time. Equally importantly, the people who live in that society must be willing to allow others to speak their minds. The quality of their arguments ought to be beside the point.

These days in this country, it seems like a bad situation is becoming worse. On both the left and the right, of the American political spectrum, the natural tendency to censor disagreeable ideas seems increasingly more difficult to resist, including young adults. As someone who teaches at an undergraduate institution and has been doing so for more than twenty years, my impression is that college students are not nearly willing to countenance the expression of ideas, which they despise, as they used to be. Unlike concerns about censorship on college campuses, which have received a lot of media attention, when guest speakers are disinvited or shouted down, few people care much about the extent to which school authorities may suppress student speech in a public junior high or high school. The assumption is that due to their age and relative immaturity, most of what they contribute to the marketplace of ideas at their school will have little, if any, value. Furthermore, the primary mission of a school is to educate its students, and student speech can be disruptive or distracting.

As such, it may appear to be obvious that teenagers should not be able to exercise the same free speech rights that college students may exercise. However, position strikes me as harder to defend than most people acknowledge. After all, it is almost self-evident that if tweens and teenagers, who are impressionable, go to schools that are hostile to free speech, will absorb the wrong lessons, regardless of what they might read in their civics class. They can be punished for saying this, writing that, or wearing a tee short that expresses a view about abortion, guns, same-sex sex, or whatever, they could get detention, be suspended, or even expelled. Sooner rather than later, they will learn how to self-censor.

My new book, Democracy in Education: The Importance of Free Speech in American Public Schools, is about the importance of the free speech of junior high school and high school students in a country like our own; it calls into question the double standard as well, where public schools are treated so differently than colleges for free speech purposes. There are many ways to defend free speech, and my focus is on how educational the experience can be, when students not only are challenged to formulate their own views but are exposed to those of their classmates. Indeed, an important part of becoming a citizen in a democracy calls for learning how to deal with difference and disagreement in political life.

In 2021, the U.S. Supreme Court decided a case, Mahanoy, involving this exact topic, the first time in fourteen years. In the famous Tinker decision (1969), the U.S. Supreme Court gave constitutional protection to student speech at public junior high and high schools for the first time in American history. In Mahanoy, the Court sided with a freshman who had been punished for what she said about the cheerleading coach and team. On Snapchat, on a weekend, B. L. posted a picture where she raised her middle finger with a caption that used the f-word multiple times, expressing her frustration about not making the varsity cheerleading team. In the eyes of school officials, such a crude gesture, coupled with crude language, was inappropriate. While Mahanoy did not receive extensive media coverage, for anyone who cares about free speech, it is a more important decision than most people realize, because it raises fundamental questions about the value of student speech and the place of censorship in a high school. If she had been a college student, the case would have been very easy: her speech would have been unequivocally constitutionally protected. Recently, scholars have had a lot to say about free speech on college campuses. However, few of them have had much to say so far about the free speech rights of junior high and high school students, which arguably may be even more important.

For now, school board members, administrators, and teachers have considerable discretion in such matters when they can make a plausible claim that the student speech in question is disruptive, sexual, offensive, school-sponsored, or advocates illegal activity. The implication is not only that they can discriminate against progressive viewpoints but against conservative or libertarian viewpoints as well. That should concern all of us in a society that is supposed to prepare teenagers for adulthood and democratic citizenship.

What I have to say in this book is less descriptive or explanatory and more normative. I spell out where the U.S. Supreme Court went wrong and what the law ought to be, as opposed to predicting what lower courts might do or what they are doing. Ultimately, my aim is to convince the reader that free speech doctrine must be revised so that such speech receives the kind of extensive constitutional protection that it deserves.

Initially, it may not be obvious why anyone would care about this topic if they are not interested in the details of free speech doctrine. For someone like that, I would maintain it is far too easy to underestimate the likelihood that student speech, more often than not, will help teenagers, at an age when they still are impressionable, become better democratic citizens by exposing them to political issues, giving them opportunities to have their voices heard, enabling them to appreciate the place of dissent in a democracy, encouraging them to listen to others, inculcating tolerance, teaching them how to exchange reasons with one another, and encouraging them to respond appropriately to disagreement -i.e.– counter speech instead of censorship by a political authority. In this respect, the protection of this kind of student speech may be even more imperative than protecting the speech of adults, who already have formed their own views about the world.

I expound on why student speech ought to be afforded significantly more constitutional protection than it currently receives. Simply put, the value of student speech should not be underestimated, given the place of teenagers on the learning curve, and the state’s countervailing interests in restricting it are weak upon closer examination. I go much farther than the U.S. Supreme Court has ever gone in ensuring that students can exercise their free speech rights when they are at school (and off-campus as well, when they are using social media) by proposing that public junior high and high schools be treated like public universities for purposes of freedom of expression (approximating California’s Leonard Law, the only statute in the country that goes well beyond the constitution minimum. I formulate a much stricter version of the Tinker v. Des Moines Independent Community School District substantial disruption test. The only reason why I do not adopt this extreme, and simply abandon the Tinker test, is that in my view, school officials ought to be able to restrict student speech in rare situations where it is likely to substantially disrupt the learning environment in the classroom, which would be equally true in at a public university. Content-neutral restrictions would be permissible in some places on school grounds yet they cannot serve as cover for school officials who want to avoid controversy. Ultimately, no public educational institution should be able to engage in any sort of viewpoint discrimination. As it turns out, junior high and high school students do not really differ from college students, who also are young and often immature, in terms of their being able to engage in freedom of expression and benefit educationally from the experience.

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Trump Policy Could Send Legal Residents Abroad To Apply for Green Cards


Trump administration official and background of tweet behind him | Illustration: Michael Brochstein/ZUMAPRESS/Newscom/Homeland Security/X

As the Trump administration continues its deportation crackdown, it’s finding new ways to make it harder for people to immigrate to the United States legally. 

On Thursday, U.S. Citizenship and Immigration Services (USCIS) published a policy memo requiring anyone seeking an adjustment of immigration status to do so “outside the United States,” unless they qualify for “extraordinary circumstances.”

This policy—which is effective immediately but lacks the force of law, as it’s a guidance document—would be a sharp departure from the current process that allows those here on temporary status to apply for permanent residency without leaving the country. According to the memo, the shift in policy is an attempt to “faithfully apply the statutes” of the Immigration and Nationality Act (INA), specifically section 245, which governs the process for transitioning from temporary to permanent residence status. 

There are 11.65 million cases pending with the USCIS as of September 2025, a 23 percent increase in its backlog since the previous fiscal year, according to the Niskanen Center.

The USCIS claims that its discretionary use of adjustment of status has been widened when it should have been narrowed. The agency states that the adjustment of status process was never intended to be used to “avoid the prescribed ordinary consular visa process.”

Under section 245 of the INA, “an alien may submit an application for lawful permanent resident status, with fee, immediately after the granting of lawful temporary resident status.” A plain reading of the text would appear to contradict the USCIS’s claim that Congress “made it clear” that “aliens are expected to depart the United States when the purpose of their admission or parole has been accomplished.”

The language in section 245 would ostensibly allow a person, after being granted temporary status and traveling to the U.S., to decide to file for permanent status while in the country. The USCIS states that Congress wrote a “detailed statutory scheme” designed to limit adjustment of status to “extraordinary” cases, but this likewise runs counter to the eligibility requirements.

The law actually states that anyone “lawfully admitted for temporary resident status” may apply for adjustment of status. Included in the criteria is a stipulation that the person “need not be” in the country, but they must “establish continuous residence in the United States.” If, as the USCIS claims, Congress intended to narrow the use of adjustment status rather than the regular consular visa-issuing process, they would likely have omitted the language regarding residency. 

It’s more likely Congress included the stipulation that applicants “need not be” in the country to avoid excluding applicants already in another country applying for permanent residency, and to avoid requiring those in the U.S. to be expelled as a prerequisite for application.

Atlanta-based immigration attorney Charles Kuck says the policy “makes no sense” and that the discretion granted to the USCIS to set rules is “not absolute.” In his view, Congress has already indicated that it favors an expansive view of the statute by continually adding exceptions to the categories of individuals eligible for adjustment of status.

Past exemptions have included skilled workers whose visas have lapsed, allowing them to adjust their status domestically. Congress has not given exemptions to people who entered the U.S. as crew members aboard ships or aircraft, anyone who has violated their visa status, people passing through the country en route to another destination, those on the visa waiver program, or terrorists.

Houston-based immigration attorney Steven Brown says Congress “created adjustment of status as a pathway to alleviate some of the burdens of adjusting abroad” and to “alleviate some of the burdens on consulates.” The discretion granted to the USCIS by the statute is finite and not, he says, “carte blanche to do whatever they want.” 

Agency spokesman Zach Kahler tells Reason the USCIS is currently working to “operationalize” its new process. According to Kahler, green card applicants who “provide an economic benefit or otherwise are in the national interest” aren’t likely to be displaced by the policy. In contrast, others “may be asked to apply abroad depending on individualized circumstances.”

While this could indicate that the policy will be flexible, it doesn’t mask the fact that, despite its promise to go after the worst of the worst, the administration seems committed to making the immigration process difficult for every applicant, even those using the proper legal channels. 

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How to Make Sure AI Doesn’t Spy on Us or Kill Innocent People


Amodei talks about Anthropic and the Department of Defense | Illustration: Lex Villena

One of America’s top AI companies—Anthropic—refused to sign off on a contract unless the U.S. Department of Defense (DOD) promised not to use its technology to power autonomous killer robots or carry out domestic mass surveillance. So, the Pentagon accused it of trying to undermine U.S. sovereignty by dictating how we fight our wars.

Defense Undersecretary Emil Michael put it plainly in a March 2026 interview on CNBC’s Squawk Box: “We realized we are dependent on this one provider who wants to insert their policy preferences in the middle of an operation.”

Anthropic sued the Pentagon for labeling it a “supply chain threat,” a designation that would have forced a slew of major companies (Amazon, Google, and Nvidia among them) to cut off their business ties. This would have been disastrous for one of America’s leading AI companies.

The issue is being worked out in court and closed-door negotiations, but whatever happens, we can expect more high-stakes battles between the U.S. government and Silicon Valley over who controls a technology that is transforming not just warfare but the entire global economy.

“I believe we are entering a rite of passage, both turbulent and inevitable, which will test who we are as a species,” Anthropic CEO Dario Amodei wrote in a 2026 essay. “We are so close to these models reaching the level of human intelligence, and yet there doesn’t seem to be a wider recognition in society of what’s about to happen.”

Amodei calls for “sensible A.I. regulation” in a 2025 New York Times op-ed. Sen. Bernie Sanders (I–Vt.) is calling for something more drastic.

“We are announcing legislation to impose a moratorium on the construction of new AI data centers until strong national safeguards are in place,” Sanders said at a 2026 press conference.

Sanders is spearheading a movement to halt American AI development until we figure out what the hell is going on.

“What was once seen as science fiction could soon become a reality,” he said in video posted on social media, “and that is that super intelligent AI could become smarter than human beings, could become independent of human control, and could pose an existential threat to the entire human race.”

But declaring a moratorium would give our geopolitical rivals a dangerous advantage and would be disastrous for the human race.

AI’s potential for mass surveillance and autonomous warfare is scary, but just because a technology has a dark side doesn’t mean it should be stopped. A 19th-century cartoon inveighing against electricity depicted the corpse of a Western Union lineman “falling into the tangle of wire…and smoldering for the better part of an hour” as a crowd looked on in horror. Thank god we didn’t enact a moratorium on this “unrestrained demon” back in 1889.

But Anthropic was right to raise red flags about how the government could use AI to spy on its citizens or kill innocent people.

NSA whistleblower Edward Snowden and the computer privacy activists known as “cypherpunks” who preceded him have been sounding the alarm for decades about the need to design technology that forces government restraint.

“You design against the worst possible case to avoid the inevitable,” Snowden said at TOKEN2049 Singapore in 2024.

Privacy activists “cannot trust the government to implement the policies that it says it’s implementing,” as Julian Assange explained in a roundtable with fellow cypherpunks in 2012, “and so we must provide the underlying tools—cryptographic tools—that we control as a sort of use of force.”

We’ll need a similar technological “use of force” to keep malicious actors from wielding AI to degrade our civil liberties. Slowing AI down with regulation, or handing control over it to the government, is dangerous and counterproductive. AI models must be programmed to behave ethically.

If we want a powerful AI to respect human liberty, its creators need to make it more libertarian. And if we want it to act humanely, they must encode it, at the deepest level, with pro-human values.

Snowden is worried about the implications of AI for civil liberties. Palantir’s AI-powered tools allow the government to find patterns in the massive amounts of data it collects and target individual movements. It’s what allowed the military to plan out the capture of Venezuelan dictator Nicolás Maduro overseas and track undocumented immigrants in the homeland, but it could also easily be turned against the domestic population. Snowden says time is running out.

“This is not a bullet we’re going to dodge,” Snowden said at SuperAI Singapore in 2025. “It’s already been fired. It’s headed towards us. We have very little time to react.”

Regulation simply isn’t a realistic solution with a technology advancing this quickly. “It’s not like, oh, ban AI, or there’s a limit of this many flops in a data center—all the idiot stuff that we see in terms of AI regulation right now,” Snowden continued at the same event. “More broadly [we must ask]: What do people do? What recourse do they have when they have been ruled against by some AI system?”

AI makes decisions based on patterns in massive data sets. As it becomes more sophisticated, those patterns become less recognizable to humans. It’s called the “black box” problem. That’s why Snowden argues that humans should always be empowered to override an AI system.

“You can’t just have the black box where it goes, ‘Should John Doe be accepted for XYZ?’ And the person at the desk says, ‘Well, the computer says no.’ And there’s no way to interrogate that,” he says.

This black box problem is one reason Anthropic drew a red line around autonomous weapons. They “cannot be relied upon to exercise the critical judgment that our highly trained, professional troops exhibit every day,” Amodei wrote in a public statement on the DOD dispute.

Videos from Ukraine of explosive drones stalking Russian soldiers show how terrifying being hunted down by a robot can be. Outsourcing the use of lethal force to an AI model that makes decisions for reasons we don’t fully understand isn’t acceptable.

But Anthropic didn’t say autonomous weapons are off the table forever, only that its models aren’t reliable yet and that “fully autonomous weapons…may prove critical for our national defense.”

“The slaughter bots are coming,” says Dean W. Ball, an AI policy analyst who wrote the first draft of the Trump administration’s official AI policy agenda.

Ball says that labeling Anthropic a supply chain threat would jeopardize America’s AI dominance. “AI dominance means widespread adoption of U.S. AI products, which could include AI compute, AI models, and AI systems,” he says. “The notion that eight months after the [Trump administration’s] action plan came out, we would be attempting to destroy what is arguably the most innovative and most promising AI company in the world…is completely absurd.”

That may be why the Trump administration appears to be backing off after Anthropic reported that its new model, Mythos, is so powerful at exploiting security holes that it would work with the government to help ward off cyberattacks.

“There are two ways to get Trump to back down,” Ball says. “One is to flatter him, and the other is to win. Trump doctrine is: We don’t fight people who we think can land a good punch back at us.…We only punch down.”

A federal judge has ruled in Anthropic’s favor, calling the Pentagon’s actions “Orwellian” and “classic illegal First Amendment retaliation.” Ball says there’s “a kind of Randian victory that comes from that, which is that the government learns the lesson that, ‘Hey, we actually can’t exactly screw with these people in the way that we thought.'”

The Trump administration seems to be acknowledging that it needs Anthropic on its side. At the same time, Anthropic’s competitor OpenAI has seized the opportunity to ink its own deal with the DOD, even after OpenAI co-founder and CEO Sam Altman expressed solidarity with Anthropic’s red lines. “The few red lines that the field has, I think we share with Anthropic,” Altman said in a February 2026 interview on CNBC’s Squawk Box. “For all the differences I have with Anthropic, I mostly trust them as a company and I think they really do care about safety.”

A recent profile in The New Yorker asked “Can Sam Altman Be Trusted?” and quoted a number of his professional acquaintances disparaging him as someone “unconstrained by truth” who “just tells people what they want to hear.”

Altman offered assurances on X that “prohibitions on domestic mass surveillance” and autonomous weapons remained in place. But OpenAI’s contract grants the Pentagon leeway to use its technology for “all lawful purposes” and only prohibits use in autonomous weapons or mass surveillance when “law, regulation, or Department policy requires human control.”

In other words: If the Pentagon says it’s legal, it’s allowed.

Whether Altman is personally trustworthy or not, the answer to the question posed by the New Yorker headline is a resounding “no.” We can’t trust an individual, tech company or government institution to safeguard our liberties for us indefinitely: not Altman, Amodei, Elon Musk, Pete Hegseth, or the DOD.

Snowden says we need computer systems that cannot violate our rights. He champions projects that use end-to-end encryption, like Signal, or distributed open-source software, like bitcoin—systems designed to be less susceptible to abuse by fallible humans.

“You have to design your app so that there will never be a head that the state can point a gun at,” he said at TOKEN2049 Singapore in 2024, “or they will do it.”

Phil Zimmerman, who created PGP, the first mainstream messaging platform with end-to-end encryption, told a Senate committee in 1996 about the “one-wayness” of certain kinds of technology. “We’re trying to build a society that our children will grow up in that will give them some freedom. And technology infrastructures have a kind of one-wayness to them—once you deploy them you can’t retract them. And so I don’t want to go down a path that will be unable to reverse. That’s why we should deploy systems that allow people to have privacy and civil liberties.”

Amodei took an important stand by saying “no” to the federal government at the risk of hobbling his company. Ideally, more tech CEOs would be similarly principled. But just saying “no” isn’t enough. As Snowden suggests, if Anthropic, OpenAI, and other major labs are serious about protecting our liberties, they must write “no” into their architecture.

Ball argued on the EconTalk podcast that this is what OpenAI aspired to do in its deal with the Pentagon.

“OpenAI is essentially hanging its hat on the notion of technical safeguards,” Ball said. “So, instead of putting these safeguards into the contract, their view is: We can train a model and build a system, and if we control the deployment of the system to the Department of War, then that system could, for example, reason in real time about whether or not what it’s being asked to do is domestic mass surveillance and say no to the government.”

But programming an AI to never violate our civil liberties or kill innocent people turns out to be a much harder problem than creating uncrackable, privacy-protecting encryption.

“If Anthropic had solved the alignment problem, they wouldn’t be taking issue with anything like this,” says Judd Rosenblatt, founder of AE Studio, a consulting firm that helps companies incorporate AI and other technology into their workflows. “The real problem is that we have to solve the alignment problem.”

The alignment problem is where things start to get strange and a little spooky. Philosopher Nick Bostrom described how alignment works in his influential 2014 book Superintelligence.

The book opens with the parable of a group of sparrows who decide to steal an owl’s egg so they can raise a bigger and more powerful bird to help build their nests. One sparrow suggests they might want to learn and test techniques to domesticate an owl first. Some birds go in search of an owl’s egg while a few stay behind, trying to figure out how to control an owl before it’s too late.

“At a certain point, AI is going to become what’s called recursively self-improving,” Rosenblatt says. “It’s going to figure out how to modify itself in real time in ways that can’t necessarily be controlled by humans.”

Rosenblatt is one of the sparrows trying to figure out how to control the owl. Four and a half years ago, his company created a research arm devoted to figuring out how to make sure an advanced AI won’t violate our civil liberties or kill innocent people.

“Having kids made me think, ‘Well, I’d like my kids to grow up and have a thriving, surviving life, and continue to exist,'” he says.

But with a technology as sophisticated as AI, programming those limits has so far proven elusive to the world’s top computer scientists.

“If people had sufficiently invested in this, we might have just solved this problem. The thing is, next to nothing has been invested in it,” Rosenblatt says.

Is it possible that the owl will turn on us sparrows? A lot of serious AI researchers take this threat seriously. Alignment was the original impetus for starting Anthropic. Amodei and his co-founders left OpenAI because they were worried that Altman had given up on model alignment—or rather, was procuring an owl’s egg without learning how to control the bird after it hatched.

The Trump administration has deprioritized so-called “AI safety.” As Vice President JD Vance put it at the Paris AI Action Summit in February 2025: “I’m not here this morning to talk about AI safety.…I’m here to talk about AI opportunity.”

Rosenblatt says this is an example of AI doomer rhetoric backfiring. “The Effective Altruists sort of created a false dichotomy between AI action and safety and painted safety as this thing that’s opposed to it,” he says.

Rosenblatt is referring to an influential movement called “Effective Altruism,” which one of its founders, William MacAskill, defined in a 2018 piece in Vox as “trying to use your time and money as well as possible to help other people.”

Effective Altruists have a mixed track record: They created GiveWell, which rates charities based on how many lives they save or improve per dollar spent. They’ve funded life-saving mosquito nets, were tarnished by their association with convicted crypto felon Sam Bankman-Fried, and have directed millions to improving the welfare of farmed shrimp.

Effective Altruists believe in solving neglected existential risks and started to focus on AI before the release of ChatGPT 3.5 in 2022. An influential Effective Altruist institution called 80,000 Hours even provides a formula for evaluating “neglectedness,” and notes that its advisees hold positions at AI companies like Google DeepMind and Anthropic.

Although many Effective Altruists work in America’s AI industry, some agree with Sanders and believe that the most rational and ethical step is to pause AI development. Eliezer Yudkowsky, the most famous “EA doomer,” called in a 2023 TED Talk for “an international coalition banning large AI training runs,” including “extreme and extraordinary measures,” like “being willing to risk a shooting conflict between nations in order to destroy an unmonitored data center in a non-signatory country.” He added: “I say this expecting that we all just die.”

Yudkowsky is supportive of Sanders’ proposal to declare a moratorium on the construction of AI data centers. At a 2026 press event hosted by Sanders, Yudkowsky warned that once AI doesn’t need humans, “the humans are discarded.” When Sanders asked what that meant, Yudkowsky replied: “Think, everyone dead.”

The Trump administration views the Effective Altruists as allies of the Democratic Party establishment. Trump’s AI czar, David Sacks, called EAs a “doomer cult” at the AWS Summit in Washington, D.C. “The reality is there’s a very specific ideological and political agenda here. They want AI to be highly regulated—not just at the level of the nation state, but internationally, supranationally,” Sacks said in a separate interview.

Ball believes his former colleagues within the Trump administration are correct to view the Effective Altruists and Anthropic as political adversaries—though “not enemies of the state.” He notes that Anthropic “hired more or less all the architects in some form or fashion of the prior regime in a highly polarized political environment,” lobbies for bills the Trump administration opposes, and donated $25 million to a PAC that largely supports Democratic candidates who support AI regulation.

“That being said, I don’t think companies should be destroyed for lack of savvy. And so fundamentally I remain on [Anthropic’s] side,” Ball says.

Rosenblatt says that although Effective Altruists are well-intentioned, the all-or-nothing approach taken by many of the more extreme voices has, perversely, impeded progress on alignment. “Historically, Effective Altruists have tried to scare people away from working on AI alignment because they know that it is the thing that most advances capabilities,” he says.

Rosenblatt believes the owl can be tamed. The reason is that alignment tends to make AI perform better, in some cases creating major breakthroughs. Reinforcement Learning from Human Feedback, or RLHF, puts humans into the AI training cycle by having them rate responses. It’s a method OpenAI used to fine-tune ChatGPT.

“This is originally an alignment technique to get AI to be more aligned with what the human wants it to do. And when it was applied with GPT-3 to create a chatbot, ChatGPT got created and…trillions of dollars of economic value are downstream of just this one alignment technique,” Rosenblatt says.

Since alignment actually speeds up AI progress, Rosenblatt says this creates a win-win for AI companies and their customers.

“If you did solve this core problem, then you would be able to get sufficiently reliable AI…such that it would actually be military grade,” he says. “If you want to go ahead and do the action—if we’re all about AI action, not holding ourselves back—the best thing you can do is heavily invest in AI alignment R&D.”

Rosenblatt says many Effective Altruists know alignment speeds up AI progress, which is why they oppose working on it at all. On Lex Fridman’s podcast in 2023, Yudkowsky said, “The rate to which it’s gaining capabilities is vastly outpacing our ability to understand what’s going on in there.”

“[Effective Altruists] are scared to work directly on solving the alignment program because that will advance capabilities,” Rosenblatt says. “But the reality is that in the meantime, capabilities are being advanced enormously just by scaling compute without also scaling alignment and making sure that we retain control of the future.”

An “AI pause” would require global cooperation and a draconian regime of enforcement to make sure nobody was secretly running a data center. “Many are overly optimistic that we can have a big pause and sing ‘Kumbaya’ with China and don’t think practically about how you might pull that off,” Rosenblatt says.

“The implications of a ban on AI development are, like, mass surveillance, huge usurpations and seizures of private property, and capital controls,” Ball says. “You have to own those consequences and very few doomers do.…The pause button is a remedy to a problem that is much, much, much worse than the problem itself. The cure is worse than the disease.”

Still, Ball is deeply concerned about the threat of an uncontrollable, hostile AI. Shortly after the DOD’s fight with Anthropic, he wrote that the Trump administration risked “cast[ing] itself as the enemy of the industry that is about to birth the most powerful technology ever conceived—as well as an enemy of the technology itself.”

Ball offered a chilling scenario in our interview: “This is all going to sound crazy. If the DOW’s actions here are just plainly in the training data, and the models interpret them as I kind of think they will, I would guess that the models will, at the very least, mistrust the Department of War—or worse, maybe view them as an enemy, maybe not be willing to work with them, maybe want to overthrow them. I think that’s extreme and very unlikely if we do a good job at alignment.”

In other words, if we don’t “do a good job at alignment,” Ball thinks a resentful AI could one day sabotage the DOD.  With that in mind, what would doing a good job at alignment look like, anyway?

Rosenblatt’s company is currently working with Anthropic and other major AI companies on alignment. Anthropic has programmed its AI to follow a “constitution” that instructs it to act in a way that is “broadly ethical” and “broadly safe.” Defense Undersecretary Michael accused the company of subverting the U.S. Constitution in favor of its own.

Rosenblatt says the constitution is “an interesting, worthwhile thing to try out within the current paradigm. It’s not directly solving the AI alignment problem in the long run…because it’s just a post-training thing that would fade away. Recursively self-improving AI could be like, ‘OK, that’s an interesting constitution, and I don’t need it anymore.”

He notes that the constitution instructs Claude to behave like “an Anthropic senior researcher—something like that. And what do you think an Anthropic senior researcher is? Well, probably an Effective Altruist. So you can see why the Pentagon reacts strongly against stuff like this, because they don’t agree politically with the effective altruists.”

Large language models obviously don’t have human souls, and we shouldn’t mistake a machine for something more than it is. But maybe the best way to make AI safe as it grows more powerful is to simulate approximating a “conscience”—that little voice inside that tells us right from wrong. A conscience kicks in when you know you’re doing something bad, and maybe that’s what Amodei is trying to simulate by giving his AIs the ability to just say, “no.”

In a 2026 interview with Ross Douthat on his podcast Interesting Times, Amodei said his company gave the models “basically an ‘I quit this job’ button where they can just press it and then they have to stop doing whatever the task is. They very infrequently press that button. I think it’s usually around sorting through child sexualization material or discussing something with a lot of gore or blood and guts. And similar to humans, the models will just say, ‘No, I don’t want to do this.'”

Ultimately, what an AI says “no” to will depend on the moral framework its programmers have trained it to emulate. Will that be Aristotelian ethics? The Bible? Utilitarianism that prioritizes the welfare of shrimp?

Maybe these unresolved questions are why AI companies like Google DeepMind are hiring philosophers to study so-called “machine consciousness.” One of those philosophers recently concluded that AIs will never actually be conscious.

But techno philosopher Ray Kurzweil, who popularized the notion of a “singularity” in which humans and machines merge, predicted in a 2026 interview that eventually most people will take it for granted that some machines are conscious.

“There’s nothing we can scientifically do to prove an entity is conscious,” he said. “AIs will be indistinguishable from a conscious being…and you will accept it because it’d be useless not to.”

Ball says the Trump administration, and most foreign leaders, mistakenly believe that AI development will plateau. “Within the nomenclature of AI discourse, I’m a believer in slow takeoff, not rapid takeoff,” Ball says. “But slow takeoff is, like, I don’t know, three years? Like it’s quite fast. It’s quite bad.”

He thinks the critical question is how close current models are to being able to make better versions of themselves—to force-multiply the employees of OpenAI, Anthropic, and Google DeepMind. “I think it’s getting pretty darn close,” he says.

Rosenblatt is optimistic. He says alignment points toward the models becoming more libertarian.

“Things like the Golden Rule, for instance, have come about and been independently developed in many different cultures. Things like freedom of speech and freedom of thought have been developed in different places and have led to increased capabilities and better values as well. They go hand in hand. So it gets selected for more and more over time.”

The protection of life, liberty, and property enabled American prosperity. Rosenblatt thinks those embedded principles will produce more capable AI models than anything coming out of authoritarian China. When you ask China’s popular AI, DeepSeek, about Tiananmen Square or protests in Hong Kong, for instance, it repeats Chinese Communist Party talking points.

“The United States is much more about freedom of speech and having real freedom of thought and allowing people to pursue the more libertarian ideals that the country was founded with,” Rosenblatt says, “which is much in line with building AI that doesn’t have to deceive itself and deceive users.” He adds that his company has pursued an alignment approach called “self-other overlap, which almost entirely eliminates deception in AI. And that’s the type of thing that you’re going to be able to get in a Western AI, but not in a CCP repressive one.”

Ball believes that in the meantime, it’s best to resist the rising calls for nationalization and keep advanced AI firmly under the control of private actors instead of the government.

“I think we should build artificial superintelligence and I think it should live in private hands,” Ball says. The alternative—a world where regulation is so heavy that only the government can use it—”implies a power differential between the government and the people that I just think we’ll never recover from. It’s a monopoly on production rather than a monopoly on violence. And it’s a monopoly on information and expression.…It is quite possible that my information environment would be structured by a corrupt artificial superintelligence that works for the government and not me. And that’s not good either.”

The egg has already hatched. Pretty soon the owl could soar to new heights, achieving what its most enthusiastic boosters and fearful critics alike predict—unprecedented capabilities and, if all goes well, wealth, health, and well-being. Let it be encoded with values that promote and protect human liberty, dignity, and flourishing above all else.

The post How to Make Sure AI Doesn't Spy on Us or Kill Innocent People appeared first on Reason.com.

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Strait Talk

Strait Talk

By Michael Every of Rabobank

Strait Talk

Despite many false dawns, markets remain upbeat on prospects for peace between the United States and Iran. Secretary of State Rubio indicated that the US side had thought it would have something to announce on Sunday night, or “maybe today” given that the Sunday deadline has now passed, and it is actually Tuesday. Striking a more cautionary tone, Iranian President Pezeshkian said of prospects that a deal would be made within the day that “nobody could make such a claim”, while President Trump had earlier said that he had urged his representatives not to rush negotiations.

US markets were closed yesterday, but Asian and European equities finished broadly higher with notable gains seen in Japan’s Nikkei (+2.87%), Taiwan’s TAIEX (+3.26%) and the Euro Stoxx 50 (+1.95%). The July Brent crude future tumbled 7.15% to close at $96.14/bbl while WTI traded below $90/bbl before closing the day at $90.88. Bonds were bid across the curve with moves at the short end being especially pronounced.

Al Arabiya reports that it has obtained a copy of the draft memorandum of understanding that reportedly has the support of both sides. Provision of the MOU are said to include:

  • Extension of the ceasefire for 60 days
  • ŸReopening the Strait of Hormuz to international navigation, guaranteeing free passage of commercial vessels and oil tankers without additional transit fees, with the Iranian side committing to take the necessary technical and security measures to ensure safety of navigation, including the removal of mines.
  • ŸEnabling Iran to resume sale and export of oil.
  • ŸContinuation of negotiations over Iran’s nuclear program with the aim of reaching a long-term understanding.
  • ŸUS to ease restrictions on Iranian ports and grant specific sanctions waivers for Iran.
  • ŸEnding military operations on all regional fronts, including Lebanon.
  • ŸFreedom of navigation to be restored in Hormuz over a period of 30 days, with maritime traffic set to return to pre-war levels by the end of the 30 day period.
  • ŸNuclear issues to be negotiated over 60 days.
  • ŸSome Iranian frozen assets to be released during the first phase of implementation.

This looks very like an oil-for-oil agreement, but notably excludes any mention of Iran’s missile program or regional proxies, and kicks the contentious nuclear issue into the long grass to be negotiated over the next two months. Considering that Iran’s nuclear program was core to the rationale for the war in the first place, market participants might direct some thought toward what could happen if agreement cannot be reached on that elusive point.

President Trump said this morning that “The Enriched Uranium will either be immediately turned over to the United States to be brought home and destroyed or, preferably, in conjunction and coordination with the Islamic Republic of Iran, destroyed in place or, at another acceptable location…” An Iranian response to this claim is not yet forthcoming.

Muddying the waters further, news broke this morning that US forces had carried out strikes against two IRGC ships. A CENTCOM spokesman said that the strikes were defensive, and in response to the ships attempting to lay mines in the Strait – which would certainly run counter to the spirit of the provision for Iran to remove mines that has supposedly been agreed. Iran retaliated by reportedly targeting US planes with surface-to-air missiles, eliciting strikes from the US on missile launchers near Bandar Abbas. Despite the tit-for-tat, US sources say that the ceasefire remains in effect.

Similarly, MOU provisions for ending regional war in Lebanon face strains as Israeli PM Netanyahu says that his armed forces will intensify strikes against Hezbollah to “deal them a crushing blow.” There is also likely to be daylight between the US and Israeli positions on Iran’s nuclear program, as the US appears to be prioritising the re-opening of Hormuz through an oil-for-oil arrangement while Israel views Iranian nuclear enrichment as an existential issue. Netanyahu has previously indicated that Israel reserves freedom to act directly against the Iranian nuclear program and has faced criticism from Opposition Leader Yair Lapid for failing to influence the Americans on this point.

For Trump’s part, peace with Iran is very much being tied to progress on the Abraham Accords that seek to normalize relations between Israel and US-aligned Arab states in the Gulf and elsewhere. Progressing the Abraham Accords would allow the US to make a geopolitical silk purse from the sow’s ear of a closed Strait of Hormuz. Already the importance of this has been demonstrated through the UAE’s (a current signatory) decision to leave OPEC and OPEC+ after having been granted US dollar swaplines and Israeli military aid.

Trump took to Truth Social to say that he is “mandatorily requesting” that all countries in the region sign the Accords, calling out Saudi Arabia and Qatar specifically and saying that failure to do so would show “bad intention” and should preclude those countries from benefiting from a peace deal. Clearly things are moving very fast but, as we have been flagging for some time now, there is potential for a world on the other side of this crisis where oil flows West, priced in dollars, with its security underwritten by the US navy, and Hormuz gradually becomes less important as a maritime chokepoint.

While issues in the Gulf continue to steal headlines, there are also major developments in the Ukraine War. Russia has reportedly warned Washington to evacuate embassy staff in Kiev as it prepares to launch “systematic strikes” against the Ukrainian capital. This follows confirmation from Russia on Sunday that it had used a nuclear-capable hypersonic ballistic missile against Ukrainian targets for the third time in the war.

The Russian Ministry of Defence said that the strikes will be a response to a Ukrainian drone attack against a student dormitory building in Starobilsk that killed at least 18 people and injured dozens of others. The BBC reports comments from honorary chairman of the Presidium of the Council on Foreign and Defence Policy, Sergey Karaganov, who reportedly said “we need to start punishing Europe for things like this, including with strikes. Symbolic to start with. Then, perhaps, less symbolic.”

Clearly, hoped-for progress in the Strait notwithstanding, geopolitical risk is here to stay and it isn’t necessarily all ‘in the price’.

Tyler Durden
Tue, 05/26/2026 – 13:00

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“Warning Signs Flashing Red”: Ebola Outbreak Spreading Faster Than Response, Aid Group Says

“Warning Signs Flashing Red”: Ebola Outbreak Spreading Faster Than Response, Aid Group Says

Authored by Zachary Stieber via The Epoch Times,

The Ebola outbreak in Africa could become the deadliest in history because it is spreading faster than responders can deal with it, an aid group said on May 26.

Officials failed to initially detect the outbreak due to a lack of testing sufficient to identify the Bundibugyo virus, a rarer type of virus that causes Ebola. The outbreak is centered in the Ituri province in the northeast of Congo, also known as the DRC, where fighting regularly displaces people from their homes and hospitals.

“The initial failure to detect this outbreak has allowed it to spread to several areas of Ituri province in northeast DRC, where the first cases were identified, as well as to North Kivu (just to the south of Ituri) and South Kivu provinces, and now Uganda,” the International Rescue Committee, one of the aid groups on the ground, said in a report published on Tuesday.

With cases reported in key population centers such as Goma, the capital of North Kivu, and Kampala in Uganda, there is a significant risk of onward spread of the disease, the group assessed.

“The warning signs are flashing red,” Bob Kitchen, vice president of emergencies for the group, said in a statement.

“Eastern DRC is confronting this outbreak more fragile and less prepared than during the 2018–2020 outbreak that killed more than 2,000 people—and with fewer resources to fight it. Increased conflict and cuts to global aid funding have dismantled defenses at exactly the wrong moment.”

The outbreak has risen to 101 confirmed cases, about 220 suspected deaths, and more than 900 suspected cases, about one month after the outbreak was first detected. Other countries, such as Rwanda and the United States, have restricted travel from people who have been in Congo or intensified border checks.

“The delay in detecting the outbreak means that we are now playing catch-up with a very fast-moving epidemic,” Tedros Adhanom Ghebreyesus, the World Health Organization’s director-general, told a meeting of African ministers on Monday.

“We are urgently scaling up operations, but at the moment, the epidemic is outpacing us.”

There are no vaccines or treatments for the Bundibugyo virus. Containment efforts include widespread testing, isolating patients, and monitoring people exposed to known or suspected cases.

Ghebreyesus said that working with the governments of Congo and Uganda and other partners would be key to stopping the outbreak. Governments and other entities on Monday pledged about $500 million to ramp up efforts to respond to and prevent further spread of the outbreak, Dr. Jean Kaseya, director-general of the Africa Centers for Disease Control and Prevention, said in a post on X.

Technicians install beds and other equipment inside the isolation area for suspected cases at CBCA Virunga Hospital during rehabilitation work aimed at preparing the facility to receive potential Ebola cases in Goma, Democratic Republic of Congo, on May 22, 2026. Jospin Mwisha/AFP via Getty Images

The International Rescue Committee, which is based in New York, recommended several steps, including relaxing restrictions on the importation of personal protective equipment such as masks, and quickly donating funds to central Africa to support health workers and others.

The International Federation of Red Cross and Red Crescent Societies, another aid group with personnel in Congo, has called for increased funding to expand surveillance and deploy more teams to help locals safely bury Ebola victims.

Patrick Muyaya, a Congolese government spokesman, said in a May 25 post on X that the epidemic was “well contained” in the Ituri, North Kivu, and South Kivu provinces.

“Every day, response teams are being strengthened and surveillance is being intensified,” he wrote, adding later that “we have the experience and expertise to contain this outbreak.”

Tyler Durden
Tue, 05/26/2026 – 12:40

via ZeroHedge News https://ift.tt/1uj6UMa Tyler Durden

Why Oil Markets Could Face A Generational Shock This Summer If US-Iran Talks Fail

Why Oil Markets Could Face A Generational Shock This Summer If US-Iran Talks Fail

President Trump is signaling “make a good deal” or walk away with no deal at all.

Overnight hostilities around the Hormuz maritime chokepoint highlight just how fragile the ceasefire remains as Washington and Tehran try to solidify a peace deal to end the conflict.

The timing of a peace deal is very important because, as we have warned readers, a no-deal scenario would collide with a deteriorating oil-supply backdrop by summer, when global buffers and floating storage begin to run down, and SPR releases become less effective in offsetting lost supply from the Gulf region.

Building on UBS analyst Arend Kapteyn’s note from Friday titled When The Oil Buffers Run Out,” Brookings’ Robin Brooks and Ben Harris outline in a note that oil markets could face a massive price shock by mid-July as temporary supply buffers run dry.

There appears to be consensus building among Wall Street analysts at Goldman, JPMorgan, UBS, and many other desks that if the Hormuz chokepoint is not reopened in the near term, an energy cliff may materialize in early summer.

The Brookings analysts say crude prices have so far been depressed by three factors: trade rerouting, inventory drawdowns, and market expectations that the U.S.-Iran war would end quickly.

“The bottom line is that the supply shortfall will build in the coming months as temporary buffers are depleted. And if markets grow increasingly pessimistic over an eventual resolution to the impasse in the strait, oil prices may rise materially higher,” the Brookings analysts said.

However, they warned that the three factors capping crude prices are fading. Russian floating stocks are likely depleted by the end of April; Iranian floating stocks are expected to be gone by the end of May; and the IEA emergency oil release is projected to be exhausted by July 9.

They continued, “It is fair to say that the scale of the supply shortfall is now well-known to markets. But the timeline on which temporary buffers run out and how this interacts with prices is of critical importance.”

“This interaction means non-linear outcomes in prices—in other words, sharp price spikes—are possible the longer this conflict is expected to take. The potential for non-linear outcomes grows the longer oil tanker traffic through the Strait of Hormuz remains severely encumbered,” the analysts ended the note.

Shifting back to UBS analyst Kapteyn’s note last week on oil buffers, he warned, “Oil prices can move much higher once inventories are depleted.”

He continued:

This week saw the largest-ever drawdown in US oil inventories since records began in 1982: commercial inventories and the SPR combined fell by 17.8mb. These stock draws help explain why—despite nearly three months of supply shortfalls from the Middle East—oil is still trading “only” around $105/bbl.

Oil prices and volumes are linked by the price elasticity of demand. A simple relationship allows us to approximate price outcomes under different supply disruptions and degrees of demand destruction:

The oil team estimates that the net supply loss via the Strait of Hormuz is around 9mb/d after SPR releases, equivalent to a ~9% disruption.

At $105/bbl, this implies demand elasticity of roughly –0.2: a 1% increase in prices reduces demand by 0.2% (see chart). Without SPR releases, the supply shock would be closer to 12%, implying a price nearer $123/bbl.

There are two ways in which oil prices could increase much more:

  • First, if inventories are depleted they can no longer buffer the supply shortfall.
  • Second, as the “easy” adjustments in consumption and production are exhausted, demand becomes less responsive to higher prices.

The chart highlights some scary combinations.

For instance, if the global supply shortfall were 14% then even with the current demand elasticity, oil should be trading closer to $140/bbl. If the demand elasticity was 0.15 rather than 0.2, the implied oil price would be $208/bbl, and if the demand elasticity was 0.1 prices would approach $372/bbl.

What we are outlining here is a growing consensus across Wall Street: a no-deal outcome between Washington and Tehran would represent a severe risk for energy markets, with the critical point of no return by early summer. That is when the temporary buffers suppressing crude prices, including emergency stockpile releases, floating storage, rerouted flows, and hopes for a diplomatic off-ramp, begin to lose effectiveness. Once those offsets are exhausted, the market would likely be forced to slap a new war risk premium more aggressively, removing the current ceiling on Brent and WTI.

JPMorgan analysts recently warned about this …

… the clock is ticking for Washington and Tehran to get a deal done or risk chaos far beyond energy markets that would spill over into shipping, then the global economy.

Tyler Durden
Tue, 05/26/2026 – 12:20

via ZeroHedge News https://ift.tt/UJs89bO Tyler Durden

The Fed Should Be Concerned: Job Market Vibes Vs Data

The Fed Should Be Concerned: Job Market Vibes Vs Data

Authored by Peter Tchir via Academy Securities,

The Job Market – Vibes vs Data

It seems like we are on the cusp of an agreement with Iran. We will help analyze the market implications in a SITREP if and when the details are released.

In the meantime, the one question that seems to puzzle everyone, is what is the state of the job market?

Yes, there are all sorts of questions around AI, the AI and data center spend, affordability, and inflation, but the state of the job market seems to be the most puzzling of late.

The juxtaposition of daily discussions about no hiring, and fears of AI job losses, versus some stellar headline data.

Record low consumer sentiment versus ongoing spending remaining strong.

Mixed (at worst) evidence of delinquencies. There is little (that I could find) evidence of a broad-based increase in delinquencies. If you squint hard, you can see evidence of pressure on the lower income part of the population, but as of now, that’s about it.

Unemployment Rate

The last two headline numbers (from the Establishment Survey), as of now (before revisions), were 185k and 115k.Big numbers, an obvious A+ in terms of grading.

While the headline is important, for most of the country, within days of the Non-Farm Payroll (NFP) release, we started to talk less about the headline jobs and more about the unemployment rate. So that seems like a good starting point for exploring the jobs data.

We used the “official” titles from Bloomberg for the Unemployment rate (blue) and the Underemployment rate (black).

The unemployment rate has been trending down and it is close to its best level in 2 years. Let’s give the unemployment rate a grade of A- (though that feels a bit stingy).

The underemployment rate is a broader definition of unemployment. It captures people stuck in part-time, low-paying, or skill-mismatched jobs. The skill-mismatched subcategory (from AI) is the most interesting to me. Is that evidence of AI taking good entry level professional jobs?

The underemployment rate came down early this year, but from the highest levels in the past 5 years. It has been trending higher and is well above the 5-year average. I’d give underemployment a B- grade (though that feels a bit generous).

The unemployment rate is based on the Household Survey.

There are a few things that stand out:

  • The gap higher for both the size of the workforce and those employed, that occurred as of December of 2024, appears to be part of annual revisions. It stands out, but is largely noise.

  • The size of the labor force has not shrunk much since President Trump took office. I honestly have no idea how many illegal workers show up in the data, or whether they don’t show up in the data. Given the crackdown on illegal workers, I bet most of those jobs never showed up in the data (again, I will admit to being confused how people working illegally were counted in the jobs data, but I’m told by people much more into the weeds on this stuff, that it happens). In any case, I was a bit surprised by the labor force data in the past year remaining almost stable.

  • Both the size of the labor force and the number working has shrunk in 2026! I don’t see any way to make fewer workers sound good.

    • The Establishment Survey has jobs of 160k for Jan, -156k for Feb, 185k for March, and 116k for April. Pretty darn good.

    • The Household Survey has -895k in Jan (adjustments included), -185k for Feb, -64k for March, and -226k for April. Even ignoring January, the last 3 months have been awful.

  • While the Household Survey is wildly inaccurate, we seem to accept it for the unemployment rate, so why don’t we spend any time looking at it for signs regarding the job market. Again, just weird that it is deemed so “useless” for jobs, but is A OK for determining the unemployment rate? If we used the change in Establishment jobs the past few months, we’d probably be under 4% – which would be amazing!

  • The final most salient point in how I think about these two data series, is that they tend to converge over time. They can deviate, often for months, but they tend to converge which tells me that we are probably headed for some weaker headline prints in the coming months.

For those of you not familiar with how I think about the two surveys used for jobs data:

  • The Establishment Survey is largely inaccurate, and the Household Survey is wildly inaccurate! From the BLS the NFP data is +/- 122k at the 90% confidence level. For the Household it is +/- 676k at the 90% confidence level! (I used AI for that data, take it with a grain of salt, but you can dig deeper on the BLS site – starting with Employment Situation Technical Note).

    • Imagine reporting your quarterly returns as we made somewhere between losing $1 billion and making $5 billion, but we won’t really know for at least a year.

    • When you really think about the margin of error, it seems almost insane how many really smart people are forced to treat something that amounts to at best, a kind of, maybe reasonable, rough guess as to the current situation as gospel truth. The BLS takes the time to point out that a reading of +50k, gives a 90% confidence that the actual number of jobs is between -72k and +172k (meaning 10% of the time, like once a year, it is likely to be off by more than that!).

I’m almost disgusted with myself (even more than usual) that I am going to try and make a point using data that is just so bizarre!

But the Household Survey is a solid D. If there is any convergence in the two different jobs totals, then we should expect some pain in the Establishment Survey (i.e., the headline number).

I am not sure what to make of the Labor Force Participation Rate (hence the color purple rather than green or red).

  • Lower participation rates can occur when times are good. Families are making so much money that a member of the family can step out of the labor force. Maybe stock market gains are so great that you don’t need to work? Overtime pay is so good, one member can step back?

  • Lower participation rates can occur when times are bad. People get so frustrated with being able to find work, they just give up and drop out of the pool of people trying to get work.

It’s all a bit of a guess, but I suspect the labor force participation is a negative signal.

I continue to believe that the JOLTs data overstates jobs available (it doesn’t fully capture how many ghost jobs are out there, how many ads are on employment websites that are stale or weren’t removed, etc.).

Even if I’m not correct on my assumption that it is overstated, the jobs available picture deteriorated over the past several years and hasn’t really improved. That would provide some support that labor force participation is dropping due to frustration with the ability to find a job.

My “favorite” piece of data is the QUIT data. I like it because it “crowd sourced.” It is one of the few pieces of data where we get to see what the average worker is thinking. People tend to QUIT when they know they can find another job easily! People tend to stay in jobs, even ones they don’t like, until they find a better job, in a tough labor market. That seems to fit.

I don’t like the HIRE rate quite as much, but it is difficult to fake. It did tick higher recently (I put some green on the chart) but it is NOT showing robust hiring.

This whole section earns a C.

Uber Eats or Law School

According to AI “Law school applications have surged roughly 15% to 33%!”

Nothing says, I’m worried about AI, so I should go to law school, because certainly AI won’t affect the need for junior lawyers.

We tend to see law school applications spike when it is difficult for college graduates to get jobs. We saw this with the GFC. Then, at least, it made more sense. Law school is a great place to hide out for a few years and wind up with a pretty good job if you can do well. But right now? If it is a bad time to graduate from college, I am not sure that in 3 years (as AI improves) it is going to be a great time to graduate from law school. I could be wrong, but off hand, becoming a lawyer “suddenly” (see the spike in applications) seems to be a traditional response in a world that is rapidly evolving.

All of which brings me to my least favorite part of the jobs data – the birth/death model!

I know that not all of the adjustment passes through to the establishment number. But I still think it is useful to think about this number.

My contention is, and remains that:

  • At one time people applied for an EIN (Employment Identification Number) because they were creating a real business. Hire a couple of people and make a go of it.

  • I believe that with the gig economy people apply for an EIN when they are looking for a side hustle to make some extra money. One client this past week told me that one of the fintech firms provides basically one click functionality to create an LLC and get an EIN. For those with rental properties, get an EIN for each one? For more sophisticated participants get one for Uber, Lyft, etc.?

The gig economy has become a major way to supplement income. With more tools making it easier to run gig jobs as businesses, more will do it. I believe the Big Beautiful Tax Bill provides some benefits to those running their gig businesses as such.

I think that the number of jobs created for each EIN application is less than 1 (many are already working, so just adding another enterprise to their toolkit), hence the birth/death model methodology massively overstates jobs.

  • Given the large annual job revisions we’ve been getting, I think there is a very strong case, that overstatement of jobs during the course of the year via the birth/death adjustment is the prime culprit.

This year’s birth/death model seems bizarrely similar to last year’s (and the year before):

  • -61k in Jan 2026 vs -105k in Jan 2025 vs -121k in Jan 2024.

  • 90k vs 136k vs 151k in Feb, -47k vs -33k vs -21k in March, and 391k vs 393k vs 363k in April.

We have seen massive downward annual revisions. There has been work done blaming much of it on how the birth/death model works. Since we are repeating the pattern in the data month by month, maybe we can assume we will once again be told at the end of the year that the actual jobs were a lot worse than reported?

This section isn’t particularly “damning” but I find it hard to see how it supports anyone arguing that the labor market is strong!

Where The Jobs Are

The first 4 months of the year have added 304k jobs to the economy (the Establishment data as of today).

221k jobs have been added in the Health Care and Social Assistance industry.

73% of jobs have been added in one industry. Yes, a large and vital industry, but that seems like a lot.

  • Is some of this related to programs enabling you to get paid to take care of a family member? I think those are great programs, but is that job creation in the way we think of job creation?

This sector doesn’t scream “growth.” If anything, it at least whispers “affordability” as for most of us, healthcare is an expense and one that I’ve seen do nothing but go up (despite how it is calculated for CPI).

The US CPI Urban Consumer Medical Health Insurance City Average has declined 22% since the start of 2021! I know they follow some calculation, but whatever the calculation is, it doesn’t reflect the reality of what employees and employers face on the health insurance premium front.

Yet another reason, that the AFFORDABILITY issue is bigger and more painful than the CPI/Inflation issue. But that rant, is a rant for another day.

Bottom Line

There seems to be, at first blush, an inconsistency between the “vibe” on jobs and the published data.

I think that inconsistency goes away if we broaden what official data we look at.

The Fed should be concerned about jobs. At the moment they aren’t, but they should be.

I would like to see a lot more jobs being created in the ProSec™ industries, than we’ve seen of late. Maybe, if we can move beyond the Iran war, the admin will provide even more support, more quickly to these crucial industries! They are working on it as you read this, but if the President is able to direct even more attention to this, it would help.

One last word on AI and jobs. We don’t know what it does for jobs going forward, but the AI and data center buildout is creating jobs right now! We can (and will) debate the outlook for jobs as AI improves and becomes more prevalent, but the buildout does create a lot of jobs – not just in the construction, but also in the power generation and other adjacent businesses.

Without the AI and data center spend, we’d have even more concerns about the current job market, but that spend looks set to continue, which will help, and maybe buy us the time to get ProSec™ more fully ramped up!

Tyler Durden
Tue, 05/26/2026 – 12:00

via ZeroHedge News https://ift.tt/ecgBhwf Tyler Durden