Month: March 2023

Authored by Brayden Lindrea via CoinTelegraph.com,

Congressman Tom Emmer made the anti-central bank digital currency comments to an audience at the Cato Institute, a libertarian think tank in Washington…

United States Representative Tom Emmer believes the launch of programmable central bank digital currency in the country could strip American citizens of their financial privacy.

Speaking on March 9 at the Cato Institute, a Washington D.C.-based libertarian think tank, Emmer explained that the programmable CBDC would be “easily weaponized” as a spying tool to “choke out politically unpopular activity,” among other things:

“As the federal government seeks to maintain and expand financial control to which it has grown accustomed, the idea of the central bank digital currency has gained traction within the institutions of power in the United States as a government-controlled programmable money that can be easily weaponized into a surveillance tool.”

The Minnesota congressman introduced the CBDC Anti-Surveillance Act on Feb. 22 to halt the progress of the Digital Dollar Project, which has seen considerable developments in how it would be used since the second version of its white paper was released in mid-January.

“Recent actions from the Biden Administration make it clear that they are not only itching to create a digital dollar but they are willing to trade Americans’ right to financial privacy for the surveillance-style CBDC,” he added.

The Blockchain Regulatory Certainty Act
The Securities Clarity Act
The Safe Harbor for Taxpayers with Forked Assets Act
The CBDC Anti-Surveillance State Act

The future of crypto in the US will be determined by Congress and the American People – not the Administrative State. pic.twitter.com/OQ0uwxjVxX

— Tom Emmer (@GOPMajorityWhip) March 9, 2023

Emmer suggested that the blockchain-enabled “ownership economy” is “threatening” many bureaucrats in Washington, as it “shifts economic power from centralized institutions back into the hands of the people.”

While the latest Federal Reserve discussion paper explained that it would only issue the CBDC in the context of “broad public and cross-governmental support,” Emmer and many others are concerned with the potential dangers that could ensue:

“It not only tracks transaction level data down to the individual user but also the ability to program the CBDC to choke out politically unpopular activity.”

Emmer also argued that decentralized cryptocurrencies can serve as a solution to the mismanagement of the U.S. monetary system and restore many of the “American values” that led the nation to become an economic powerhouse in the 20th century — privacy, individual sovereignty and free markets.

He added that by even experimenting with CBDCs, the U.S. is going against these values:

“Nothing could be more dangerous than adhering to a manufactured sense of urgency like this and ultimately developing a CBDC that is not open, permissionless and private.”

Authored by Owen Evans via The Epoch Times,

A judge has overturned the conviction of a Christian street preacher who was arrested and reported to Prevent for “misgendering” a member of the public.

Dave McConnell, 42, was appealing a conviction on Thursday at Leeds Crown Court after he was arrested under section 4A of the Public Order Act 1986 for insulting a member of the public in Leeds City Centre on June 8, 2021.

The arrest was made after he “misgendered” someone who self-identified as transgender.

In footage from McConnell’s body-worn camera, Farrah Munir is seen approaching the preacher and asking, “Does God accept the LGBT community?”

In the video, McConnell refers to Munir as “a man” and “this gentleman.”

As the police arrive, a growing crowd chants, “Hate speech, hate speech.”

McConnell is later arrested after a policeman says, “Listen mate, I’m not having that because she’s told you she’s a woman.”

“She asked me, he asked me what do I think,” replies McConnell. At that point, the officer handcuffs him, adding, “OK, you’re under arrest.”

Joint Counter-Terrorism Team

McConnell was convicted of causing harassment, alarm, or distress to Munir at Leeds Magistrates’ Court last year and sentenced to a 12-month community order with 80 hours of unpaid work. Following his conviction and prior to the sentencing hearing, the Probation Service reported McConnell to the Joint Counter-Terrorism Team.

A legal team supported by the Christian Legal Centre sought to overturn the conviction by arguing that the police response was unlawful, disproportionate, and interfered with his rights under Articles 9 and 10 of the European Convention on Human Rights.

McConnell’s appeal was backed by evidence from Sex Matters campaigner Maya Forstater and Toby Young, general secretary for the Free Speech Union.

On Thursday, the judge in the case, Recorder Anthony Hawks, sitting with two magistrates, allowed the preacher’s appeal against his conviction.

At the start of the hearing and before cross-examination, Hawks said of the complainant, “This is a woman—we will have no more debate.”

During proceedings, the arresting officer was asked why he had arrested McConnell after initially suggesting that he just move on. The officer said: “He wanted to argue his rights of free speech. Regardless of what he’d have preached, I think the crowd wouldn’t allow it … the final trigger was when [McConnell] referred to the victim as a man in a dress. I stopped him and told him he’d been told the victim was a female.”

McConnell was asked in court whether he knew that “misgendering” a trans person could be insulting, to which he replied: “I wasn’t misgendering. I was telling the truth.”

He told the court: “I think people could have been offended but that’s not the intention. My intention was to simply stay faithful to my beliefs, stay faithful to God, and to stay faithful to my conscience.”

“I wasn’t being transphobic—I was expressing what I believe,” he added.

‘Appalled’

Hawks said that McConnell “misgendering” the complainant did cause the complainant distress but “it is not an offence to insult someone.”

Furthermore, he said that under the Public Order Act “it is not enough to show words were insulting and that [the complainant] was distressed.”

“They must prove that we as a bench are sure that when [McConnell] was using those words that he intended to cause distress,” he said.

“[McConnell] said he had no such intent. He says he goes out preaching the word of God and the last thing he wants to do is upset. He said he was not intending distress, just repeating what he genuinely believed to be the Bible’s teaching.”

The judge concluded that there was no evidence McConnell had intended to harass Munir.

Following the hearing, McConnell said he was “delighted and relieved,” adding: “I am, however, appalled at how I have been treated by the authorities in this matter.

“No other street preacher, professional, or member of the public must go through what I have.

“Misgendering is not a crime and should never be treated as such.”

He added, “How I was treated was totally unreasonable and should concern anyone who cares about Christian freedoms and free speech in this country.”

‘Disturbing Trend’

“This case represents a disturbing trend in our society, which is seeing members of the public and professionals being prosecuted and reported as potential terrorists for refusing to celebrate and approve LGBTQ ideology,” said Andrea Williams, chief executive of the Christian Legal Centre.

“Police forces who fly Pride flags from their headquarters are failing to provide Christian preachers with impartial protection. If a person cries ‘offence’ at a street preacher’s words, it’s the street preacher that is punished and taken out. This is deeply illiberal,” she added.

For those who slept through yesterday, here is what you missed and why the US banking system is suffering its worst crisis since 2020. Silicon Valley Bank, aka SIVB, a bank with $212 billion in assets of which $120 billion are securities (of which most or $57.7BN are Held to Maturity (HTM) Mortgage Backed Securities and another $10.5BN are CMO, while $26BN are Available for Sale, more on that later )…

… funded by over $173 billion in deposits (of which $151.5 billion are uninsured), has long been viewed as the bank at the heart of the US startup industry due to its singular focus on venture-capital firms. In many ways it echoes the issues we saw at Silvergate, which banked crypto firms almost exclusively.

SIVB stunned markets on Thursday after it announced a series of actions to improve its balance sheet flexibility and capital ratios as rates potentially remain higher-for-longer and private markets remain under pressure. Note: while many had speculated that the bank may be facing a liquidity crisis in a rapidly rising rate environment (most notably the WSJ in late 2022), it took the management team’s confirmation that liquidity has collapsed to spark a bank crisis and a depositor run. The bank said it sold $21 billion of its available for sale (AFS) securities to be reinvested into shorter-duration Treasuries, and publicly announced raising $2.25 bil of equity ($1.75 bil common and $0.5 bil pref) primarily to support its capital ratios given the $1.8 bil after-tax loss it expects to realize on the sale and also partly to help support its credit rating. We now know, courtesy of CNBC reporting, that this equity raise failed and the bank is instead is trying to sell itself to a bigger bank.

Why did SIVB do this? Well, according to Morgan Stanley’s Manan Gosalia, who as of yesterday was the only sellside analyst to have a Sell rating on the company with a $190 price target…

…  the bank did not intend to spark a panic but instead “these actions enhance its balance sheet flexibility as rates move higher. By selling down its existing AFS portfolio, which had a duration of 3.6 years, and reinvesting the proceeds into short-term US Treasurys, SIVB is enhancing its liquidity position and NIM protection as rates continue to rise. The bank is also terming out its funding by adding $15 bil of longer-dated borrowings and hedging to protect against further increases in rates. All in, the bank estimates that it will flip to asset sensitive with each 25 bp increase in rates driving $50-60 mil of higher NII.“

In English? The bank had a lot of fixed-rate TSY (and other) exposure that was underwater and carrying an unrealized loss, and having decided that rates will keep rising, the bank decided to restructure its assets and flip its portfolio from a fixed-rate one (where rate hikes cause even more capital losses) to a short-term one (where they lead to modest NIM gains). Of course, the transition ended up costing the bank billions.

None of this is shocking, and yet the market was clearly surprised. Why?

For the answer we have to go all the way back to the immediate aftermath of the last financial crisis, when in early 2009 US regulators suspended Mark to Market, and instead of having banks hold debt securities on their books at price, they allowed them to split their asset holdings into two components: Available for Sale (or AfS), a bucket which would be marked to market and which could be sold to short up liquidity, and Held to Maturity (or HTM), a (far larger bucket) which allowed the banks to keep debt securities at cost.

This was created to avoid cross-selling contagion if one bank was forced to liquidate securities and infect other holders of the same security. In other words, it was purely a idiosyncratic feature, not one that was meant to offset macro conditions. And understandably so: in a time of raging deflation, and ZIRP and QE, when rates would seemingly never go up, virtually nobody even considered a scenario when it would be the Fed itself that would force rates higher to fight galloping inflation.

Sadly for SIVB, that’s where we are now, and the Fed’s rate hikes have manifested in two ways.

• First, rising rates afford depositors a completely risk-free way of parking your money at Treasuries without taking on company-specific deposit risk. This is a big issue for SIVB because as noted above it has $170BN in deposits.
• Second, rising rates force the bank to sweep ever bigger losses on its debt assets under the rug. And yes, while the bank can hide behind the “held at cost” basis afforded by Held to Maturity, the fact that the bank’s HTB book was of relatively moderate duration meant that even if it held to maturity, it would still suffer losses, which is why it proceeded with the previously discussed balance sheet restructuring.

The funny part, of course, is that we knew all of this!

Yes, both SEC and FDIC regulators require banks to disclose not only the value of their HTM assets, but also the fair value of said assets, with the fair value being – as the name implies – the value of the HTM assets if they were to be sold today. The delta between the two is what is known as “net unrealized loss” and it is rapidly emerging as the most important indicator of bank health.

To be sure, until recently nobody cared about net unrealized losses on bank portfolios because, well, there simply weren’t any. But once the rate hikes started and debt prices – for anything from Treasurys, to MBS, to CRE – to started to tumble, the unrealized losses started to climb, and nowhere is this more visible than in Silicon Valley Bank’s own balance sheet, where from virtually no losses a year ago, the number climbed to $16 billion as of Q3.

Now this is a problem because at the same time, its total shareholder equity was $15.8 billion. This means that quietly, all of the bank’s book equity had been wiped out simply by the accumulated – but not marked – losses on SIVB’s HTM portfolio.

And here lies the rub: if it was only SIVB that has an “unrealized loss” problem then there would be no contagion, and the rest of the banking sector would be safe and sound. Unfortunately, as explained, the reason why SIVB’s HTM book blew up is because of surging rates, which is also why SIVB proceeded  to liquidate its Available for Sale securities (at $26BN these are far less than the $91.3BN in HTM book). And it’s also why every other bank is now suffering under the pressure of massive “net unrealized losses.”

Presenting Exhibit A: net unrealized losses for the Big 4 banks.

Just like SVB, the unrealized loss issue emerged only in 2022 when rates exploded and prices of debt securities tumbled. What stands out here is that while all banks have substantial exposure – the total is $250BN as of Dec 31, 22 – Bank of America has the most exposure at just under $110 billion.

And another problem: these amounts may not sound like a lot, but when expressed in terms of book shareholder value for any given bank, they are staggering. The next chart shows what the net unrealized losses is when expressed as a function of total equity. Yes, SIVB is by far the worst with all of its book value wiped out by the unrealized loss, but other banks are hardly doing much better, to wit: Bank of America’s unrealized loss (i.e., the market-value gap between its HTB book and fair value) represents 43% of combined total equity; at State Street it is 27%; at Wells it is 25%, at US Bancorp it is 24% and so on…

Extending this analysis to all 15 of the 24 KBW index members, the “fair value” gaps were equivalent to 10% of their equity or more. And cumulatively for all 24 banks, the $300 billion difference between the bonds’ book value and market value represented 22% of their $1.39 trillion of combined total equity!

Still think there won’t be contagion?

To be sure, some do: take Morgan Stanley’s Manan Gosalia (who as noted above was the sole SIVB sell rating before yesterday’s implosion), who this morning said that “the funding pressures facing SIVB are highly idiosyncratic and should not be viewed as a read-across to other regional banks.” He continues:

SIVB primarily banks technology, life science, and healthcare companies and is an integral part of the VC ecosystem. Falling VC funding activity and elevated cash burn are idiosyncratic pressures for SIVB’s clients, driving a decline in total client funds and on-balance-sheet deposits for SIVB. That said, we have always believed that SIVB has more than enough liquidity to fund deposit outflows related to venture capital client cash burn. SIVB has $15B in cash, $25B in newly repositioned short-dated securities, $73B in off-balance-sheet sweep accounts and repo funds that can be brought on balance sheet, and $65B in borrowing capacity (FHLB and Repo). This totals to ~$180B in available liquidity, relative to $165B of on-balance-sheet deposits. Our Underweight rating on the stock reflects that some of these sources of liquidity (particularly sweep accounts and wholesale borrowings) are expensive in a higher-for-longer rate environment, and represent a drag to earnings until the VC funding environment improves.

There is more in the full note (which is a must read for anyone involved in this situation and is available to pro subs), but Gosalia’s thesis is that while “the stock reactions across the group show that investors are worried about liquidity across the banking space” he does not “believe there is a liquidity crunch facing the banking industry, and most banks in our coverage have ample access to liquidity. As we have said before, the headwind for the banking industry is that the cost of liquidity is high and rising, which we have been tracking with our bi-weekly deposit tracker. This is a headwind for net interest margins, revenue and EPS.” (again, more in the full note available to pro subs).

Perhaps he is right (one can’t forget that Manan is just a little conflicted, being employed by – well – a bank. But what we would counter with is that while he may well be right and contragion risk is modest for big banks, which thanks to the Fed’s massive post-covid QE are still drowning in reserves and have trillions in excess liquidity, the same can not be said for small banks.  And the reason for that, as we explained in “Why Small Banks Are In Big Trouble: As Hedge Funds Pile Into The New “Big Short”, The Next ‘Credit Event’ Emerges“ is that not only do small banks have much more exposure to commercial real estate, and especially the office sector, but as TS Lombard showed, they are – unlike their bigger peers – now reserve constrained.

Which boils down to the following: if depositor confidence in the regional/small bank sector is now shot  – and after both Silvergate and SIVB it very well may be – we will see a small (to medium if not larger) deposit run among the regionals which could prove devastating for these reserve-constrained banks which will need to scramble to raise capital a la SIVB in what eventually transforms into a death spiral for the sector, especially if depositors take one look at what is going on with regional bank prices – which have been in freefall in the past two days – and extrapolate what may come next – there’s a reason why banking is the ultimate confidence game.

There is one way to short-circuit this process and it, of course, involves the Fed which would need to step in the way it did in September 2019 when it was the big banks – namely JPMorgan – that were reserve-constrained, and forced the Fed to launch “Not QE” (but only after the US repo market suffered some historic rollercoaster moves). Ironically, even if the Fed does somehow whisper words of reassurance, the question is why would depositors park their money at “suddenly” risky banks when they can just buy a 6M T-Bill and get the same return with zero risk.

Yes, the Fed may have no choice but to cut rates if it wishes to save the (regional) banking system. But then again, the Fed is still stuck fighting runaway inflation, which means that Powell is now trapped, and as we tweeted previously, Powell is now trapped: More hikes: regional banks collapse; Less hikes: inflation target must be raised.

Tough spot for Jerome:

More hikes: regional banks collapse
Less hikes: inflation target must be raised

What to do…. https://t.co/wgeZDitSQP

— zerohedge (@zerohedge) March 10, 2023

So will Powell let America’s small, regional banks risk failure as a result of his rate hikes (an outcome the likes of JPMorgan would find quite beneficial as it will make them even bigger), or will the Fed chair step in the way he did in 2019 even if it means gambling with runaway inflation? The right answer to that question could make some traders extremely rich.

Authored by Jonathan Turley,

If there is one image from Jan. 6th that will remain indelible with the day, it is the “QAnon Shaman.” Bare chested and wearing an animal headdress, horns and red-white-and-blue face paint, Jake Angeli Chansley is to the Capitol riot what Rosie the Riveter was to World War II. Howling and “chanting an unintelligible mantra” on the Senate floor, he is the embodiment of the unhinged rage that led to one of the most disgraceful attacks on our constitutional process in history.

However, the newly released Fox footage from that day raises serious questions over the prosecution and punishment of Chansley.

The videotapes aired on Tucker Carlson this week show Chansley being escorted by officers through the Capitol. Two officers appear to not only guide him to the floor but actually appear to be trying to open locked doors for him. At one point, Chansley is shown walking unimpeded through a large number of armed officers with his four-foot flag-draped spear and horned Viking helmet on his way to the Senate floor.

It is otherworldly footage. While I admit that I approach these stories from the perspective of a long-standing criminal defense attorney, I would be outraged if I was unable to see such evidence before a plea or sentencing. At no point in the videotapes does Chansley appear violent or threatening. Indeed, he appears to thank the officers for their guidance and assistance. On the Senate floor, Chansley actually gave a prayer to thank the officers agreed “to allow us into the building.”

Before addressing the legal implications of this footage, one thing should be clear. The public should have been given access to this footage long ago and the Jan. 6th Committee withheld important evidence on what occurred inside the Capitol on that day.

While it is understandable that many would object to Carlson being given an exclusive in the initial release, many in the media are denouncing the release of the footage to the public at all. The press and pundits are now opposing greater transparency in resisting any contradiction of the narrative put forward by the Jan. 6th Committee. Indeed, MSNBC’s Jason Johnson angrily objected that this is “federal evidence” — ignoring that it is evidence that was denied to criminal defendants.

This is not just material that the public should be able to see, it was potential evidence in criminal cases like that of the QAnon Shaman.

When the footage aired, I wrote a column raising the question of whether this evidence was known to or shared with Chansley’s defense.

After all, he was portrayed as a violent offender by the Justice Department at his sentencing.

It now appears that the answer is no. I spoke with Chansley’s new counsel, Bill Shipley, and confirmed that defense counsel did not have this material.

In the hearing, federal prosecutor Kimberly Paschall played videos showing Chansley yelling along with the crowd and insisted “that is not peaceful.”

That portrayal of Chansley would have been more difficult to maintain if the Court was allowed to see images of Chansley casually walking through a door of the Capitol with hundreds of other protesters and then being escorted by officers through the Capitol. At no point is he violent and at no point is he shown destroying evidence. Instead, he dutifully follows the officers who facilitate his going eventually to the unoccupied Senate floor.

We all knew that Chansley was treated more harshly because of his visibility. It was his costume, not his conduct, that seemed to drive the sentencing. In the hearing, Judge Royce Lamberth noted, “He made himself the image of the riot, didn’t he? For good or bad, he made himself the very image of this whole event.”

Lamberth hit Chansley with a heavy 41-month sentence for “obstructing a federal proceeding.”

However, the QAnon Shaman was led through the Capitol by officers. Defense counsel could have noted that his “obstruction” in going to an unoccupied Senate floor was facilitated by officers. While the police were clearly trying to deescalate the situation after the Capitol was breached, this is evidence of how Chansley came to the Senate. Indeed, his interaction with officers could have impacted how he viewed the gravity of his conduct. It certainly would have been material to the court in sentencing the conduct.

In his rambling sentencing statement to the court, Chansley apologized for “a lot of bad juju that I never meant to create.”

I have great respect for Judge Lamberth, who has always shown an admirable resistance to public pressure in high profile cases. I cannot imagine that Lamberth would not have found this footage material and frankly alarming.

At first blush, this would appear a clear “Brady violation” when a prosecutor fails to provide a defendant with any evidence that is favorable or exculpatory to his case. Like most things in Chansley’s life, it is a bit more complex than it would seem.

• First, Chansley quickly pleaded guilty to the charge. This may have been due in part to the draconian treatment that he received by the Justice Department, which insisted on keeping him in solitary confinement with no apparent justification. The result is that he moved rapidly to sentencing without significant discovery in his case.

• Second, the footage was in the possession of the legislative branch so the Justice Department could claim that it was not required to produce it. Indeed, the prosecution may have been entirely unaware of the footage.

• Third, Chansley waived an appeal of the plea agreement and is now weeks away from release. The case is practically closed.

It is not clear, however, if Judge Lamberth will find the failure to disclose this evidence troubling and worthy of inquiry. None of this means that Chansley should not have been given jail time. Indeed, it is appropriate to sentence rioters to greater than average time due to the assault on our constitutional process.

Yet, it is hard to believe that Judge Lamberth would have given 41 months to a nonviolent, first offender who was led through the Capitol by police officers to the floor.

This was a Navy veteran who pleaded guilty to the crime.

The role of Congress in withholding this footage is disgraceful and wrong. The Congress and the January 6th Committee knew of this footage and its relevance to a pending criminal case. Yet, they refused to make it public. Instead, the January 6th Committee hired a former ABC producer to put on a made-for-television production of highly edited images for public consumption. Countervailing evidence or images were consistently excluded and witnesses appeared as virtual props to support high-quality video packages.

Even The New York Times admitted the narrative was meant to “recast the midterm message” and “give [Democrats] a platform for making a broader case about why they deserve to stay in power.”

The image of the QAnon Shaman being escorted through the Capitol by police officers is hardly the image that they wanted to show the public. So Committee members and counsel buried footage that was clearly relevant to literally hundreds of people facing criminal sentencing across the country. They did this while repeatedly referencing those cases in hearings as upholding the rule of law.

I hold little sympathy for Chansley or the others arrested on that day. I was highly critical of President Donald Trump’s remarks before the riot.

However, it is hard to see this withheld evidence and not conclude that the Qanon Shaman got the shaft on his sentencing.

On Friday, an atmospheric river moves inland, pounding Northern and Central California with a series of moisture-packed storms. According to the National Weather Service, the mountains will experience “copious amounts of heavy snow,” while the lower elevations will experience “significant rainfall.” 

NWS’ Weather Prediction Center issued an “extreme” flash flooding risk for the Southern Sierra Nevada and the central California coast range south of Monterey. The reason for this severe warning is the latest computer models, which indicate that the atmospheric river will be even warmer and wetter than previously forecasted. 

The combination of heavy rain and melting snow in certain parts of California is expected to pose a significant risk of flooding until Friday night.

Very heavy rain combined with melting snow will create a major flood risk in parts of California through Friday night: https://t.co/smONH4RjkB pic.twitter.com/6iIK9eYwQf

— Breaking Weather by AccuWeather (@breakingweather) March 10, 2023

California Gov. Gavin Newsome added 21 counties to California’s state of emergency declaration, including those in the Bay Area. Newsom also requested President Biden to declare an emergency for the region. 

Accuweather shows the atmospheric river extends more than 2,400 miles from California to the southwest of Hawaii — this type of weather phenomenon is called a “Pineapple Express.” 

Accuweather meteorologists warned: 

Because above-freezing temperatures are forecast in higher elevations, the several inches to a couple of feet of snow already on the ground in intermediate elevations from 2,500 to 5,000 feet may not fully absorb the rain and could completely melt instead.

The equivalent of 8-12 inches of water could be released in a matter of hours when accounting for the moisture already locked up in the snow and the incoming several inches of rain. As this rapid runoff occurs, the smaller rivers and streams from the mountains and hills have the potential to lead to rapid flooding, which can create dangerous and damaging conditions for people, homes, businesses and other structures in the path of the raging waters.

A general 1-4 inches of rain will cause problems on area streets, highways and rural roads. Incidents of urban flooding are likely in areas from near Santa Barbara to Redding. Motorists should be prepared for road hazards ranging from high water to falling rocks and mudslides. In some severe cases, stretches of roads could be washed away.

“The torrential rain and piles of snow laying at the edges of area streets and rural roads is likely to lead to flooding,” AccuWeather Senior Meteorologist Brett Anderson said. “Where possible, road crews and property owners may want to open up the storm drains to minimize the flooding risk.”

Despite the conveyor belt of storms, AccuWeather Chief On-Air Meteorologist Bernie Rayno noted some good news for the drought situation in the state: “The rain from the storm from Thursday night to Friday night will likely wipe out most of the remaining drought across Central California.”

Authored by Philip Wegmann via RealClear Wire,

The clarion call to “build the wall” is no longer enough. Each of the declared Republican candidates for president tell RealClearPolitics that Mexican drug cartels must be designated as foreign terrorist organizations. It is the newest populist orthodoxy, one that the Biden administration flatly rejects.

The context for the latest partisan divide was Friday’s kidnapping of four Americans in the Mexican border town of Matamoros. Two of them were murdered, the other two were rescued and are in a Texas hospital. The White House insisted this kind of designation is unnecessary while implying that their critics are grandstanding..

“Designating these cartels as [foreign terrorist organizations] would not grant us any additional authorities that we don’t really have at this time,” press secretary Karine Jean-Pierre told reporters Wednesday, adding that the United States already has “powerful sanctions authorities” and “we have not been afraid to use them.”

The steady flow of fentanyl across the southern border, and the violence that follows, have left Republicans unconvinced. The say the federal government must do more. Legislation reintroduced Wednesday by Sens. Roger Marshall of Kansas and Rick Scott of Florida would designate the cartels as terrorist organizations, providing what they describe as “additional power” for law enforcement to combat drug trafficking.

The bill’s sponsors say it would grant the Treasury Department necessary new authority to freeze the assets of cartels beyond the sanctions that the U.S. has in place. Beyond banking, it would also flag any foreign national formally associated with a cartel as an individual “engaged in terrorist activity” and ban them from entering the country, while make it illegal for anyone to knowingly provide them “material support.”

Once the Mexican drug cartels are placed in the same legal category as al-Qaeda and ISIS, the Republicans now competing for the presidency have revealed an appetite for more than financial assets. Former President Donald Trump, who is running again in 2024, promised in January that he would “designate the major drug cartels as foreign terrorist organizations” and then deploy special forces to “inflict maximum damage” on their infrastructure and operations.

A Trump campaign spokesman told RCP that the goal is simple: “Stop the scourge of drugs and violence from crossing our southern border.” The plan, straightforward: “Declare war on the cartels.”

By design or otherwise, the move creates a contrast with the current president. Republicans have accused him of being MIA on the entire border issue since coming into office, with the Trump campaign arguing that “Joe Biden leads from the back and is on the side of the cartels” and “as a result, he has put the safety of Americans and their communities at risk.”

This isn’t the first time Trump has promised to designate drug gangs as terrorists. He threatened to do so after a faction of the Sinaloa Cartel ambushed and killed nine American citizens in the Sierra Madre mountains in 2019. The victims were traveling to the La Mora ranch, a tight-knit community of Mormons in Mexico. Among the murdered were two 8-month-old children.

“All necessary work has been completed to declare Mexican Cartels terrorist organizations,” Trump said at the time. “Statutorily we are ready to do so.” But he held off at the request of Mexican President Lopez Obrador, “who I like and respect, and has worked so well with us.” It was only a temporary move, he explained on Twitter, in order to provide room for both nations to “step up our joint efforts to deal decisively with these vicious and ever-growing organizations!”

Obrador celebrated that decision, thanking Trump “for respecting our decisions and for choosing to maintain a policy of good neighborliness, a policy of cooperation with us.”

Republican patience has since run out, and the call to fight cartels like terrorists has hardened into something approaching political orthodoxy. In February, Republican attorneys general from 21 states sent a letter to the president and Secretary of State Antony Blinken urging the terrorists designation for the drug organizations. Noting that 100,000 Americans now die from drug overdoses annually – two thirds of them from fentanyl smuggled across the border – the state law enforcement officers noted that the cartels have built private armies to protect themselves from rival cartels and the Mexican government.

“The existence of such forces just across our southwestern land border, and the Mexican government’s inability to control them, pose a threat to our national security far greater than a typical drug-trafficking enterprise,” they said. This view has now morphed into the Republican Party’s view.

GOP presidential candidate Vivek Ramaswamy told supporters on Wednesday that combatting the cartels would be a “top foreign policy priority.” The former biotech CEO has promised to use military force, unmanned drones in particular, to cut them off at the head. A spokesman for the campaign told RCP that the cartels should be “decimated,” and said Ramaswamy considers their leaders no better than “Bin Laden, Soleimani, and Al-Zawahiri.”

Mexico could be a partner in that effort – if it so desires: “As president, Vivek will call Mexican President Obrador (or the next Mexican president) in January 2025 with a clear message: We will support you in decimating the cartels.” But he told RCP that the candidate would be willing to move without Mexico’s blessing: “And if you don’t, we’ll come in and do it for you. Time to end the fentanyl crisis.”

A political newcomer, Ramaswamy is considered a longshot. But his bellicose rhetoric is increasingly in line with a bloc of the country that is fed up with the situation on the southern border. The hawks once comfortable with hurling cruise missiles in the Middle East now seem willing to fire them across the southern border.

In New Hampshire last September, former Secretary of State Mike Pompeo reminded voters of previous news reports that “Trump wanted to bomb Mexico.” According to Mark Esper, the previous defense secretary, Trump had asked his military advisors at least twice if he could “shoot missiles into Mexico to destroy the drug labs.”

But that idea didn’t come from the Oval Office, Pompeo said. The media had it wrong. According to Pompeo, who is considering his own bid for the presidency, “that was actually me!” He likens the border to “an ungoverned space,” not so different than Afghanistan other than being “a stone’s throw from El Paso.” The real story, he said, was how the Trump administration was considering how best to stop the cartels from moving Chinese fentanyl across the southern border and “what are the tools we might have?”

Citing the need to cut off the money supply, Pompeo told RCP that Biden “is making a clear mistake in refusing to designate Mexican cartels as a terrorist organization” and missing an opportunity to “hit them where it hurts.”

A spokesman for the Nikki Haley campaign told RCP that the former U.N. ambassador also supports designating cartels as foreign terrorist organizations.

Combatting cartels like terror cells would come with controversy on both sides of the border. The Mexican government has already expressed alarm at the idea, and former U.S. Attorney General Alberto Gonzales, who served in George W. Bush’s administration, warns that the move could erase established norms in the United States.

“There’s been a longstanding tradition that we don’t use our military within our borders related to enforcement matters,” he said in an interview with NewsNation, noting that even litigating something like the rules of engagement would be a thorny legal question.

“It just remains to be seen whether or not this can be sufficiently cabined in a way that won’t have the military and law enforcement falling over each other,” Gonzales continued, “that we don’t have the military battling the rights of American citizens in this country.”

But if Republicans win the White House, the next president will have made commitments to the contrary. Political momentum is already behind the idea.

“The same cartels who produce and traffic this dangerous chemical are also assassinating rivals and government officials, ambushing, and killing Americans at the border, and engaging in an armed insurgency against the Mexican government,” wrote the 21 GOP state attorneys general. “This dangerous terrorist activity occurring at our border will not abate unless we escalate our response.”