NYPD Overtime Budget On Pace For Record As Cop Shortage Worsens

NYPD Overtime Budget On Pace For Record As Cop Shortage Worsens

The New York City Police Department is experiencing its biggest officer exodus in twenty years, leading to a shortage of personnel. As a result, officers are now increasing their hours on patrols, causing the overtime budget to swell, on track to hit the highest level in a decade this year, according to Bloomberg

New York City Comptroller Brad Lander published a new report outlining that the NYPD has exceeded its budget by $98 million, spending $472 million on overtime through February. Lander’s office said the department is on track to spend more than $740 million, which would be the highest in a decade. The NYPD’s fiscal year ends on June 30. 

While newly-elected Mayor Eric Adams has pledged to reduce NYPD overtime spending, the department is suffering a severe staffing crisis following the protests and riots of 2020 that were sparked by George Floyd’s death. Then defunding the police movement swept in as progressive lawmakers demanded a reduction in police budgets. 

On top of all of that, left-leaning media outlets demonized officers and led to a further exodus that continues to this day. Data from NYC Police Pension Fund found that 1,955 officers retired in 2022, and another 1,746 quit, indicating a total of 3,701 left the force just last year — the largest exodus since 2002, following the 9/11 attacks. 

So what’s clear is that the soaring overtime budget results from officers working longer hours because of a shortage of personnel. NYPD has lowered its standards for new officers in an attempt to boost numbers on the streets. 

Meanwhile, robberies, burglaries, felony assaults, and grand larceny are surging. How can New Yorkers rest assured that they will be protected as a cop shortage plagues the metro area?

Tyler Durden
Sun, 03/26/2023 – 15:00

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Mattresses, Social Media, Smart Phones, & Failure Of The Fed

Mattresses, Social Media, Smart Phones, & Failure Of The Fed

Authored by Mike Shedlock via MishTalk.com,

The Fed is looking for scapegoats. It got some assistance from the Wall Street Journal…

Silicon Valley Bank Scapegoats

Please consider The Economy Changed, Regulators Didn’t

On March 8, Silicon Valley Bank and Signature Bank were both, according to public disclosures, “well capitalized,” the optimal level of health by federal regulatory standards. Days later, both failed. 

“The question we were all asking ourselves over that first week was, ‘How did this happen?’” Federal Reserve Chair Jerome Powell said Wednesday.

Banking regulators will spend months, if not years, getting to the bottom of what happened.

What none of the regulators or bankers anticipated was how fast depositors could flee, which appears to be a new reality in the age of smartphone apps and social media.

“The speed of the run…is very different from what we’ve seen in the past,” Mr. Powell said Wednesday. “And it does kind of suggest that there’s a need for possible regulatory and supervisory changes, just because supervision and regulation need to keep up with what’s happening in the world.”

FDIC officials are discussing how to manage public confidence as social media expands people’s ability to “electronically panic,” a person familiar with the talks said.

“The speed of the run…is very different from what we’ve seen in the past,” Mr. Powell said Wednesday. “And it does kind of suggest that there’s a need for possible regulatory and supervisory changes, just because supervision and regulation need to keep up with what’s happening in the world.”

Scapegoat Nonsense

The idea that the economy changed (it’s always changing), and smart phones and social media are largely responsible for the failure of Silicon Valley Bank is a bunch of scapegoat nonsense.  

OK, social media increased the speed at which SVB failed, but that has nothing to do with the cause of the failure. 

Social media did increase the speed of the failure, but smart phones played no role at all. To initiate a wire from bank A to bank B requires an account at both banks. Whether this was done by computer, a regular land line, or a smart phone makes no difference in speed.    

Banking regulators will spend months, if not years, getting to the bottom of what happened.

What a hoot, yet I have no doubt it’s true.

In Fed Q&A Jerome Powell Wonders “How Did Bank Failures Happen?”

The question we are asking ourselves the first weekend is how did this all happen.”

There is no need for a study. I outlined twelve reasons for the bank failures, none of which had anything to do with smart phones or the changing economy.

Please consider In Fed Q&A Jerome Powell Wonders “How Did Bank Failures Happen?”

How Did This Happen?

  1. The Fed held interest rates too low too long, once again.

  2. The Fed even wanted to make up for lack of prior inflation, initially welcoming the pickup of inflation.

  3. The Fed failed to understand how $9 trillion in QE would fan asset bubbles.

  4. The Fed failed to understand how three rounds of fiscal stimulus, the largest in history, would fan inflation.

  5. The Fed presidents believe in economic models such as inflation expectations that its own studies prove do not work.

  6. When inflation did pick up, the Fed kept insisting that inflation was transitory.

  7. Even when the Fed finally realized inflation was not transitory, it kept QE going until the bitter end, not wanting to disturb prior forward guidance.

  8. The San Francisco Fed, whose job it was to monitor Silicon Valley Bank (SVB) was asleep at the wheel.

  9. The Fed considers treasuries a risk-free asset, ignoring duration risk.

  10. The Fed ignored a record concentration of long-term treasury and mortgage assets at SVB despite understanding the interest rate risk of those assets.

  11. The Fed’s forward guidance has been a disaster. It openly encouraged speculation.

  12. The Fed reduced reserve requirements on deposits to ZERO. 

If you are looking for one item and one item only look at point 12. The reserve requirement on deposits is ZERO

The discussion triggered a bunch of silly responses on Twitter but this one takes the cake for financial illiteracy. 

Mattress Solution

Anyone in the U.S. can set up a 100% reserve account tomorrow if they want. By a big safe and stuff it with large denomination bills, gold, silver, whatever they want. But, why require everyone to have what nearly no one wants?


Try making a $1 million payroll out of a safe or a mattress. 

Heck, try paying for anything with $10,000 in cash. You will have a quick knock on the door wondering where you got the money and more than likely it will be confiscated as drug money.

As for “But, why require everyone to have what nearly no one wants,” it seems to me that there was a run on SVB to the tune of hundreds of billions of dollars because there was amazing demand for a safekeeping bank. 

FDIC only covers $250,000. The bank run happened precisely because there was no safekeeping by the bank. 

Not Designed for Speed

Not Designed for Speed

Here’s another hoot from the same article.

The supervisory process has not evolved for rapid decision making. It is focused on consistency over speed. In a fast-moving situation, the system is not as well-designed to force change quickly.”

Again, this has nothing to do with speed. It has everything to do with a zero reserve requirement on deposits plus a Fed that crammed about $9 trillion in deposits down banks throats while ignoring duration mismatch of bank investments of those funds.

We do have consistency, that’s for sure. We have consistency of doubling down on failed policies and not learning from past mistakes.

Fed Policy: It’s Not Fractional Reserve Banking, It’s ZERO Reserve Banking

If you think we have fractional reserve banking, we don’t. We have zero reserve banking.

For further discussion, please see Fed Policy: It’s Not Fractional Reserve Banking, It’s ZERO Reserve Banking

Part of my proposal is admittedly controversial. I propose a 100% gold-backed dollar. But we do not even have a 100% dollar-backed dollar.

All SVB or any bank had to do to maintain 100% liquidity was park deposits at the Fed or in extremely short duration US Treasuries. 

Reader Question

My posts also triggered this question. “Are you proposing that banks stop making loans from their deposits?

The fact of the matter is loans create deposits. And so did QE to the tune of nearly $9 trillion.

Fictional Reserve Lending 

If anyone thinks I am a johnny-come-after-the-fact-lately I have written about the problem many times, at least once in 2009 an again in 2020. 

Please consider my March 2020 article Fictional Reserve Lending Is the New Official Policy

Official policy finally caught up with reality. Reserves are fictional.

With little fanfare or media coverage, the Fed made this Announcement on Reserves: “On March 15, 2020, the Board reduced reserve requirement ratios to zero percent effective March 26, 2020. This action eliminated reserve requirements for all depository institutions.

What’s Changed Regarding Lending?

Essentially, nothing.

The announcement just officially admitted the denominator on reserves is zero.

There are no reserve lending constraints (but practically speaking, there never were).

When Do Banks Make Loans?

  1. They meet capital requirements

  2. They believe they have a creditworthy borrower

  3. Creditworthy borrowers want to borrow

BIS Working Papers No 292 Unconventional Monetary

In 2009, I referred to BIS Working Papers No 292 Unconventional Monetary

The article addresses two fallacies

Proposition #1: an expansion of bank reserves endows banks with additional resources to extend loans

Proposition #2: There is something uniquely inflationary about bank reserves financing

From the BIS

The underlying premise of the first proposition is that bank reserves are needed for banks to make loans. An extreme version of this view is the text-book notion of a stable money multiplier. 

In fact, the level of reserves hardly figures in banks’ lending decisions. The amount of credit outstanding is determined by banks’ willingness to supply loans, based on perceived risk-return trade-offs, and by the demand for those loans

The main exogenous constraint on the expansion of credit is minimum capital requirements.

The central bank has a monopoly over interest rate policy, but not over balance sheet policy. This raises tricky questions about coordination, operational independence and division of responsibilities

Balance sheet policies can have a significant impact on the financial risks absorbed by the central bank. The extent depends on their characteristics and on how much they are relied upon. This, too, raises questions about operational autonomy and credibility, largely reflecting the impact of losses on the financial position of the central bank. 

Read those points over and over until they sink in. I discussed that article in 2009 and again in 2020. 

Three Key Points 

  1. Deposits result from loans and QE policy.

  2. The central bank has a monopoly over interest rate policy, but not over balance sheet policy. The FDIC is supposed to address the latter. And in the case of SVB, the San Francisco Fed was also asleep at the wheel.

  3. Social media, smart phones, and the WSJ notion “The Economy Changed, Regulators Didn’t” are scapegoats to a problem I addressed in 2009. 

What to Expect

Banking regulators will spend months, if not years, getting to the bottom of what happened.

They will conclude the problems are social media, smart phones, and the WSJ notion that the economy changed but regulators failed to keep up. 

*  *  *

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Tyler Durden
Sun, 03/26/2023 – 14:30

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IPO Market Shattered By Banking Crisis

IPO Market Shattered By Banking Crisis

Prior to Silicon Valley Bank’s collapse, US funding markets were already facing difficulties, with startup CEOs concentrating on cutting expenses and protecting their dwindling cash reserves. The downturn in IPOs directly resulted from Fed Chair Powell’s aggressive interest rate hikes. With the added impact of the SVB debacle, the US and global IPO markets have come to a standstill. 

Bloomberg data shows companies worldwide raised a paltry $19.7 billion via IPOs in 2023. That’s down a staggering 70% year-on-year and the lowest comparable amount since 2019. The most significant decline was in the US, where only $3.2 billion has been raised. The subdued activity will likely remain locked in place until easier monetary conditions are seen. 

“Rates is the number one issue, and there is a clear debate around how long the tightening lasts or changes direction and at what speed,” Udhay Furtado, co-head of ECM, Asia Pacific at Citigroup Inc., told Bloomberg. 

“There are a number of things people will need to see, including central bank direction, to ascertain whether it’s the second, third, or fourth quarter,” Furtado said, referring to when IPO deals might restart. 

Last week, we pointed out that funding challenges for startups pose a problem for venture capital funds that paid record-high prices for these companies, as they cannot offload their positions to retail in the secondary market. 

For the last year, readers have been well-informed about the drought in offerings (recall: “IPOs Vanish As Market Mayhem Saps Deal Appetite”). 

Turmoil in the IPO markets is creating massive problems:

“We’ve been stalled for more than a year.

“It caught people off guard because they didn’t expect to not have the ability to IPO in this amount of time,” said Patricia Adams, a partner at Vinson & Elkins LLP. 

On a positive note, secondary offerings have surged $76 billion this year, a 48% increase from a year ago, Bloomberg data show. Companies have also turned to convertible bonds, which allow them to borrow more cheaply, given the securities have a call option. 

Returning to SVB, the bank had been a major player in the venture debt space, offering loans to high-risk, early-stage companies. However, with SVB no longer in the picture, it is widely anticipated that such capital will be scarcer and more costly. We spoke with one Wall Street firm about the changing landscape of funding in the VC space — who said large investment banks, such as Goldman, are now stepping in to fill the gap left by SVB, providing funding lines to cash-strapped startups at deep valuation discounts. 

Tyler Durden
Sun, 03/26/2023 – 14:00

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Democracy Died in Darkness in Harvard Trial Sidebars

Recently, there was much consternation about Judge Kacsmaryk’s decision to delay posting notice of a hearing. Indeed, a coalition of media organizations actually argued that this decision could violate the First Amendment! Ultimately, the proceeding went as planned, with no disruptions or incidents. There were protests outside. And the event was widely covered by the press. Thankfully, democracy did not die in the darkness.

Throughout this entire process, I chuckled. People who had zero experience with federal district court litigation suddenly became experts. In reality, trial judges have vast discretion over their dockets and courtrooms. In any normal case, this sort of request would never have raised an eyebrow. And the information would have never leaked to the press. But, with the abortion ad-hoc nullification machine at maximum power, all the usual rules are ignored.

If you’d like some evidence of how much power judges have to keep their proceedings secret, consider the sidebar conference. Generally, everything a judge says is in open court. But the judge can ask the parties to “approach” the bench, at which point the judge and attorneys can have a private conversation that the witness, jury, and other parties cannot hear. Some courts have noice-cancelling devices that make it impossible to even hear anything. (The district court that I clerked in did not have that technology, and was very small, so the parties were asked to speak low, but not too low so that the court reporter could not hear them.) Generally, the court reporter transcribes these proceedings. But sidebars may be redacted from the public transcripts.

A particularly egregious exercise of sidebar-redaction came during the Harvard affirmative action trial in Boston federal district court. Jannie Suk Gersen, a professor at Harvard, writes about what happened in Judge Allison Burroughs courtroom. During the trial, the judge held lengthy sidebar discussions with counsel, and declined to release those matters in the public transcript. Indeed, those sidebars were not initially included in the record that was transmitted to the United States Supreme Court!

The secrecy would continue. Gersen filed a letter with the court, asking to unseal the sidebars. Judge Burroughs held two hearings about which sidebars to unseal. And the public was barred from those hearings! Only Suk and the other attorneys could attend. Lawyers for Harvard objected to release the information, even as the case was pending before the Supreme Court! Why?

… Harvard argued vigorously against unsealing certain sidebars, reminding the judge that concern about “the press gallery” was the reason she had sealed some discussions in the first place and maintaining that she should keep them sealed “because of the increased or the continuing public attention on this case.”

Imagine that. A district court limiting some access to the public in light of “continuing public attention.”

Apparently, the Supreme Court became concerned by the incomplete record, and asked for the sealed proceedings. Recently, the District Court sent the Supreme Court a “password protected and encrypted” thumb drive containing sealed materials. And what was Judge Burroughs trying to keep secret? A crass joke about Asian-American college applicants.

Thomas Hibino worked at the Boston location of the Department of Education, Office of Civil Rights. William Fitzsimmons is the Harvard Dean of Admissions. In 2012, Hibino emailed Fitzsimmons an attached memo:

On November 30, 2012, amid a friendly back-and-forth about lunch plans, Hibino e-mailed Fitzsimmons an attachment that he described as “really hilarious if I do say so myself!” Hibino explained, “I did it for the amusement of our team, and of course, you guys”—presumably Harvard admissions officers—”are the only others who can appreciate the humor.” The joke memo had been written on Harvard admissions-office stationery, during the earlier investigation. It was purportedly from an associate director of admissions and parodied the admissions officer downplaying an Asian American applicant’s achievements. The memo denigrated “José,” who was “the sole support of his family of 14 since his father, a Filipino farm worker, got run over by a tractor,” saying, “It can’t be that difficult on his part-time job as a senior cancer researcher.” It continued, “While he was California’s Class AAA Player of the Year,” with an offer from the Rams, “we just don’t need a 132 pound defensive lineman,” apparently referring to a slight Asian male physique. “I have to discount the Nobel Peace Prize he received. . . . After all, they gave one to Martin Luther King, too. No doubt just another example of giving preference to minorities.” The memo dismissed the fictional applicant as “just another AA CJer.” That was Harvard admissions shorthand for an Asian American applicant who intends to study biology and become a doctor, according to the trial transcript.

Fitzsimmons e-mailed Hibino back, “I’m stunned!” Fitzsimmons apparently believed that the admissions officer whose name was on the Harvard stationery had actually authored the memo. She “passed away a few years ago and I’d forgotten that she had such a sense of humor,” he wrote. “We’ll ‘de-construct’ at lunch. Where should we go?” Hibino wrote to clarify, “No, no! I did that from purloined stationery from your shop! Pretty convincing, huh?!!!!! I forget—are we getting together here or there?” (Through Harvard’s press office, Fitzsimmons declined to comment, and calls and messages to Hibino were not returned.)

It seems the Office of Civil Rights stole stationary from Harvard, which they used to put together this awful memo. The Dean of Admissions thought the memo was funny. Justice Kagan recently mused that maybe she has no sense of humor. Maybe I don’t have a sense of humor either. I’m not laughing.

And it also isn’t funny that the judge tried to keep this information out of the record:

The sidebars about the memo show that S.F.F.A. wanted to question Fitzsimmons, during his courtroom testimony, about his reaction to the memo’s “stereotypical comments about Asian Americans.” S.F.F.A. argued that the dean of admissions was “laughing along” with a joke including Asian stereotypes. Harvard objected that the memo and Fitzsimmons’s reaction should be excluded as “irrelevant,” because it was “so tangentially related to anybody’s credibility” or to a claim of Harvard’s “discriminatory animus” against Asian Americans. Furthermore, Harvard claimed that the move to introduce this evidence was “calculated to be handed to the press” and “intended to embarrass Dean Fitzsimmons.”

This information would seem to at least be relevant to the Supreme Court’s consideration. But the trial judge, apparently, thought it better to keep this matter out of the record. Gersen continues:

Judge Burroughs did not think that it was fair to assume that Fitzsimmons found the stereotypes in the memo funny, and she didn’t want what she saw as his “wholly ambiguous” comment to be public. “It has the potential to be explosively prejudicial, not to me because I take it for what it is, but in terms of the external world’s response to this,” she said. “At some point, I feel for the guy,” she added, asserting that asking him about the memo on the stand would be “designed for media consumption and not for any great search for the truth.” She ruled the memo and e-mails not relevant, and excluded them; if there were a jury, it would not have heard about them. And because she also sealed the sidebars, the press and the public knew nothing of them, either. . . .

But we also know that Judge Burroughs thought that the material could “explosively” affect how the public saw the facts. So, her decision was not just to exclude the evidence but also to seal it and attempt, even long after the trial ended, to prevent the public from knowing about a federal official’s allegedly anti-Asian remarks. An attorney familiar with the case told me, “Judge Burroughs mistakenly conflated admissibility under the rules with her own decision, as the fact finder, that this evidence would have no weight with her. And then, because it would have no weight, it would be sealed to prevent embarrassment to Harvard witnesses.”

Are judges allowed to make decisions based on concerns about media consumption?Back to Judge Kacsmaryk. He delayed posting the announcement of a hearing till the evening before. The public still would have been able to attend, and the press could have schlepped from Dallas. It would have been harder to bus in protestors. And there was not enough time to dry-clean their Gileadian bonnets. But Kacsmaryk’s position was a reasonable attempt to deal with an unknown security situation.

The post Democracy Died in Darkness in <i>Harvard</i> Trial Sidebars appeared first on Reason.com.

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David Stockman On The Status Of The Everything Bubble Created By The Fed

David Stockman On The Status Of The Everything Bubble Created By The Fed

Authored by David Stockman via InternationalMan.com,

The Wall Street Journal recently brought word that a professor Efraim Benmelech of the finance department at Northwestern University thinks the Fed is hurting housing and the consumer too much.

Opined he,

….those higher interest rates are making mortgages more expensive and leading to fewer home sales. That leads to less spending on appliances, paint and other home goods, because people commonly buy those items ahead of a sale and after moving.

“The actions of the Fed are leading to lower consumption,” he said.

You don’t say!

Then again, has it occurred to the good professor that the years and years of ultra low mortgage rates engineered by the Fed were totally unnatural, uneconomic and not sustainable?

The evidence for that is in the chart below. It shows that for most of the last three decades, the Fed drove the after-inflation or “real” interest rate on 30-year mortgages steadily lower until it actually turned negative.

Inflation-Adjusted Interest Rate on 30-Year Fixed Rate Mortgages, 1990 to 2023

Stated differently, the unfolding recession is a long overdue and necessary purge of artificial economic activity stimulated and subsidized by the central bank’s own financial repression policies.

The Fed’s belated attempt to “normalize” interest rates, therefore, is not a mean-spirited policy to deliberately cause labor, manufacturing capacity and other economic resources to be idled. To the contrary, it’s a belated attempt to unshackle markets from the excesses, bubbles, malinvestments, inefficiencies and unsustainabilities that were the inherent results of decades of reckless money-printing.

One of the many bubbles created by the Fed’s relentless monetary expansion of recent years might be termed the “labor bubble”. By that we are referring to the madcap hiring undertaken by corporate HR departments in the aftermath of the Covid Lockdown disruption.

As it happened, they failed to meet staffing needs in the early days of the re-opening in 2021 owing to the fact that millions of workers had left the active labor force thanks to massive stimmies, early retirements and other welfare state inducements, along with mom and dad’s basements and checkbooks. So HR departments plunged into hiring “just in case” the re-opening boom of 2021 and early 2022 continued. In effect, they began to hoard labor.

Spotify CEO Daniel Ek admitted as much in a recent missive to employees announcing a 6% cut in the company’s workforce:

“In hindsight, I was too ambitious in investing ahead of our revenue growth. And for this reason, today, we are reducing our employee base by about 6% across the company. I take full accountability for the moves that got us here today,” the exec said.

Of course, the re-opening and stimmy boom didn’t last—notwithstanding the Fed’s massive money-pumping and monetization of the public debt issued to finance the $6 trillion of Covid bailouts.

Since the spring of 2021 when the stimmies peaked, the US economy has actually been slouching toward idle. In fact, once you strain out of the GDP numbers the one-time inventory rebuilding, which was necessitated by the drastic depletion of merchandise stocks triggered by the stimmy based consumer spend-a-thons, there is hardly any organic growth left.

As shown in the chart below, the combination of Dr. Fauci’s Virus Patrol and the Washington spenders did a real number on the business economy. First, the normal business inventory-to-sales ratio exploded to the upside during the initial lockdowns and spending collapse, and then plunged to unprecedented lows as the stimmy-fueled boom in Amazon orders drained the system of its working inventories.

Whipsaw of Business Inventory-to-Sales Ratio, 2018 to 2022

Since reaching bottom in October 2021 inventories have been rebuilt to nearly normal levels, but that’s just the problem. The GDP gain reflected in the inventory rebuild is just a case of “one and done”. In fact, with the interest cost of carrying inventories now rising rapidly it is likely that the business sector restocking is over.

As we indicated, once you peel back the effect of inventory restocking, the stagnation of the US economy is starkly apparent. For instance, in the case of the industrial production index, which covers all of manufacturing, energy, mining and utility output, the level in March 2022 stood at 103.5.

As it happened, the index posted at a nearly identical 103.4 in December. Call it nine months of “growth” to nowhere!

Industrial Production Index, March to December 2022

Needless to say, none of this madness would have happened without the enabling hand of the Federal Reserve.

*  *  *

The truth is, we’re on the cusp of an economic crisis that could eclipse anything we’ve seen before. And most people won’t be prepared for what’s coming. That’s exactly why bestselling author Doug Casey and his team just released a free report with all the details on how to survive an economic collapse. Click here to download the PDF now.

Tyler Durden
Sun, 03/26/2023 – 13:30

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‘The Witch Hunt Against Me Is DEAD’: Trump Says Manhattan DA Tricked By ‘Fraud’ Star Witness, Wasn’t Into ‘Horseface’ Stormy

‘The Witch Hunt Against Me Is DEAD’: Trump Says Manhattan DA Tricked By ‘Fraud’ Star Witness, Wasn’t Into ‘Horseface’ Stormy

Former President Trump on Saturday suggested that the Manhattan DA was tricked by “Star” witness Michael Cohen, Trump’s former lawyer who was disbarred after pleading guilty in 2018 to multiple felony charges, including 5 counts of tax evasion, lying to a financial institution, lying to congress, and two campaign finance violations.

In addition to Cohen’s credibility issues, a 2018 letter emerged last week in which Cohen’s lawyer tells the Federal Election Commission that Cohen used his own funds to make a $130,000 ‘hush’ payment to Ms. Stephanie Clifford (Stormy Daniels aka “Horse Face”), and that Trump did not reimburse him for it.

Following a Saturday night rally in Waco, Texas, Trump told reporters on his plane: “I think they’ve already dropped the case … they have absolutely nothing.”

It’s a fake case. Some fake cases, they have absolutely nothing,” Trump continued.

The former president made a similar statement earlier Saturday, writing:

“The Manhattan D.A. Witch Hunt against me is DEAD, no evidence at all, & it has been conclusively proven that I did nothing wrong!”

“The evidence against their “Star” witness, however, is overwhelming. An already disbarred lawyer & convicted Felon, the only question left is will the D.A.s Office sue him for lying & fraud. They should!”

Trump also told reporters on the plane that he wasn’t trying to incite violence with a recent Truth Social post warning of “potential death and destruction” if he’s indicted.

“No, I don’t like violence and I’m not for violence. But a lot of people are upset.” he said.

Cohen’s credibility is shot

As the Epoch Times notes, former Trump attorney Robert Costello said he told the grand jury in the Manhattan case that Cohen was a tainted witness against Trump.

Cohen’s testimony against the 45th president in the investigation, which reportedly is connected to so-called hush money payments that were given to adult performer Stormy Daniels during the 2016 presidential campaign. A lawyer for Cohen, when reached for comment, declined to issue a statement, although Cohen told MSNBC last week that Costello never represented him and disputed his testimony.

Bragg’s has not returned a request for comment, and The Epoch Times cannot verify the authenticity of Trump’s claims. Previous Epoch Times requests for comment from the DA’s office have gone unanswered.

Over the past week, Bragg’s office has issued one public statement on the case, and that came in response to a House Republican letter seeking testimony and information about the DA’s case or whether his office would arrest Trump. A letter sent by his general counsel said that it was Trump who created a “false expectation” he would be indicted last week, although he provided no other details.

During Saturday night’s rally in Waco, Trump declared that his “enemies are desperate to stop us,” and that “our opponents have done everything they can to crush our spirit and to break our will.”

He also told the crowd that Bragg was investigating him “for something that is not a crime, not a misdemeanor, not an affair.

“But they failed. They’ve only made us stronger. And 2024 is the final battle, it’s going to be the big one. You put me back in the White House, their reign will be over and America will be a free nation once again.”

Tyler Durden
Sun, 03/26/2023 – 13:00

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Disruption Is At The Epicenter Of The Problem That The Economy & The Market Are Facing

Disruption Is At The Epicenter Of The Problem That The Economy & The Market Are Facing

Authored by Peter Tchir via Academy Securities,

I Know What You Did Last Winter

While not quite a horror story yet, we’ve had at least a few deaths (or near-death experiences) depending on your perspective and what you own. Much of the current situation can be tied to events that occurred a year or so ago. Yes Virginia, there are long and variable lags to monetary policy. These recent events can be traced back to the start of the hiking cycle last winter, but also back to last summer (which would have been a catchier title) when the Fed doubled down on hiking to fight inflation at all costs.

In theory, there should be a lesson for central bankers in all of this. However, both the ECB and FOMC missed that possible lesson as they chose to hike rates at their recent meetings despite significant changes in financial conditions.

I’ve chosen the RSM Financials Conditions Index as it tries to track business sentiment and the demand for credit. In the past few weeks, we’ve seen an almost 2 standard deviation move, which RSM associates with a higher risk of financial dislocation that will impact the real economy! We all see how the stock and bond markets react instantaneously to news. One fear is that the events of recent weeks (which were triggered by the events of “last summer”) won’t show up in the economic data immediately. However, they have begun to cause inexorable damage to the real economy. Not just through tighter lending standards, but through an impetus for everyone (from savers to companies) to act more fiscally conservative.

I Still Know What You Did Last Summer

I didn’t choose this for a title, but I could easily have done so since we are living in a sequel (if not a trilogy). Before going further into today’s main topics, I want to highlight that the events of last winter were a direct result of the summer before that!

The events of last summer (hiking, Jackson Hole, QT, and high inflation) were a direct result of the previous summer when we left ZIRP (0% rates, large scale asset purchases, etc.) on for too long! We don’t have the time to harp on this subject. It was really important, but reliving those actions (or inactions) won’t change anything about where we are today. However, looking at last summer may help us figure out what is next. It isn’t too late to fix things, but I’m increasingly worried that we are heading in this direction.

Bonds – Texas Chain Massacre

A recurring theme in today’s T-report, unfortunately, will be the “steaming pile of unrealized bond losses”.

This long bond began its life in February 2021 when 1.875% was a “good” yield (even for a 30-year bond). It was so good that the bond even traded above par in December 2021. While the massacre started well before the summer of 2022, the theme applies. Any attempts to bounce at a price near 80 were thwarted. Currently, we still languish in the 60s.

No part of the curve was spared!

As inversion got worse, there was no place in the yield curve to hide.

Credit spreads weren’t helping anything for the corporate bond investor (or the issuer)

At least corporate spreads are below their widest levels (seen in June 2022). However, they’ve started to widen again recently as concerns about a possible recession get put back on the table. These concerns should never have been removed from the table as thoroughly as they were. In addition, more people are starting to worry about credit conditions.

One positive is that very little, if any, of the pressure on the banking sector can be linked to corporate credit quality concerns and I don’t see that changing!

The Ring – Deposit Rates

I remember being creeped out by “The Ring”. However, I still don’t understand it (which brings me to deposit rates). They are starting to creep me out as well and I don’t fully understand them either.

The only interest rates on the entire planet that have barely budged are the rates paid on deposits.

I can only find “reliable” data on FRED going back to April 2021. The data here is the FDIC rate on savings and it only moved above 0.1% in the summer of 2022 and was reported as 0.37% today (which is astonishing). We discussed this topic on Friday in Discretion is the Better Part of Valor and it is potentially the lynchpin for what happens next for banks.

  • I’m 99.9999% confident that depositors in any bank will be fully protected. However, the policy makers could have been more explicit (rather than Powell’s “wink, wink, nudge, nudge” approach of hinting that they would step in when needed). This is hard to do except in the case of an “emergency”.

If I’m not worried about credit risk as a depositor, why am I still worried about bank deposits?

  • Having money in a bank deposit account serves many purposes (getting cash, paying bills, and easily moving money around). There are a lot of services that banks provide and part of the “payment” is accepting a lower interest rate than you could otherwise receive.

  • That is how it has always been done and is likely how it will continue. However, it seems like it has become much easier to move money seamlessly back and forth (quite cheaply), which could cause many to question how much one should keep in a bank.

  • What started as people re-thinking their credit risk may morph into people re-thinking the cost (in terms of yield give up).

A “preliminary chart”. As mentioned earlier, I have had some difficulty finding a good estimate of the average interest rate paid on bank deposits. I found this bankrate.com index that seems to include rates paid on jumbo savings accounts. This might be why (at 0.9%) it is higher than the FDIC rate I mentioned earlier. I need to do more work to find some better information on this, but it is at least indicative of the spreads between something as safe as bank accounts and 1-month T-bills.

On Friday, I had an interesting discussion with a banker that offers clients the ability diversify up to $50 million in deposits at the touch of a button. It would be distributed to enough different banks (and bank accounts) that the entire $50 million would be covered by the FDIC. This is impressive (both the technology and anyone who has $50 million lying around), but I am wondering if someone will ask the question – why?

Low rates paid on deposits and the ease of moving money around will be the next important point of discussion around banks. They can raise the rate they pay (should stem deposit flow), but this may hit earnings.

The timing of the “deposit boom” is also important!

It took about 7 years for deposits to grow from $10 trillion to just over $13 trillion. Then, between stimulus and ZIRP, deposits grew by $5 trillion in 2 years!

A system that basically was growing around $0.5 trillion per annum for an extended period of time grew by $2.5 trillion for 2 years in a row!

Remember (and this is crucial) that from early 2020 until somewhere in 2022, there was virtually no difference between what you could get in 1-month T-bills (and other super safe/low duration assets) and bank deposits. You had all the benefits/features of a bank account and were paying next to nothing (in terms of yield give-up).

That has all changed. It is not a coincidence that the level of bank deposits started to shrink early in 2022. This was all before bank deposits were part of the headlines on the nightly news.

Maybe I’m wrong and this is sustainable, but something has to give in the coming weeks and months.

What concerns me is how much money came into the banking system during ZIRP when there were few ways to earn net interest margin without taking more risk than was needed in the past. Yes, remember that the seeds of inflation (and other issues) were sown when we kept ZIRP going far longer than many thought was necessary.

Scream – Disruption

The wealth destruction in disruption has been nothing short of epic – hence the “scream”.

What has happened to cryptocurrencies (even as bitcoin is climbing), private equity (not immune to what has happened in public markets), and so many companies (investors and their employees) has been awful.

I use ARKK as a proxy for disruptive since everyone knows it. Its problems started earlier, but it is still down 70% from late 2021 (and even more compared to the early 2021 highs). There are some issues with using this as a proxy because the portfolio is traded actively (which may overstate the problems in disruption) and it is only a subset of “disruption”. However, it also tended to have TSLA as a large investment, which is still up more than 500% during this time period. In any case, I still cannot believe that I failed to tie the importance of the “disruptive economy” and the “disruptive portfolio” to Silicon Valley Bank. It literally personified my theory and I failed to see it.

If you get a chance, go back to Inflation Factors for why I think that disruption is so important.

I still believe in the importance of the wealth effect and think that disruption is at the epicenter of the problem that the market and economy are facing. The more your economy or business depends on the disruptive community, the more at risk you are.

Silence of the Lambs – Commercial Real Estate

The housing market, so far, has sustained much higher mortgage rates reasonably well.

I suspect that we will see declines continue, but so long as job losses remain minimal (so far, so good), many individuals who refinanced during ZIRP will not be in any rush to sell.

However, what isn’t so positive is what is happening in relative silence.

Limiting at least some withdrawals on at least one real estate focused fund is hardly an endorsement for that type of investment. That was reported late last year, but it is an ongoing issue (I haven’t seen stories that it has been re-opened to full withdrawals, but I could be wrong).

There are some publicly traded REITs that are at least 50% down since the start of 2022. Again, this is occurring in relative silence.

As I’m talking to people, CRE or commercial real estate is becoming the “topic de jour”. Small banks, which rely on local lending opportunities, could be exposed.

In any case, I encourage you to reach out to Stav Gaon at Academy who is our resident expert (and an II ranked analyst in the space). He has published many reports on structured products and real estate.

Bottom Line – Caution

If I had to pick one “crazy” idea right now, it would be an emergency rate cut of 100 bps or more sometime before the summer is over.

One thing that fixes the “cost of funds” issue for everyone (even if the curve steepens) is much lower short-term rates.

But the Fed and ECB both just hiked and are convinced that inflation is rebounding so I see more pain ahead. Inflation had improved steadily from last summer into January (disinflation was a risk at the second to last Fed meeting) and even wage inflation pressures eased in the most recent data, but let’s not let facts get in the way of hyping the return of inflation. They’ve also chosen to ignore a potential serious tightening of financial conditions. So long as deposits remain at risk of being taken elsewhere, banks will be more cautious on their lending than they were even a month or two ago.

I haven’t even touched on European banks today despite Friday morning’s spread widening. I think that the SNB could have handled CS much better from an overall market perspective. They did a lot to ensure that it got taken over by UBS, but did little to give confidence to the broader market. European banks face a different set of issues. These issues include the ability to retain deposits and to address questions about that “steaming pile” of unrealized (or unrecognized/unknown) losses in their portfolios.

Lehman was NOT a Moment. In no way am I comparing recent events to Lehman, but it is worth pointing out that the S&P 500 finished higher the week after Lehman filed. Yeah, stocks bounced off of the lows Friday, all is good! Hmmmmm…

I like lower yields.

I’m mildly nervous about credit spreads here, including structured products.

  • I am NOT worried about credit risk increasing materially. Companies are doing well and will likely weather any economic slowdown (which is by no means a foregone conclusion even in a cautious state).

  • I am worried about the cost of credit risk increasing. Investors will demand more premium for any given level of credit risk. The price of credit is always influenced by liquidity and if selling pressure mounts, pricing will deteriorate. I cannot remember how low AAA CLO paper got during the GFC, but it was absurdly cheap for an asset class that still hasn’t experienced losses due to credit. Even after this year’s bracket busting NCAA tournament, I still think that it is easier to pick a perfect bracket than to create credit losses in a AAA CLO tranche (but that doesn’t mean that the prices can’t get worse).

  • One positive development next week (I think it is positive) is that we may see more institutions use the new Fed facility after March 31st. They wouldn’t have to report accessing the facility until the following quarter (small, but could help).

Equities, I see greater downside.

  • Equities have been trying to re-ignite the ZIRP framework of 2020 (though conditions are so different compared to back then). This has created bullish positioning that is susceptible to a pullback.

  • The system is “saved” mentality has helped markets too. Just watch how well stocks did after the FSOC meeting was announced (which so far has only produced a generic statement of “all is well”).

  • You get any geopolitical risk for “free” being underweight equities. Maybe Putin is making peace overtures, but I’m still leaning towards China deciding to sell weapons to Russia before then.

  • I saw people mocking “volmageddon” early last week. While I didn’t fully agree with the “volmageddon” idea, I do think that 0DTE options can push markets. While I’m convinced that there is “always a seller”, I’m not as convinced that there is “always a buyer”. The risk of a big move here is heavily skewed to the downside rather than a face-ripping rally!

  • In addition, the debt ceiling debate is also looming and there are concerns that the situation could be even more contentious this time around, which would hurt risk assets.

The narrative is shifting and one thing that I learned from 2007-2009 (and again during the European Debt Crisis) is that by the time central bankers and policy makers solve the “current” issue, the market has started to move on to the “next” issue.

There won’t be as many “green dots” on Bloomberg this Sunday night as there were last Sunday so enjoy your weekend!

I’m going to remain cautious into next week until I see things evolving in a sustainable way (rather than just knee-jerk reactions and short covering).

Tyler Durden
Sun, 03/26/2023 – 12:30

via ZeroHedge News https://ift.tt/CX8PsJi Tyler Durden

Starlink Competitor OneWeb Completes Satellite Constellation

Starlink Competitor OneWeb Completes Satellite Constellation

The race to provide global high-speed internet through space-based networks is underway, heralding the potential beginning of a new era in communication.

London-based company OneWeb launched the final 36 satellites of its initial 616-satellite “constellation” via an Indian LVM3 rocket from the Sriharikota spaceport in Andhra Pradesh on Saturday. 

“It’s the fruition of an enormous amount of hard work, and obviously, we’ve been through some geopolitical issues over the last year or so, and the team has proven to be extremely resilient and caught up,” Chief Executive Officer Neil Masterson told Bloomberg ahead of the launch. 

“This launch will be one of the most significant milestones in OneWeb’s history so far, with the launch adding an additional 36 satellites to the OneWeb fleet, the first ever completed global LEO constellation,” OneWeb wrote in a press release

OneWeb’s space-based internet will provide high-speed, low-latency solutions to communities, enterprises, and governments worldwide through its constellation of satellites. 

Besides OneWeb, there is only one other company flying more satellites in space today and a competitor: Elon Musk’s Starlink system. 

However, OneWeb is different from Starlink because it’s not selling broadband connections to individuals but rather to telecom companies that will then provide this internet service. 

Bloomberg noted OneWeb had a rocky past, filing for bankruptcy in March 2020, only to be rescued by the UK government and Indian telecom tycoon Sunil Mittal’s Bharti Group. The company has attracted investments from Hughes Satelite Systems and SoftBank Group. 

More importantly, there’s a space race to provide satellite internet worldwide. Musk’s Starlink happens to be the leader

    Tyler Durden
    Sun, 03/26/2023 – 12:00

    via ZeroHedge News https://ift.tt/Be4kyNR Tyler Durden

    US Bank Trouble Heralds The End Of Dollar Reserve System

    US Bank Trouble Heralds The End Of Dollar Reserve System

    Authored by David Goldman via AsiaTimes.com,

    Bank crisis not a credit quality problem but stems instead from now-impossible task of financing America’s ever-expanding foreign debt…

    The US banking system is broken. That doesn’t portend more high-profile failures like Credit Suisse. The central banks will keep moribund institutions on life support.

    But the era of dollar-based reserves and floating exchange rates that began on August 15, 1971, when the US severed the link between the dollar and gold, is coming to an end. The pain will be transferred from the banks to the real economy, which will starve for credit.

    And the geopolitical consequences will be enormous.

    The seize-up of dollar credit will accelerate the shift to a multipolar reserve system, with advantage to China’s RMB as a competitor to the dollar.

    Gold, the “barbarous relic” abhorred by John Maynard Keynes, will play a bigger role because the dollar banking system is dysfunctional, and no other currency—surely not the tightly-controlled RMB—can replace it. Now near an all-time record price of US$2,000 an ounce, gold is likely to rise further.

    The greatest danger to dollar hegemony and the strategic power that it imparts to Washington is not China’s ambition to expand the international role of the RMB. The danger comes from the exhaustion of the financial mechanism that made it possible for the US to run up a negative $18 trillion net foreign asset position during the past 30 years.

    Germany’s flagship institution, Deutsche Bank, hit an all-time low of 8 euros on the morning of March 24, before recovering to 8.69 euros at the end of that day’s trading, and its credit default swap premium—the cost of insurance on its subordinated debt—spiked to about 380 basis points above LIBOR, or 3.8%.

    That’s as much as during the 2008 banking crisis and the 2015 European financial crisis, although not quite as much as during the March 2020 Covid lockdown, when the premium exceeded 5%. Deutsche Bank won’t fail, but it may need official support. It may have received such support already.

    This crisis is utterly unlike 2008, when banks levered up trillions of dollars of dodgy assets based on “liar’s loans” to homeowners. Fifteen years ago, the credit quality of the banking system was rotten and leverage was out of control. Bank credit quality today is the best in a generation. The crisis stems from the now-impossible task of financing America’s ever-expanding foreign debt.

    It’s also the most anticipated financial crisis in history. In 2018, the Bank for International Settlements (a sort of central bank for central banks) warned that $14 trillion of short-term dollar borrowings of European and Japanese banks used to hedge foreign exchange risk were a time bomb waiting to explode (“Has the derivatives volcano already begun to erupt?”, October 9, 2018).

    In March 2020, dollar credit seized up in a run for liquidity when the Covid lockdowns began, provoking a sudden dearth of bank financing. The Federal Reserve put out the fire by opening multi-billion-dollar swap lines to foreign central banks. It expanded those swap lines on March 19.

    Source: US Bureau of Economic Analysis, Bank for International Settlements

    Correspondingly, the dollar balance sheet of the world banking system exploded, as gauged by the volume of overseas claims in the global banking system. This opened up a new vulnerability, namely counterparty risk, or the exposure of banks to enormous amounts of short-term loans to other banks.

    Source: Bank for International Settlements

    America’s chronic current account deficits of the past 30 years amount to an exchange of goods for paper: America buys more goods than it sells, and sells assets (stocks, bonds, real estate, and so on) to foreigners to make up the difference.

    America now owes a net $18 trillion to foreigners, roughly equal to the cumulative sum of these deficits over 30 years. The trouble is that the foreigners who own US assets receive cash flows in dollars, but need to spend money in their own currencies.

    With floating exchange rates, the value of dollar cash flows in euro, Japanese yen or Chinese RMB is uncertain. Foreign investors need to hedge their dollar income, that is, sell US dollars short against their own currencies.

    That’s why the size of the foreign exchange derivatives market ballooned along with America’s liabilities to foreigners. The mechanism is simple: If you are receiving dollars but pay in euros, you sell dollars against euros to hedge your foreign exchange risk.

    But your bank has to borrow the dollars and lend them to you before you can sell them. Foreign banks borrowed perhaps $18 trillion from US banks to fund these hedges. That creates a gigantic vulnerability: If a bank looks dodgy, as did Credit Suisse earlier this month, banks will pull credit lines in a global run.

    Before 1971, when central banks maintained exchange rates at a fixed level and the United States covered its relatively small current account deficit by transferring gold to foreign central banks at a fixed price of $35 an ounce, none of this was necessary.

    The end of the gold link to the dollar and the new regime of floating exchange rates allowed the United States to run massive current account deficits by selling its assets to the world. The population of Europe and Japan was aging faster than the US, and had a correspondingly greater need for retirement assets. That arrangement is now coming to a messy end.

    One failsafe gauge of global systemic risk is the price of gold, and especially the price of gold relative to alternative hedges against unexpected inflation.

    Between 2007 and 2021, the price of gold tracked inflation-indexed US Treasury securities  (“TIPS”) with a correlation of about 90%.

    Starting in 2022, however, gold rose while the price of TIPS fell. Something like this happened in the aftermath of the 2008 global financial crisis, but the past year’s move has been far more extreme. Shown below is the residual of the regression of the gold price against 5- and 10-year maturity TIPS.

    Graphic: Asia Times

    If we look at the same data in a scatter plot, it’s clear that the linear relationship between gold and TIPS remains in place, but it has shifted both its baseline and steepened its slope.

    In effect, the market worries that buying inflation protection from the US government is like passengers on the Titanic buying shipwreck insurance from the captain. The gold market is too big and diverse to manipulate. No one has a lot of confidence in the US Consumer Price Index, the gauge against which the payout of TIPS is determined.

    The dollar reserve system will go out not with a bang, but a whimper. The central banks will step in to prevent any dramatic failures. But bank balance sheets will shrink, credit to the real economy will diminish and international lending in particular will evaporate.

    At the margin, local currency financing will replace dollar credit. We have already seen this happen in Turkey, whose currency imploded during 2019-2021 as the country lost access to dollar and euro financing.

    To an important extent, Chinese trade financing replaced the dollar, and supported Turkey’s remarkable economic turnaround of the past year. Southeast Asia will rely more on its own currencies and the RMB. The dollar frog will boil by slow increments.

    It’s fortuitous that Western sanctions on Russia during the past year prompted China, Russia, India and the Persian Gulf states to find alternative financing arrangements. These are not a monetary phenomenon, but an expensive, inefficient and cumbersome way to work around the US dollar banking system.

    As dollar credit diminishes, though, these alternative arrangements will turn into permanent features of the monetary landscape, and other currencies will continue to gain ground against the dollar.

    Tyler Durden
    Sun, 03/26/2023 – 11:30

    via ZeroHedge News https://ift.tt/qLV1s8N Tyler Durden

    FIRE Sues West Texas A&M Over Its Blocking of Student Group’s Drag Show

    From the brief in support of motion for TRO in Spectrum WT v. Wendler (N.D. Tex.), filed Friday (see the brief for more factual details, and some further analysis); the argument seems correct to me:


    West Texas A&M University’s President, Defendant Walter Wendler, has declared that he will not obey “the law of the land.” Instead, he insists on banning a recognized student group’s event from campus simply because he dislikes the event’s entirely lawful message. By moving for a temporary restraining order and preliminary injunction, Plaintiffs ask this Court to put a swift end to Wendler’s disdain for the First Amendment and prevent further irreparable harm to Plaintiffs’ constitutional freedoms.

    On March 20, 2023, President Wendler announced to the campus community that he is forbidding Plaintiff Spectrum WT from holding its scheduled PG-13 charity drag show because he disagrees with the show’s viewpoint. Making matters worse, President Wendler has all but confessed that he is knowingly violating the Constitution: “A harmless drag show? Not possible. I will not appear to condone the diminishment of any group at the expense of impertinent gestures toward another group for any reason, even when the law of the land appears to require it.” (Dkt. 1, Verified Compl., Ex. A.) That is textbook viewpoint discrimination. And it violates the First Amendment.

    The Supreme Court has concluded that even controversial live theater is protected First Amendment expression. Se. Promotions, Ltd. v. Conrad, 420 U.S. 546, 557–58 (1975). If officials in Tennessee could not exclude a group from presenting the provocative play Hair in a public theatre because they disagreed with Hair’s message, then surely President Wendler and the other Defendants cannot exclude students wanting to put on a PG-13 charity drag show in a campus space open to student groups for expressive activities, simply because the show does not match Wendler’s worldview. Id.

    Indeed, the Constitution’s bar against viewpoint discrimination is vital to preserving freedom of speech at public colleges and universities. “[N]o matter how offensive to good taste” some may find it, expression “on a state university campus may not be shut off in the name alone of ‘conventions of decency.'” Papish v. Bd. of Curators of the Univ. of Mo., 410 U.S. 667, 670 (1973). So, whether students gather on campus to support a political candidate, talk about the Bible, or put on a drag show, public college administrators cannot censor student expression just because they find it disagreeable or offensive.

    Yet that is exactly what President Wendler is doing by refusing to let the show go on. The result is ongoing irreparable harm to Spectrum WT and its student officers, Plaintiffs Barrett Bright and Lauren Stovall. Above all, the eleventh-hour cancelation of their March 31 charity drag show—and President Wendler’s moratorium on campus drag shows altogether—are depriving Spectrum WT’s members of their First Amendment rights, which is always an irreparable injury. Elrod v. Burns, 427 U.S. 347, 373 (1976). What’s more, Spectrum WT carefully followed West Texas A&M’s process for getting event approval—with the full backing of campus staff—only for Wendler to pull the rug out at the last minute. If Spectrum WT cannot hold its March 31 event on campus, or similar events it plans to hold in the future, it will suffer significant injury to its mission of advocating for the LGBTQ+ community at West Texas A&M….

    [I.] Plaintiffs Are Substantially Likely to Succeed on the Merits Against the University’s Brazen Censorship of Protected Expression.

    “The First Amendment is not an art critic,” and drag shows, like other forms of theatrical performance, are expressive conduct that the First Amendment prohibits President Wendler from censoring. Norma Kristie, Inc. v. City of Okla. City, 572 F. Supp. 88, 91 (W.D. Okla. 1983) (holding drag shows are protected First Amendment expression).

    The freedom of expression enshrined in the First Amendment “does not end at the spoken or written word.” Texas v. Johnson, 491 U.S. 397, 404 (1989). Whatever the mode of expression, the First Amendment protects conduct “inten[ded] to convey a particularized message,” (id. at 404, 406), and it prohibits public university officials from suppressing student expression simply because they disagree with its viewpoint or find the message offensive. Papish, 410 U.S. at 670. If anything, whether speech is protected by the First Amendment is a legal, not moral, analysis. Dodds v. Childers, 933 F.2d 271, 273 (5th Cir. 1991). President Wendler imposing his morals at the expense of free expression violates the First Amendment.

    The First Amendment also bars public university officials from denying student groups access to campus public forums because of the content or viewpoint of a group’s message. Widmar v. Vincent, 454 U.S. 263, 267–70 (1981); Rosenberger v. Rector & Visitors of Univ. of Va., 515 U.S. 819, 828–29 (1995). And messaging within a broader genre—such as art, theater, and dancing—is also protected even if it does not convey a “narrow, succinctly articulable message.” Hurley v. Irish-Am. Gay, Lesbian & Bisexual Grp., 515 U.S. 557, 569 (1995). Indeed, “[e]ven crude street skits come within the First Amendment’s reach.” Iota Xi Chapter of Sigma Chi Fraternity v. George Mason Univ., 993 F.2d 386, 390 (4th Cir. 1993) (fraternity “ugly woman contest” is protected expression). See also Berger v. Battaglia, 779 F.2d 992, 999 (4th Cir. 1985) (holding a blackface performance is protected First Amendment expression, even when it is “sheer entertainment” without a political message).

    Under core First Amendment principles, Defendants’ ongoing suppression of a peaceful charity drag show constitutes unlawful viewpoint and content discrimination. The Court should stop the ongoing injury to Plaintiffs’ First Amendment freedoms and restore constitutional order on West Texas A&M’s campus by issuing a temporary restraining order and preliminary injunction.

    [A.] President Wendler’s Censorship of a Drag Show Based on Personal Disagreements with the Expression’s Message Is Textbook Viewpoint Discrimination.

    President Wendler’s abuse of his powers to quash a PG-13 charity drag show because he disagrees with the show’s message—real or perceived—violates the First Amendment. It is “axiomatic that the government may not regulate speech based on its substantive content or the message it conveys.” Rosenberger, 515 U.S. at 828. “Viewpoint discrimination is censorship in its purest form,” and government action “that discriminates among viewpoints threatens the continued vitality of free speech.” Bible Believers v. Wayne Cnty., Mich., 805 F.3d 228, 248 (6th Cir. 2015) (en banc) (cleaned up). Indeed, government officials like college administrators are “inherently” incapable of making “principled distinctions” between offensive and inoffensive speech, and the state has “no right to cleanse” public expression such that it is “palatable to the most squeamish among us.” Cohen v. California, 403 U.S. 15, 25 (1971).

    To that end, “state colleges and universities are not enclaves immune from the sweep of the First Amendment.” Healy v. James, 408 U.S. 169, 180 (1972). And that includes the First Amendment prohibition on viewpoint discrimination. Rosenberger, 515 U.S. at 835–36 (invalidating college’s denial of funding to Christian student newspaper). True, courts often employ “forum analysis” to determine when public university administrators “in regulating property in [their] charge, may place limitations on speech.” Christian Legal Soc’y Chapter of the Univ. of Cali, Hastings Coll. of Law v. Martinez, 561 U.S. 661, 679 (2010). But regardless of the forum’s classification, “any access barrier … must be viewpoint neutral.” Id. (citing Rosenberger, 515 U.S. at 829).

    By picking and choosing which performances fit his moral tastes, President Wendler is engaging in viewpoint discrimination. Indeed, “the essence of viewpoint discrimination” is “the Government’s disapproval of … messages it finds offensive.” Iancu v. Brunetti, 139 S. Ct. 2294, 2299 (2019) (quoting Matal v. Tam, 582 U.S. 218, 248–49 (2017) (Kennedy, J., concurring)). And as President Wendler proclaims, he personally finds that “drag shows are derisive, divisive and demoralizing misogyny, no matter the stated intent.” (Verif. Compl., Ex. A.)

    President Wendler’s stance mirrors that of the censorial officials in Southeastern Promotions. 420 U.S. 546. There, a group petitioned to use a city- operated municipal auditorium to present the rock musical “Hair.” Id. at 547. The auditorium directors denied the application, reasoning that allowing the play “was not in the best interest of the community” and the board would only “allow those productions which are clean and healthful and culturally uplifting, or words to that effect.” Id. at 549. The Supreme Court struck down the directors’ censorship as an unconstitutional prior restraint. To the same end, this Court should put a stop to Defendants’ ongoing viewpoint-based censorship of Plaintiffs’ PG-13 charity drag show.

    The Fourth Circuit’s decision in Iota Xi also shows why the Court should enjoin Defendants’ censorship. 993 F.2d 386. There, George Mason University imposed sanctions on a fraternity for hosting an “ugly woman contest” riddled with “racist and sexist” overtones, including contestants “dressed as caricatures of different types of women[]” (i.e., in drag). Id. at 387–88. George Mason’s administrators cited many of the same concerns President Wendler relies on—that the event was degrading, amounted to harassment, and conflicted with the institution’s mission. Id. at 388; Verif. Compl., Ex. A.

    The Fourth Circuit had no trouble brushing aside the administrators’ excuses. As the court explained, “First Amendment principles governing live entertainment are relatively clear: short of obscenity, it is generally protected.” Iota Xi, 993 F.2d at

    389 (collecting cases). The court likewise held the fraternity’s drag skit was constitutionally protected, since it intended to convey a message, both through the mode of dress and use of a theatrical medium. Id. at 392. The court held GMU engaged in unconstitutional viewpoint discrimination by sanctioning the fraternity as the sanction arose from the fact that “the ‘ugly woman contest’ … ran counter to the views the University sought to communicate to its students and the community.” Id. at 393.

    Even if President Wendler’s opinion were shared by all but the students here, he cannot justify stifling Plaintiffs’ expression on moral grounds. That argument lost in Southeastern Promotions. It lost in Iota Xi. And it must lose here. See also Gay Student Servs. v. Tex. A & M Univ., 737 F.2d 1317, 1322–27 (5th Cir. 1984) (holding Texas A&M violated the First Amendment by refusing to recognize a gay student organization when the official responsible for the denial justified the decision “based on his perception that the organization would attempt to convey ideas” he found morally repugnant).

    This Court should refuse Wendler’s viewpoint-driven reasons for violating the First Amendment, grant Plaintiffs’ motion, and put a stop to Wendler and the other Defendants’ ongoing censorship of Plaintiffs’ protected expression.

    1. Excluding Plaintiffs’ Drag Show from Campus Public Forums Violates the First Amendment.

    President Wendler’s denial of use of a campus public forum to Plaintiffs also violates the First Amendment, to their ongoing injury. Legacy Hall is a designated public forum for First Amendment purposes. West Texas A&M opens its facilities, like Legacy Hall, to West Texas A&M students and student organizations for exactly these expressive purposes: theatrical performances before a willing audience, music, dancing, and banter. (Verif. Compl. ¶¶ 31–32, 41–42.) Thus, because “the University has created a forum generally open for use by student groups,” “the University must therefore satisfy the standard of review appropriate to content-based exclusions.” Widmar, 454 U.S. at 270. See also Pro-Life Cougars v. Univ. of Houston, 259 F. Supp. 2d 575, 582 (S.D. Tex. 2003) (“When as here a University by policy and practice opens up an area for indiscriminate use … by some segment of the public, such as student organizations, such area may be deemed to be a designated public forum”).

    Under the First Amendment, “a government … has no power to restrict expression because of its message, its ideas, its subject matter, or its content” unless it satisfies strict scrutiny. Reed v. Town of Gilbert, Ariz., 576 U.S. 155, 163 (2015) (cleaned up). To meet that high bar here, Defendants “must show that [their] regulation is necessary to serve a compelling state interest and that it is narrowly drawn to achieve that end.” Widmar, 454 U.S. at 270. They cannot meet that burden. See United States v. Playboy Ent. Grp., Inc., 529 U.S. 803, 816 (2000) (“When the Government restricts speech, the Government bears the burden of proving the constitutionality of its actions”).

    For starters, a ban on drag shows is content-based (if not outright viewpoint- based, as shown above). It singles out a particular type of expression—drag—for differential treatment. That is textbook content discrimination. Reed, 576 U.S. at 169 (content discrimination exists when the government “singles out a specific subject matter for differential treatment”).

    Defendants’ content-based ban of campus drag shows—including canceling Plaintiffs’ March 31 show—fails strict scrutiny. And Widmar shows why. In Widmar, the University of Missouri at Kansas City denied an evangelical Christian student group the use of university facilities otherwise “generally available for … registered student groups.” Id. at 264–65. The Supreme Court explained that such restrictions, which single out a particular subject for differential treatment, are subject to “the most exacting scrutiny.” Id. at 276. The Court held that the university unlawfully “discriminated against student groups and speakers based on their desire to use a generally open forum to engage in” protected expression and that the university’s stated goal, “achieving greater separation of church and State,” was not sufficiently “‘compelling’ to justify content-based discrimination against respondents’ religious speech.” Id. at 269, 278.

    Here, advancing President Wendler’s belief that drag shows promote “misogyny” is not a compelling state interest. (Verif. Compl. Ex. A.) As a threshold matter, banning drag shows does not prevent tangible harm to women. Any women (or men) who might take offense from a drag show can simply opt to not attend. Likewise, those who agree with President Wendler’s estimation of the value of the students’ expression can exercise a time-honored means of “effectively avoid[ing] further bombardment of their sensibilities simply by averting their eyes.” Cohen, 403

    U.S. at 21.

    Rather, President Wendler, like the administrators in Iota Xi, seeks to suppress Plaintiffs’ speech “because it r[uns] counter to the views the University s[eeks] to communicate to its students and the community.” 993 F.2d at 393. That is not redressing a harm. It is big-brother government insisting it “knows what’s best” for women and that it can silence dissenting expression. But “[t]he state may not ordain preferred viewpoints [about women and femininity] in this way. The Constitution forbids the state to declare one perspective right and silence opponents.” Am. Booksellers Ass’n v. Hudnut, 771 F.2d 323, 325 (7th Cir. 1985).

    Nor is Defendants’ ban on drag shows narrowly tailored or the least restrictive means of furthering their goals. See Playboy Ent. Grp., 529 U.S. at 813 (content regulation permissible only if the government “chooses the least restrictive means to further the articulated interest”) (cleaned up). Neither President Wendler nor the other Defendants have banned any other type of expression from campus which might tend to disparage or demean women. And a content-based law is not narrowly tailored if it leaves untouched a significant amount of expression causing the same problem. Reed, 576 U.S. at 172. Plus, the government’s objection to a speaker’s message is not even a legitimate government interest, let alone a compelling one.

    America’s college campuses are no stranger to censorship, which is often visited upon students and faculty who find themselves among the minority viewpoint—including, in many cases, conservative and religious groups. See, e.g., Widmar, 454 U.S. at 265; Rosenberger, 515 U.S. at 830. From Central Washington University threatening to defund the College Republicans for protected speech, to Iowa State University threatening to punish the College Republicans for protected speech, to pro-life groups having to fight for recognition at the University of Arizona, censorship of expression on public campuses continues to fester. But students’ expressive rights should not, and do not, turn on the whims of college administrators. The First Amendment does not play favorites.

    President Wendler’s censorship singles out one type of artistic expression out of many—drag shows—for differential treatment and censorship simply because he dislikes the message he perceives. It is unconstitutional viewpoint discrimination for the reasons explained. And putting aside President Wendler’s confessed motives, the ban is unlawful content discrimination. A temporary restraining order and preliminary injunction are necessary to secure Plaintiffs’ First Amendment rights….

    The post FIRE Sues West Texas A&M Over Its Blocking of Student Group's Drag Show appeared first on Reason.com.

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