RSN: Stephen Eric Bronner | Fightin' in the Streets

02 June 20

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RSN: Stephen Eric Bronner | Fightin' in the Streets

Stephen Eric Bronner, Reader Supported News
Bronner writes: "Violence is not a symbol, but a reality: people get hurt, businesses get destroyed, kids get arrested, and catharsis is always momentary. Always it is the most vulnerable - people of color - who get hurt, watch their businesses burn, get arrested, and then have their catharsis with tears in their eyes."

I was told of some Twitter message describing a woman trying to restrain a few young white guys from inciting violence outside Baltimore Hall. She yelled at them that they were putting African-Americans at risk and, supposedly, the white guy responded: “They’re going to kill you anyway!” 

I’m sure that there are many types in “Antifa” (anti-fascists), but I never met a member or anyone in the anarchist “Black Bloc” who wasn’t white and (usually) privileged. Nor have I ever met one who knew that the Antifa slogan, “smash the fascist where he stands,” derives from the German Communist Party in 1929. I could be wrong, but I don’t think that it had the desired impact. It is the same regarding another old, failed ultra-left slogan, “the worse the better.” Even the most cursory look at history suggests that the worse doesn’t beget the better, it only begets what is even worse.

A significant minority among the black protestors participated in the rioting and looting, just as in the riots of 1967, and they share responsibility for what happened to any number of black neighborhoods. That white nationalists acted as provocateurs doesn’t change matters; they are not worth talking about. It is different with other groups, though. Legitimate rage is no excuse for illegitimate violence, especially since “law and order” bigots will use it to confirm their worst prejudices. Spontaneous violence is not an expression of power, but of weakness, hopelessness, and frustration with the  procedures for resolving grievances. Violence makes it easier for protestors to define themselves by the white-racist tactics that the black community has courageously opposed. That our wannabe fascist president wishes to label a completely decentralized Antifa as a “professional terrorist organization” should not blind progressives to their irresponsible tactics and sectarian politics. Their violence will undoubtedly serve as a pretext for Trump to introduce more sweeping programs to constrict civil liberties, voting rights, and welfare programs. Perhaps he will also use his call for law and order as the precedent for an authoritarian response to an electoral loss in November of 2020. 

Indiscriminate rioting is “red meat” not only for his base but also for those “secret racists” who won’t publicly admit to their choices in the voting booth. “Our” president ignores reality: Antifa and the Black Bloc, the looters and the petty thieves, speak only for themselves. The vast majority of those racially diverse young protestors are neither terrorists nor revolutionaries. They seek justice for their brothers and sisters. Witnessing the horrifying murder of George Floyd online, they remember other murders of other blacks by other cops, and they are infuriated by a systemically racist police apparatus and a government whose multi-trillion-dollar response to the coronavirus never dripped down to the working class and the poor. The old adage remains as true as ever that “when America catches a cold, the black community catches pneumonia.”

Violence is tempting under these circumstances, and only a fool would argue that people of color should trust or preoccupy themselves with the sensibilities of white liberals and moderates. But those who surrender to the temptation confuse the momentary rush with political power, social media sites with real organization, and ugly graffiti with an authentic agenda. Violence is sometimes justified — but only very rarely, and only as a last resort, which this is not. If employed, moreover, it must serve an explicit communal end rather than that of quasi-criminal individuals. Violence is never a cause for celebration. One reaps what one sows: the greater the violence, the greater the unfocused rage, the greater the probability that rebellion will generate counter-revolt. 

I approach all this as an outsider — I can’t be anything else. But I know that violence should always be mourned as a tragic deviation from the practices of a righteous cause; it doesn’t contribute to  the solidarity of a real movement, especially one concerned with civil rights and the rule of law. Too often, in fact, brash talk about violence is used as an excuse to avoid engaging in real political activism such as that being developed by Reverend William Barber’s Poor People’s Campaign and a host of other organizations. Working with them, however, is not as dramatic as throwing a Molotov cocktail; real change requires discipline and long-term commitment. 

A pressing need exists for positive proposals, whether speculative or not, which can improve the transparency and accountability of law enforcement agencies. Suggestions might include demanding new and more thorough audits, eliminating their insular self-policing, seeking input from the most decorated cops on the ground, especially women, and — yes! — raising their wages and benefits to attract better-grade applicants. Other proposals might substitute national for local civilian review boards and call for the creation of a new cabinet post concerned specifically with police-community relations. Such proposals are worth considering, and that is true of many others. What I have written should be taken in the spirit of constructive criticism and solidarity with the exploited and the insulted. Precisely at a moment when our lying, megalomaniacal commander ‘n’ chief is aligning himself with the most retrograde forces of “law and order,” all protestors today must, just as did Martin Luther King and Nelson Mandela in their time, link the means they use to the ends that they wish to realize: justice, equality, and peace.

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Stephen Eric Bronner is Board of Governors Professor Emeritus of Political Science at Rutgers University and Co-Director of the International Council for Diplomacy and Dialogue. Author of more than twenty works, his latest is The Sovereign (Routledge)

Reader Supported News is the Publication of Origin for this work. Permission to republish is freely granted with credit and a link back to Reader Supported News.

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Justin Muzinich, center-left, and Steven Mnuchin, center-right. (photo: Tom Williams/CQ Roll Call/Newscom/Zuma Press)

This Treasury Official Is Running the Bailout. It's Been Great for His Family.
Justin Elliott, Lydia DePillis and Robert Faturechi, ProPublica
Excerpt: "Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin have become the public faces of the $3 trillion federal coronavirus bailout."

Deputy Treasury Secretary Justin Muzinich has an increasingly prominent role. He still has ties to his family’s investment firm, which is a major beneficiary of the Treasury’s bailout actions.

ederal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin have become the public faces of the $3 trillion federal coronavirus bailout. Behind the scenes, however, the Treasury’s responsibilities have fallen largely to the 42-year-old deputy secretary, Justin Muzinich. 

A major beneficiary of that bailout so far: Muzinich & Co., the asset manager founded by his father where Justin served as president before joining the administration. He reported owning a stake worth at least $60 million when he entered government in 2017.

Today, Muzinich retains financial ties to the firm through an opaque transaction in which he transferred his shares in the privately held company to his father. Ethics experts say the arrangement is troubling because his father received the shares for no money up front, and it appears possible that Muzinich can simply get his stake back after leaving government.

When lockdowns crippled the economy in March, the Treasury and the Fed launched an unprecedented effort to buy up corporate debt to avert a freeze in lending at the exact moment businesses needed to borrow to keep running. That effort has succeeded, at least temporarily, with credit continuing to flow to companies over the last several weeks. This policy also allowed those who were heavily invested in corporate loans to recoup huge losses.

Muzinich & Co. has long specialized in precisely this market, managing approximately $38 billion of clients’ money, including in riskier instruments known as junk, or high-yield, bonds. Since the Fed and the Treasury’s actions in late March, the bond market has roared back. Muzinich & Co. has reversed billions in losses, according to a review of its holdings, with 28 of the 29 funds tracked by the investor research service Morningstar Direct rising in that period. The firm doesn’t publicly detail all of its holdings, so a precise figure can’t be calculated.

The Treasury is understaffed, and Muzinich was overseeing two-thirds of the department before the crisis hit. He spent his first year as the Trump administration’s point man on its only major legislative achievement, the landmark $1.9 trillion tax cut that mainly benefited the wealthy and corporations.

As the markets panicked about the economic impact of the coronavirus, Muzinich’s responsibilities expanded. The Treasury worked with the Fed on the emergency lending programs, and the agency has ultimate power to sign off. Muzinich was personally involved in crafting the programs, including the effort to bail out the junk bond market, The Wall Street Journal reported in April. He communicates with Fed officials daily by phone, email or text, the paper said.

That effort has many skeptics. The Fed has never bought corporate debt in its more than 100 years of existence, much less that of the indebted and fragile companies that raise money through the sale of junk bonds. Private equity firms, hedge funds and specialty investment firms like Muzinich & Co. dominate the market for junk-rated debt. In effect, the Fed has swooped in to protect the most sophisticated investors from losses on some of their riskiest bets.

Muzinich & Co. Profited From the Government’s Actions

Muzinich & Co.’s largest fund, with over $10 billion in assets, jumped in value when the Treasury and the Federal Reserve announced plans to buy bonds.

Justin Muzinich’s ongoing ties to the family firm present a thicket of potential conflicts of interest, ethics lawyers said. Instead of immediately divesting his stake in the firm when he joined the Trump administration in early 2017, Muzinich retained it until the end of that year. But even then, he did not sell his stake and use the proceeds to buy broad-based securities such as index funds, as is common practice. Instead, he transferred his piece of the company to his father, who owns Muzinich & Co. In exchange, he received what amounts to an IOU — a written agreement in which his father agreed to pay him for the shares, with interest, but with no principal due for nine years.

“This is something akin to a fake divestiture,” said Kathleen Clark, a law professor and ethics specialist at Washington University in St. Louis. “It sure looks like he is simply parking this asset with a relative, and he will likely get it back after he leaves the government.”

A Treasury spokeswoman declined to say whether Muzinich has pledged not to take back the stake in the family firm once his public service ends. Muzinich “takes his ethics obligations very seriously” and “any suggestion to the contrary is completely baseless,” she said.

She added the arrangement with his family firm was approved by the Office of Government Ethics and agency ethics lawyers, who recently reexamined the setup given Muzinich’s role in the economic crisis response. They concluded that there is no currently envisaged scenario in which Muzinich would make decisions as a government official that would affect his father’s ability to repay the money he owes under the IOU.

“Treasury’s career Designated Agency Ethics Official has determined that there is no such conflict of interest, as there are no current or reasonably anticipated matters in which Deputy Secretary Muzinich would participate that would affect the note obligor’s ability or willingness to satisfy its financial obligations under the note,” she said in a statement. (The note obligor is Muzinich’s father.)

Muzinich & Co. did not respond to multiple requests for comment.

Muzinich’s relationship with the family firm also creates potential conflicts related to Muzinich & Co.’s clients. The firm makes money by charging investment management fees to several dozen wealthy individuals, insurance companies, pension funds, as well as what filings describe as a “quasi foreign government corporation.” The client list is not public and it’s unclear whether Muzinich would know about clients that came on board since he left. But any large investor has much to gain, or lose, from decisions being made by the Treasury about the bailout policies.

“The clients of this firm, I imagine, must be thrilled that Muzinich has this vitally important, powerful position with a huge amount of discretion and authority,” Clark said.

The Treasury spokeswoman declined to answer a question about the firm’s clients.

Even as Justin Muzinich has presided over bailout policies criticized by some observers, Muzinich & Co. executives have praised the government’s actions in recent briefings for investors. One described the interventions “as providing somewhat of a floor underneath the high yield market.”

Another Muzinich executive, David Bowen, who manages one of the firm’s high-yield bond portfolios, said during a May 20 webinar, “The Fed has been about as supportive, helpful, accommodative — whatever word you want to use — as anyone could imagine.”

Untangling the Financial Relationship

When Treasury Secretary Steven Mnuchin hired Justin Muzinich as counselor in early 2017, in many ways he was selecting a younger version of himself.

Like Mnuchin, Muzinich grew up in New York City, the son of a wealthy finance executive. Also like his boss, Muzinich spent years collecting a series of elite credentials: He attended Groton and holds degrees from Harvard College, the London School of Economics, Yale Law School and Harvard Business School. He worked at Morgan Stanley and spent a few months at a hedge fund associated with billionaire Steven A. Cohen, followed by a few years at EMS Capital, which invests the money of the wealthy Safra family.

Colleagues praise Muzinich as hardworking and serious, and Democrats have expressed relief that he isn’t as inflammatory as many other Trump appointees. Powell, the Fed chair, called Muzinich “creative and extremely capable” in a statement to The Wall Street Journal in April.

In 2010, he joined the family firm and became its president. His father, George, founded the company in 1988, specializing in handling portfolios of American high-yield bonds for European pension funds. The company expanded to offer funds to other institutional investors and wealthy individuals, but it stuck to its focus on corporate credit — particularly the riskier type that pays higher interest rates. Headquartered in New York and London, the firm has eight offices across Europe and one in Singapore.

“Talking about credit all the time might sound boring, I’m sure it does,” Justin Muzinich said in a 2014 interview, “but that is what makes you good.”

As he rose in the family business, Muzinich also launched himself into GOP policy circles, advising the presidential campaigns of Mitt Romney in 2012 and Jeb Bush in 2016. He owns a $20 million ultramodern beachfront house in the Hamptons and a $4.5 million Park Avenue apartment and commutes from New York City to work in Washington.

When Muzinich entered the Trump administration, he reported owning stock and stock options in the family firm collectively worth at least $60 million. The true value could be much higher, but disclosure rules don’t require officials to give a specific figure for any asset worth more than $50 million.

The Treasury’s ethics officers are frequently called on to rule on complex questions, given that the department tends to attract people from careers on Wall Street who have large, complicated financial holdings — from ex-Goldman Sachs Chairman Hank Paulson to banker and Hollywood financier Mnuchin.

Stakes in individual companies can create conflicts of interest. So incoming Treasury officials typically sell those stocks and invest in broad-based options like mutual funds. Ownership in private investment funds can be particularly thorny because ethics rules treat each of the fund’s investments in specific companies as sources of potential conflicts. Sarah Bloom Raskin, who preceded Muzinich as deputy secretary in the Obama administration, reported holding only a collection of index and mutual funds that either track the whole stock market or a large basket of companies.

But government ethics officials did not require Muzinich to sell his stake in the family firm through his first year in office as counselor to Mnuchin.

According to ethics filings, Muzinich said that he did not divest it until December 2017, the month the tax law was signed. (Several months later, in April 2018, Trump nominated him to be deputy secretary.)

Muzinich did not receive cash for most of his stake in the family firm. Instead, his more recent financial disclosures show that the stake, held in a family trust, was replaced with an opaque asset described as a “receivable from family,” valued at over $50 million.

Muzinich’s disclosure filings don’t reveal much about this asset at all. They don’t say who the family member is or explain the arrangement. They don’t say how the terms were negotiated, or even if the valuation of the deal was vetted by an independent third party.

It turns out that Muzinich transferred his stake to his father. But his father didn’t have to pay him right away. According to a Senate Finance Committee memo obtained by ProPublica, Justin received two promissory notes from his father in return for the shares. The notes pay Justin between $1 million and $5 million in interest over a year, at a rate of 2.11%. Moreover, his father does not have to pay any principal on the loan for nine years.

Neither the financial disclosure forms nor the Senate memo say how long the agreement is supposed to last. Neither addresses the possibility of his getting the shares back after he leaves the government. The Treasury says the transaction is “not reversible” but did not elaborate.

In other words, Justin still has an ongoing long-term stake in the financial well-being of Muzinich & Co., since his father now owes him more than $50 million. If the company were to plummet in value or even go under, it could cost Justin. Actions the Treasury and the Fed take can either enhance the chances he gets his money back or lower them.

The Treasury defended the IOU transaction as an appropriate remedy for any conflicts of interest. The agency provided a statement from Elizabeth Horton, an ethics attorney who left the agency in 2019 and who worked with Muzinich on the divestiture from his family business. Horton said that when Muzinich first joined the agency, “the Treasury ethics office correctly advised him that he did not need to divest his holdings in his family business because of the generalized nature of his work on tax reform legislation.” She said that when his duties changed, “I advised Mr. Muzinich that an exchange for a fixed value note was an appropriate way to divest.”

Horton said that advice was “consistent with practice in previous administrations” — though the Treasury declined to cite similar cases. “Muzinich worked very closely with the ethics office and was extremely attentive to his ethics obligations,” Horton said.

ProPublica reached out to four ethics officials, including two former Treasury ethics lawyers. None could recall a similar divestment transaction. Three of the four disagreed that it resolved Muzinich’s conflicts, while one said that turning it into an asset with a value that doesn’t fluctuate with future developments should shield him from any allegations of impropriety.

The deal does not look like an arms-length transaction, said Virginia Canter, who served as a career ethics attorney at Treasury during the George W. Bush administration and is now at the watchdog group Citizens for Responsibility and Ethics in Washington.

“The terms of the loan suggest something less than a bona fide transaction,” she said. “Once he leaves office, nothing in the arrangement appears to preclude Muzinich from forgiving the debt owed to him by his father so they can amicably agree on returning to Muzinich the interest in the Muzinich family business.”

As ranking member of the Finance Committee, Sen. Ron Wyden opposed Muzinich’s nomination as deputy secretary because of his role in crafting the tax bill. Although he would have preferred a cash sale of the Muzinich & Co. stock, Wyden said in a statement that in July 2018 Muzinich had agreed to “strengthen his recusal commitments to include matters where his family’s company is a party.”

That satisfied Wyden at the time, but it is a very narrow restriction. A vast range of issues before the Treasury could affect Muzinich & Co. regardless of whether the firm was directly a party to any of them.

How Justin Muzinich treated the transaction for tax purposes could reveal whether it was a true and final sale or not.

Ordinarily, a sale of an asset such as equity in a company would trigger a capital gains tax bill. In Muzinich’s case, that could run into the tens of millions of dollars, even though his father paid him no cash upfront. But there is an exception if the asset in question is merely transferred with a commitment to have it returned, said Steve Rosenthal, a tax law expert at the Urban-Brookings Tax Policy Center.

“If you are merely parking or pledging securities, and you are going to get them back, that’s not viewed as a taxable transaction,” he said.

It is not clear how he reported the transaction to the IRS, and whether he was left with a huge tax bill. The Treasury declined to comment on the tax issues.

Tax Reform — for Friends and Family

Through his first year in the administration, even as Muzinich continued to own his stake in the family firm, he met with a wide range of business executives to hash out major tax provisions that would affect them, according to his 2017 calendars that ProPublica obtained after suing the Treasury last year under the Freedom of Information Act. Others were obtained by the watchdog group American Oversight. The Treasury redacted large sections of the calendars, saying that they required consultation with the White House before they could be released.

One of the most important principles in the federal government ethics rules covers whether an official is dealing with a “particular matter” that would affect a discrete group of people with specific interests or a “general matter” that affects a larger and more diverse group.

The Treasury spokeswoman said the tax reform bill was to affect a very large and diverse group, so ethics rules did not prevent Muzinich from working on it. He was allowed to keep his equity in the company while working on the tax bill because his “duties did not include particular matters that required divestiture of certain assets.”

But many industries had specific interests in the tax bill that they lobbied on — industries that may include clients of Muzinich & Co. Insurance companies, for example, featured prominently. Muzinich met with trade groups representing insurers as well as Liberty Mutual, The Hartford, Zurich and Blue Cross Blue Shield. In the final tax bill, property and casualty insurers fared particularly well by dodging new limitations on deductions that applied to other companies.

Insurance companies invest their premiums in order to increase their profits. In its regulatory filings, Muzinich & Co. reports that 17 of its 89 clients are insurance companies, which have given the firm more than $1.4 billion to invest. Muzinich & Co. did not provide a list of its clients.

Some of the companies Muzinich & Co. has stakes in also have been lobbying the Treasury on their own behalf. For example, Muzinich & Co. helps its clients invest in business development companies, a type of investment fund that enjoys lower taxes in exchange for providing capital to medium-sized companies. The firm itself owns stock in BDCs, many of them run by private equity companies such as Ares Capital Corporation, which has paid millions of dollars to lobby for looser rules governing the BDC industry.

Even beyond any overlap with the family firm’s interests, Muzinich’s calendars, which cover the period from February to September of 2017, reflect the administration’s priorities in negotiating the tax deal. Muzinich spent long days in meetings with private equity titans, energy company CEOs and heavy-hitting interest groups like the Business Roundtable and the anti-tax group Americans for Prosperity. His calendar shows no meetings with labor unions or progressive groups.

Muzinich did meet often with the Treasury’s in-house tax experts but frequently didn’t follow their recommendations. Richard Prisinzano, who served in the agency’s tax analysis office until August 2017, recalled trying to tell Mnuchin and Muzinich that drastically lowering corporate tax rates would likely prompt businesses to transform into C corporations, which often pay lower rates under the new law.

He argued that such a change would further reduce tax revenues. Muzinich disagreed, Prisinzano said, protesting that businesses wouldn’t change their corporate form just to lower their taxes. “He really pushed back,” Prisinzano recalled. “He said to me, ‘The secretary is a numbers person, and the numbers don’t make sense to him.’”

“‘I’m a numbers person, and they make perfect sense to me,’” Prisinzano said he responded. “That was not an answer that they liked.”

In the following two years, many large businesses did indeed convert into C corporations, including private equity giants Ares, Blackstone and KKR. The government hasn’t produced an estimate of how big a hit taxpayers took from these conversions.

During his confirmation hearing as deputy secretary in July 2018, Democratic senators pressed Muzinich on whether he agreed with the White House that the tax bill would “pay for itself,” despite the dire projections of independent forecasters such as the nonpartisan Congressional Budget Office. “Yes,” Muzinich responded.

It has not come close, as corporate tax collections plunged and left the national debt at historic levels on the eve of the pandemic.

Muzinich Takes on the COVID-19 Crisis

As the economic response to the novel coronavirus consumed Washington in March, Mnuchin turned again to Muzinich to negotiate with Congress over the shape of a bailout intended to sustain companies as they weathered the worst part of the crisis.

Ultimately, Trump administration officials and lawmakers settled on a package worth more than $2 trillion, divided into aid regimens for different sectors of the economy. While setting general parameters, the Coronavirus Aid, Relief and Economic Security Act gives the Treasury wide latitude over how the money is to be distributed. It calls for $50 billion in grants and loans for the airline industry, for example, with few rules on who should get what. (In another potential intersection with Muzinich’s Treasury work, Muzinich & Co. started a new business line to loan money to airlines to buy planes in February.)

Perhaps the greatest power the Treasury now has is the authority to sign off on Fed loan programs funded with CARES Act money. The Fed has said it will leverage that money to lend up to several trillion dollars.

Among their biggest decisions: Which firms to include in the $600 billion Main Street Lending Program, which will lend directly to mid-sized businesses, and how to structure two programs that will purchase up to $750 billion in corporate bonds.

The Main Street program, which has yet to launch, changed substantially after it was first announced to sweep in bigger companies and those with heavier debt loads. Offering a glimpse into how the Treasury directly shaped the Fed programs, Energy Secretary Dan Brouillette told Bloomberg the change was made in part to make sure beleaguered oil companies had access to the program’s favorable terms. Muzinich & Co.’s U.S.-based funds include dozens of energy companies.

Mnuchin also deputized Muzinich to fix problems that arose during the first round of funding for the Paycheck Protection Program, which offers forgivable loans to small businesses. The government hasn’t said who got money through the program, but Muzinich & Co.’s portfolio includes many companies that are small enough to be eligible.

The Fed’s bond purchasing programs will go even further to help companies with poorly rated credit.

On March 23, the Fed and the Treasury announced a sweeping stimulus program that would involve buying hundreds of billions of dollars of investment-grade bonds. Selling bonds is a way for large companies like Boeing or PepsiCo to raise money for new investments, to fund day-to-day operations or to pay back older loans. Companies that are strong and profitable are expected to be able to pay back the borrowed money. Their bonds are deemed “investment grade” and come with lower interest rates. The news of the Fed program on its own heralded a dramatic recovery in the bond market, which in three weeks recovered nearly all of the 13.6% it had lost since the plunge began on March 6, according to one index.

Then, on April 9, the Fed announced, with the Treasury’s approval, that it would expand its efforts to buy some junk bonds. These carry higher interest rates because the borrowing companies are viewed as riskier and may already be heavily in debt. One index tracking that market segment surged nearly 8% on the news, the most in a decade. This risker category of bonds has expanded dramatically in recent years as companies took on higher debt burdens to do things like acquire competitors and buy back stock. These are the bonds in which Muzinich & Co. has long specialized.

At the end of 2019, Muzinich & Co. reported it had $2.8 billion of assets under management in its U.S. high-yield bond strategy. A Muzinich fund that focuses specifically on those bonds took significant losses in March, as companies like oilfield services provider Targa Resources and Caesars Entertainment saw the price of their bonds fall 30% and 35% respectively.

The government’s announcement buoyed Muzinich & Co.’s high-yield holdings along with everyone else’s. The portfolio manager for the firm’s U.S. high-yield offering also praised CARES Act’s tax provisions that would “help high yield companies.”

In a separate development in May, the Fed expanded another Treasury-backed lending program in a way that could help Muzinich & Co.’s portfolio. The central bank said May 12 it would support “syndicated loans,” another form of corporate debt often in which riskier firms borrow money from multiple lenders. Muzinich & Co. had more than $3 billion in assets under management in U.S. and European syndicated loans at the end of last year.

The good news for Muzinich & Co. keeps coming. As the firm’s head of investment strategy, Erick Muller, told investors in a May 13 webcast about the junk bond market: “The recovery is pretty spectacular.”

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New Study Shows Global Warming Intensifying Extreme Rainstorms Over North America
Bob Berwyn, InsideClimate News
Berwyn writes: "New research showing how global warming intensifies extreme rainfall at the regional level could help communities better prepare for storms that in the decades ahead threaten to swamp cities and farms."

The current warming trajectory could bring 100-year rainstorms as often as every 2.5 years by 2100, driving calls for improved infrastructure and planning. 

The likelihood of intense storms is rising rapidly in North America, and the study, published Monday in the Proceedings of the National Academy of Sciences, projects big increases in such deluges.

"The longer you have the warming, the stronger the signal gets, and the more you can separate it from random natural variability," said co-author Megan Kirchmeier-Young, a climate scientist with Environment Canada.

Previous research showed that global warming increases the frequency of extreme rainstorms across the Northern Hemisphere, and the new study was able to find that fingerprint for extreme rain in North America.

"We're finding that extreme precipitation has increased over North America, and we're finding that's consistent with what the models are showing about the influence of human-caused warming," she said. "We have very high confidence of extreme precipitation in the future." 

At the current level of warming caused by greenhouse gases—about 1.8 degrees Fahrenheit above the pre-industrial average—extreme rainstorms that in the past happened once every 20 years will occur every five years, according to the study. If the current rate of warming continues, Earth will heat up 5.4 degrees by 2100. Then, 20, 50 and 100-year extreme rainstorms could happen every 1.5 to 2.5 years, the researchers concluded.

"The changes in the return periods really stood out," she said. "That is a key contributor to flash flooding events and it will mean that flash flooding is going to be an increasing concern as well."

Better Science, Better Forecasts

The 2013 floods in Boulder, Colorado that killed nine people and caused more than $2 billion in property damage are a good example of how such climate studies can help improve flood forecasts, said Kevin Trenberth, a climate scientist with the National Center for Atmospheric Research in Boulder, Colorado.

"That was an exceptional event and the rain was like tropical rain. The radars greatly underestimated the magnitude as a result," said Trenberth who returned to his home in Boulder during the floods with a broken foot, only to have to climb on his roof to direct the gushing water away from his house.

A subsequent study found that the rain resulted from an unusual atmospheric brew over Colorado. Mountain thunderstorms mingled with a juicy atmospheric river from the tropics, dropping up to 17 inches of rain in a few days, nearly as much as Boulder's annual average total. Human-caused climate change "increased the magnitude of heavy northeast Colorado rainfall for the wet week in September 2013 by 30%," the study found.

A separate study concluded that global warming actually decreased the likelihood of the 2013 floods. The conflicting results hint at the complexities of climate research, but, since then, the influence of human-caused climate change on extreme weather has become more clear.

The risks will continue to increase as the atmosphere warms, said David R. Easterling, a climate extremes researcher and director of the U.S. National Climate Assessment. "The detection has been there for a while on a lot of extreme events," said Easterling, who was not involved in the new study. "We're going to see increases in extreme events, and we need to be prepared." 

Easterling said most current infrastructure, such as dams and bridges, was designed based on rainfall values from the mid- to late-20th century and was not built to withstand the more frequent extreme rains identified by the new research.

"There are going to be much more damaging floods that are going to wash out a lot of the infrastructure," he said. "You'll see more floods and bigger floods and major impacts to our civil engineering infrastructure."

According to the Environmental Protection Agency's website, data from the National Oceanic and Atmospheric Administration indicates that the percentage of total precipitation coming from intense single day events has increased significantly since about 1980, with nine of the top 10 years for extreme one-day precipitation events occurring since 1990. The EPA's precipitation indicator website also shows similar changes at the global scale.

Warmer Air, More Moisture and Shifting Storm Tracks

One way to visualize the planet's climate system is as a heat-driven pump that tries to balance the planet's energy by circulating it around the globe and cycling it from oceans, to land, to the atmosphere. Global warming puts more heat into the pump and that energy is manifested elsewhere in the system. For instance, for every 1.8 degrees Fahrenheit of warming, the atmosphere holds 7 percent more moisture that can fall as extreme rain, hail or snow. 

But global warming can increase rainfall by much more than 7 percent in individual events. In Hurricane Harvey, for example, the estimated boost in rainfall was about 30 percent, said Trenberth.

"The outcome depends on the kind of storm. If the rainfall is in or near the center of the storm, as for a hurricane, then the extra oomph from the latent heat release intensifies the storm and makes it bigger and longer lasting," he said. "This can also happen for an individual thunderstorm." He was not involved in the new study.

For storms outside the tropics, the most rain happens away from the center, which doesn't necessarily make the rain more intense, but can affect the way the storms move and develop, he added.

"This is the atmospheric river phenomenon and requires the weather situation to remain stuck for a bit, as a river of moisture from the subtropics, like the pineapple express, pours into a region," he said. A 2019 study showed that atmospheric rivers cause most of the flood damage in the Western United States already, and global warming is projected to intensify those events.

In addition to simply having more moisture in the atmosphere, global warming may also drive more extreme rainfall by shifting global weather patterns, said climate scientist Peter Pfleiderer, with Climate Analytics in Berlin. 

In a 2019 study published in the journal Nature Climate Change, Pfleiderer and other scientists looked at how global warming changes weather patterns in ways that make heat waves, droughts or rainstorms longer or more intense. With global temperature increases of 2.7 to 3.6 degrees Fahrenheit (the range to which the Paris climate agreement hopes to limit warming), periods of heavy rain would increase 26 percent—the most of all the weather phenomena studied—the research found.

Friederike Otto, acting Director of the Environmental Change Institute at Oxford, said new research showing how global warming affects extreme rain regionally complements studies that identify the effect on individual events.

As a co-investigator with World Weather Attribution, Otto has been involved in a series of recent studies looking at how global warming affects droughts, heat waves and extreme rain. The strongest signal, as she expected, was with heat waves, but she expects rain events "far outside the observations so far."

"One thing I only started to realize in the last year, is how important attribution is for making projections," she said. Climate attribution studies show how the warming of the planet makes some extremes more likely, and intensifies other weather events. Linking measurements of what actually happens with model predictions "gives you more confidence that the changes are because of climate change," she said.

Escalating Impacts Require Adaptation and Resilience

Floods caused by extreme rain are among the costliest climate-related disasters. A NOAA compilation of billion-dollar disasters lists a long string of deadly catastrophes caused, at least in part, by extreme rain. These include the January 2020 floods in New York, Michigan and Wisconsin, where significant damage along the shoreline of Lake Michigan was compounded by extremely high water levels in the lake, as well as a lack of seasonal ice cover.

In 2019, extreme and persistent spring rainfall in the Midwest led to one of the costliest inland flooding events on record. Floodwaters inundated millions of acres of farms, along with numerous cities and towns and Offut Air Force Base in Nebraska—the third U.S. military base to be damaged by a billion-dollar disaster in a six-month period. In all, that wave of flooding caused $10.9 billion in damage, NOAA estimated.

Earlier this month, persistent heavy rains contributed to the failure of a dam in Michigan, and Easterling said heavy rains were also implicated in the 2017 Oroville Dam failure that cost $1.1 billion and forced the evacuation of 180,000 people. The flooding caused by record rainfall from Hurricane Harvey in 2017 was a big part of the $125 billion worth of damage caused by the storm.

Extreme rain can also have an impact on a smaller scale. In mountainous areas, heavy precipitation over even a small area can be disastrous. In the Rocky Mountains, such cloudbursts have caused toxic floods of acidic water from abandoned mines, and in the European Alps, scientists say extreme rains are unleashing larger and more destructive rockfalls and landslides.

"We are going to get more intense, extreme precipitation, this is one of the things we are sure about," said Hannah Cloke, a University of Reading natural hazards researcher and hydrologist specializing in flood forecasting. 

The United Kingdom has been hit repeatedly by extreme rain in recent years, including Storm Desmond in 2015, which was linked with global warming and caused at least $550 million in damage, flooding nearly 10,000 homes and businesses. Cloke said the recent flooding has apparently even shaped her daughter's world view. For a recent school assignment, the nine-year-old used plastic bottles to build a floating house reminiscent of the movie Waterworld.

"Most of the design standards for storm infrastructure are not high enough for the predictions, or even what we're seeing right now," she said. "We have to get away from the idea that you can just carry on business as usual. We have to adjust our expectations of what could happen. We need to get people out of harm's way and be realistic about where we live."

Cloke said the certainty of increased extreme rainfall means that communities have to adapt by creating or restoring natural areas that can soak up the rains in the uplands, and cities need to be redesigned with green roofs and other measures to prevent flood waters from piling up and destroying property. More and more, flood experts are thinking in terms of socio-hydrology, she said.

"You can't just look at the water, at the heavier rain, and how fast it's running down the rivers," she said. "It's about how humans and water interact at all levels, and how politics controls where the water is. It's about who is at risk of flooding and whether those people have any agency to reduce the risk." 

New research like the PNAS study that shows the regional fingerprint of global warming on extreme rainfall can help reduce the risk, she said, because it enables better short-term forecasts. 

"We have a lot of the right science in place but we still can't predict the exact locations and amounts," she said. "We don't quite understand the development of the water cycle and we often underestimate rainfall for those reasons. But we shouldn't be surprised that these rains are happening. We're going to see entire cities at a standstill."

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