Monday, October 31, 2022

This Time Will Be Different: One or More Corporations Will Blow Up from Derivatives along with Global Banks

 

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This Time Will Be Different: One or More Corporations Will Blow Up from Derivatives along with Global Banks

By Pam Martens and Russ Martens: October 19, 2022 ~

Senator Sherrod Brown

Senator Sherrod Brown, Chair, Senate Banking Committee

Today, we will be asking the Senate Banking Committee, its Chair, Senator Sherrod Brown, and one of its most knowledgeable members, Senator Elizabeth Warren, to call an emergency hearing and subpoena the testimony of two brilliant researchers for the Office of Financial Research. Those researchers are Andrew Ellul and Dasol Kim.

The men have done nothing wrong. In fact, they have done something courageous. They have effectively blown the whistle on how global Wall Street banks have, once again, endangered the stability of the U.S. financial system through their opaque and dangerous use of over-the-counter derivatives.

Unfortunately, because of the legions of lobbyists employed by Wall Street that shape and corrupt the rules of federal bank regulators, these men are prevented from revealing the names of the most dangerous banks and their most dangerous counterparties because that information is considered restricted information obtained through supervisory inspections. (We have not spoken to these researchers directly. We make the assumption that they have not released the names of the banks and their most dangerous counterparties because it is considered “supervisory” information since that is the same excuse that we have received repeatedly when we file Freedom of Information Act requests with federal banking regulators.)

We believe that the Senate Banking Committee can, and should, compel their testimony and the naming of names under subpoena because the secrets they are being forced to keep present a clear and present danger to the financial stability of the United States and thus a clear and present danger to the national security of the United States.

Andrew Ellul is Professor of Finance and Fred T. Greene Chair in Finance at Indiana University’s Kelley School of Business. He holds a Ph.D. from the London School of Economics and Political Science.

Kim joined the Office of Financial Research in 2016. He holds a doctorate in financial economics from the Yale School of Management, a master’s degree in statistics from Columbia University, and a bachelor’s degree in mathematics and economics from the University of California, Los Angeles.

Ellul and Kim first sounded the alarm in a draft report that was published by the Office of Financial Research (OFR) in July 2021. (OFR is a federal agency that was created under the Dodd-Frank financial reform legislation of 2010 to closely monitor financial threats and analyze data so that Wall Street’s global banks could never again crash the U.S. financial system as they did in 2008.)

The draft report found the following:

“We provide evidence on how banks form network connections and endogenous risk-taking in their non-bank counterparty choices in the OTC derivative markets. We use confidential regulatory data from the Capital Assessment and Stress Testing reports that provide counterparty-level data across a wide range of OTC markets for the most systemically important U.S. banks. We show that banks are more likely to either establish or maintain a relationship, and increase their exposures within an existing relationship, with non-bank counterparties that are already heavily connected and exposed to other banks. Banks in such densely-connected networks are more likely to connect with riskier counterparties for their most material exposures. The effects are strongest in the case of (non-bank) financial counterparties. These findings suggest moral hazard behavior in counterparty choices. Finally, we demonstrate that these exposures are strongly linked to systemic risk. Overall, the results suggest a network formation process that amplifies risk propagation through non-bank linkages in opaque financial markets.”

When the researchers use the term “OTC derivatives markets” they are referring to opaque derivative contracts entered into between two parties (bilateral). Typically, a global bank is on one side of that trade. Unlike derivatives that trade on exchanges or are centrally cleared, these are dark contracts with little visibility. Unfortunately, trillions of dollars in notional (face amount) OTC derivatives exist today with federal regulators doing little to rein in the risks. The researchers correctly emphasize that “Losses on uncleared derivatives are fully borne by the bank, whereas those for cleared derivatives are mutualized across member firms of the clearinghouse.” And, despite the promise of Congress to reduce the threat of derivatives through the passage of the Dodd-Frank legislation, more than half of derivatives at U.S. global banks remain non centrally cleared today — more than 12 years after the passage of Dodd-Frank.

After Ellul and Kim sounded the alarm in July 2021, they conducted more tests and did more research and updated their report and released it on September 22 of this year. This time they were more blunt about their findings, writing as follows:

“We investigate whether banks’ counterparty choices in OTC derivative markets contribute to network fragility. We use novel confidential regulatory data and show that banks are more likely to choose densely connected non-bank counterparties and do not hedge such exposures. Banks are also more likely to connect with riskier counterparties for their most material exposures, suggesting the existence of moral hazard behavior in network formation. Finally, we show that these exposures are correlated with systemic risk measures despite greater regulatory oversight after the crisis. Overall, the results provide evidence of risk propagation in bank networks through non-bank linkages in opaque markets.”

The researchers explain in their updated report that global banks are piling on to the same risky, non-bank counterparties for their OTC derivative trades; not hedging this risk effectively because at least some of these risky counterparties are not even big enough or prominent enough (our assessment) to have single name credit default swaps available with which to hedge. And, increasingly, these counterparties are not other banks that federal regulators would be looking at, but are “corporations.”

Exactly what kind of corporations are on the other side of these derivative trades? According to the researchers, there are both “non-bank financial counterparties” – which could be insurance companies, brokerage firms, asset managers or hedge funds – and “non-financial corporate counterparties” – which could be just about any domestic or foreign corporation. To put it another way, the American people have no idea if they hold a large investment position in a publicly-traded company that could blow up any day from reckless dealings in derivatives with global banks.

This is not some pie in the sky fantasy. Wall Street has a history of blowing up things with derivatives. Merrill Lynch blew up Orange County, California with derivatives. Some of the biggest trading houses on Wall Street blew up the giant insurer, AIG, with derivatives in 2008, forcing a $185 billion bailout. JPMorgan Chase blew up $6.2 billion of its depositors’ money in the London Whale derivatives scandal of 2012-2013. And, according to the Financial Crisis Inquiry Commission (FCIC), derivatives played an outsized role in the spread of financial panic in 2008. The FCIC wrote in its final report:

“the existence of millions of derivatives contracts of all types between systemically important financial institutions—unseen and unknown in this unregulated market—added to uncertainty and escalated panic….”

Given this history, given the clarion siren call coming – not once, but twice – from researchers Ellul and Kim, it would be a dereliction of duty for the Senate Banking Committee to fail to call an emergency hearing on this vital matter.


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RSN: FOCUS: Don’t Look Now But Progressives Are About to Expand Their Ranks in Congress

 

 

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Rep. Alexandria Ocasio-Cortez (D-N.Y.) joins a February 13 campaign rally for democratic socialist Greg Casar, now the Democratic Party's House candidate for the 35th District in Texas. (photo: Greg Casar/InTheseTimes)
FOCUS: Don’t Look Now But Progressives Are About to Expand Their Ranks in Congress
Branko Marcetic, In These Times
Marcetic writes: "A lot is uncertain about the midterms, but there’s one thing we do know—the House will have the largest left cohort in decades."

A lot is uncertain about the midterms, but there’s one thing we do know—the House will have the largest left cohort in decades.

It’s been a rough year for progressives, or so the headlines tell us. Pundits have been quick to elegize the left electoral movement after several high-profile primary defeats in New York, Illinois and Texas. “Left loses momentum.” “Progressives are in danger of losing influence.” Pundits are “seeing limits on the political support for their reformist vision of the country” with this year’s “spate of losses” only the “latest blow to progressive power,” as the Bernie Sanders wing of the Democratic Party struggles “to find a winning formula.”

The jubilant mood at the Vermont senator’s September roundtable with a group of progressive House primary winners, then, might come as a surprise. “The Squad” — the moniker claimed by the troupe of progressive and democratic-socialist insurgents who started elbowing their way into the House in 2018 — is expected to number in the double digits in 2023, with at least four likely inductees poised to safely win blue districts in November. All in all, progressives are set to claim at least six Congressional seats opened up by redistricting and a record number of retirements.

“I was elected to the House and took office in 1991, and I can tell you there was nothing — nothing — like what we will be seeing in Congress next year,” Sanders said.

If that’s the case, it will not only be thanks to the political talents of the candidates themselves, but to the work of groups like Justice Democrats and the Working Families Party (WFP), among the most prominent of the multiplying constellation of organizations devoted to overturning the Democratic establishment. For this faction, the fight is bigger than any one election cycle, whether defined by shock progressive upsets as in 2018 or this year’s handful of undeniably bitter losses. And they measure success as much by the lengths their opponents are going to stop them as by the number of congressional seats they control.

ATTACKS AND PARRIES

Few would deny the left electoral movement has suffered major setbacks since Sanders’ 2016 and 2020 presidential campaigns.

Sanders’ brutal 2020 primary losses — after the Democratic establishment belatedly rallied around Joe Biden — were intertwined with a powerful Republican ground game that torpedoed many progressive campaigns alongside establishment Democrats that November. Sanders ally Nina Turner lost her bid for Ohio’s 11th District seat in 2021, and her campaign failed again nine months later. The Democrats’ 2021 electoral setback was widely spun as a repudiation of the Left.

This year’s primary season also saw painful progressive losses. Despite holding an anti-choice record in a post-Dobbs moment, Rep. Henry Cuellar (D-Texas) narrowly fended off a second primary challenge from immigration lawyer Jessica Cisneros in the 28th District. Progressive first-term Rep. Marie Newman (D-Ill.) fell to centrist Rep. Sean Casten, while Democratic Congressional Campaign Committee Chair Sean Patrick Maloney (D-N.Y.) prevailed over his progressive challenger, state Sen. Alessandra Biaggi, in what Maloney called a win for the “mainstream.” In all, centrist Democrats challenged by progressives ended up winning 14 of 22 primaries this cycle — roughly two-thirds. “The main problem was corporate PAC dark money,” says Alexandra Rojas, executive director of Justice Democrats. “The scale of it,” says Maurice Mitchell, National Director of the WFP, “I can’t overstate.”

The pro-Israel group Democratic Majority for Israel infamously intervened in Turner’s 2021 race, rapidly dissolving her massive polling lead with a blitz of negative advertising that painted the longtime Democrat as insufficiently loyal to the party, part of the pro-Israel lobby’s emerging strategy to make criticism of Israel a congressional nonstarter. After that, the floodgates opened.

By May of this year, Super PACs and outside spending organizations had poured more than $53 million into House Democratic primaries, according to an analysis by Politico. Venture capitalist and LinkedIn co-founder Reid Hoffman’s Super PAC dropped more than three-quarters of a million dollars in the last three weeks of the race to defeat Cisneros. Opportunity for All Action Fund, a dark money group run by Democratic operatives, spent more than $125,000 on digital ads and production to successfully stave off gun control activist Kina Collins’ bid to defeat 13-term incumbent Rep. Danny Davis (D-Ill.)

“You could be a great candidate, have a legislative record that shows you can be effective, but money in politics is what kept me and my team up [at night],” says Delia Ramirez, who ran and won the primary for the newly drawn 3rd District in Illinois.

Incumbent Squad members Rep. Rashida Tlaib (D-Mich.), Ilhan Omar (D-Minn.) and Cori Bush (D-Mo.) each faced primary challengers backed by dark money. Billionaire hedge fund manager Dan Loeb and other pro-Israel interests targeted Tlaib; Trump backers and Minnesota business tycoons tried to oust Omar; and Bush faced a flood of attacks from entrepreneur Steven C. Roberts, head of a sprawling business empire who also happens to be the father of Bush’s challenger.

Then there was the cryptocurrency industry, something of a wildcard. Cryptocurrency billionaire Samuel Bankman-Fried, 30, bought nearly $700,000 in TV airtime for ads backing the ultimately victorious insurgent progressive Maxwell Frost in Florida’s 10th, but Crypto PAC Protect Our Future put up $1 million for Turner’s opponent.

“The main attack point was that these candidates were insufficiently loyal to the Democratic Party and Biden,” says Waleed Shahid, communications director for Justice Democrats.

“Strong, Democratic, progressive Black women” were particularly questioned on their credentials, Rojas says. Issues the Right has weaponized — such as defunding the police—were less important as individual attacks than as part of a tapestry of negative messaging telling loyal Democratic voters that insurgents were inexperienced, unserious and out of step with the party, according to those involved in the campaigns. “They tested those attacks early on and poured lots of money to make sure the message they went with was salient enough with a large swath of voters,” Rojas adds.

It’s not just progressives who stand to lose. Former Congresswoman Donna Edwards, too, fell to a hailstorm of money from the American Israel Public Affairs Committee (AIPAC), despite her endorsement from both establishment figures like Hillary Clinton and Nancy Pelosi and the Sanders-affiliated Our Revolution.

The dark money spigot won’t shut off anytime soon. In September, the Democratic National Committee blocked a resolution to ban outside spending in primaries.

FULL STEAM

But if the progressive movement is on the ropes, no one’s told its leaders.

“I think it’s been mis-portrayed as a bad year for progressives by the media,” says Greg Casar, a democratic socialist candidate who won his primary for an open House seat in Texas, and who (like other winning candidates) had the crucial backing of groups like WFP and Justice Democrats. “We’ll have a historic number of progressives, true progressives, in Congress.”

According to the Brookings Institution, 50% of all candidates endorsed by Justice for All, Our Revolution, Indivisible, or by Sanders or members of the Squad, won their primaries. Justice Democrats saw three of its five carefully chosen challengers win their primaries, its highest success rate ever. The WFP, meanwhile, saw what it calls its best-ever winning streak, with victories in eight of the 14 non-incumbent House bids it prioritized, a number that doesn’t include incumbent Reps. Omar, Bush and Jamaal Bowman (D-N.Y.), who won despite stiff challenges.

And while the WFP’s overall win rate in House primaries might be lower this year (57% for non-incumbents vs. 77% in 2020), the group is on track for its best year ever in terms of a more important metric: winning seats in Congress. Rob Duffey says the group invested more heavily in federal primaries in blue districts, rather than winning primaries in red seats that are long shots in the general elections.

In a blow to centrist Democrats, WFP endorsee Jamie McLeod-Skinner ousted Rep. Kurt Schrader (D-Ore.), the Blue Dog who led the corporate-backed effort in the House to derail the Build Back Better Act, the omnibus climate and social policy bill that was a priority for progressives. Another WFP candidate, Sanders-endorsed Vermont state Sen. Becca Balint, won her primary against Vermont’s lieutenant governor for Vermont’s only House seat, making her a shoo-in for the seat that, 30 years ago, catapulted Sanders to national prominence.

But four winning primary candidates in particular have excited those involved: Casar (Texas-35th), Ramirez (Ill.-4th), Summer Lee (Pa.-12th) and Maxwell Frost (Fla.-10th)—young, nonwhite and largely working-class candidates with bold progressive platforms. All were backed by the WFP, and Casar and Lee also had support from Justice Democrats. Should they win in November, as expected, their cohort’s entry into Congress would match the size of the original Squad that sent shockwaves through the political landscape in 2018 — something overshadowed by the media’s disproportionate attention to losses.

TACTICS AND STRATEGIES

Those involved in these winning campaigns credit a number of factors in fending off big money. One was starting early, sometimes 14 months before voting.

“It was important to firm up as much support as possible early, so that when lies or mischaracterizations hit, they don’t stick,” says Casar. “And we worked really hard to pay for early polling to show how much broad support we had, which can help keep that right-wing money from coming in.”

A more uncomfortable fact is that some candidates have also neutralized the impact of big money by going centrist on Israel. Casar distanced himself from the Boycott, Divestment and Sanctions movement (BDS) in aletter to a local rabbi, affirming his support for continued military aid to Israel as long as it’s not used to violate human rights, while stressing his support for a two-state solution and opposition to Israel’s steadily expanding illegal settlements in the West Bank. The letter was made public by Jewish Insider, and in the ensuing outrage Casar pre-emptively rescinded his request for Austin DSA’s endorsement. Casar’s campaign says that he had been “pressed by many groups” to change his positions on the Middle East and that he “decided to stay true to his own values and write down his thoughts in a letter” instead. But one AIPAC donor remarked that the “Casar race is a very good example of how [our strategy] is working.”

Casar’s not the only one. Frost, a former activist in the Florida Palestine Network, changed his position on the Israeli-Palestinian conflict during his campaign — eventually both disavowing BDS and backing military aid to Israel — and alienated key early advisors as a result. Frost told the Intercept, which broke the story, that the evolution “wasn’t really about the spending” but “about the dialogues in district and my conversations with people,” but campaign sources told the outlet the question of outside money and how to keep it out was top of mind. In Pennsylvania, WFP-backed Senate candidate John Fetterman took a similar tack, pledging “unwavering” commitment to Israel, and receiving a DMFI endorsement and spending boost in return.

Another factor was the candidates themselves. “The quality of the candidate matters so much,” says Waleed Shahid. “You can have the math on paper that the demographics and the path to victory are such and such, but if the candidate’s not an authentic messenger or grounded in good values, it’s going to be hard to make that case.”

The candidates’ years of involvement in organizing gave them pre-established public profiles, plus deep connections to local leaders, activists and potential allies — as did their time in elected office. Casar, at 33, was a three-term Austin City Council member who worked as policy director for the Austin-based Workers Defense Project, lobbying for workers’ rights and helping mobile home residents organize against rent hikes and evictions. That work helped him secure the crucial backing of local unions, who mobilized what Texas AFL-CIO President Rick Levy calls “the whole toolkit,” including block-walking, phone calls, joint events and mail to local members.

“The fact that so many unions were engaged there was very unusual,” Levy says.

Illinois state Rep. Delia Ramirez, 39, is a daughter of Guatemalan immigrants who spent her childhood talking with unhoused Chicagoans who gathered at the church soup kitchen her family lived above. She had no plans to run for the new, majority-Latino 3rd District in Illinois until friends and colleagues urged her — including some who put aside their own ambitions. Ramirez says the experiences of her mother, a homecare worker with diabetes, and father, who worked in a bakery for 20 years until a cancer diagnosis forced him to retire, were key to her decision.

“When [Dad] retired, he got a frozen pie — not retirement benefits,” Ramirez says.

Ramirez came up through Illinois progressive political networks as the campaign manager for progressive watchdog Common Cause Illinois and, later, co-chair of the Elected Officials Chapter of United Working Families, the Illinois WFP affiliate. “We were with Greg [Casar] from day one, and that’s true with Delia as well,” says Mitchell. “This is a story about leadership development and candidate pipelines.”

State Rep. Summer Lee, 34, one of four candidates backed by the Democratic Socialists of America (DSA) to enter the Pennsylvania state House in 2018, has said she only ran for office because she saw it as an “organizing opportunity.” Having worked as an organizer for a $15 minimum wage, she brought her activist roots to the statehouse, joining protests that erupted after the 2019 acquittal of a Pittsburgh cop who killed an unarmed Black teenager, and giving a famously critical keynote address to a 2020 Women’s March gathering. “I hope that you will get up, that you will take your pink pussy hat off,” Summer told the Vermont crowd, “and go up to your sister of color and tell her that, ‘I am here. What do you need?’ ”

Lee’s organizing roots and legislative record on labor rights also won her the support of three large SEIU locals and the United Electrical Workers union.

Maxwell Frost, who rounds out the group, worked on the Florida
ACLU’s successful felon re-enfranchisement campaign and was national organizing director for the gun control group started by Parkland shooting survivors. At 25, Maxwell stands to be the youngest member of Congress, a Generation Z Uber driver shaped by the era-defining anxieties around climate, economic precarity and gun violence.

Frost, too, says he had no plans to run until prodded by local organizers. A month before he announced, he connected by phone with the mother he’d been separated from at birth, who he learned had spent her life “in a cycle of poverty.” “She never had healthcare, she wasn’t in a financial position to have another child,” Frost says. “I was number eight, which is why she put me up for adoption. Hearing that from her really changed everything for me.”

Apart from Frost, each candidate climbed the ladder of elected office starting at the local or state levels. Their impressive legislative records were “undeniably a benefit,” Mitchell says. “There’s an advantage of demonstrating, as a progressive, that you know how to run and win, that it leads to concrete victories for working people they can feel and see in their lives.” Typical centrist attack lines about pie-in-the-sky ideas that can never come to pass “ring hollow when your constituents have seen you govern,” Mitchell adds.

On the Austin City Council, Casar pushed through affordable housing measures and a 60-day eviction moratorium at the start of the pandemic. Even his legislative defeats helped burnish his public standing, as when he ended up the lone council vote against restoring the city’s ban on homeless camping, or when his measure mandating paid sick leave for workers was struck down by the state Supreme Court.

In Illinois, Ramirez authored an emergency housing assistance bill, signed into law in May 2021, that temporarily stayed some foreclosures and allocated money for struggling renters and homeowners during the pandemic.

Lee, who had to work within a long GOP-controlled Pennsylvania legislature, drew on her activist roots to jumpstart action on police reform during the 2020 George Floyd protests, leading the effort to commandeer the House podium at the start of voting. She successfully forced foot-dragging Republican leadership to move, and she did so with more establishment-friendly Democrats. The result was a state law creating a landmark (if flawed) misconduct database for police hires.

These records made charges of party disloyalty a tough sell. “To accuse them of being Republicans didn’t really work,” Shahid says. Their legislation had been publicized as victories by local Democratic branches in party press releases, such as the paid sick leave ordinance passed by Casar, who calls himself “a proud member” of the Democratic Party. When Ramirez spearheaded the codification of abortion rights in Illinois in 2019 and successfully passed a provision—inserted at the end of a 465-page budget bill in 2020 — to expand Medicaid to undocumented immigrants, Democratic Gov. JB Pritzker touted both as major accomplishments.

This history was especially useful given the timing of this round of primaries, which happened to land in the period of Democratic despondency between the death of Build Back Better and the August passage of the Inflation Reduction Act.

“We stressed that we are the people who really want to deliver on the Democratic agenda that’s been promised,” says Rob Duffey, WFP national communications director. For candidates without a large legislative record, like Kina Collins, that timing may have hurt. She fell in a low-turnout election in Chicago, where doorknockers in typically blue-voting African-American neighborhoods met voters complaining the president wasn’t doing anything for them, Alexandra Rojas says.

Through it all, the winning campaigns continued the strategies progressive challengers have become known for, namely the blister-inducing doorknocking and phonebanking that’s been the bedrock of left-wing upsets going back to Sanders’ first mayoral victory in 1981. Central as these tactics are, however, they’re clearly no longer enough.

“That can’t make up for the imbalance in paid communications,” Shahid says. “Our adversaries are spending six, seven figures on mailers and ads, and we can’t abandon that terrain to them. For older voters, it’s the main way they get information.”

One clear trend is that progressive candidates who are outspent 2-to-1 can win, while those with steeper ratios aren’t as lucky. “When our candidates were outspent to that level, our opponents could shape the narrative in ways that became overwhelming for us to reshape, even with all the advantages we had,” Mitchell says. WFP-backed Durham County Commissioner Nida Allam was outspent 14-to-1 and lost her bid for North Carolina’s 4th District.

Lee saw a 25-point lead wither in only a month to less than 1% under a blizzard of dark money-financed negative advertising. But Justice Democrats and others were able to put together their own resources to stay within that 2-to-1 ratio and help Lee eke out a win.

“Summer’s race was one we knew we could win, but it required us to go all in,” says Rojas. “After that, we didn’t have the money to spend in the same way on others.”

In the end, Justice Democrats and other outside groups came up with $1.7 million to offset the nearly $3 million spent against Lee. Only $22,000 separated Ramirez and the runner-up in her race, while Casar faced no serious outside spending in his four-way primary. Frost, as a dark horse political novice, did not draw much resistance in his race — but as time has proven, such out-of-nowhere upsets hardly make for reliable left-wing victories.

“A big part of what I’m thinking about is what I can do between now and the next cycle to build that war chest,” Rojas says. “In the same way that progressives care about organizing people, we have to start caring about organizing money.”

That predicament may require finding progressive counterparts to legendary establishment fundraisers like Speaker Nancy Pelosi. Rojas says endorsements from Sanders and Ocasio-Cortez were “incredibly impactful” for this year’s challengers, providing a fundraising boost and local media attention, which brought volunteers and resources.

“They’re a big part of this question,” Rojas says.

SINK OR SWIM

As counterintuitive as it seems, the groups challenging the corporate establishment view the flood of dark money as a marker of success.

“Their money is a response to our victories,” Mitchell says. “They wouldn’t be spending this much if our strategies weren’t working, or on candidates who have no path to victory.”

These victories defied a number of pernicious narratives. Republicans have claimed since 2020, with some evidence, that Latino voters are a conservative constituency drifting steadily away from the Democratic Party. Yet Casar and Ramirez won big in majority Latino districts running on unabashedly progressive platforms. Casar, in March, romped to victory over his three opponents with more than 60% of the vote. Ramirez trounced her nearest rival, a two-term alderman who racked up major endorsements, by more than 40 points; her undocumented husband wasn’t even able to vote.

“Latinos are overwhelmingly working class in Texas,” Casar says. “We need to make sure we don’t just say we’re the party of the working class, but show we are.” Casar is the son of a doctor and grew up in an affluent neighborhood, but spent his pre-political career and time in elected office waging high-profile fights for working-class issues.

“I want to continue to be an organizer inside Congress,” Casar says. “My goal is to be the most pro-labor congressperson from the South.”

Despite a bipartisan effort to turn “defund the police” and reform efforts into a political liability — partly based on the claim that minority voters are most concerned with law and order — Casar, Ramirez, Frost and Lee all backed Black Lives Matter protests (Frost was arrested) or even supported the defunding demand.

“Defund the police, socialism — all those big slogans have come up on the campaign trail,” Rojas says. The difference, she says, was the candidates’ long-term approach to politics that saw them campaign for 12 to 14 months and spend even longer organizing and building public profiles, giving them the public trust and infrastructure to weather such attacks.

“The tactic that all of our candidates have taken is to bring together broad coalitions by going out, knocking on doors, meeting people, having honest conversations,” Rojas says, whether about Medicare for All, about what “defunding” really entails, or what democratic socialism actually means.

More than anything, this round of successful insurgencies proves — if the Midwest victories of Tlaib, Omar and Bush hadn’t already — that the Left has a constituency broader than what the establishment claims. “There’s a neoliberal narrative that benefits the opposition that suggests progressives can only win in coastal urban centers,” Mitchell says. “But what we know is that a progressive, pro-people platform is attractive to people of all persuasions.”

THE LONG DETOUR

Even a 10-member Squad will be a tiny minority in a Democratic caucus made up of hundreds of congresspeople, let alone the full 435-member House. And there’s every likelihood the House will be GOP controlled in 2023. While those involved caution it’s early, discussions about the road ahead have already begun, starting with staffing and connecting incoming members to the existing Squad so “we can start working together as early as possible,” Rojas says.

Groups like the WFP and Justice Democrats don’t merely come to the aid of challengers when they run for federal office, but are part of a network of outside groups working with and supporting them through their time in office, a fact particularly instrumental in a House with a narrow majority.

“My goal is to be the most pro-labor congressperson from the South.” —Greg Casar

For an electoral Left that is still maturing, “the next frontier is learning how to wield our leverage and power inside the halls of Congress and other legislative bodies,” Shahid says. “If these members of Congress have a clear organizing program on the inside and the outside, they can really make a difference, because the margins will probably be slim.”

But maybe they won’t have to settle for pure defense. “No matter what, we’ll still have a Democratic president,” Casar notes, pointing to the sometimes confrontational public advocacy from progressives like Bush and Ocasio-Cortez that led to executive orders extending the eviction pause and canceling some student debt. “I’ve been starting to have discussions about how to work to grow the labor movement or bring abortion care to states like Texas through executive action,” Casar says.

Meanwhile, progressives will keep their eyes on the long game, continuing to grow their numbers in Congress, building out the progressive bench that will feed future Squad expansions, and putting the pieces in place for the next Democratic majority.

“Many of the candidates we’ve elected are in their 30s — or 20s, in the case of Maxwell,” Duffey says. “They’ll be in their seats for a decade, probably. Even if they’re not in the majority next year, there will be a future majority.”

Ramirez agrees: “We have to prepare ourselves strategically to move the needle, to get the folks we need at the table, to get sponsors for bills, so that when we regain the majority, we’ll be ready.”


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About those Brutal Losses in Your 401(K) – Here Are the Charts

 

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About those Brutal Losses in Your 401(K) – Here Are the Charts

By Pam Martens and Russ Martens: October 31, 2022 ~

Whether your mutual fund was one of the popular 60/40 funds (60 percent equities and 40 percent bonds) or was 100 percent in equities, you’ve been battered this year. The Fed’s relentless hiking of interest rates this year beat down the market value of existing bonds because they have lower fixed rates of interest, thus making them less valuable than the newly issued bonds with higher rates of interest. Growth stocks, which have dominated the investment scene for years, were particularly crushed because growth companies need to borrow money to grow and higher interest rates mean that their cost of capital will become more expensive, thus slowing growth and hurting their earnings outlook.

Another factor weighing on the negative performance of equities (stocks) is that higher interest rates pumped up the value of the U.S. dollar, hurting the earnings of U.S. companies that are big exporters. (Consumers in foreign countries hold foreign currency that has lost value to the U.S. dollar, thus making the cost of U.S. manufactured goods more expensive to them. That incentivizes those consumers to trim purchases of U.S. goods and/or switch to a less expensive foreign brand.)

The Financial Times reported on Saturday that the strong dollar is forecast to wipe $10 billion off U.S. corporate earnings in just the third quarter. Bloomberg News estimates that “The greenback’s strength is likely to reduce the profits of a third of the companies in the S&P 500 this quarter.”

To help our readers understand that the market pain is touching a wide swath of investors – not just your own 401(k) plan – we pulled up Kiplinger’s list of the 100 most widely-held mutual funds in 401(k) plans. Then we charted the share price performance for the past year through Friday, October 28, 2022. (Total return from any dividends or capital gains is not included.) Below are some of our findings:

JPMorgan’s idea of how to build seniors a “SmartRetirement” three years from now may need a serious overhaul. As the chart below indicates, that Fund has lost more than 25 percent of its share price over the past year through last Friday, October 28. Kiplinger categorizes the fund as a “Conservative Allocation” but what we observed on the JPMorgan Chase website calls that seriously into question. It states that as of September 30, 2022 its SmartRetirement 2025 Fund’s asset allocations included international equities, junk bonds (“high yield”), emerging market stocks and small caps along with other stock and bond exposures.

Making those big brains at JPMorgan look even worse, a passively-managed fund, the Vanguard 500 Index Fund lost about 10 percent less over the past year than JPMorgan’s SmartRetirement 2025 Fund.

JPMorgan SmartRetirement 2025 versus Vanguard 500 Index Fund

Another finding was that active management of a stock mutual fund can beat out a passive index fund in a challenging bear market if you select the right investment managers. The actively-managed Dodge & Cox Stock Fund, for example, has performed far better than the passively-managed Vanguard 500 Index Fund over the past year. (See chart below.) Dodge & Cox explains its investment strategy for this fund as follows:

“Select individual securities based on our analyses of various factors—including a company’s financial strength, economic condition, competitive advantage, quality of the business franchise, financially material environmental, social, and governance (ESG) issues, and the reputation, experience, and competence of its management—as weighed against valuation.”

Dodge & Cox Stock Fund versus Vanguard 500 Index Fund, One Year Return through October 28, 2022

And, finally, investors need to fully grasp the difference between “growth” stocks and “value” stocks before the next bear market arrives. Investopedia includes the following characteristics for “growth” stocks:

“Growth stocks are those companies expected to grow sales and earnings at a faster rate than the market average.

“Growth stocks often look expensive, trading at a high P/E [price to earnings] ratio, but such valuations could actually be cheap if the company continues to grow rapidly which will drive the share price up.

“Since investors are paying a high price for a growth stock, based on expectation, if those expectations aren’t realized growth stocks can see dramatic declines.

“Growth stocks typically don’t pay dividends.

“Growth stocks are often put in contrast with value stocks.”

For an idea of what that reference to “dramatic declines” might look like, consider what happened to Facebook on February 3 of this year. In one trading session, the publicly-traded company that owns Facebook (Meta Platforms Inc.) lost 26.39 percent of its market value. Last Thursday, October 27, Facebook plunged another 24.5 percent – in one trading session. Its profit had plummeted 52 percent in the third quarter. On October 28, 2021 Facebook closed the trading day at $316.92. Last Friday, October 28, 2022, Facebook (Meta Platforms Inc.) closed the trading session at $99.20 – a decline of 69 percent in one year. Facebook pays no cash dividend and has never paid a cash dividend. There is nothing to buttress its fall (like investors receiving a quarterly cash dividend) when things go south.

Investopedia describes “value” stocks as follows:

“A value stock is trading at levels that are perceived to be below its fundamentals.

“Common characteristics of value stocks include high dividend yield, low P/B [price to book] ratio, and a low P/E [price to earnings] ratio.

“A value stock typically has a bargain-price as investors see the company as unfavorable in the marketplace.”

The chart below shows how a large cap value stock fund performed over the past year versus a large cap growth fund – which lost a gut-wrenching 40 percent of its share price.

Large Cap Value Versus Large Cap Growth

Editor’s Note: Past performance is no guarantee of future performance for a mutual fund. Readers should not interpret this article as rendering investment advice. Always seek the advice of a qualified investment advisor and your accountant before investing or making changes to your investment portfolio.


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Obama torches MAGA senator in scathing speech (VIDEO)

 

OD Action:

It's Our Democracy!

Expel Ron Johnson for trying to overturn the election with fake Trump electors!

Today’s Action: Get out the vote for Democratic Senate candidate Mandela Barnes!

Today's Top Stories:

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VIDEO OF THE DAY: Obama slams GOP Sen. Ron Johnson over far-right policies in impassioned rally speech

The former president's fiery rebuke of Ron Johnson at a rally in Milwaukee went viral over the weekend, amassing nearly 8 millions views. Obama implored Wisconsin voters to back rising Democratic star Mandela Barnes in his effort to stop the MAGA lackey Johnson from winning a completely unwarranted third term in the US Senate.


Legal abortions fell by 10,000 in two months after fall of Roe, new data shows
By design, Republicans are forcing women to carry unwanted pregnancies to term and make dangerous reproductive healthcare choices with no regard for privacy or the well-being of the impregnated. It will not stop here, folks. Remember in November.

Take Action: Call on Congress to pass a law protecting abortion access, no matter what the Supreme Court says!


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Democrats now in striking distance of a surprise Senate flip

No Lie with Brian Tyler Cohen: Whoa.


Donald Trump Jr. mocks Pelosi’s husband’s hammer attack with obnoxious meme
There truly is no bottom with this clan.

Take Action: Keep Trump off Facebook!


Supreme Court revisits affirmative action in college admissions
The conservative-dominated court is revisiting decades of precedent upheld over the years by narrow court majorities that included Republican-appointed justices. This time, however, there is every likelihood that the hyper-right court will overrule some or all of those precedents, because shit-talking judicial activism is so passé and originalist overreach is in, baby!

Take Action: Tell Congress to add new tax brackets for the megawealthy!


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Arizona GOP attorney general calls out Kari Lake, election-denying "clowns"

Speaking to 60 Minutes, Arizona Republican Attorney General and soon-to-be GOP public enemy #1 Mark Brnovich slammed election deniers in his own party, including gubernatorial nominee Kari Lake, over their relentlessly absurd election fraud claims. Mark Brnovich, come on down! You're the next contestant on "On Borrowed Time!"

Take Action: Tell Congress to protect immigrant youths from deportation!


Crucial abortion amendment left off at least one mail-in ballot in Louisville, Kentucky
Kentucky Constitutional Amendment 2, if approved, would eliminate ANY right to abortion from the state constitution. A spokesperson for Jefferson County's longtime Republican Clerk Bobbi Holsclaw cited a "printer setting" error and claimed the problem had been fixed.

Take Action: Keep McConnell's handpicked clerk from interfering in Louisville elections!


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Halloween may be coming, but the only thing you should be scared of is a Republican Senate majority

OD Action Partner: McConnell and his cronies are chomping at the bit to take back the gavel and unleash their extremist agenda of cruelty and greed upon an unwilling nation. Will you make a donation to make sure this nightmare never becomes a reality?


Kanye West digs in on antisemitism, compares his experience with Adidas to George Floyd murder
The sneaker and apparel giant's no-brainer decision to sever business ties with Ye over rampant antisemitism is just like when Minneapolis cops mercilessly killed Floyd by suffocation in broad daylight over a suspected counterfeit $20 bill. It's basically the same, right? Right?


State, city of New York to pay $36 million to men exonerated in Malcolm X’s murder
Muhammad Aziz, 84, and Khalil Islam, who died in 2009 at age 74, were wrongfully convicted in the fatal shooting of Black Muslims' most high-profile spokesman, Malcolm X, during the start of a speech at the Audubon Ballroom in New York City on Feb. 21, 1965. The pair spent decades behind bars for a crime they clearly did not commit. 57 years later, the City of New York Law Department said "some measure of justice" was meted out in the form of the announced cash settlement. Let's be clear — the woefully belated acknowledgment of heinous wrongdoing is well and good, but this is not justice by any measure.


Lula stages astonishing comeback to beat far-right Bolsonaro in Brazil election
Brazil’s former leftist president, Luiz Inácio Lula da Silva, has sealed an astonishing political comeback, beating the far-right incumbent Jair Bolsonaro in one of the most significant and bruising elections in the country’s history. The Amazon rainforest weeps in relief.


TikToker uses massive reach to track down racist, homophobic, suspects, tries to keep mob in check
Michael McWhorter, whose full-time job is editing and directing movies and music videos, has gained five million followers by calling out apparent racist, homophobic, violent, or otherwise illegal behavior. Oftentimes the videos he posts are an effort to track down perpetrators caught on film, either to report them to police or as a way to call them out in our modern-day village square.


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Today’s Action: Get out the vote for Democratic Senate candidate Mandela Barnes!

Polls leading up to the election have shown incumbent Republican Senator and noted coup-enthusiast Ron Johnson with a razor-thin lead over his progressive Democratic challenger, Mandela Barnes. With control of the US Senate hanging in the balance, we need every available progressive to step up and help Barnes’ defeat Johnson on November 8th. Phone banking is one of the best ways that you can help get out the vote in this upcoming election — luckily, plenty of organizations are still hosting virtual events you can join right from your couch! Barnes has been polling neck and neck with the Trump lackey throughout the summer. You can be the difference-maker this November!

The margin of error for retaining Democratic control of the House and Senate is far too close for comfort. You don’t have to be a seasoned professional or a registered voter in Wisconsin to join this fight. Just be ready to do good work!

Indivisible is hosting a text banking for Mandela Barnes THIS TUESDAY from 1-3PM CDT. If you have the capacity to attend, the voters you reach could push Barnes over the top and help secure a crucial Democratic pickup in the Senate.

Our work does not stop in Wisconsin. There are progressives all across the country that need your help getting out the vote. Filter through virtual phone- and text-banking events through Mobilize. Critical issues and fundamental freedoms are on the line this election, including reproductive rights, LGBTQ+ rights, gun safety initiatives, and climate mitigation — everything we’ve worked so tirelessly for. Do your part for a truly progressive future!

PS — Please don't forget to sign the petition to expel Ron Johnson for trying to overturn the election with fake Trump electors, and be sure to follow OD Action on TwitterFacebook, and Instagram.

 @advocacy | 1002 Hull St., Louisville, KY 40204  




BREAKING: Elon Musk’s gamble BLOWS UP in his face PAY ATTENTION! ELECT CLOWNS EXPECT A CIRCUS!

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