Tuesday, September 12, 2023

POLITICO Nightly: The impeachment gambit that could flip the House

 


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BY CHARLIE MAHTESIAN AND CALDER MCHUGH

Presented by

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Speaker Kevin McCarthy speaks with reporters at the U.S. Capitol today.

Speaker Kevin McCarthy speaks with reporters at the U.S. Capitol today. | Francis Chung/POLITICO

CROSSOVER CRISIS — Today, Speaker Kevin McCarthy made a decision that could save his gavel for now but cost him the House majority next fall.

After months of speculation and pressure from much of the House Republican conference, McCarthy announced that he would direct three House committees to open an impeachment inquiry into President Joe Biden.

Aside from the constitutional implications of the inquiry , the decision is all but certain to rattle the House election landscape next year. Why? The GOP currently has a narrow five-seat majority and there are 18 House Republicans who represent districts won by Biden in 2020. By comparison, there are only five House Democrats who represent districts won by Trump in 2020. Protecting those 18 seats is essential to Republican hopes of maintaining control of the House.

It was a tough task to begin with, since many of those “crossover districts” are suburban-based and all but one of them are located in blue states. Now it’s likely to be even harder, which is why moderates have been trying to slow the hardliners’ rush toward impeachment.

“Impeachment needs to be about the dad, not the son… as of now, I don’t support [an impeachment inquiry,” Rep. Don Bacon (R-Neb.) said, referring to what he called corruption by Hunter Biden for using his father’s name to enrich himself. Bacon occupies an Omaha-oriented district where the president defeated Donald Trump, 52 percent to 46 percent.

Republicans like Bacon have good cause for concern, based on the political fallout of the first Trump impeachment. Of the two Trump impeachments, that’s the one that offers the clearer view of the political implications. The second Trump impeachment took place just as Trump’s term in office expired in 2021; the electoral consequences are impossible to separate from the Jan. 6 Capitol insurrection that preceded it.

Back in 2019, when Democrats held the House and initiated impeachment proceedings, 31 Democrats represented districts that Trump had won in the previous election. Eight of them lost their reelection bids, including Rep. Collin Peterson (D-Minn.), who voted against both articles of impeachment against Trump.

When the dust settled after the 2020 election, 10 of the 31 crossover districts were gone: the eight where Democratic incumbents lost, a New Jersey district where Rep. Jeff Van Drew switched parties in large part because of impeachment-related political pressures and an Iowa district where the incumbent retired and the GOP won the open seat race to succeed him.

The Democratic defeats in 2020 can’t be pinned on impeachment alone — there were other forces at play in nearly all of those contests. But the noise surrounding Trump’s impeachment unquestionably colored the debate that fall and the outcome. Republican challengers used impeachment to paint Democratic incumbents as being part of “the circus in Washington” or as lockstep supporters of Nancy Pelosi. In New York, where GOP Rep. Claudia Tenney knocked off then-Democratic Rep. Anthony Brindisi, she argued that in voting to impeach Trump, Brindisi had sided with the forces of socialism rather than preserving “American greatness.”

Another political lesson from the first impeachment: Republicans in crossover districts are going to be on full blast from here on out. With the 2019 impeachment, the overheated rhetoric surrounding the political consequences began almost immediately. During the inquiry stage in fall 2019, the National Republican Congressional Committee pronounced the pursuit of impeachment “a political death sentence” for then-Rep. Antonio Delgado (D-N.Y.). (It wasn’t; he’s now the state’s lieutenant governor.) After Rep. Matt Cartwright (D-Pa.) voted to impeach, his opponent described him as “toast.” (He wasn’t).

McCarthy has insisted that beginning the impeachment inquiry won’t require a vote — a move assuredly intended to protect his crossover caucus. But hardline Republicans already calling for McCarthy’s head won’t be satisfied with an inquiry that goes nowhere; they’ll want to bring charges. There’s a good chance it spells doom for some of their colleagues in 2024.

Welcome to POLITICO Nightly. Reach out with news, tips and ideas at nightly@politico.com . Or contact tonight’s authors at cmahtesian@politico.com and cmchugh@politico.com or on X (formerly known as Twitter) at @PoliticoCharlie and @calder_mchugh .

 

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WHAT'D I MISS?

— Harris announces House bid after election fraud controversy: Republican Mark Harris announced today that he will run for Congress in North Carolina , five years after his campaign was the subject of fraud allegations. Harris is running for the state’s 8th District, which is expected to be an open seat with incumbent GOP Rep. Dan Bishop running for state attorney general next year. When Harris ran for the House in 2018, he initially led Democrat Dan McCready by 905 votes after the votes were tallied. But the election board declined to certify the results and ordered a do-over election the following year amid accusations that McCrae Dowless, an operative hired by Harris’ campaign consultants, organized an illegal scheme to collect and mark absentee ballots.

— Alex Jones colleague gets 60 days for Jan. 6 misdemeanor: A judge today sentenced InfoWars broadcaster Owen Shroyer — who shadowed his boss and ally Alex Jones onto Capitol grounds on Jan. 6, 2021 — to 60 days in prison for breaching the restricted area. U.S. District Judge Tim Kelly handed down the sentence after contending that Shroyer, who never entered the Capitol building, played a role in “amping up” the mob at a sensitive moment during the riot. Shroyer’s foray onto Capitol grounds came even though Shroyer had been ordered to stay away from the area under a court-sanctioned agreement for disrupting a House impeachment hearing in 2019.

— Trump privately discussed Biden impeachment with House GOPers: Donald Trump has been weighing in behind the scenes in support of the House GOP push to impeach President Joe Biden , including talking with a member of leadership in the lead up to today’s announcement authorizing a formal impeachment inquiry. The former president has been speaking weekly with House GOP Conference Chair Elise Stefanik, who was the first member of Republican leadership to come out in support of impeachment. The two spoke today, the same day House Speaker Kevin McCarthy announced Republicans would be pursuing the inquiry, according to two people familiar with the conversation.

 

GO INSIDE THE WORLD’S BIGGEST DIPLOMATIC PLATFORM WITH UNGA PLAYBOOK: The 78th Session of the United Nations General Assembly will jam some of the world's most influential leaders into four city blocks in Manhattan. POLITICO's special edition UNGA Playbook will take you inside this important gathering starting Sept. 17 — revealing newsy nuggets throughout the week and insights into the most pressing issues facing global decision-makers today. Sign up for UNGA Playbook .

 
 
NIGHTLY ROAD TO 2024

TOUGH TALK ON MEXICO — Former president Donald Trump proposed a naval blockade of Mexico. Florida Gov. Ron DeSantis pledged to send drones and Special Forces over the southern border starting “on day one.” And investor Vivek Ramaswamy imagined launching a “shock-and-awe” military campaign against drug cartels, reports the Washington Post.

Republican candidates are engaged in a rhetorical arms race , vying to one up each other with tough talk on the U.S. border with Mexico, taking the 2016 rallying cry of Trump to “build the wall” to the next level. The bellicose proposals reflect widespread Republican outrage over immigration, as well as the ongoing crisis of opioid deaths. “It’s now time for America to wage war on the cartels,” Trump said in a campaign video.

But Mexican officials and independent security analysts have cautioned that military force by the United States would fail to quickly stop drug trafficking while torching relations with its southern neighbor and risking significant casualties.

AGED OUT — Florida Gov. Ron DeSantis said Tuesday that the ages of President Biden and former President Donald Trump are "absolutely a legitimate concern" for voters in the 2024 presidential race and believes Americans will be ready for the next generation of leadership if he is the GOP's pick to face-off against Mr. Biden in the general election.

"The presidency is not a job for someone that's 80 years old," DeSantis, a GOP candidate for president, told "CBS Evening News" anchor and managing editor Norah O'Donnell. "And there's nothing, you know, wrong with being 80. Obviously I'm the governor of Florida. I know a lot of people who are elderly. They're great people. But you're talking about a job where you need to give it 100%. We need an energetic president."

THE 2024 CASH DASH — Political ad spending is projected to reach new heights by the end of the 2024 election cycle, eclipsing $10 billion in what would amount to the most expensive two years in political history, reports NBC News.

AdImpact, a firm that tracks political ad spending, projects that campaigns and outside groups will spend $2.7 billion on ads in the presidential election alone, followed by $2.1 billion on the Senate, $1.7 billion on the House, $361 million on gubernatorial elections and $3.3 billion on other elections.

It's no surprise that the presidential race is expected to drive the spending, as it does every election cycle. But the $10.2 billion projection for 2024 would be a 13% increase over the $9 billion spent in 2020, when two self-funding Democratic billionaires unsuccessfully ran for president. And it represents a massive increase from the $2.6 billion spent during the 2016 election cycle.

 

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AROUND THE WORLD

President of Iran Ebrahim Raisi attends a meeting during the 2023 BRICS Summit in Johannesburg, South Africa on August 24.

President of Iran Ebrahim Raisi attends a meeting during the 2023 BRICS Summit in Johannesburg, South Africa on August 24. | Kim Ludbrook/AFP via Getty Images

THAWING, NOT UNFROZEN — The Biden administration is pushing back after Iranian President Ebrahim Raisi said his government would choose how it will use the $6 billion in frozen funds set to be released by Washington in a prisoner exchange deal, writes Matt Berg .

The deal, which would see South Korea releasing frozen Iranian funds to Qatar, marks a diplomatic breakthrough for the U.S. and Iran, as they have sparred over issues from the Iran nuclear deal to Tehran’s continued ties with Moscow. That money can be used only for humanitarian goods like food and medicine, the Biden administration has said.

However, Raisi told NBC News that the money “belongs to the Iranian people, the Iranian government, so the Islamic Republic of Iran will decide what to do with this money.”

State Department spokesperson Matthew Miller denied Raisi’s assertion, telling reporters on this afternoon that the funds would arrive in banks in Qatar and would be “under strict oversight” by the Treasury Department.

“The money can only be used for humanitarian purposes,” Miller told reporters. “We will remain vigilant in watching the spending of those funds and have the ability to freeze them again if we need to.”

 

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NIGHTLY NUMBER

8.8 billion

The number of dosage units — between pills, patches and lollipops — of 12 common opioids that were shipped in the United States in 2019, according to new data from the DEA’s Automation of Reports and Consolidated Orders System. That’s down sharply from the nearly 16 billion dosage units shipped in 2010, and yet coincides with a rise in opioid-related deaths, as illicit opioids — particularly heroin and illegally produced versions of fentanyl — increased. The distribution data is being released by lawyers after a judge ordered the U.S. Drug Enforcement Administration to share it with plaintiffs suing drugmakers, distribution companies and pharmacies.

RADAR SWEEP

EARLY WARNING SIGNS — In the last decade, it’s become clear that NFL players in particular have developed CTE — damage to the brain from repeated contact to the head. It’s shortened their lives and affected them in numerous ways, from increasing depression and suicide to other degenerative brain injuries. But now, as research develops, it’s become clear that these conditions can start well before the NFL comes calling . Children who play rough contact sports like football are also suffering from the effects of CTE — and some are dying from it, via suicide or unintentional drug overdose. For WIRED, Celia Ford looks into new research making this point and what it could mean for the future of youth contact sports.

PARTING IMAGE

On this date in 1968: A UNICEF helicopter is pictured practicing a food lift at Lagos Airport, Nigeria.  A group of Americans, some with experience in the Vietnam War, piloted helicopters for UNICEF, dropping food supplies to aid starving Biafrans in Nigeria in the midst of a civil war that saw the Nigerian government fight with the Republic of Biafra, a secessionist state. Televised images of malnourished Biafran children saturated Western media and increased
 humanitarian aid from NGOs to the region.

On this date in 1968: A UNICEF helicopter is pictured practicing a food lift at Lagos Airport, Nigeria. A group of Americans, some with experience in the Vietnam War, piloted helicopters for UNICEF, dropping food supplies to aid starving Biafrans in Nigeria in the midst of a civil war that saw the Nigerian government fight with the Republic of Biafra, a secessionist state. Televised images of malnourished Biafran children saturated Western media and increased humanitarian aid from NGOs to the region. | Dennis Lee Royle/AP Photo

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By providing a conversational style response to an inquiry instead of links to suggested sites, generative AI could make the overall search and browsing experience more natural and intuitive, potentially reshaping the way we search for travel, buy goods, and research products.

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EDUCATION BY STATE

 
A REMINDER!


https://worldpopulationreview.com/state-rankings/least-educated-states

Historian Nancy MacLean: We're seeing a right-wing plan built on "decades of disinformation" MacLean published "Democracy in Chains" four years ago — and says it's "gut-wrenching" to see it come to life

 

Historian Nancy MacLean: We're seeing a right-wing plan built on "decades of disinformation"

MacLean published "Democracy in Chains" four years ago — and says it's "gut-wrenching" to see it come to life

By CHAUNCEY DEVEGA

Senior Writer
PUBLISHED NOVEMBER 9, 2021


On Friday, the House finally passed Joe Biden's infrastructure plan.
While the president's larger Build Back Better agenda remains in
doubt, this is a landmark achievement, representing the largest 

investment in America's infrastructure since the Great Society 

programs of the 1960s. Since the bill has already passed the 

Senate, Biden will sign it into law later this month.

A vast majority of Americans — including a large percentage of Republicans — support the specific policies contained in the 

infrastructure plan. (And for that matter, many or most of the 

social policies included in the Build Back Better package as well.) 


Logically, the infrastructure plan should now become part of the Democratic brand, and simultaneously an anchor around the
Republican Party's feet for decades to come.

That outcome would be almost guaranteed in a healthy democracy
that was not locked in an existential struggle against fascism.
I scarcely need to clarify that these are not normal times and
this is not a healthy democracy. 

RELATED: The Republicans have dug up Jim Crow's 

corpse — and now they've married it


The Democrats' success with the infrastructure plan came on 

the heels of their defeat in last week's Virginia gubernatorial election, where Terry McAuliffe crumbled under an attack by 

Republican Glenn Youngkin and a right-wing machine that 

deftly deployed its moral panic bogeyman of "critical race 

theory."

In Virginia and elsewhere, Republican voters and Trump
supporters appear energized and mobilized by the Big Lie,
racism and white supremacy, pandemic-related public health issues and other aspects of the "culture war." In comparison, too many Democratic voters seem unenthusiastic and listless, exhausted by the escalating assaults on democracy and uninspired by the party's leadership.

Pollsters and other political experts are now predicting that Democratic losses in Virginia and elsewhere are a signal that Republicans will likely regain control of both the Senate and House in the 2022 midterms. Such an outcome could well be a precursor to Donald Trump's attempted comeback in the 2024 presidential election.

Ultimately, what good are Joe Biden and the Democratic Party's legislative successes if the Republican-fascist movement stands on the verge of taking control of Congress and then the White House?


Want a daily wrap-up of all the news and commentary Salon has to offer? Subscribe to our morning newsletter, Crash Course.


Democrats will be left claiming the historic success of an infrastructure bill that would likely be gutted by a Republican majority, except for whatever provisions the fascist regime wishes to claim as its own. 

To this point, Democrats have been unable to mount an effective defense against the Republican fascists and their forces because they refuse to grapple with the enormity of the challenge. In that way, the party and too many of its liberal and progressive supporters remain trapped in short-term crisis mod, focusing on the immediate problem rather than the long-term threat and big picture.

By comparison, Republicans and "movement" conservatives have been thinking strategically, and in many respects have prepared for their impending victory for decades. Understood this way, American's democracy crisis is neither surprising nor new. The roots of our current disaster go back at least to the 1960s, with the  backlash to the civil rights movement and other struggles to expand and improve the country's social democracy.  

To discuss these issues and more, I recently spoke with Nancy MacLean, who is the William H. Chafe Professor of History and Public Policy at Duke University. She is the author of several important books, including "Behind the Mask of Chivalry: The Making of the Second Ku Klux Klan" and "Freedom is Not Enough: The Opening of the American Workplace."

Her most recent book, "Democracy in Chains: The Deep History of the Radical Right's Stealth Plan for America," a National Book Award nominee, was published four years ago but now appears prophetic. In this conversation, MacLean explains her view that the events of Jan. 6 and the larger ongoing coup against democracy are just one aspect of a long-term plan by right-wing libertarians and other well-funded and powerful ideologues to undermine or overthrow American democracy.

MacLean also discusses how and why these right-wing billionaire funders continue to support the treasonous and seditious behavior of Republican congresspeople who support the Big Lie and voted against democracy on Jan. 6. She warns that the goals of these right-wing libertarians are more extreme than many people imagine, and may include restricting the vote to (white) property owners to vote and fully defunding the country's already threadbare social safety net.

Toward the end of this conversation, MacLean discusses the Republican Party and white right's attempt to use "critical race theory" to mobilize angry white parents at the local level, and how that connects to Jim Crow-era battles over school desegregation and racial democracy.

How are you feeling? For some time, you have warned the American people about the anti-democracy campaign being waged by the libertarian right-wing. That's all coming together right now. 

It's dispiriting. I believe that more people are understanding what's going on in this country with the democracy crisis, but I do not think it is happening on a scale and in a timely enough way to stop what's unfolding before us. It's just gut-wrenching, to be frank. People who should know better are not behaving as they should. The Biden administration is running into exactly the same roadblocks the Obama administration did.

So the Republican Party won't compromise? What did they think was going to happen when the Republican Party was taken over by libertarian donors and a base that's been fed red meat by Fox News for 25 years?

America's political class continues to behave as though it is shocked and stunned by the Republican attempts to nullify democracy, as seen on Jan. 6 and in the ongoing coup attempt. Are they in denial? Is this willful ignorance? Are they so invested in a broken political system that they refuse to admit the obvious and respond appropriately? How do you make sense of this lack of urgency?

First, I do not believe that they are a monolith. It is important to emphasize that fact because there are people who do know better. This includes Pramila Jayapal of the Progressive Caucus, Alexandria Ocasio-Cortez, Bernie Sanders, Sherrod Brown, Sheldon Whitehouse and others. There have been some bold and outspoken and truth-delivering voices who we should applaud. But it is a real challenge to persuade their colleagues to speak to these truths about the country's democracy crises.

I'm not denying that it's a complicated operation. If the Democrats need 60 senators to get anything substantive done and you're dealing with the likes of Joe Manchin and Kyrsten Sinema, it's a challenge and it's frustrating. But I do believe that the leading Democrats could do more with the bully pulpit to help the American people understand the origins of the democracy crisis — and what is at stake for their day-to-day lives if this right-wing libertarian and larger anti-democracy cause is allowed to advance, as it has been doing for years.

What and who are the elements in this anti-democracy movement?

There is an elite element and the voters they count on to advance the goals. The elite elements are parts of the corporate libertarian Koch network. The large number of donors and institutions they fund include the Cato Institute, the Heritage Foundation, the Federalist Society, Americans for Prosperity, the State Policy Network and many others.

This network also includes supposed scholars, faculty, and students at over 300 institutions at present. The corporate-libertarian cause knows that the world they want to create is unpopular. Therefore, they have to get the votes to advance their agenda by relying on the religious right.

The religious right has now been boiled down to a base consisting of white nationalist Christian evangelicals in various forms, who are anti-science for example. In my opinion, it was fairly easy to persuade them to reject climate science and to embrace the Big Lie about the 2020 election and all the other lies and untruths being pandered by the right-wing movement and its media.

We are now also seeing the religious right overlapping in significant ways with white supremacists and the larger white power movement. In this country we are in real trouble in that regard because of how these white nationalist identities are being used to promote vigilante actions.

What did you see on Jan. 6?

To my eyes, it was a fulfillment of these decades of disinformation and agitation of the worst impulses held by some Americans. For example, these very self-interested right-wing forces who oppose taking action to stop the global climate crisis are willing to leverage racism, homophobia, sexism and other antisocial behavior and values to achieve that goal.

There is plenty of evidence showing that the Koch donor network has funded and continues to back the politicians who spurred on the events of Jan. 6 and the Big Lie, and refused to certify Biden's election.

The mainstream news media are complicit in so much of this because of their "both sides" script. The mainstream news media needs to recognize that there is an imminent threat of autocracy in the United States.

Where do these talking points, lies, disinformation and propaganda come from, meaning the things that Trump insurrectionists and others in the right-wing echo chamber believe? Who is developing and weaponizing these ideas?

There are perverse and ridiculous theories or interpretations of the Constitution coming from the Federalist Society and other groups that are part of the donor-funded radical right-wing libertarian legal movement. That includes prominent right-wing attorney John Eastman, who came up with this claim that state legislatures have the capacity to overthrow a national election. People like Eastman are making the kinds of arguments and claims that fueled the rabid and crazy behavior we saw at the Capitol on Jan. 6. That's what the insurrectionists have been imbibing — and it has been their steady diet for years.

At its core, we can understand what we saw on Jan. 6 as also being a rejection of the core principle that all Americans are equally entitled to citizenship and voting, and to having a say in our government.

For the right-wing anti-democracy movement, the phrase "real Americans" is a potent rallying cry. They love to use that language about "real Americans." But what do they really mean? Who are the real Americans, to them?

For the elites at least, "real Americans" are the white, property-holding, right-wing voters who agree with their right-wing extremist libertarian ideology. We saw that language of "real Americans" from Sarah Palin and others directed against Barack Obama. Presumably, Obama was not a real American and, by comparison, Palin was. We used to talk about dog-whistle racism, but it is not even coded anymore.

Certainly, anyone who benefits from the earned income tax credit is not a "real American." According to these right-wing thinkers such people shouldn't have the right to vote. In total, what is being advocated for is really a type of economic eugenics. They really would rather have people die than get health care provided by government — and some of these right-wing elite thinkers are absolutely explicit about that. They argue that if you do not have the money to support yourself in a commercial, unregulated capitalist society, then too bad for you.  

Your suffering, and even your death, will be a lesson to others that they need to save and work harder and then they will be able to become one of the "real Americans." That reality is very hard for many people to understand. That is why so many people are in denial about it.

It has been a standing assumption by many, including myself, that the Koch network and other members of the right-wing elite extremist class wanted to operate in the shadows as a way of growing their power and influence over American society. But with Jan. 6 and the ongoing coup, it seems that those forces are now working in a much more public way. How are they balancing this? And what about the role of right-wing paramilitaries and other agitators and their relationship to the right-wing elites?

To me, that is what I find scariest about this moment. The corporate element is beginning to rely on the street thugs. This is not a new thing for the arch pro-corporate libertarian right. This happened with the Southern schools crisis after Brown v. Board of Education [the Supreme Court decision that ended school segregation], with libertarians such as Milton Friedman and others of that era. They were perfectly happy, if not eager, to harness the white supremacist response to Brown v. Board of Education in order to advance their goal of school privatization.

Koch political donors have funded the Jan. 6 politicians, and shown no sign of backing down. They have also funded the organizations that are promoting this "critical race theory" hysteria, which is directed at inciting panic among white parents as a strategy to mobilize them for the 2022 midterm elections. The ultimate goal is to undermine public education. Koch-funded organizations are also encouraging the current attacks on school boards, both over masks and vaccines and the alleged teaching of critical race theory.

You are a historian who has written extensively about democracy, Jim and Jane Crow, the civil rights and Black freedom movements, and racist organizations such as the Ku Klux Klan. How do you make sense of these school board meetings where white parents show up en masse to oppose "critical race theory," and sometimes threaten violence and mayhem? How are you connecting the past to the present?

These are people who have been whipped up into a frenzy by a steady diet of disinformation orchestrated by individuals and organization who are working strategically to make them feel like they are under attack. Part of this is making them feel like they are embattled, and their children are being turned against them. This all triggers some of the most potent emotional buttons that one can push. This is what the right-wing is doing, and it's all based on a willful lie.

Critical race theory is not taught in K-12 public schools. It's an elective at some law schools, but what they're doing — if you look at the actual text of the laws in places like Texas, what they're claiming falls under the rubric of "critical race theory" includes anything that mentions anti-racism, equity, diversity and inclusion. Basically, they're saying you cannot in any way address past or present racism in the schools and continue to teach and hold your job and not be subject to criminal prosecution.

The images I see of these protests very much remind me of what we saw by whites in the South and elsewhere against school desegregation in the 1950s and 1960s. But at present, I would put more of the emphasis on the strategic right-wing actors behind this activity, who are funding the operations that mobilize people to these school board meetings, fill them with disinformation and ultimately seek to turn them into vigilantes.




Charles and David Koch (aka the Koch Brothers) and the January 6, 2021 Riot on the US Capitol (Photo illustration by Salon/Getty Images)
Charles and David Koch (aka the Koch Brothers) and the January 6, 2021 Riot on the US Capitol (Photo illustration by Salon/Getty Images)

https://www.salon.com/2021/11/09/historian-nancy-maclean-were-seeing-a-right-wing-plan-built-on-decades-of-disinformation/



Steve Schmidt reacts to Vivek Ramaswamy's embarrassing interview on MSNBC | The Warning

 



Steve Schmidt reacts to Vivek Ramaswamy's embarrassing interview with Medhi Hasan. Steve explains why holding Donald Trump imitators like Ramaswamy to account is essential to saving our democracy.


The Best Democracy Money Can Buy Teaser

 


Greg Palast's feature documentary exposing the theft of the 2016 election and the billionaires bankrolling the ballot banditry.



REPORT: Trump Has 'Odd Little Office' With FAMILIAR Boxes Piled In It

 






The Warning Bell at the Federal Agency Created to Monitor Systemic Bank Risk Failed to Ring

 


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The Warning Bell at the Federal Agency Created to Monitor Systemic Bank Risk Failed to Ring

Office of Financial Research Contagion Index as of December 31, 2022

By Pam Martens and Russ Martens: April 25, 2023

For years Wall Street On Parade saluted the work of the Office of Financial Research (OFR) in sounding the alarms about the risks building up in the U.S. banking system – even when it was politically unpalatable for the OFR to do so. Then the Trump/Koch administration took over and gutted OFR and put a crony in charge.

It does not appear that the damage to staffing and talent under the former Trump/Koch administration has been adequately repaired under the Biden administration.

The OFR was created after the near collapse of the U.S. financial system in 2008. It derives its statutory role from the Dodd-Frank financial reform legislation of 2010. Its key job is to issue timely alerts and research reports to keep the Financial Stability Oversight Council (F-SOC) informed of emerging financial threats or weaknesses that have the potential to crater the U.S. financial system again.

Unfortunately, there was no loud warning issued (at least publicly) by OFR prior to three banks blowing up in the span of five days in March and rapidly spreading panic among uninsured bank depositors.

According to H.8 data from the Federal Reserve, as of the week ending March 1 there was $17.636 trillion in deposits at U.S. banks, not seasonally adjusted. There was just a negligible drop in deposits of $20 billion over the next week that ended March 8. (The H.8 is based on Wednesday to Wednesday data.)

Then the following occurred:

On Wednesday, March 8, Silvergate Capital Corporation, parent of Silvergate Bank, which had gotten in bed with crypto companies (including Sam Bankman-Fried’s house of frauds) announced it was winding down and would “voluntarily liquidate the Bank.” That sent depositors fleeing from other banks with crypto exposure and the share prices of those banks plunging.

On Friday, March 10, Silicon Valley Bank, headquartered in Santa Clara, California, was put into receivership by the Federal Deposit Insurance Corporation (FDIC).

On Sunday, March 12, the New York headquartered Signature Bank was also put into receivership by the FDIC.

Silicon Valley Bank and Signature Bank, respectively, were the second and third largest bank failures in U.S. history – a point not lost on depositors reading those facts in newspaper headlines. (The largest bank failure was Washington Mutual in 2008.)

After this series of events in a 5-day span, deposit flight got into gear. At the close of the week ending March 15, deposits were down to $17.486 trillion. By the close of the week ending March 22, deposits had plunged to $17.307 trillion.

From the week ending March 1 to the week ending March 22, deposits in U.S. commercial banks had declined by an astounding $328 billion dollars – in a span of just three weeks.

As of the most recent H.8 data for the week ending April 12, deposits stood at $17.380 trillion – still down $256 billion from the week ending March 1.

Only one of the banks that imploded was on the OFR’s Contagion Index list. Per the chart above, that was Silicon Valley Bank and it ranked 13 on the OFR’s watch list for the period ending December 31, 2022.

The other two banks which helped spread panic and contagion, Silvergate Bank and Signature Bank, were not on OFR’s Contagion Index at all. That’s very troubling because on August 1 of last year, we published an article headlined as follows: Brace Yourself for Federally-Insured Bank Failures Caused by Crypto. We specifically mentioned Silvergate Bank and Signature Bank in the article.

OFR explains its Contagion Index as follows:

“[It] measures the loss that could spill over to the rest of the financial system if a given bank were to default. It depends on the size of the bank, its leverage, and how connected it is to other financial institutions:

OFR Contagion Index = Connectivity X Net Worth X (Outside Leverage).

Connectivity is defined by OFR as “the share of the bank’s unsecured liabilities that are held by other financial institutions. It is the ratio of the bank’s liabilities within the financial system to the bank’s total liabilities. With higher connectivity, a bank’s failure has a potentially broader impact on the rest of the financial system.”

OFR defines a bank’s net worth as “the difference between a bank’s assets and its liabilities. A larger bank’s failure can have a broader impact on the financial system, other things being equal.”

Outside leverage is defined by OFR as “the vulnerability of the bank to shocks from the real side of the economy. It is the ratio of a bank’s claims on nonfinancial entities to its net worth.”

What OFR has not captured in its Contagion Index is panic spreading because of reputational damage to the banking system itself. Silvergate Bank was federally-insured but had been in the headlines as potentially facilitating the looting of customer funds at Sam Bankman-Fried’s crypto exchange, FTX. That reputational damage then spilled over to other federally-insured banks involved in any manner with crypto companies. That crypto had gained a foothold in taxpayer-backstopped, federally-insured banks drained confidence in the U.S. banking system.

In the case of Silicon Valley Bank, its regulators had also allowed it to set itself up for reputational damage by effectively becoming a Wall Street IPO pipeline in drag as a federally-insured bank. Also, a large percentage of its deposits were uninsured, meaning they were larger than the $250,000 cap per depositor, per bank set by the FDIC. When the bank announced on March 8 that it had taken a loss of $1.8 billion on the sale of underwater securities and would be raising additional capital through a secondary stock offering of common as well as mandatory convertible preferred stock (which would dilute existing shareholders) that set those uninsured deposits into serious motion out of the bank.

Signature Bank had also become tainted by rubbing its elbows too close to crypto and had a large percentage of uninsured deposits. A bank run ensued there as well.

On March 29, the Vice Chair for Supervision at the Federal Reserve, Michael Barr, indicated during his testimony before the Senate Banking Committee that his office would be conducting a review of what went wrong at Silicon Valley Bank and releasing a report on May 1. The FDIC is conducting a similar review of the failure of Signature Bank and will also release a report on May 1.

The FDIC is also slated to release a report on May 1 regarding the deposit insurance system, options for consideration related to deposit insurance coverage levels, excess deposit insurance, and the adequacy of DIF, the Deposit Insurance Fund.

https://wallstreetonparade.com/2023/04/the-warning-bell-at-the-federal-agency-created-to-monitor-systemic-bank-risk-failed-to-ring/


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