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The Paradox of Paul Ryan: Why the Tea Party Is Right to Be Wary Print
Written by <a href="index.php?option=com_comprofiler&task=userProfile&user=14990"><span class="small">Bill Moyers and Michael Winship, Moyers & Company</span></a>   
Wednesday, 28 October 2015 13:57

Excerpt: "Despite his ideological kinship with the anti-government crowd, Paul Ryan is the embodiment of the troika of money, power, and politics that corrupts and controls the capital, the very thing the tea partiers detest."

Representative Paul Ryan at the 2012 Republican National Convention. (photo: Harry E. Walker/MCT/Zumapress.com )
Representative Paul Ryan at the 2012 Republican National Convention. (photo: Harry E. Walker/MCT/Zumapress.com )


The Paradox of Paul Ryan: Why the Tea Party Is Right to Be Wary

By Bill Moyers and Michael Winship, Moyers & Company

28 October 15

 

nly in a world where Cosmopolitan magazine can declare the Kardashians “America’s First Family” and the multi-billionaire loose cannon Donald Trump is perceived by millions as the potential steward of our nuclear arsenal could about-to-be Speaker of the House Paul Ryan be savaged as insufficiently right-wing.

This is after all a man who made his bones in Congress and the Republican Party as an Ayn Rand-spouting, body building budget-buster slashing away at the body politic like a mad vivisectionist, as well as an anti-choice, pro-gun zealot who never met a government program he liked (except the military, whose swollen budget he would increase until we are all left naked living in a national security state).

But the former vice presidential candidate is widely cited among many of his colleagues as a likable enough chap who is polite to his elders in the hierarchy of Congress, and this makes the more rabid bomb throwers seethe. To them, that chummy, self-enlightened pragmatism as well as his past embrace of immigration reform qualify him as a so-called RINO, a Republican in Name Only, a “squish.” Time makes ancient good uncouth, as the poem goes, and in the words of Ed Kilgore at Washington Monthly’s “Political Animal” blog, “Nowadays if you are guilty of having ever supported ‘amnesty’ your other heresies will be uncovered, however old they are. The other way to look at it, of course, is that the GOP continues to drift to the Right, making yesterday’s ideological heroes suspect.”

The House Freedom Caucus, the fractious faction of radical right-wingers gerrymandered into a permanent demolition squad, successfully conspired to bring down House Speaker John Boehner and his designated successor Kevin McCarthy. They have for the moment agreed to support Paul Ryan’s speakership, but not with the unanimity that would constitute an official endorsement. Further, it seems that for their support to continue once he takes the job Ryan must pledge to curtail some of his powers and enable the insurgents to continue to wreak havoc on the day-to-day business of the House without fear of punishment by the grown-ups.

There’s a paradox to all this. Despite his ideological kinship with the anti-government crowd, Paul Ryan is the embodiment of the troika of money, power and politics that corrupts and controls the capital, the very thing the tea partiers detest. Ryan is “a creature of Washington,” Red State’s Erick Erickson wrote. “He worked on Capitol Hill, worked in a think tank, then went back as a congressman. He speaks Washingtonese with the best of them.”

He’s a master at the insider cronyism that defines Washington today. Just look at Ryan’s choice as his new chief of staff: David Hoppe, the personification of the supreme K-Street lobbyist, his footprints stamped all over the tar pit of Washington patronage, his hands chapped from rubbing at the prospect of the big bucks corporations pay for government favors. A 29-year veteran staffer on Capitol Hill, he’s a poster child for the revolving door through which members of Congress and their staffs rotate in the endless cycling between public service and private lucre.

In Hoppe’s case, the rush of air from the revolving door would jumpstart the windmill in a Dutch landscape painting. The indefatigable journalistic sleuth David Sirota went digging into federal records this week and reports that, “Hoppe has lobbied for such major financial industry interests as insurance giant MetLife, the National Venture Capital Association and Zurich Financial Services.”

Hoppe also has scurried along the inner corridors and back rooms of government for the investment firm BlackRock. Imagine: this man will now be sitting right there beside the Speaker of the House after working for a company which, Sirota writes, “could be affected by efforts to change federal financial regulations and which could benefit from a recent proposal to shift military pension money into a federal savings plan managed in part by the Wall Street giant.”

What’s more, Hoppe has lobbied for Cayman Finance, “whose business ‘promot[ing] the development of the Cayman Islands financial services industry’ could be affected by legislation to crack down on offshore tax havens.” The big tax avoiders must be licking their corporate chops.

Hoppe’s other clients have included the “free-trade” promoting and job-busting US Chamber of Commerce, recently outed as perhaps the tobacco industry’s most influential champion not only in Washington but the entire world. And then there are Sony, AT&T, Amazon, Delta Airlines and the candy and food behemoth Mars, as well as the Lebanese al-Mawarid Bank. Eric Lipton at The New York Times adds that Hoppe has worked for Sheldon Adelson’s Coalition to Stop Internet Gambling and as a registered foreign agent, “representing the governments of Kosovo and the Philippines.”

There’s even more. Hoppe’s listicle of paymasters continues, as reported by Lipton: “The more than 100 companies and trade associations he has represented over the last decade have paid $95 million in lobbying fees, according to records filed with the United States Senate clerk, for work that Mr. Hoppe and his colleagues have provided, to his firm [Hoppe Strategies], to Squire Patton Boggs, or to Quinn Gillespie & Associates, where he once served as president.”

And it turns out that Hoppe is just one of the network of Ryan pals who have turned their Capitol Hill experience into pay dirt. Catherine Ho at The Washington Post notes, among others, Ryan friend and former Senate staffer Tim McGivern, “a longtime AT&T lobbyist who last month joined the lobby firm Ogilvy Government Relations.” Others in the Ryan orbit include two former aides of then-Rep. Eric Cantor (R-VA), the House majority leader who was found to be so deeply embedded in the money machinery of Washington’s crony capitalism that he was embarrassingly trounced by an obscure tea partier running against him in their Republican primary. (Now that successful challenger, David Brat, has endorsed Ryan. Oh, the temptations, the temptations ready for plucking!)

You get the picture. Paul Ryan, waiting to be crowned speaker of what was once called “The People’s House,” prepares for business-as-usual. Committed to the sad and sordid Washington game that has so angered Americans on every point of the political spectrum, he is about to be named one of its Most Valuable Players. And if anyone tells you otherwise, just recall for them the testimony of one of Ryan’s own Republican colleagues, Rep. Walter B. Jones of North Carolina, who says he can’t support Ryan because, “If you’ve got problems with a man today, and the man tells you, ‘Tomorrow, I’ll be a different person’ – it doesn’t happen.”

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Anthropocene or Capitalocene? Print
Wednesday, 28 October 2015 13:48

Street writes: "Analysts argue with good reason that it is more appropriate to understand humanity's Earth-altering assault on livable ecology as 'Capitalocene.' After all, it is only during the relatively brief period of history when capitalism has existed and ruled the world that human social organization has developed the capacity, inner accumulation, and growth-mad compulsion to transform Earth systems."

Smokestack at sunset. (photo: Flickr)
Smokestack at sunset. (photo: Flickr)


Anthropocene or Capitalocene?

By Paul Street, teleSUR

28 October 15

 

Humanity as a whole did not create global warming.

few months ago, I received a statement of anthro-exceptionalist hubris from an American academic:

“I love and respect the life, beauty, and intelligence of other animals, BUT, as the American Museum of Natural History reminds us, ‘Our intelligence and creativity go well beyond those of any other animal. Humans have long communicated through language, created and appreciated art and music, and invented complex tools that have enabled our species survive and thrive, though often at the expense of other species…we owe our creative success to the human brain and our ability to think symbolically….only humans can use symbols to re-create the world mentally and contemplate endless new realities [while]…symbolic consciousness has given us the capacity for spirituality and a shared sense of empathy and morality.’”

Yes, I responded, and what has our glorious species done with these marvelous and unmatched qualities? What other species can remotely match supreme homo sapiens when it comes to destroying lives, including both those of other species and our own? It has recently become clear to Earth scientists that the history of our planet has resided for some time now in a new geologic epoch called “the Anthropocene” (successor to “the Holocene”). It is an era in which, in the words of leading experts Will Steffen, Paul Crutzen, and John McNeil, “Human activities have become so pervasive and profound that they rival the great forces of Nature and are pushing the earth into planetary terra incognita. The Earth is rapidly moving into a less biologically diverse, less forested, much warmer, and probably wetter and stormier era.” It is “a no-analogue state” in which “the Earth system has recently moved well outside the range of natural variability.”

The new Earth epoch bearing its species’ mark and name is nothing for homo sapiens to boast about. The changes introduced by humanity are ecologically unsustainable for decent life. Thanks to the Anthropocene, the world is in the middle of “its sixth great extinction event, with rates of species loss growing rapidly for both terrestrial and marine ecosystems. The atmospheric concentrations of several important greenhouse gases have increased substantially, and the Earth is warming rapidly,” Steffen, Crutzen, and McNeil note. As Noam Chomsky has observed:

“The world that we’re creating for our grandchildren is grim…The level of species destruction in the world today is about at the level of sixty-five million years ago, when a huge asteroid hit the earth and had horrifying ecological effects. It ended the age of the dinosaurs; they were wiped out. It kind of left a little opening for small mammals, who began to develop, and ultimately us. The same thing is happening now, except that we’re the asteroid…Human civilization is tottering at the edge…”

Humans have “survived and thrived,” the American Museum of Natural History raves. But not for long if it doesn’t act soon to avert the environmental calamity that is already showing signs of dark and potentially irreversible arrival before the births of “our grandchildren.” The nightmare threat isn’t about anthropogenic global warming marching along slowly in a linear fashion, with the planet getting a little hotter year by year. It’s about tipping points and the question of civilizational survival producing abrupt and irreversible climate change with catastrophic outcomes. A recent report from the prestigious and normally restrained Intergovernmental Panel on Climate Change (IPCC) suggest very strongly that the Earth is approååaching such tipping points – the melting of polar ice and Arctic permafrost, the acid-bleaching of global coral reefs, and the drying out of the Amazonian rain forest – at a pace and in ways that had not been anticipated.

My aforementioned academic correspondent’s accolade to his species reminded me of something Chomsky wrote in Hegemony or Survival (2003). Reflecting on biologist Ernest Mayr’s observations that the average life expectancy of a species is roughly 100,000 years and that evolutionary history suggested longer biological success for less intelligent species than more intelligent ones, Chomsky argued that “We are entering a period…that may provide an answer to the question of whether it is better to be smart than stupid…If it receives a definite answer, that answer can only be that humans were a kind of ‘biological error,’ using their allotted 100,000 years to destroy themselves and, in the process, much else.”

Here, however, we need to be careful about falling into ahistorical and bourgeois misanthropy. The concept of “the Anthropocene” has rich geological validity and holds welcome political relevance in countering the carbon-industrial complex’s denial of humanity’s responsibility for contemporary climate change. Still, we must guard against lapsing into the historically unspecific and class-blind uses of “anthros,” projecting the currently and historically recent age of capital onto the broad 100,000-year swath of human activity on and in nature. As left environmental sociologist Jason Moore reminded radio interviewer Sasha Lilley last March, “It was not humanity as whole that created …large-scale industry and the massive textile factories of Manchester in the 19th century or Detroit in the last century or Shenzen today. It was capital.” And it is only during a relatively small slice of human history – roughly the last half-millennium give or take a century or so – that humanity has been socially and institutionally wired from the top down to wreck livable ecology.

Moore and other left analysts argue with good reason that it is more appropriate to understand humanity’s Earth-altering assault on livable ecology as “Capitalocene." After all, it is only during the relatively brief period of history when capitalism has existed and ruled the world system (since 1600 or thereabouts by some academic calculations, earlier and later by others) that human social organization has developed the capacity and inner accumulation- and commodification - and “productivity” - and growth-mad compulsion to transform Earth systems – with profitability and “productivity” dependent upon on the relentless appropriation of “cheap nature” (cheap food, cheap energy, cheap raw materials and cheap human labor power or cheap human nature). Moore maintains that human destruction of livable ecology is best explained by changes that capitalism’s addictive and interrelated pursuits of profit and empire imposed on humanity’s relationships with "the web of life" since “the long sixteen century” starting in 1450.

In terms of measurable material consequences, it is true, the real destructive and Earth-altering impact dates from more recent history. The original geological Anthropocene argument pegged the major changes with the onset of the Industrial Revolution around 1800 but recent Earth science findings point to 1945 and the post-WWII era of US-led global monopoly-capitalist economic expansion as the real material onset of the Anthropocene/Capitalocene. Still, the social, historical, political and class-historical DNA of the eco-cidal disease crystalized during Europe’s transition from feudalism to capitalism in the wake of the Black Death.

This matters for those who want to avert catastrophe. There is no desirable remedy without a proper historical diagnosis. Those who want to avert a new Black Death on a planetary scale need to confront the imperial world system that emerged in feudalism’s aftermath – capitalism – if prospects for a decent future are to be saved. We cannot afford stupidity about systems of class rule any more than we can afford stupidity about our species’ impact on planetary life systems. Paul Street is an author in Iowa City, Iowa.

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FOCUS: George W. Bush Was AWOL, But What's"Truth" Got to Do With It? Print
Written by <a href="index.php?option=com_comprofiler&task=userProfile&user=29754"><span class="small">Dan Froomkin, The Intercept</span></a>   
Wednesday, 28 October 2015 12:04

Froomkin writes: "The only journalistic sin worse than disastrously misreporting an important story that turns out to be untrue is disastrously misreporting an important story that is true, so no one believes it anymore."

President Bush, wearing his flight suit, walks on the flight deck of the aircraft carrier USS Abraham Lincoln after arriving via a US Navy S-3B Viking Thursday, May 1, 2003, in the Pacific Ocean. (photo: Khue Bui)
President Bush, wearing his flight suit, walks on the flight deck of the aircraft carrier USS Abraham Lincoln after arriving via a US Navy S-3B Viking Thursday, May 1, 2003, in the Pacific Ocean. (photo: Khue Bui)


George W. Bush Was AWOL, But What's "Truth" Got to Do With It?

By Dan Froomkin, The Intercept

28 October 15

 

he only journalistic sin worse than disastrously misreporting an important story that turns out to be untrue is disastrously misreporting an important story that is true, so no one believes it anymore.

The end result of Dan Rather’s half-assed September 2004 report on George W. Bush’s already well-chronicled, cowardly, rule-breaking behavior as a young man during the Vietnam War was that Bush, once again, was able to avoid accountability for his conduct, and skated to an election victory over John Kerry, a genuine war hero his lickspittles had successfully smeared as unpatriotic.

So a story that should have taken down a president — a story that was already thoroughly documented, but that the mainstream media had hitherto shied away from as overly partisan — was instead discredited, never to be heard of again. Never, at least, until a very bad movie called Truth came out this month, trying to get us to see Rather (Robert Redford) and his producer, Mary Mapes (Cate Blanchett), as heroic and wronged, rather than grappling honestly with their journalistic failures.

Rather and Mapes had an obligation to make sure their segment for CBS’s “60 Minutes II” on Bush using pull to get into the National Guard instead of going to Vietnam — and then going AWOL for a chunk of what was supposed to be his service — was bulletproof. But it wasn’t even bloggerproof. The “new” documents they got copies of — from a source who was cagey about their provenance — were debunked by a bunch of Internet sleuths. An independent review commissioned by CBS found that the segment “failed to meet” CBS’s “two core principles: accuracy and fairness,” and Rather, Mapes and three other staffers were fired or forced to retire.

Two things are undeniably true about the Bush-AWOL story. One is that its collapse exemplified the Bush magic that somehow imbued him with the aura of competence, intelligence, and leadership and made him oddly invulnerable to obvious criticism — think “The Emperor’s New Clothes” — until it all came crashing down after Hurricane Katrina.

The other truth is that Bush was undeniably a shirker, and smugly AWOL from his safe, cushy National Guard gig at a time when thousands of young men his age were being sent to their slaughter in Vietnam.

That had been clear ever since Walter Robinson, the editor of the Spotlight investigative team at the Boston Globe, extensively reported out the story in May 2000, piecing together an article from available military records that has never been definitively challenged.

The Washington Post in 1999 had raised questions of favoritism and joining the Guard to avoid dangerous duty in Vietnam. But it was the Globe that introduced the missing AWOL year.

Possibly because the Globe had out-reported its bigger colleagues, the story didn’t get picked up by the elite national outlets. When Democrats tried to bring it up again on the eve of the election, the New York Times pooh-poohed it under an instant classic of false-equivalence headline: “Bush’s Guard Attendance Is Questioned and Defended.” A “review of records by the New York Times indicated that some of those concerns may be unfounded,” the story said.

Meanwhile, the Washington Post castigated Democrats for their “11th-hour attempt to exploit a dormant issue.” The Post acknowledged the truth — “It is safe to say that Bush did very light duty in his last two years in the Guard and that his superiors made it easy for him” — but waved it off as an irrelevance.

During Bush’s first term, the AWOL story continued to burble on the Internet, including on websites like The AWOL Project and awolbush.com, but things didn’t pick up again until his reelection campaign.

In January 2004, iconoclastic filmmaker Michael Moore called Bush a “deserter.” And, as Moore himself wrote: “The pundits immediately went berserk. … As well they should. Because they know that they — and much of the mainstream media — ignored this Bush AWOL story when it was first revealed by an investigation in the Boston Globe (in 2000).”

Factcheck.org, even then the toothless watchdog of the Washington cocktail-party crowd, channeled the elite media with a response headlined: “Bush A Military ‘Deserter?’ [sic] Calm Down, Michael.”

In February, then-Democratic National Committee chairman Terence R. McAuliffe called Bush “AWOL,” and created a brief flurry of coverage. The Globe’s Robinson used the news peg to review the evidence he had collected four years earlier.

In response, the then-White House press secretary Scott McClellan issued robotic non-denial denials — “The President fulfilled his duties. The President was honorably discharged” and “It is really shameful that this was brought up four years ago, and it’s shameful that some are trying to bring it up again.” The White House released 400 pages of records, none of which were definitive. But the elite press, looking for a smoking gun in a case where the real clue was more of the dog-that-didn’t-bark-in-the-night variety, lost interest again.

The story wouldn’t entirely die, however. It came back with a vengeance in September, two months before the 2004 election.

On September 5, the Associated Press, which had sued in a failed attempt to see a microfilm copy of Bush’s entire Texas Air National Guard personnel record, declared: “Documents that should have been written to explain gaps in President Bush’s Texas Air National Guard service are missing from the military records released about his service in 1972 and 1973, according to regulations and outside experts.”

On the morning of September 8, the Boston Globe published Walter Robinson’s full-fledged reexamination of documents old and new, concluding that “Bush fell well short of meeting his military obligation.”

That same day — just hours before CBS aired Rather’s specious report — U.S. News published another thorough debunking of the Bush apologists, describing how “new examination of payroll records and other documents released by the White House earlier this year appear to confirm critics’ assertions that President George W. Bush failed to fulfill his duty to the Air National Guard during the Vietnam War.”

So Dan Rather, who aired his report that night, was hardly the first to report the story. He was simply the last.

Truth is a really odd movie. The casting alone makes it clear that the filmmakers consider Rather and Mapes to be heroic, sympathetic figures. But because the artless screenplay sticks mostly to the truth, most viewers will not be inclined to see things that way. Its painfully cliched establishing shots will give them plenty of time to mull this contradiction. Avoid it. Instead go see Spotlight — a film opening in November about another investigation by Walter Robinson and the Boston Globe team — where the journalistic heroes actually do something heroic, and it’s great to watch. (Disclosure: Spotlight was partially funded by The Intercept’s parent company, First Look Media.)

The best that can be said for Rather and Mapes is that they didn’t intend to screw up the truth. But they did.

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FOCUS: The Official GOP Debate Drinking Game Rules, Pt. 3 Print
Wednesday, 28 October 2015 10:26

Taibbi writes: "Some thought we should change the rules that made us all too drunk last time. Sorry, America. The third Republican debate is here - hydrate!"

Ben Carson and Donald Trump will square off at Wednesday evening's GOP debate. (photo: Ronyn Beck/AFP/Getty Images)
Ben Carson and Donald Trump will square off at Wednesday evening's GOP debate. (photo: Ronyn Beck/AFP/Getty Images)


The Official GOP Debate Drinking Game Rules, Pt. 3

By Matt Taibbi, Rolling Stone

28 October 15

 

Some thought we should change the rules that made us all too drunk last time. Sorry, America. The third Republican debate is here – hydrate!

ast time around, the GOP presidential debate turned into a destructively alcoholic affair from the jump. This was primarily due to two drinking game rules: One, drink whenever Donald Trump brags about how much money he makes. Two, drink whenever you hear the phrase,"I'm the only candidate on this stage who…"

I had letters calling for a mercy rule here. "Hey, jackass, I threw up in hour two. And I'm forty-eight," read one. "You can't make us drink every time Trump brags about his wallet. It's in the Geneva Conventions."

Well, I checked. It's not in the Geneva Conventions. Remember, folks, we're not in this for the fun of it. This is democracy. We owe it to ourselves and to the Constitution to honor the process.

So I'm leaving the two high-volume rules in there for at least one more debate, along with some other Republican-debate standards (like uncomfortable applause for racist/sexist lines). We're mixing in new rules also, to reflect the changing dynamic of the race.

Ben Carson is a focus in tonight's game because of new polls that show him seizing the lead. His new frontrunner status figures to inspire lots of bad behavior from Trump, of course. But other candidates should show up here as well, particularly desperate ones like Jeb Bush who may flail wildly at Carson in an attempt to remind his donors that he's still in the race.

The ten candidates at the grownup table tonight are Trump, Carson, the surging Marco Rubio (watch the party elders coalesce around him soon), the "low-energy" Jeb Bush, Carly Fiorina (who has faceplanted pollswise since the bounce from the last debate), the stubbornly unlikeable Reagan-wannabe Ted Cruz, TV's cheerful madman Mike Huckabee, quiet car antagonist Chris Christie, and the faceless John Kasich (could you pick him out in a lineup?).

Bringing up the rear is the man I like to call the "Republican Gallagher," Rand Paul, who has spent much of the campaign shooting and chainsawing stuff and doing self-described "dumbass" live streams. If he drops out soon, it won't be for a failure to search out every conceivable method of demeaning the process.

It saddens me to see CNBC moderator Carl Quintanilla, with whom I used to laugh about all of this stuff while stuck on campaign planes together, forced to wear a straight face for the whole of tonight's event. Good luck to him.

Please do not watch presidential debates and drive. Also, please don't run to the bathroom to do uppers to stay in the game if you drink too much. Without further ado:

DRINK EVERY TIME:

  1. Donald Trump brags about how much money he makes.

  2. Trump uses the words "disaster," "loser" or "head spin."

  3. Trump says he "loves" somebody or thinks he/she is a "wonderful person," before ripping him/her for being a loser or a disaster or whatever.

  4. Trump rips another candidate's poll numbers. Make it a double if he tweaks Jeb about cutting the pay of his staffers. Add a beer chaser if Trump doubles down and talks about how well, in contrast, he pays his people.

  5. Anyone references how Hillary "lied before the committee."

  6. A candidate proposes abolishing an utterly necessary branch of government, or a politically untouchable program like Medicare.

  7. Jeb Bush refers to himself as "Veto Corleone," or insists that "Washington is the pejorative term, not Redskins." Drink as much as you can stomach if he actually uses either line.

  8. Any candidate makes an awkward/craven pop-culture reference, including references to Peyton Manning or the Broncos.

  9. Any candidate illustrates the virtue of one of his/her positions by pointing out how not PC it is.

  10. Any candidate compares anything that isn't slavery to slavery. A double if it's Ben Carson.

  11. Any candidate evokes Nazis, the Gestapo, Neville Chamberlain, concentration camps, etc. Again, a double if it's Ben Carson, who has been amping up the slavery/Holocaust imagery lately.

  12. Carson cites the Bible as authority for complex policy questions.

  13. Any candidate righteously claims he/she would never have compromised on the debt ceiling thing. You may drink more if you feel sure enough that the person is lying.

  14. Carly Fiorina whips out a number that is debunked by Politifact or some other reputable fact-checking service before the end of the night. (Example: the 307,000 veterans who supposedly died last year because of Barack Obama's inept management of the VA.) Actually, drink if any candidate does this.

  15. A low-polling candidate makes a wild and outrageous statement in a transparent attempt to revive his or her campaign. Huckabee calling for summary bludgeonings of immigrants would be an example.

  16. A candidate complains about not getting enough time. This evergreen drinking game concept is henceforth known as the "Jim Webb rule."

  17. The audience bursts into uncomfortable applause at a racist/sexist statement.
  18. DRINK THE FIRST TIME AND THE FIRST TIME ONLY:

  19. A candidate evokes St. Reagan.
  20. Drink EVERY TIME you hear:

  21. "Selling baby parts"

  22. "White Lives Matter" or "All Lives Matter"

  23. "Ferguson Effect"

  24. "I'm the only candidate on this stage who…"

  25. George Bush/My brother "kept us safe"

  26. "Shining city on a hill"
  27. TAKE A SHOT OF JAGER IF:

  28. Anyone references a biblical justification for gun ownership, or insists an infamous historical tragedy would have been prevented if more people had been armed.

The following rules are optional, for the truly hardcore.

BONUS SHOTS IF:

  • Ted Cruz mentions his wife's baking skills without mentioning she worked for Goldman Sachs.

  • Rand Paul mentions the Constitution, the Framers or the founders before he mentions his children.

  • Someone makes a quiet car joke at Christie's expense.

  • Fiorina mentions being a secretary or having a husband who drove a tow truck.

Watch responsibly. See you all on Twitter this evening.

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Making Insider Trading Legal Print
Wednesday, 28 October 2015 08:41

Keefe writes: "Do you run a hedge fund? If so, I have exciting news. The prominent campaign by Preet Bharara, the United States Attorney in Manhattan, to crack down on insider trading in the three-trillion-dollar hedge-fund industry has just ground to an inglorious halt."

Earlier this month, the Supreme Court declined to hear a high-profile insider-trading case, delivering a setback to the efforts of Preet Bharara, the United States Attorney in Manhattan. (photo: Spencer Platt/Getty Images)
Earlier this month, the Supreme Court declined to hear a high-profile insider-trading case, delivering a setback to the efforts of Preet Bharara, the United States Attorney in Manhattan. (photo: Spencer Platt/Getty Images)


Making Insider Trading Legal

By Patrick Radden Keefe, The New Yorker

28 October 15

 

o you run a hedge fund? If so, I have exciting news. The prominent campaign by Preet Bharara, the United States Attorney in Manhattan, to crack down on insider trading in the three-trillion-dollar hedge-fund industry has just ground to an inglorious halt. Late last week, it was quietly announced that prosecutors would drop all charges against one of Bharara’s highest-profile targets, Michael Steinberg, who worked at the fourteen-billion-dollar hedge fund S.A.C. Capital Advisors.

Steinberg, a trusted deputy of Steven A. Cohen, the founder of S.A.C., was convicted of insider trading, in 2013. (I wrote about the investigation of S.A.C. for the magazine last year.) But Steinberg appealed. Last December, in a separate case, a New York appeals court overturned the convictions of two other hedge-fund traders and issued an opinion that dramatically narrowed the definition of insider trading, by requiring that prosecutors prove both that the tipper received some sort of compensation for sharing the information and that the individual who traded on that information knew it was an illegal tip. Bharara’s office challenged the ruling, but, earlier this month, the Supreme Court declined to hear the case.

Under this new interpretation of insider trading, Steinberg appeared likely to win his appeal—so Bharara dropped the charges against him, and also dismissed the guilty pleas of six coöperating witnesses who had acknowledged trading on material nonpublic information. The United States Attorney’s office maintains that the majority of its insider-trading convictions will remain unchallenged by this change in the legal landscape. But the truth is that if you operate a hedge fund and care to structure your business around the gaping loopholes that the Supreme Court has implicitly endorsed, insider trading is now effectively legal in the United States.

Successful hedge funds are like vast information combines, voraciously churning market data and analysis. At its height, S.A.C. employed about a thousand people, and portfolio managers were charged with generating investment ideas upon which the firm would bet enormous sums. But because there are so many hedge funds, each with its own army of analysts, the trick is to find some nugget of information that the rest of the market doesn’t know. This is where the culture of insider trading took hold.

In the summer of 2008, a floppy-haired S.A.C. analyst named Jon Horvath began feeding tips based on insider information to Steinberg, his boss. Through a friend at another hedge fund, Horvath obtained details from an insider at Dell about the company’s disappointing financial results. Horvath passed his information to Steinberg, who made sizable bets against Dell stock in advance of a quarterly earnings report.

Horvath’s friend had obtained the tip from a friend of his who worked at another hedge fund, and had obtained it directly from an insider at Dell. Horvath knew that the provenance of the information was illegal. But did Steinberg? During Steinberg’s trial, in 2013, Horvath, who made a plea deal and became a prosecution witness, testified that Steinberg once told him, “I can day-trade these stocks and make money by myself. I don’t need your help to do that. What I need you to do is go out and get me edgy, proprietary information.” On the stand, Horvath said that he inferred this to mean illegal, nonpublic information. Bharara described the culture at S.A.C. as one in which insider trading was prevalent, even subtly encouraged, and called the firm a “magnet for market cheaters.” Cohen was never personally charged with any crime, but the fund ended up pleading guilty to a criminal indictment, agreeing to stop investing money from outsiders and to pay a $1.8 billion fine.

Before and after his initial conviction, Steinberg maintained his innocence, arguing that he did not know that the source of the Dell information may have been illegal when he traded on it. Many people on Wall Street felt that Bharara’s crusade against insider trading was recklessly broad: An analyst like Horvath might knowingly obtain an illegal tip, but if he feeds his information up the chain to a Steinberg or a Cohen, and they take his word that he is not passing along stolen goods, should they really go to prison for that misplaced faith? Is it fair to convict someone of engaging in insider trading if he didn’t know he was doing so at the time?

An edgy tip tends to travel: a company insider shares a fragment of data with a friend, who passes it along to another friend, who passes it to the portfolio manager he works for, who passes it to his boss. Bharara believed that when people like Steinberg make big bets on the basis of this sort of information, they should be prosecuted, even if they are separated by several links on the information chain from the original tipper.

The Court of Appeals for the Second Circuit disagreed. In overturning the convictions of the two other traders, Todd Newman and Anthony Chiasson, the court derided the “doctrinal novelty” of Bharara’s approach, and held that it is not enough to prove that someone traded on a tip that she should have known constituted material nonpublic information; instead, prosecutors need to prove that she was affirmatively aware of the dodgy provenance of the tip. The court also held that prosecutors must demonstrate that the original tipper was somehow compensated for offering the tip.

For Bharara this was a devastating repudiation. But to anyone who is at all acquainted with the anthropology of the contemporary hedge fund it also represented, unmistakably, a license to cheat. Company insiders share tips for many reasons, not just financial compensation: the person they share the information with may be a friend or a family member, someone they want to impress, someone they owe a favor. And once they pass the tip along it often circulates through a network of people in the investment community. At a large hedge fund, the senior investors are generally not out shaking the trees and doing primary market research themselves—they are relying on their analysts and portfolio managers to feed them data and hypotheses. These intermediaries were always a buffer against legal exposure, and the existence of that buffer may offer one explanation for why Bharara was never able to personally charge Cohen with criminal wrongdoing.

What the Second Circuit opinion does is fortify the buffer with Kevlar. Richard Holwell, a former federal judge who presided over several high-profile securities-fraud cases, told me that when an illegal tip is passed up the chain at a hedge fund, senior traders often know better than to inquire about its origins. Instead, some firms have an unspoken policy that Holwell characterized as “don’t ask, don’t tell.” This was the case in the old legal landscape, at the height of Bharara’s crackdown. But in the new legal climate “don’t ask, don’t tell” will amount to much more than a mere precaution—it will be an ironclad bar to prosecution.

One encouraging byproduct of Bharara’s efforts is that many firms, including S.A.C. (which was rechristened last year as Point72 Asset Management, a “family office” that can only invest Cohen’s personal fortune and the money of some of its employees), have beefed up their compliance departments. But in a textbook instance of perverse incentives the ruling by the Second Circuit will discourage due diligence, because the less management knows about the sourcing employed by analysts and traders to generate investment ideas, the fewer people will face legal exposure. It’s not that it will be impossible to bring insider-trading cases from now on; it’s that at a hedge fund, all of the legal liability will now rest with the analysts and traders on the front lines of information gathering—with the initial knowing recipients of a tip. (Incidentally, if you’re a junior portfolio manager, this might be a good time to ask your boss for a raise.)

Bharara observed, earlier this month, that the decision by the Supreme Court to let the Second Circuit’s interpretation of insider trading stand creates “an obvious road map for unscrupulous investors.” But the hedge-fund community is celebrating. “The Justice Department can take its busted insider trading theories back where they came from,” the Wall Street Journal crowed in an editorial, earlier this month. With billions of dollars to be made in betting on the market, whether or not you see cause for alarm in any of this will likely depend on just how scrupulous or unscrupulous you think the average investor is.

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