A NASA experiment suggested life on Mars in 1976. However, the failure of other instruments to detect organic material and possible non-biological explanations for the result caused NASA to dismiss the results as a false positive. Now, additional information gives scientists reason to reconsider that conclusion.
Gilbert Levin, who was principal investigator of NASA’s Viking life detection experiment, wrote in a recent Scientific American article that the experiment did indeed find life back in 1976. He argues that NASA made a mistake when it initially dismissed the results.
The Labeled Release (LR) experiments conducted by the Viking mission added nutrients to Martian soil then looked for byproducts of metabolic processes. It repeated the experiment after cooking the soil to rule out inorganic processes. The results were positive. But, other instruments caused scientists to discount the results.
Why NASA Dismissed the Original Findings
The Viking mission failed to find organic molecules or the presence of water. And some scientists hypothesized other explanations could have caused a false positive. These include the presence of hydrogen peroxide in the Martian soil and interactions with ultraviolet radiation
But, subsequent experiments on earth have failed to produce false positives under similar conditions. Additionally, the discovery of organic compounds and the presence of water suggested by more recent Mars missions have further eroded the basis for dismissing the Viking LR result as a false positive.
Back on earth, study of microorganisms living in extreme polar environments suggests the plausibility of life surviving in the Martian permafrost as well.
Further, the exchange of material between the earth and Mars over the millennia make it likely that living organisms could have hitched a ride at some point.
All this argues for the inclusion a revamped version of the LR experiment on any new mission to Mars, Levin says. He has proposed an experiment that would be capable of determining whether life on the two planets had a common origin or developed independently.
Did NASA Cover-Up Evidence of Life on Mars?
It is a misperception, however, that NASA found conclusive proof of life during the Viking mission and chose to hide it. There were valid scientific reasons NASA scientists were skeptical of the original positive LR experiment results. However, subsequent scientific study rendered those objections less salient.
Among NASA’s central goals is the discovery of life beyond earth. NASA is planning a new rover mission to Mars in 2020 for an area NASA selected precisely because of the likelihood they might find life there.
NASA May Soon Have an Announcement About Life on Mars
Dr. Jim Green, the director of NASA’s planetary science decision said in a recent interview that the agency is close to making an announcement of life on Mars. However, he’s not sure humanity is ready for it.
“It will be revolutionary,” Green told The Telegraph. “It’s like when Copernicus stated ‘no we go around the Sun.’ Completely revolutionary. It will start a whole new line of thinking. I don’t think we’re prepared for the results. We’re not.”
The moment we learn that life exists beyond the earth will be among the most consequential in human history. Ready or not, that moment may be here sooner than we think.
It is now becoming increasingly clear that President Donald Trump threatened Ukraine’s President Volodymyr Zelensky with the loss of military aid unless Ukraine pursued an investigation that Mr. Trump hoped would politically embarrass his chief 2020 rival, Joe Biden. On Monday, Mr. Trump acknowledged that he raised Mr. Biden in a July phone call with Mr. Zelensky.
“The conversation I had was largely congratulatory, with largely corruption, all of the corruption taking place and largely the fact that we don’t want our people like Vice President Biden and his son creating to the corruption already in the Ukraine,” Mr. Trump told reporters Monday.
At issue is Mr. Biden’s effort to compel Kiev to remove Ukraine’s former state prosecutor Victor Shokin. International observers widely considered Mr. Shokin to be enabling corruption by refusing to pursue prosecutions against corrupt allies. International donors did not want to issue loan guarantees until they could be confident that Kiev would address growing corruption.
At a Council on Foreign Relations event last year Mr. Biden recalled how, as Vice President, he refused to agree to a $1 billion loan guarantee backed by the US and IMF unless Ukraine took steps to implement anti-corruption measures. Specifically, Mr. Biden wanted Ukraine’s government to sack Mr. Shokin.
“I looked at them and said, ‘I’m leaving in six hours. If the prosecutor is not fired, you’re not getting the money,’” Mr. Biden recalled. “Well, son of a bitch. He got fired. And they put in place someone who was solid at the time.”
Hunter Biden’s Connection to Ukraine
It turns out, that Mr. Shorkin’s office was investigating a Ukrainian natural gas company called Burisma. Mr. Biden’s son, Hunter, served on Burisma’s board at the time. However, the Biden camp insists that Mr. Biden and his son never spoke about this and that it had no bearing on his action.
Kate Bedingfield, a spokeswoman for Mr. Biden’s campaign, told the New York Times that that Mr. Biden undertook his effort to remove Mr. Shokin “without any regard for how it would or would not impact any business interests of his son, a private citizen.”
Further, it is not clear that Shokin’s investigation against Burisma was actually all that active. According to Politifact, there are conflicting reports. Some in Shorkin’s office say the investigation was dormant at the time. Burisma maintains that the threat of an investigation was merely a shakedown intended to solicit bribes from the company.
Yet, in spite of the potential that Mr. Biden’s son might benefit, there was nevertheless ample justification for Mr. Biden’s push for Ukraine to fire him.
Widespread Concerns About Shokin
The IMF, the U.S. and international partners all agreed the Shokin was a problem. It would be a mistake to extend load unless they could be confident that the state prosecutor would aggressively pursue corruption.
In early 2016, International Monetary Fund chief Christine Lagarde said that “it’s hard to see how the I.M.F.-supported program can continue” unless corruption prosecutions accelerate.
Also, after Ukraine’s parliament voted overwhelmingly to force Mr. Shokin out, Jan Tombinski, the EU’s envoy to Ukraine, praised the move as “an opportunity to make a fresh start.” He added that he hoped that Kiev would name a new prosecutor who will ensure that the prosecutor’s office “becomes independent from political influence and pressure and enjoys public trust.”
The Bottom Line
There were legitimate reasons for Mr. Biden to push for Mr. Shokin’s ouster and international observers widely agreed that Shokin was not doing his job and was woefully corrupt. So, there is a plausible explanation for Biden’s action that doesn’t involve a corrupt motive.
Further, there is no evidence that Mr. Biden intended to benefit his son. Yet, at the least his son’s business ties created the appearance of a conflict of interest. Mr. Biden should have been more cautious about the appearance of impropriety.
Finally, Mr. Biden’s judgement in this matter is fair game for Trump’s campaign. It would be entirely appropriate for the Trump campaign to hire researchers to investigate Mr. Biden’s actions, much as Ms. Clinton and the Democrats did in 2016 to look into Mr. Trump’s ties to Russia. Still, this does not excuse Mr. Trump’s leveraging of public resources for personal political gain. Presidents must separate the duties of the office and their own interests. President Trump’s actions are a reminder of his continuing failure to understand the distinction.
The U.S. economy is entering the longest expansion in history. But, how long can it last? The economic turmoil and relentless uncertainty of President Donald Trump’s mercurial trade policies are making businesses more reluctant to expand. Slowing growth in economies around the world isn’t helping either. New York Times Chief Economic Correspondent Neil Irwin joins the Axis of Reason podcast to discuss whether this all adds up to a recession on the horizon.
About Neil Irwin
Twitter: @Neil_Irwin
Neil Irwin is a senior economics correspondent for The New York Times, where he writes for The Upshot, a Times site for analysis of politics, economics and more. He is the author of “How to Win in a Winner-Take-All World,” a guide to navigating a career in the modern economy, published by St. Martin’s Press.
He is also the author “The Alchemists: Three Central Bankers and a World on Fire,” about the efforts of the world’s central banks to combat the global financial crisis, published by the Penguin Press in 2013. Mr. Irwin was previously a columnist and reporter at The Washington Post, where he led the Post’s coverage of the global financial crisis and the government’s response to it.
Mr. Irwin has an M.B.A. from Columbia University, where he was a Knight-Bagehot Fellow in Economics and Business Journalism, and his undergraduate studies were at St. Mary’s College of Maryland. He has often appeared on television analyzing economic issues, including on “PBS NewsHour” and CNBC. – New York Times Bio
Links
“Often, a recession results when some widely held belief about the world turns out to be false…. This time around, the belief in doubt is that the world will only become more stable and interconnected over time, and that trade, currency and diplomatic relationships can be counted upon.” – Neil Irwin: How the Recession of 2020 Could Happen (NY Times)
How to Win in a Winner-Take-All World
In How to Win in a Winner-Take-All World, Neil Irwin, senior economic correspondent at the New York Times, delivers the essential guide to being successful in today’s economy when the very notion of the “job” is shifting and the corporate landscape has become dominated by global firms. He shows that the route to success lies in cultivating the ability to bring multiple specialties together―to become a “glue person” who can ensure people with radically different technical skills work together effectively―and how a winding career path makes you better prepared for today’s fast-changing world. Through original data, close analysis, and case studies, Irwin deftly explains the 21st century economic landscape and its implications for ambitious people seeking a lifetime of professional success.
The Alchemists
Neil Irwin’s The Alchemists is a gripping account of the most intense exercise in economic crisis management we’ve ever seen, a poker game in which the stakes have run into the trillions of dollars. The book begins in, of all places, Stockholm, Sweden, in the seventeenth century, where central banking had its rocky birth, and then progresses through a brisk but dazzling tutorial on how the central banker came to exert such vast influence over our world, from its troubled beginnings to the Age of Greenspan, bringing the reader into the present with a marvelous handle on how these figures and institutions became what they are – the possessors of extraordinary power over our collective fate. What they chose to do with those powers is the heart of the story Irwin tells. Available on Amazon here.
Despite a tax cut that strongly incentivized business investment, recent economic data suggests companies are not spending significantly more on new equipment. Fear of tariffs may have something to do with it.
The 2017 tax bill reduced the corporate tax rate from 35% to 21%. That should encourage firms to spend more on expanding their business. Yet, after a short-lived spike last year, business investment has languished. In the second quarter of this year, gross private investment fell 5.5%.
Why is among one of the bigger economic mysteries of late.
Tariffs Breed Supply Chain Uncertainty
So, what’s going on? At least part of the answer may lie in another Trump administration economic policy working at cross purposes to the tax cuts.
One possible explanation is uncertainty surrounding President Trump’s trade wars. As Trump’s trade war ramped up, business leaders grew more conservative about expanding. Federal Reserve Chairman Jerome Powell recently testified to Congress that concern that trade spats could disrupt supply chains is holding back businesses.
“If you’re a manufacturing company in our economy, of any size, chances are pretty good that your supply chain goes across national borders,” Powell said in his testimony. “That supply chain is really part of how you do business, and you just assume that it’s working and you can focus on your clients. When your supply chain is called into question — we hear this a lot from businesses — when it’s called into question, you pull back.”
Even companies that make things in America depend on parts imported from abroad. So, when tariffs rise on imported goods, the input costs of American-made products rise too.
Tariffs meant to hold off foreign imports don’t necessarily help U.S. manufacturers. Even companies that make things in America depend on parts imported from abroad. So, when tariffs rise on imported goods, the input costs of American-made products rise too.
Mr. Trump’s scattershot approach to trade policy exacerbates the problem. Mr. Trump announces new trade fights on Twitter seemingly at random. It’s hard for businesses to know what’s coming next. As a result, manufacturers can never be sure that Trump won’t hit the parts they depend on with tariffs. So, they conclude the risks of ramping up outweigh the potential benefits.
This uncertainty was especially pronounced in the second quarter of this year. In May, President Trump threatened Mexico with tariffs unless it took more robust action to keep illegal immigrants from crossing its border with the U.S. This spooked American companies who depend on parts imported from Mexico.
Trade Wars and the Fed
Mr. Trump has demanded that the Federal Reserve cut interest rates at its next meeting. Analysts expect that they will do exactly that. The Fed holds its independence sacrosanct. They won’t cut rates just because Mr. Trump told them to do it. However, his actions on trade may have contributed to the Fed’s view that a rate cut is needed to shore up a weakening economy.
“All Trump had to do was keep up geopolitical trade uncertainty for a while and he’d get the Fed to cut rates,” Ed Yardeni, president and chief investment strategist of Yardeni Research Inc. told Politico this week. Mr. Yardeni pointed out that Mr. Powell mentioned uncertainty surrounding trade as a headwind to economic growth eight times in his recent Congressional testimony.
The problem with protectionist trade policies is that they come laden with unintended consequences. These can be hard to predict.Protectionist tariffs often undermine the very outcomes they are meant to accomplish.
Increases in input costs for imported parts nullify the benefits to American firms. Further, when we slap tariffs on foreign products, foreign countries are likely to put tariffs on American products too. For example, after Trump levied tariffs on Chinese products, Beijing replied with tariffs of their own. Chinese tariffs on American soybeans have hit U.S. farmers hard. President Trump has spent billions to pay farmers for lost revenues.
Trade protectionism is intended to bolster American businesses. But, recent events suggest that they can end up doing the opposite.
Robert Mueller arrived on Capitol Hill Wednesday in the uniform that has been a trademark throughout his career – dark suit, white shirt, blue tie. Mr. Mueller’s testimony was as unremarkable as his wardrobe. This was deliberate. Mr. Mueller insisted on sticking to the conclusions of his report and scrupulously avoided fanning partisan flames.
In Mr. Mueller’s appearances before the House Judiciary and Intelligence Committees, the partisan battle lines were predictable. Democrats looked to Mr. Mueller as a savior; for Republicans he was a villain, or at least a tool of villains.
Neither side left satisfied. It appeared that’s exactly what Mr. Mueller intended. In this, he was a success.
Democrats hoped Mr. Muller’s testimony would validate their argument that he would have indicted President Trump on obstruction of justice charges had Department of Justice policy permitted him to do so. Republicans hoped his testimony would further their efforts to portray the FBI’s investigation into potential ties between the Trump campaign and Russia’s election meddling as unwarranted, and born nefarious political motivations. Neither side left satisfied. It appeared that’s exactly what Mr. Mueller intended. In this, he was a success.
A Reluctant Witness
In often halting tones, Mr. Mueller delivered several hours of nothing particularly new. A straight-arrow g-man with little interest in the melee of politics, Mr. Muller was a polite but reluctant witness. His responses rarely extended for more than a sentence, often he offered just a word or two: “yes,” “no,” “that’s correct.” He spent more time asking preening lawmakers to repeat their questions than actually answering them.
Democrats pressed their theories of how Mr. Trump criminally obstructed justice. Mr. Mueller shrugged. A Department of Justice Office of Legal Counsel opinion, which concluded that a sitting President could not be indicted, he said, precluded him from considering the question.
Republicans pressed Mr. Mueller on what role the so-called Steele dossier, an opposition research document funded by Democrats, played in the opening of the FBI’s probe. Mr. Mueller simply said that it was before his time. “[T]hat part of the building of the case predated me by at least 10 months,” Mr. Mueller said in response to a question from Rep. Matt Gaetz of Florida.
The Bombshell That Wasn’t
Democrats hoping for a bombshell had their hopes buoyed, only to be deflated again. When Rep. Ted Lieu laid out a theory for Mr. Trump’s criminal liability in obstructing justice, and asked Mr. Mueller if he would have indicted Mr. Trump had Dept. of Justice policy prevented him from doing so, he answered “that’s correct.”
But, an hour later, in his opening comments to the House Intelligence Committee, Mr. Mueller clarified that Department policy prevented him from considering whether to indict the President, not that he would have done so in its absence.
“I want to add one correction to my testimony this morning,” Mr. Mueller said referring to his earlier appearance before the House Judiciary Committee. “[Rep. Lieu] said, and I quote, ‘you didn’t charge the president because of the OLC opinion.’ That is not the correct way to say it. As we say in the report and as I said in the opening, we did not reach a determination as to whether the president committed a crime.”
Mueller’s Testimony: The Bottom Line
Mr. Mueller’s Testimony revealed little we didn’t know about Mr. Trump and Russia. He was determined to stay within the bounds of the report. He grew considerably more animated when he spoke of the threat to American Democracy presented by Russia’s interference in the political process. Every American should be concerned about this.
“Over the course of my career, I have seen a number of challenges to our democracy,” Mr. Mueller said. “The Russian government’s effort to interfere in our election is among the most serious…this deserves the attention of every American.”
Robert Mueller might be the only man in Washington so thoroughly disinterested in the public spotlight.
But, mostly Mr. Mueller seemed weary — and more enfeebled than we might have expected. Robert Mueller might be the only man in Washington so thoroughly disinterested in the public spotlight. He did his job. He did it well. Now, it seems, he’d prefer we all left him in peace.
On this week’s Axis of Reason podcast, we talk with best-selling author James Rickards about his new book, Aftermath: Seven Secrets of Wealth Preservation in the Coming Chaos. Jim explains why he thinks the extraordinary steps central banks took to tame the Great Recession, an explosion in the national debt fueled by spending-addicted politicians, and general political dysfunction have put the global economy on a collision course with calamity. Aftermath will be released on July 23rd, but is available for pre-order from Amazon and other booksellers.
About Aftermath
“In his most prescriptive book to date, financial expert and investment advisor James Rickards shows how and why our financial markets are being artificially inflated–and what smart investors can do to protect their assets…James Rickards, the author of the prescient books Currency Wars, The Death of Money, and The Road to Ruin, lays out the true risks to our financial system, and offers invaluable advice on how best to weather the storm.” – Penguin/Portfolio
About James Rickards
Author and economist James Rickards.
James Rickards is the Editor of Strategic Intelligence, a financial newsletter, and Director of The James Rickards Project, an inquiry into the complex dynamics of geopolitics + global capital. He is the author of three New York Times best sellers, The Road to Ruin (2016), The Death of Money (2014), and Currency Wars (2011), and the national best seller, The New Case for Gold (2016), all from Penguin Random House.
Thursday afternoon, a cryptic error message greeted Twitter users. It simply said, “Something is technically wrong.”
According to DownDetector.com, reports of problems at Twitter started pouring in at 2:46 pm ET Thursday afternoon. The outage was widespread. Tens of thousands of users worldwide reported problems accessing the site to the internet trouble-tracking site.
Users worldwide are reporting problems accessing Twitter. (CREDIT: DownDetector.com)
Reddit experienced some outages earlier in the day, according to The Independent. But, there’s no indication that the two are related.
Twitter Down due to an “Internal Configuration Change”
Twitter blamed the outage on an “internal configuration change.” Thursday afternoon, the micro-blogging site posted a message to their status website indicating that they were “investigating.”
An hour later, they identified the problem. “The outage was due to an internal configuration change, which we’re now fixing,” they wrote. “Some people may be able to access Twitter again and we’re working to make sure Twitter is available to everyone as quickly as possible.”
Last month, a configuration error led to a major disruption of Google Cloud services, including YouTube, Snapchat, Venmo, and Gmail among others. Google’s head of engineering, Benjamin Treynor Sloss, explained what went wrong in a blog post:
In essence, the root cause of Sunday’s disruption was a configuration change that was intended for a small number of servers in a single region. The configuration was incorrectly applied to a larger number of servers across several neighboring regions, and it caused those regions to stop using more than half of their available network capacity. The network traffic to/from those regions then tried to fit into the remaining network capacity, but it did not. The network became congested, and our networking systems correctly triaged the traffic overload and dropped larger, less latency-sensitive traffic in order to preserve smaller latency-sensitive traffic flows, much as urgent packages may be couriered by bicycle through even the worst traffic jam.
It took Google four and a half hours to fix the issue last month. This was in part because the outage affected tools Google’s engineers use to fix problems. However, Twitter was back to normal more quickly. Most users were able to access their accounts again by late Thursday afternoon. True to form, within minutes the sarcastic tweets followed.
Had to resort to yelling my terrible opinions at strangers in public during the Twitter outage.
The legal marijuana market is growing like weeds in the field. Analysts project that worldwide, consumers will spend $16.9 billion on legal cannabis this year. That according to a recent report by BDS Analytics and Arcview Market Research. But the cannabis industry has been burned by lack of access to green. It is a cash-only business. The reason is simple: any financial company that deals with the industry risks federal money laundering charges.Congress is currently considering bills that would clear away legal brush by authorizing banks to accept legal cannabis funds. A usual coalition support the measures. It includes the National Association of Attorneys General, state treasurers, and the American Banking Association. They are engaged in joint lobbying efforts. Treasurer Secretary Steven Mnuchin, Attorney General William Barr, and Federal Reserve Chairman Jerome Powell do not object. All have indicated they welcome congressional action that would hoe a path for cannabis firms to access financial markets.The measure appears on a roll in the House. The House Financial Services Committee recently approved the Safe and Fair Enforcement Banking Act. That bill would allow banks to deal in cannabis-related business. But it will be a tougher grind in the Senate. Majority Leader Mitch McConnell and Sen. Chuck Grassley, chairman of the Senate Banking Committee, both oppose the measure. They likely will stash it in committee, never to see sunlight.
AG Memo
Deputy Attorney General James M. Cole sewed the seeds of this thicket. In August 2013 he issued a guidance memo on marijuana enforcement in light of state laws legalizing the drug. Mr. Cole noted that federal prosecutors are focused on gangs and drug cartels.The DAG said federal prosecutors, when deciding to bring cases, should consider the whether a business was “large-scale or for-profit.” Mr. Cole warned that neither the guidance memo “nor state or local law provides a legal defense to a violation of federal law.”The sale, distribution of marijuana was, and still is, a federal felony under the Controlled Substance Act. That law provides for both criminal and civil penalties.
Treasury: Don’t Try to Take Money
Six months later, in February 2014, the Treasury Department’s Financial Crimes Enforcement Network, or FinCen, issued its own guidance. The document effectively nipped the industry in the bud.FinCen said banks and other financial institutions could open accounts for marijuana-related business. But, they had to conduct extensive due diligence. Also, they must file a Suspicious Activity Report for every deposit, withdrawal, or money transfers. Finally, they must file a Currency Transaction Report for anything that involves $10,000 or more. Since the cannabis industry is rolling in cash, that essentially means banks would have to continually take some action.The guidance warned that it “is a serious crime” to distribute or dispense marijuana. FinCen went to say “financial transactions involving a marijuana-related business would generally involve funds for illegal activity.” That could subject financial institutions to prosecution under multiple federal laws. These include the USA PATRIOT Act, the Bank Secrecy Act, and the Racketeering Influenced and Corrupt Practices Act.
Bankers Balk at Taking Money, Making Loans
Financial institutions are not noted for their daring. Banks decided it was too risky to have anything to do with the sprouting industry. Only 35 financial institutions in the country deal with the cannabis industry according to Real Money. Visa and Mastercard will not allow their debit or credit cards to be used at cannabis stores or pharmacies. Gregory S. Deckard, the CEO of State Bank Northwest, said ATM companies won’t service them either. He said credit card processors and check clearing houses have threatened to cut off services with banks that service cannabis businesses. Mr. Deckard told the committee the largest armored car company cancelled contracts with banks that serve the cannabis industry.Many banks also will not issue loans to any cannabis-related firm. That particularly hurts minority entrepreneurs. Some states that have legalized marijuana sales have specific set asides for minorities.
Employees, Suppliers Also Hurt
The de facto ban on marijuana money also covers employees and forms that deal with the cannabis businesses.Mr. Deckard told the House Financial Services Committee his bank won’t give loans to employees of cannabis businesses. Their salaries come from the sale of marijuana, which he noted are “illegal proceeds under federal law.” FinCen’s guidance did not cover “third parties offering goods or services to marijuana-related businesses, such as equipment suppliers or shipping servers.” In short, the FinCen ban extends to companies that have an indirect relationship with a marijuana firm. “Indirect connections are often difficult to identify and avoid because growers and retailers don’t operate in a vacuum,” Rachel Ross, the chief risk officer of the Credit Union National Association, told the House committee. “Like any other industry, they work hand-in-hand with vendors and suppliers. These are Main Street businesses like the printing company that makes a business card, the landlord that rents office space, and even the utility company that provides water or electricity.” The third-party ban also covers plumbers, electricians, internet providers, and accountants. Mr. Deckard said it applies to any company that “offer their services to the general public, whose customer service base includes cannabis-related businesses.”
What’s a Cannabis Business to Do?
The owners and operators of marijuana stores and dispensaries have a limited number of options available to them. They could just take cash. But that raises major risks. A study by the Wharton School of Business Public Policy Initiative found that one in two cannabis businesses are robbed. The average take has been between $10,000 and $20,000.Owners of some California cannabis business say they deposit cash into their personal accounts. But, if their bank notices a large amount of “suspicious” cash deposits, it must notify FinCen. That puts the owners and their businesses in legal and financial jeopardy.Another solution is to take advantage of bank-like ventures. Hypur provides what it calls “banking solutions” for business that lack “access to basic banking services.” Hypur hypes its “electronic cannabis payments,” that transfers cash directly into business owners’ bank accounts. Ms. Ross said cannabis businesses “are frequently bombarded with proposals for payment ‘solutions’ that are unregulated.” She did not mention Hypur or any other company. Ms. Ross did warn that “their ‘solutions’ are often very clearly a form of money laundering.”
States: Here We Come to Save the Day
Two states that have legal marijuana sales will try to bridge the banking gap. A bill in the Oregon state legislature would establish limited state-chartered banks to serve the cannabis industry. The California State Senate recently approved a bill that would do something similar. It would allow individuals to start banks that could accept cash from marijuana retailers.There is a major problem with that idea. The federal government, which approves most banks, won’t allow it. The Federal Reserve has already rejected just such a bank. It turned down a bank chartered by the state of Colorado to serve the cannabis industry.A report by a California State Treasurer task-force noted that state-created cannabis banks “would be fenced off from the rest of the banking system.” It wouldn’t be able to clear checks, wire funds, or process credit and debit cards. The Cannabis Banking Work Group said a state bank would be a “closed-loop system.” Customers “could only exchange funds with other customers of the [same] institution.”Even if a state bank could overcome those obstacles, the Work Group said it “would take a long time to organize.” Some financial industry experts estimate it could take as much as a decade to create a cannabis bank.
Why the State Interest?
States are getting involved because of money. Lots of money in lost tax revenues. California, for example, saw tax collections from cannabis sales fall $100 million short of expectations. Further, the state has lowered its projected marijuana tax revenues over the next year by $223 million.Fiona Ma, the California Treasurer, explained the problem to the House. Cannabis business owners pay their taxes in cash. Often, Ms. Ma said, stuffed in duffel bags or suitcases. “I asked how much we collected from the cannabis industry and my agency really didn’t know,” she said.Ms. Ma said the problem does not just apply to sales taxes. “Social Security, State and, Federal Income taxes can’t be accurately collected on cash payments wage statements done manually to employees. This doesn’t allow employees to pay into – or receive – Social Security benefits,” she said.Advocates say the only permanent solution would come from the federal government. Congress can either legalize marijuana or create a safe harbor so banks can accept money from legal marijuana stores. Or the industry risks going to pot.
President Trump has effectively said he will not comply with a plethora of Congressional subpoenas. He refused to turn over a full copy of Mueller Report and all supporting documents to the Judiciary Committee. He’s also sued banks to prevent production of business records to Congressional Committees. And, he has argued that the Ways & Means Committee’s demand to see his tax returns was invalid.
If, as expected, those disputes wind up in court, the Trump administration is almost certain to lose those fights. In fact, a judge has already ruled that an accounting firm must comply with a Congressional subpoena for Mr. Trump’s financial records. This is not surprising. The law and decades of court decisions are all stacked against the President.
The Mueller Report Dispute
Shortly after Attorney General William Barr made the final report of Special Counsel Robert S. Mueller III public, the House Judiciary Committee issued a subpoena for an unredacted version of the report. It also requested all the evidence Mr. Mueller used to conclude that the Trump campaign did not colluded with Russia during the 2016 campaign and to analyze whether the President obstructed, or attempted to obstruct justice.
The Attorney General first said that to produce the report and its evidence would violate Rule 6(e) which bars the release of materials presented to grand juries. That argument may not fly. The Oversight Manual – The Bible for congressional investigators produced by the Congressional Research Service – says that Congress has a right to obtain grand jury evidence. CRS notes that federal courts have “held that when Congress is acting within the ‘legitimate sphere of legislative activity’ it is legally entitled to Rule 6(e) information.”
What is Legislative Activity?
That raises the question of what exactly constitutes “legislative activity.” Essentially if a committee is acting within its mandate, it has broad authority to ask for any information it wants. The Supreme Court has held that “the scope of [Congress’] power of inquiry . . . is as penetrating and far-reaching as the potential power to enact and appropriate under the constitution.”
The Court also has said the power to investigate is at its height when Congress seeks to expose government corruption. In particular, the High Court pointed to the First Congress’ investigation of “suspected corruption or mismanagement of government officials,” and specifically recognized the power of Congress to “publicize corruption.”
Under Article I of the Constitution, Congress sets its own rules. The current House Rules say the judiciary committee has jurisdiction over the federal courts and judicial proceedings, civil and criminal. Special Counsel Mueller’s report is clearly a criminal matter.
The Judiciary Committee is one of a handful of committees that grant the Chairman, and the Chairman alone, the authority to issue subpoenas. Clearly the subpoena for the Mueller report is Constitutional and the Judiciary Committee chairman acted within his authority.
Limits of Executive Privilege
The Congressional Oversight Manual notes that executive privilege can only be asserted on documents and communications that are authored by or solicited and received by the President or presidential advisors. Courts have held that the word “advisers” only covers White House aides, not cabinet secretaries or their employees. It also does not include “documents that were created and distributed solely within an executive department.”
Mueller received his charter from the Deputy Attorney General after then-Attorney General Jeff Sessions recused himself. The Special Counsel was an employee of the Department of Justice, an executive branch agency. Mueller submitted his report to the AG, who is the cabinet secretary in charge of DOJ. Attorney General Barr decided to make the report public. All of which means executive privilege does not necessarily cover the report. However, some of the interviews with the President’s immediate staff may contain materials that are subject to it.
The Bank Subpoena Dispute
Reps. Maxine Waters and Adam Schiff, chairmen of the House Committee on Financial Services and the House Permanent Select Committee on Intelligence respectively, both issued subpoenas to Deutsche Bank and Capitol One compelling the production of President Trump’s financial records.
Trump sued to block the banks from turning over the records on the grounds that the demands serve no legitimate legislative purpose. This author need not reiterate what is a legislative purpose. Suffice it to say the Financial Services Committee has broad jurisdiction over the banking industry, including illicit use of banks, and the Intelligence Committee has an ongoing investigation into allegations of Russian interference in the 2016 elections, including whether the GUR used banks in furtherance of those efforts. The subpoenas thus have a legitimate legislative purpose.
The Financial Privacy Act forbids banks from producing documents pursuant to an administrative subpoena without first notifying the account holder and allowing them to challenge the demand. Federal courts have ruled that provision does not apply to congressional subpoenas, and the House Counsel agrees.
Tax Returns? You Can’t See My Tax Returns
Congress clearly can obtain the full Mueller report and Trump’s financial information. But the issue of his tax returns is more nuanced.
There are two applicable laws. One specifically grants the Ways & Means Committee the authority to obtain copies of any person’s tax returns. That statute, Section 6103 of the IRS Code, also covers the tax returns of corporations, non-profits and other entities. The other law mandates the IRS annually audit a President’s tax returns.
If the Ways & Means Committee wants to obtain Mr. Trump’s tax returns in order to make them public ˗ as some Members implicitly said they would ˗ the President may be on solid legal ground. Section 6103 allows Congress to obtain tax returns, not make them public. The issue of whether Congress can unilaterally release someone’s tax returns without their permission has never been litigated.
Ways & Means also is using the presidential audit provision as a means of justifying its subpoena of Trump’s tax returns. There is one potential problem with that rationale: the law covers a President. Donald Trump did not become president until shortly after noon on January 20, 2017. The committee can see if the IRS fulfilled its mandate to audit Trump’s returns from that date forward, but not before.
Contempt
Congress can only enforce its subpoenas through a contempt proceeding. A committee must vote out a contempt report and resolution, and then the full House must adopt it. If that happens, the House can use one of its two powers: inherent contempt or civil contempt.
Under inherent contempt, the House orders the Sergeant-at-Arms to arrest the person held in contempt, bring them before the body for what amounts to a trial and, if the person still refuses to cooperate, they can be imprisoned in the Capitol Jail. Congress hasn’t exercised its inherent contempt powers in nearly a century, and no one knows whether the Capitol Jail actually exists.
Civil Enforcement
The only other enforcement avenue is civil enforcement, where Congress goes before the district court and obtains a compliance order. The most recent contempt court fight was between the House Oversight and Government Reform Committee and then-Attorney General Eric Holder. Back in 2012 the committee subpoenaed Holder to compel production of documents related to Operation Fast and Furious run by the Bureau of Alcohol, Tobacco, Firearms and Explosives. DOJ handed over the subpoenaed records. On May 9, 2019.
Congressional subpoenas expire the same date as the Congress that issued them. The subpoenas issued by the Judiciary, Financial Services, and Intelligence Committee thus expire on January 2, 2021. If the Holder case is any guide, Congress may win the court battle over its current subpoenas, but Trump may win the war.
In late March, Special Counsel Robert Mueller sent a letter to Attorney General William Barr expressing concern about Mr. Barr’s letter to Congress, which outlined the main conclusions of Mr. Mueller’s Russia probe. In his letter, Mr. Mueller said that Mr. Barr’s overview “did not fully capture the context, nature, and substance” of his investigative findings. Further, Mr. Mueller requested that Mr. Barr immediately release the full introductions and executive summaries of his report in order to rectify “public confusion” about his findings.
Mr. Mueller wrote:
As we stated in our meeting of March 5 and reiterated to the Department early in the afternoon of March 24, the introductions and executive summaries of our two-volume report accurately summarize this Office‘s work and conclusions. The summary letter the Department sent to Congress and released to the public late in the afternoon of March 24 did not fully capture the context, nature, and substance of this Office‘s work and conclusions… There is now public confusion about critical aspects of the results of our investigation. This threatens to undermine a central purpose for which the Department appointed the Special Counsel: to assure full public confidence in the outcome of the investigations. (Mueller letter 3-27-19)
However, Mr. Barr declined Mr. Mueller’s request. According to a Department of Justice spokeswomen, this was because Mr. Barr did not want to release the report in fragments. Rather, Mr. Barr thought it better to release the entire report all at once.
“The attorney general ultimately determined that it would not be productive to release the report in piecemeal fashion,” Justice Department spokeswoman, Kerri Kupec toldThe New York Times. Instead, she said, “the attorney general and the special counsel agreed to get the full report out with necessary redactions as expeditiously as possible.”
Barr Under Fire
In recent weeks, Mr. Barr has faced criticism that his initial characterization underplayed the gravity of Mr. Mueller’s findings, especially those related to obstruction of justice. The letter provided evidence that Mr. Mueller and his team agreed. As we post this on Wednesday morning, Mr. Barr was facing questioning about the letter and his handling of the Mueller report from lawmakers at a hearing on Capitol Hill.
You can read Mr. Mueller’s full letter here:
“In his most prescriptive book to date, financial expert and investment advisor James Rickards shows how and why our financial markets are being artificially inflated–and what smart investors can do to protect their assets…James Rickards, the author of the prescient books Currency Wars, The Death of Money, and The Road to Ruin, lays out the true risks to our financial system, and offers invaluable advice on how best to weather the storm.” – Penguin/Portfolio
