Friday, September 2, 2016

The Idle Army: America’s Unworking Men

Millions of young males have left the workforce and civic life. Full employment? The U.S. isn’t even close.

By Nicholas Eberstadt
The Wall Street Journal
September 2, 2016

Labor Day is an appropriate moment to reflect on a quiet catastrophe: the collapse, over two generations, of work for American men. During the past half-century, work rates for U.S. males spiraled relentlessly downward. America is now home to a vast army of jobless men who are no longer even looking for work—roughly seven million of them age 25 to 54, the traditional prime of working life.

This is arguably a crisis, but it is hardly ever discussed in the public square. Received wisdom holds that the U.S. is at or near “full employment.” Most readers have probably heard this, perhaps from the vice chairman of the Federal Reserve, who said in a speech last week that “it is a remarkable, and perhaps underappreciated, achievement that the economy has returned to near-full employment in a relatively short time after the Great Recession.”

Near-full employment? In 2015 the work rate (the ratio of employment to population) for American males age 25 to 54 was 84.4%. That’s slightly lower than it had been in 1940, 86.4%, at the tail end of the Great Depression. Benchmarked against 1965, when American men were at genuine full employment, the “male jobs deficit” in 2015 would be nearly 10 million, even after taking into account an older population and more adults in college.

Or look at the fraction of American men age 20 and older without paid work. In the past 50 years it rose to 32% from 19%, and not mainly because of population aging. For prime working-age men, the jobless rate jumped to 15% from 6%. Most of the postwar surge involved voluntary departure from the labor force.

Until roughly the outbreak of World War II, working-age American men fell into basically two categories: either holding a paid job or unemployed. There was no “third way” for able-bodied males. Today there is one: neither working nor seeking work—that is, men who are outside the labor force altogether. Unlike in the past, the U.S. is now evidently rich enough to carry them, after a fashion. The no-work life hardly consigns these men to destitution.

This is at least somewhat true throughout the affluent West, but the U.S. has led the pack. Not even in dysfunctional Greece or “lost generation” Japan has the male flight from work proceeded with such alacrity. The paradox is that Americans—those who do have jobs—are still among the rich world’s hardest-working people. No other developed society puts in such long hours, and at the same time supports such a large share of younger men neither holding jobs nor seeking them.

Who are America’s new cadre of prime-age male unworkers? They tend to be: 1) less educated; 2) never married; 3) native born; and 4) African-American. But those categories intersect in interesting ways. Black married men are more likely to be in the workforce than unmarried whites. Immigrants are more likely to be working or job-hunting than native-born Americans, regardless of ethnicity. High-school dropouts from abroad are as likely to be working or looking for work as native-born college grads.

What do unworking men do with their free time? Sadly, not much that’s constructive. About a tenth are students trying to improve their circumstances. But the overwhelming majority are what the British call NEET: “neither employed nor in education or training.” Time-use surveys suggest they are almost entirely idle—helping out around the house less than unemployed men; caring for others less than employed women; volunteering and engaging in religious activities less than working men and women or unemployed men. For the NEETs, “socializing, relaxing and leisure” is a full-time occupation, accounting for 3,000 hours a year, much of this time in front of television or computer screens.

Clearly big changes in the U.S. economy, including the decline of manufacturing and the Big Slowdown since the start of the century, have played a role. But something else is at work, too: the male flight from work has been practically linear over the past two generations, irrespective of economic conditions or recessions.

What we might call “sociological” factors are evident, not least the tremendous rise in unworking men who draw from government disability and means-tested benefit programs. There are also the barriers to work for America’s huge pool of male ex-prisoners and felons not behind bars—a poorly tracked cohort that accounts for one adult male in eight in the civilian population, excluding those in jail now.

Regardless of its cause, this new normal is inimical to America’s national interests. Declining labor-force participation and falling work rates have contributed to slower economic growth and widening gaps in income and wealth. Slower growth in turn reduces tax revenue and increases budgetary pressures, producing higher deficits and national debt. Unworking men have increased poverty in the U.S., not least among the great many children whose fathers are without jobs.

There are the social effects, too. The male retreat from the labor force has exacerbated family breakdown, promoted welfare dependence and recast “disability” into a viable alternative lifestyle. Among these men the death of work seems to mean also the death of civic engagement, community participation and voluntary association.

In short, the American male’s postwar flight from work is a grave social ill. Strangely, nearly everyone—the news media, major political parties, intellectuals, business leaders, policy makers—has managed to overlook it. The urgency of the moment is to bring this invisible crisis out of the shadows.

Imagine how different America would be today if another roughly 10 million men held paying jobs. It is imperative for the future health of the country to make a determined and sustained effort to bring these detached men back—into the workplace, into their families, into civil society.

Article Link To The Wall Street Journal:

Letting Terrorists Off The Hook For Killing Americans

By Seth Lipsky
The New York Post
September 2, 2016

It looks like there’s a new red line in the Middle East. It has been laid down by the Second US Circuit Court of Appeals, which just let the Palestinian Authority off the hook for killing Americans.

It’s a stunning decision that may be the beginning of the end of a decades-long effort to use civil law to hold accountable those responsible for the murder of Americans abroad. What a bitter pill for surviving families who turned to the courts when our presidents refused to act.

What fodder, too, for our presidential campaign, in which the kind of federal judges we want is one of the issues. The three judges who just ruled for the Palestinians were appointed by Bill Clinton and Barack Obama.

The case involves an effort by 11 American families who, after losing loved ones in terror attacks in Israel, sued the Palestine Liberation Organization and the Palestinian Authority. They won big last year in federal district court in Brooklyn.

This particular case involved several different attacks. The most famous of the group was the 2002 bombing of a cafeteria at the Hebrew University in Jerusalem. That attack killed nine and wounded around 100 others. Five American students were among the dead.

Not only did a jury find that the Palestinians had done the deeds but they awarded $218.5 million in damages. Under the law, known as the Anti-Terrorism Act, the damages were automatically tripled, to $655.5 million.

The appeals judges threw all that out on the grounds that the district court never should have asserted its jurisdiction over the case in the first place. It instructed the lower court to dismiss the claims.

It’s not my purpose here to get into the fine points of federal law on which the judges ruled in this case.

I’ve been warning for years of the disappointments that are going to accrue if we leave the war to civil court.

That began in the 1990s, when a Brandeis coed from New Jersey, Alisa Flatow, was slain in Israel in a bus bombing backed by Iran. Her heroic father, Stephen Flatow, eventually won a legal judgment of $247 million.

The Clinton administration actually fetched up in court to oppose Flatow’s efforts to collect on the judgment. It feared that the court would upset diplomatic immunity. It bought out the Flatow claim for six cents on the dollar yet now we’re shipping billions to Iran.

This latest case involves attacks by Palestinians against Americans and which the Palestinian Authority praised and rewarded perpetrators financially.

Yet America has launched no military strikes against the Palestinian regime, nor even against Hamas, which claimed credit for murdering the Americans. Instead, it hectors Israel against “disproportionate” responses to terror and tries to get it to be more forthcoming in negotiations.

No wonder the families tried civil law. The Anti-Terrorism Act, under which they sought justice, provides that any American national injured by international terrorism — or his estate or heirs — can sue.

When they won in lower court, though, Obama had his deputy secretary of state file a declaration in court warning against getting too tough. It’s a classic of the administration’s thinking.

Team Obama insisted that it supports “just compensation” for families of those the Palestinian terrorists killed or injured. It’s just that the administration has “significant concerns” about the “harms that could arise.”

It was worried that the Palestinian Authority’s ability to operate as a government might become “severely compromised.” Even, it seems, if Congress didn’t share that worry when it passed the Anti-Terrorism Act.

How much, if at all, the administration’s declaration swayed the appeals court is hard to gauge. In the end, the judges said that “no matter how horrendous” the attacks on the Americans, the lower court had gone beyond the limits allowed by the Constitution.

So 14 years after the Americans were killed or injured, the survivors and their loved ones are out of luck. One of their lawyers, Kent Yalowitz, called it a “cruel decision,” noting that the very terrorists who prompted the anti-terrorism law have now avoided responsibility.

The Palestinian Arabs are gloating. Reuters is quoting their regime’s finance minister, Shukri Bishara, as calling the Second Circuit’s decision “a big blow to anyone who attempts to blackmail us.”

“We have drawn a red line under it,” Bishara added, just to bring the matter full circle. It’s an ironical turn of phrase, given how Obama and Hillary Clinton seem to feel about red lines.

Article Link To The New York Post:

Make Democrats Own ObamaCare

In the states that will determine control of the Senate, the health law is falling apart.

By Kimberley A. Strassel 
The Wall Street Journal
September 2, 2016

“You bet I voted for that bill. I’m proud I did it!” yelled Russ Feingold at a Wisconsin campaign stop in 2010. That pride—in ObamaCare—lost the three-term Democratic senator his job. Now his party’s ownership of the health-care law may once again decide the Senate.

ObamaCare is roaring back as a political liability to Democrats in a way not seen since that 2010 wave election. Right in time for this fall’s presidential contest, insurers are bailing out of the government system, leaving millions of voters with dwindling options and skyrocketing premiums. ObamaCare was always destined to crack up, but there is something notable that it comes precisely as so much control of Washington is up for grabs.

Especially since the health law is playing an outsize role in the states that will matter most for which party controls the Senate. At least three crucial elections feature Democrats who provided the final Senate votes to make ObamaCare the law of the land. Several other high-profile races are playing out in states where the health law has wreaked particular damage.

Start with Wisconsin, where Mr. Feingold is running to regain his old seat. Once again he is lugging along his 2010 vote for the law, which is expected to impose rate increases of as much as 31% on Wisconsinites in 2017. Republican Sen. Ron Johnson, the businessman who defeated Mr. Feingold six years ago, is already reprising his 2010 hammering of ObamaCare. He has accused his opponent of having a “blasé attitude” about the law’s crushing effects, perhaps referring to a Politico interview last year in which Mr. Feingold said he thought ObamaCare, over time, would work out, and “that’s exactly what’s happened.”

In Indiana, Republican Rep. Todd Young is running for the Senate against another Democrat hoping for a comeback. Former Sen. Evan Bayh voted for ObamaCare in 2010, though when it proved unpopular he chose to retire rather than face voters. Now that his replacement, Republican Sen. Dan Coats, is stepping down, Mr. Bayh wants his seat back.

GOP groups are already up with ads reminding voters of his role in passing ObamaCare. Mr. Young, meanwhile, touts a bill he wrote to delay the individual mandate, as well as his support for ObamaCare alternatives, some of which reflect proposals in Speaker Paul Ryan’s “Better Way” agenda. Coming rate increases in Indiana? Up to 29%.

Then there’s Colorado’s Democratic Sen. Michael Bennet, also a deciding vote for ObamaCare. Republican challenger Darryl Glenn is making an issue out of last year’s collapse of Colorado HealthOP, the state-run ObamaCare co-op. Its failure left 80,000 Coloradans without coverage and state taxpayers with a potential bill of $40 million. Mr. Bennet is in a particularly tough spot, trying to navigate between voters’ generalized outrage over ObamaCare and the pressure from his left to get behind a universal health-care measure that’s on the Colorado ballot this fall. (He hasn’t, so far.)

The Democrats in these races appear to be comfortably ahead. Then again, no real polling has been done on them since the ObamaCare meltdown in August. And the fall ad blitz is only about to commence. Those TV spots could make the difference in tight races, where competitors are scrambling within the margin of error.

ObamaCare will play in other states, too. Arizona is experiencing one of the biggest exchange upheavals; Pinal County doesn’t have a single ObamaCare insurer. Sen. John McCain is using this to beat on Rep. Ann Kirkpatrick, who has only doubled down on her support for the law. North Carolina is near to having only one ObamaCare insurer. Sen. Richard Burr is touting a bill he introduced with a handful of GOP senators to provide consumers some financial relief. Similar dynamics are playing out in New Hampshire, Missouri and Ohio.

The tricky part for many of these Republicans is tailoring their ObamaCare message. In any other election, with a more widely loved GOP presidential nominee, they would be openly tying themselves to the top of the ticket and promising ObamaCare repeal. But given the risks Donald Trump holds for Republicans in more moderate states, many candidates are instead having to adopt a check-and-balance argument, calling for Republican control of the Senate to stop Hillary Clinton from further harming the health-care system.

This argument is easier now that Mrs. Clinton and other Democrats are claiming that the fix to ObamaCare is a new, costly “public option” (government-run care). Florida’s Democratic Senate candidate, Rep. Patrick Murphy, embraced that position on the eve of this week’s primary (which he won), inspiring a pile-on from Sen. Marco Rubio and conservative grass-roots groups like Americans for Prosperity. Only Mr. Murphy “could read the latest devastating headlines about the failure of ObamaCare and declare it a success that should be expanded,” railed a Rubio spokesman.

In what is otherwise a confused election, the failure of ObamaCare is a clear story line for the GOP. The Russ Feingold's of the world own this mess. Republicans have a chance to remind the nation of the perils of putting them back in charge.

Article Link To The Wall Street Journal:

Trump’s Immigration Speech Was Spot-On — But...

By Rich Lowry
The New York Post
September 2, 2016

Donald Trump’s speech in Arizona has occasioned wailing and rending of garments among the commentariat and “respectable” people everywhere.

At bottom, the cause of the freak-out is simple: Trump believes in immigration laws and the country’s elite really doesn’t.

That the opinion elite recoiled in horror shows how out of sympathy it is with borders and what it takes to enforce them.

It was understandable that everyone felt whiplash. Trump had primed people to expect something different, both with his public wobbliness over the last week and his quick-strike into Mexico, where he lucked out in a successful meeting with that country’s hapless president, Enrique Peña Nieto, and sounded newly statesmanlike notes about pursuing the good of the “hemisphere.”

And Trump didn’t do himself any favors by giving the Arizona speech in a rally setting. He can no more resist playing to a crowd than a stand-up comedian or a rock star. When he’s in his shouty mode, Trump could read the phone book and make it sound like an outlandish screed.

All that said, the policy portion of the speech was detailed and substantive, and took a sand-blaster to the clichés and lazy thinking encrusting the immigration debate. Trump nailed a few theses to the door of his promised great, impenetrable border wall that are important and too often neglected:

--  Immigration policy should serve the interests of the United States and its workers. This should be axiomatic. Yet it has taken Trump to make the proposition central to the immigration debate. There’s no doubt illegal immigration is good for illegal immigrants, who earn more than in their native countries and take up quasi-permanent residence here without navigating the nation’s legal immigration system.

-- Illegal immigrants compete against low-skilled workers and are a net drain on the government. The conventional rhetoric around immigration makes it sound as though we’re overwhelmingly welcoming engineers and the like, when about half of illegal immigrants are high-school dropouts. Even if they work hard (and most do), they’re unlikely to earn enough to pay much in taxes, and their families access welfare benefits through their children.

--  “Anyone who has entered the United States illegally,” Trump said, “is subject to deportation.” This only sounds radical because of the progress the left has made in delegitimizing deportation. If we aren’t going to have a sweeping amnesty or tolerate the status quo, illegal immigrants must be subject to deportation. They don’t have to all be rounded up, as Trump ridiculously advocated in the primaries. But if we begin to have enforcement in the interior of the country again — Obama has gutted it — and make it harder to work here through an e-Verify system, illegal immigrants most tenuously attached to the country will leave and fewer will come in the first place.

--  Legal immigration, too, should serve the interests of the nation. In fact, it’s a decades-long surge in legal immigration that has us on pace to hit a historic high in the foreign-born population. It shouldn’t be out of bounds, as Trump suggested, to want to tap the brakes and to adjust who we are accepting to emphasize “merit, skill, and proficiency” (like countries such as Canada and Australia do).

The opinion elite was never going to accept a Trump speech that didn’t have the “right answer” on the 11 million illegals already here. By ruling out amnesty for now, Trump emphatically gave the wrong answer — although one that makes sense if we take our immigration laws seriously. An amnesty will act as a magnet for future illegal immigrants unless we have a comprehensive, functioning system of enforcement in place to dissuade them from coming. That’s why enforcement has to come first.

This was the soundest immigration speech ever delivered by a presidential nominee, and a total policy victory for restrictionists. There are two problems, though.

One is that it’s such a tough-minded agenda it needs to be presented with a deft touch or it’s going to repel not just Hispanics, but other swing voters. Instead of opting for the soft sell, Trump seemingly went out of his way to make his policy sound as audacious and threatening as possible.

Two, if Trump loses, this agenda will be discredited and restrictionists will instantly be as embattled as ever, once again fighting a desperate rear-guard action against a political establishment and opinion elite that considers its priorities bizarre and hateful.

Article Link To The New York Post:

Donald Trump And The Mob

His real-estate developments in Atlantic City and New York brought the GOP nominee into regular contact with people who had ties to organized crime; he says he’s ‘the cleanest guy there is.’

By Michael Rothfeld and Alexander Berzon
The Wall Street Journal
September 2, 2016

In 1981, a young and ambitious Donald Trump sat down with federal agents and discussed his calculation in entering the mob-infested world of Atlantic City casinos.

He acknowledged it might tarnish the reputation his family built through traditional real-estate development in New York. He was aware a business partner in the New Jersey beach town knew people who might be unsavory. A Federal Bureau of Investigation agent advised Mr. Trump there were easier ways he could invest, said an FBI memo recounting the discussion.

Mr. Trump went ahead and built an Atlantic City casino, ultimately owning four.

There, as well as in his New York real-estate work, Mr. Trump, now the Republican nominee for president, sometimes dealt with people who had ties to organized crime, a Wall Street Journal examination of his career shows.

They included a man described by law enforcement as an agent of the Philadelphia mob; a gambler convicted of tax fraud and barred from New York racetracks; a union leader found guilty of racketeering; and a real-estate developer convicted in a stock scheme that involved several Mafiosi.

With one exception, these associations were long ago. Still, in the home stretch of Mr. Trump’s run for the presidency, he frequently cites his lucrative business career as a qualification for the nation’s highest office, and his past associations color that record.

Mr. Trump acknowledged in an interview he worked at times with people who might have had such ties, but said he either had only cursory relationships with them or wasn’t aware of the ties at the time.

“If people were like me, there would be no mob, because I don’t play that game,” Mr. Trump said. He called himself “the cleanest guy there is.”

Like many in the construction, real estate and gambling worlds three or four decades ago, especially those who built in Atlantic City and New York, Mr. Trump sometimes had to choose whether or not to deal with figures who had sketchy backgrounds.

People in the industry say those moments were unavoidable in the days when unions representing construction workers and supply deliverers were controlled by organized crime, which also had a presence in the casino world. That didn’t mean the developers sought out those relationships—much less that they themselves were gangsters.

Mr. Trump “wasn’t going to build Trump Tower without having those connections. Every builder in New York had to do that at that time,” said Michael Cody, the son of a mob-linked union leader Mr. Trump and other builders dealt with.

Some developers avoided working directly with unsavory figures by operating through a general contractor. Mr. Trump said he preferred to negotiate business matters personally, because he made more money that way.

Referring to a concrete contracting firm that law enforcement said was affiliated with one of New York’s Mafia families, Mr. Trump said: “That was a major contractor. You hear stories that they may have been [mob-controlled].

“In the meantime, I was a builder. I was never going to run for office.… I’d go by the lowest bid and I’d go by their track record, but I didn’t do a personal history of who they are.”

Many of the associations the Journal explored have been previously reported piecemeal. In the early 1990s, Mr. Trump’s license to operate casinos in Atlantic City was re-examined after a book by reporter Wayne Barrett alleged a number of organized-crime connections. New Jersey officials determined Mr. Trump remained eligible.

In its own examination, the Journal reviewed thousands of pages of legal and corporate documents and interviewed dozens of Mr. Trump’s business associates.

The gambling business now is largely corporate, but at the time when Atlantic City was newly opened to casinos and a family friend suggested Mr. Trump build there, many banks shunned the industry.

“Any project in the gaming arena in general is a difficult project to finance, because of the natural prohibition that a lot of institutions have,” Mr. Trump told New Jersey casino regulators in 1982.

Some of the people he dealt with in Atlantic City illustrate why the FBI agent counseled caution.

Kenneth Shapiro owned part of a site where Mr. Trump wanted to build his first casino. Mr. Shapiro was a Philadelphia scrap-metal dealer and property investor, described by law enforcement as an “agent” of Philadelphia mob boss Nicodemo “Little Nicky” Scarfo.

A co-owner of the site was Daniel Sullivan, a gregarious six-foot-five Teamster and labor consultant with a criminal record that included a weapons violation. “He knew a lot of organized-crime figures and they knew him,” said Walter Stowe, a former FBI agent.

Mr. Sullivan also was a tipster to the FBI. Gangsters “knew he was an informant. I don’t know why nobody ever tried to kill him,” Mr. Stowe said.

Mr. Trump negotiated with Messrs. Shapiro and Sullivan, now both dead, to lease their property. “They are not bad people from what I see,” Mr. Trump said at a regulatory hearing in 1982. His project nonetheless faced obstacles because of their involvement.

Mr. Sullivan, Mr. Trump and another partner had a deal to acquire an interest in a drywall company. New Jersey casino regulators told Mr. Trump any dealings with Mr. Sullivan beyond the property lease could delay casino licensing. He backed out of the drywall deal.

When the hotel-casino was near completion, the regulators said Messrs. Shapiro and Sullivan might need casino licenses too, as site owners, but could have trouble getting them. Eventually, Mr. Trump bought the two out.

Mr. Trump also used Mr. Sullivan as an adviser on New York labor issues. These included a 1980 dispute over the use of undocumented Polish workers to demolish the Bonwit Teller store on Fifth Avenue to make way for Trump Tower, Mr. Sullivan said in lawsuit testimony. Mr. Trump, in testimony of his own, said he didn’t know there were undocumented workers at the site.

Mr. Trump told the Journal he knew Mr. Sullivan and considered him “OK” because he traveled with FBI agents. He said he didn’t know of any underworld connection Mr. Shapiro might have had.

Mr. Shapiro was a conduit the Scarfo crime family used to buy influence with Atlantic City’s then-mayor, Michael J. Matthews,according to a 1984 indictment of the mayor. The late Mr. Matthews pleaded guilty to extortion. Mr. Scarfo, now in prison, didn’t agree to an interview.

Mr. Trump, as a casino owner, couldn’t legally contribute to the local politicians who controlled such matters as zoning and signs. Mr. Shapiro told a federal grand jury he secretly gave thousands of dollars to the mayor on Mr. Trump’s behalf, said people familiar with his account.

“Donald was always trying to maneuver politically to get things done,” said Mr. Shapiro’s brother Barry Shapiro.

Kenneth Shapiro said he never was reimbursed for the money given to the mayor, according to his brother and two other people. “Donald just reneged; that’s his automatic thing,” Barry Shapiro said.

Asked about this, Mr. Trump said he didn’t make contributions to the Atlantic City mayor. “I’m not interested in giving cash, OK?...The last thing I’m doing is now handing cash.”

As for Mr. Shapiro, “I never remember him asking me for money. He was always straight with me...I didn’t know Shapiro well other than to know that we did a pretty small little land transaction down in Atlantic City, which was fine.”

A major profit source at one Trump casino was a racehorse trader named Robert LiButti. His gambling losses earned Trump Plaza $11 million between 1986 and 1989, state documents show.

Mr. LiButti had been convicted of tax fraud related to horse sales in 1977 and was barred from attending races in New York for trying to conceal his horse ownership. A Trump employee told New Jersey regulators that Mr. LiButti repeatedly invoked the name of gangsterJohn Gotti and called him “my boss,” according to a 1991 state investigative report.

“LiButti was a high-roller in Atlantic City,” Mr. Trump said in an interview. “I found him to be a nice guy. But I had nothing to do with him.”

Jack O’Donnell, who ran Trump Plaza in the late 1980s, said, “It isn’t like [Mr. Trump] saw LiButti once or twice—he spent time with him, saw him multiple times,” and even attended a birthday party for Mr. LiButti’s daughter.

The daughter declined to be interviewed but confirmed to Yahoo News that Mr. Trump attended a birthday party for her.

It was illegal in New Jersey for casinos to keep high-rollers happy by giving them cash gifts. Regulators, in a ruling that didn’t cite Mr. Trump personally, fined Trump Plaza for funneling Mr. LiButti $1.65 million via gifts of expensive cars quickly converted into cash.

Mr. Trump agreed in 1988 to buy a horse from Mr. LiButti for $250,000, Mr. O’Donnell said in a book he wrote after quitting Trump Plaza. The horse, named D.J. Trump, had cost the LiButti family just $90,000 a year earlier, according to Blood Horse magazine. Mr. O’Donnell said Mr. Trump aborted the deal after the horse had a health problem.

Mr. Trump didn’t respond to questions about the horse and the birthday party.

Mr. LiButti, who died in 2014, denied to casino regulators that he had links to organized crime.

A lawyer Mr. Trump relied on and socialized with in his early years was the hard-driving attorney Roy Cohn. Among Mr. Cohn’s clients were several gangsters, including Anthony “Fat Tony” Salerno, co-owner of a concrete company important to New York builders. Former Trump Organization executive Barbara Res said that during heated negotiations with contractors, Mr. Trump would pull out a photo of Mr. Cohn and say, “I’m not afraid to sue you and this is who my lawyer is.”

Mr. Trump called that “totally false.” He said people in the construction industry “don’t get scared by holding up a picture.”

Mr. Trump was a character witness for Mr. Cohn in proceedings that led to the lawyer’s disbarment shortly before his death in 1986.

Mr. Cohn had many clients who, like Mr. Trump, weren’t mob-affiliated, such as the late Yankees owner George Steinbrenner. “Roy was a great lawyer if he wanted to be,” Mr. Trump said in an interview.

Messrs. Cohn and Trump had a common associate in Teamsters official John A. Cody. Mr. Cody had a lengthy arrest record and was close to mob bosses Carlo Gambino and Paul Castellano, according to a Justice Department memo from 1982, when Mr. Cody was convicted of racketeering.

Mr. Cody led a powerful union local that represented drivers who delivered cement to New York construction sites.

When he called a strike, Mr. Trump still received cement for Trump Tower, said Mr. Cody’s son, Michael.

“My father wasn’t that generous, unless there was a reason,” Michael Cody said.

Referring to John Cody, Mr. Trump said, “Part of the reason I got my concrete was I didn’t put up with his bull—.”

Mr. Trump said he would bring in private cement deliverers, or threaten to. The Teamsters people “knew I didn’t play games. When I said, ‘OK, I’m going private.’... ten minutes later I’d get a phone call [saying] ‘Well, all right, we’re going to approve you. It’s settled.”

Mr. Cody was “truly a bad dude,” Mr. Trump said. “I employed a lot Teamsters, and this guy would absolutely make life miserable and…I would fight through it.” Many developers in New York had to deal with Mr. Cody to get cement, and Mr. Trump said they all hated him.

John Cody is dead, as are Messrs. Gambino and Castellano.

In the 2000s, Mr. Trump dealt with another figure who had gangland ties. It happened when a small real-estate firm called Bayrock Group rented space in Trump Tower, two floors below Mr. Trump’s offices, and negotiated deals with Mr. Trump to put his name on buildings and give him equity in them. One person Mr. Trump worked with at Bayrock was Felix Sater.

In the early 1990s, well before Mr. Trump knew him, the Russian-born Mr. Sater was a stockbroker but lost his license and went to prison after he jabbed a margarita glass into a man’s face in a bar fight.

Later in the 1990s, Mr. Sater was involved in a Mafia-linked scheme to pump up marginal stocks, dump them on unsuspecting investors and stash the profits abroad. The scheme relied on gangsters from three mob families for protection, said a Justice Department news release. It quoted the New York police commissioner at the time as saying the operation could have been called “Goodfellas Meet the Boiler Room.”

Mr. Sater pleaded guilty to racketeering, cooperated with prosecutors and had his conviction sealed. It was then, around 2000, that he joined Bayrock and sometimes dealt with Mr. Trump on real estate.

Bayrock’s projects included the Trump SoHo condos in New York and Trump International Hotel & Tower in Fort Lauderdale, Fla. Its marketing in Fort Lauderdale included a letter in which Mr. Trump said, “This magnificent oceanfront resort offers the finest and most luxurious experience I have ever created.”

The New York Times described Mr. Sater’s criminal history in an article in 2007. Mr. Trump, giving a court deposition days later, said he was unaware of it until then.

Two federal press releases in 2000 had referred to Mr. Sater’s past, one from the National Association of Securities Dealers and one from the Justice Department. The Justice Department one announced the indictment of 19 people in the pump-and-dump stock scheme Mr. Sater was part of, including several it identified as members of La Cosa Nostra.

The Justice Department release said a Genovese crime-family soldier, Ernest “Butch” Montevecchi, had protected Mr. Sater from an extortion effort.

Mr. Montevecchi declined to comment.

In a 2009 court proceeding, Mr. Sater described the Bayrock real-estate business, which is no longer active, as one he “built with my own two hands” and where he was probably the No. 2 person. In an interview, Mr. Sater said he had atoned for his crimes by cooperating with the government in the pump-and-dump case and on national-security matters. He declined to answer questions about Mr. Trump.

Alan Garten, general counsel of the Trump Organization, said that in business deals the organization vets a partner company and its ownership, but not the company’s employees, which Mr. Sater was. He added that since Mr. Sater’s racketeering conviction was sealed, it would be unfair to “go back and say, ‘Well, you should have known.’ ”

In 2010, well after Mr. Trump had learned of Mr. Sater’s criminal background, the Trump Organization allowed Mr. Sater to be an unpaid consultant, with space in Trump Organization offices and business cards calling him a “Senior Advisor to Donald Trump.”

In an interview, Mr. Trump said, “I just said, ‘Hey, if you have a good deal bring it up.’ He actually brought me two deals and I didn’t like them.”

Mr. Trump said Mr. Sater appeared meek and mild, and Mr. Trump didn’t see him as being connected to the mob. Dealing with gangsters is “not my thing,” he said.

“When you have those relationships, in the end, you lose,” Mr. Trump said. “You can solve some problems short term, but long term, you’ve got a disaster.”

Article Link To The Wall Street Journal:

Asia Is One More Mess That Obama Will Leave The Next Prez

By Benny Avni
The New York Post
September 2, 2016

This weekend, President Obama will try, for the last time, to revive his “pivot to Asia” while in China for the G-20 meeting of top world leaders. It’s a reminder of another mess for the next president to clean up.

Obama will have a tete-a-tete with President Xi Jinping Saturday. He’ll give some speeches. But mostly, his Asian grand finale will highlight the heap of regional crises he’s leaving unsolved.

Start with the good: Obama negotiated the Trans-Pacific Partnership trade agreement with America’s allies. The agreement has the potential to counterbalance China’s growing economic dominance of the region. It’ll be “seen as a demonstration of America’s commitment to be a Pacific power,” Obama’s foreign-policy guru Ben Rhodes told reporters this week.

True enough. Indeed, Obama conducted tough negotiations with Japan and other TPP partners, and managed to overcome their (and some of our) worst protectionist tendencies. He may now whisper in Xi’s ear that the pact won’t harm China, which isn’t a party to the deal.

All to the good. But Obama failed to sell this deal where it counts most: in America.

Union types and environmentalists in his own party joined hands with Republican America-Firsters, and the resistance soon spread to party centrists and leaders. Senate Majority Leader Mitch McConnell now swears he won’t bring the TPP to a vote this year. And both major presidential candidates say they oppose it.

And so TPP, the economic jewel of Obama’s “pivot,” looks like it’ll be buried at least until a future president revives or renegotiates it.

Meanwhile, what about “freedom of navigation,” which aides say Obama will raise with Xi?

China has seized tiny islands in vast ocean area claimed by Vietnam, the Philippines, Taiwan and others in the South China Sea. It habitually challenges Japan on the Senkaku Islands, which are under Japanese stewardship in the East China Sea. As Eli Lake reported in these pages Thursday, China has sent unmarked armed military boats to the water around the Senkakus.

Chinese aggression is on the rise for several reasons: our failure to act elsewhere (see: Syria red line); major cuts in US Navy budgets; and Xi’s imperialism and ultra-nationalism.

Moreover, expansionist China aims to replace America as the dominant naval force in some of the world’s most sensitive commercial passages. And no, Beijing won’t defend open navigation on the high seas, as America has done since the late 19th century. Instead, Xi just throws his weight around.

So unless we seriously confront aggression — and do so pretty soon — expect increased volatility in the world’s most economically vital sea lanes. Allies will suffer and our commercial interests will depend on Beijing’s whims.

Oh, and lest we forget the apple of Obama’s eye: In the lead-up to the trip, Chinese officials announced that in the margin of the G-20 meeting, Obama and Xi will “ratify” the Paris Agreement, a universal anti-climate change pact signed by 195 countries last December.

Beijing’s Foreign Ministry says Xi is ready to ratify it, adding, “We have also learned that the US is pushing the agreement through [Congress].”

Huh? Obama well knows there’s no way in ever-warming hell Congress will ratify the global pact. Too many Americans suspect it goes easy on major polluters like India and China while seriously hampering the US economy.

Note: To formally join the Paris Agreement, countries must sign up with a UN treaty oversight body known as the “treaty section.” Yet Obama says it isn’t a treaty at all. Why? The US Constitution says the president can sign international treaties only once “two-thirds of the Senators present concur.”

No Senate approval? No problem. Obama will sign an “executive agreement” instead — even though it’s clearly a treaty. (A trick he pulled with his Iran deal.) His aides hint he may use his famous pen as soon as this weekend, while in China.

A future president can simply ignore this unilateral “ratification,” of course, and future legislators can decline to approve whatever purse-string requirements it entails. So yes, Obama and Xi are likely to bask in environmental pomp, but one of Obama’s top issues will remain in limbo, awaiting his successor’s action.

The “pivot to Asia” was a good idea in theory. Alas, it remained a theory — while a region in turmoil eagerly awaits a new president who might actually follow through.

But hey, next week, Obama will become the first American president to visit Laos, underlining his penchant for making “history” by being first to embrace reclusive dictatorial regimes. That, sadly, looks to be his only real global legacy.

Article Link To The New York Post:

North Korea's Weak Spot

By Editorial Board
The Bloomberg View
September 2, 2016

Barack Obama and Xi Jinping have obvious disagreements over how to handle North Korea’s illicit weapons program. China is angry about U.S. plans to deploy advanced missile defenses in South Korea to counter the threat, while Obama faces pressure to sanction Chinese banks and companies that help sustain Kim Jong Un’s nuclear ambitions. But the two presidents still have plenty of room to cooperate on this issue, if they can zero in on actions that are in both countries’ interests.

North Korea’s successful recent launch of a sea-based ballistic missile is depressing proof that the country continues to improve its weapons systems, despite the punishing additional sanctions that the United Nations imposed in March. And it is indeed tempting to blame China.

Yet the evidence that China isn’t upholding the most recent sanctions is, at best, mixed; along the border, there are as many signs that China’s longstanding commercial ties with the North have frayed. While violations no doubt continue, at least some of them are probably due to local officials’ ignoring central government diktats -- an all-too-familiar problem.

In any case, it’s unrealistic to expect China to squeeze Kim hard enough to cause the North Korean regime to collapse. That’s simply not in China’s interests. Yet China does share the U.S. desire to prevent key nuclear and ballistic-missile technology from reaching the North.

The bad news, as new research points out, is that North Korea has recruited more sophisticated and capable Chinese middlemen to source and deliver such so-called dual-use technology. Rather than travel back and forth across the border, North Korean agents now live in China and work almost entirely through these intermediaries, using Chinese banks.

The good news is that this in theory makes it easier to disrupt the agents’ operations. Rather than demand that Chinese leaders abandon Kim’s regime, the U.S. should press them to rein in these middlemen as energetically as they would any other citizens who defy their authority. Xi’s busy anti-corruption investigators could expand their campaign to border areas to pursue bank officials, customs agents and others involved in the illicit weapons trade. Directing sting operations at counterfeiters and drug dealers could address a domestic law-and-order problem, as well as cut off some of the North’s sources of hard cash. Stronger signaling from Beijing could help discourage businessmen who might be tempted by North Korean money.

If the U.S. were to blacklist a Chinese bank or company, it would be better to first consult quietly with Chinese leaders, to prevent needless friction between the two countries. Other gestures might be more productive: The U.S. could offer to bolster China’s ability to inspect cargo at ports near the border and to track ship traffic to and from North Korea. American officials would want to simultaneously do more to help Southeast Asian governments monitor North Korean agents operating in their countries, so the weapons trade doesn’t just move south.

China may be in no mood to cooperate. But if its leaders really want to undermine the case for missile defense, they’d be wise to do all they can to make sure Kim’s missiles don’t work.

Article Link To The Bloomberg View:

Friday, September 2, Morning Global Market Roundup: Asia Drifts Lower Before US Jobs Report, Dollar Nurses Losses

By Shinichi Saoshiro 
September 2, 2016

The potential for strong U.S. job data later in the day - which would raise chances of a Federal Reserve rate hike soon - kept Asian financial markets nervously marking time on Friday.

The dollar, which was bullish much of the week, nursed losses after downbeat U.S. manufacturing data tempered the recent optimism on the U.S. economy that revived expectations for a near-term rate hike by the Fed.

A report from the Institute of Supply Management (ISM) on Thursday showed U.S. factory activity contracted for the first time in six months in August, as new orders and production tumbled. The ISM index was 49.4.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was barely changed for the day.

Australian stocks lost 0.7 percent. South Korea's Kospi .KS11 and Japan's Nikkei .N225 were flat, and the yen was marginally stronger.

"Some market participants had bet the Fed may raise a U.S. rate as early as this month, but because of the weak ISM data and poor U.S. auto sales, such expectations seemed to have changed," said Hikaru Sato, a senior technical analyst at Daiwa Securities.

"The U.S. is moving towards tightening, and that direction is the same, but the dollar-yen moves also show that people stepped back from expectations for an imminent hike."

Asian equity markets took few cues from overnight moves on Wall Street, where stocks were flat with gains in the tech sector offsetting sluggish U.S. factory activity data and lower oil prices. [.N]

Given the weak ISM report, markets will look to Friday's non-farm payrolls to see if the Fed can risk raising rates this month or later this year. Economists polled by Reuters expect the U.S. economy to have added about 180,000 jobs in August. ECONUS

"While the US manufacturing ISM did undershoot expectations by quite a margin, it is worth remembering that the Fed hiked last year when the ISM manufacturing was at 48.0 and had been sub-50 for three consecutive months," wrote Sharon Zellner, a senior strategist at ANZ.

"There is therefore potential for markets to whipsaw should we see robust U.S. jobs data tonight, going into the U.S. Labor Day holiday weekend."

The dollar was nearly flat at 103.360 yen JPY= after coming down from a one-month high of 104.00 overnight. The euro traded little changed at $1.1199 EUR= after bouncing about 0.3 percent on Thursday. The common currency was at a three-week low of $1.1123 earlier in the week.

The greenback had surged against its peers following a relatively hawkish speech by Fed Chair Janet Yellen last Friday, which raised expectations the U.S. central bank was moving closer to a hike.

Sterling inched up 0.1 percent to $1.3285 GBP=D4 after jumping 1 percent overnight on purchasing managers' index (PMI) data showing the British manufacturing sector staged one of its sharpest rebounds on record in August.

The post-Brexit surprise boosted the pound as it could prompt the Bank of England to rethink the need to cut interest rates again if other surveys confirm the trend.

Commodities like oil and gold rebounded on the weaker dollar, which favours non-U.S. buyers of greenback-denominated commodities.

U.S. crude CLc1 was up 1 percent at $43.59 a barrel after sliding 3.4 percent overnight to a three-week low as a growing glut from U.S. crude stockpiles soured market sentiment. Brent LCOc1 rose 1 percent to $45.88 a barrel after shedding more than 3 percent on Thursday.

Spot gold XAU= was steady at $1,312.83 an ounce, having rebounding from a two-month trough of $1,301.91 the previous day. Gold has been dogged by the prospect of higher U.S. interest rates which would diminish the appeal of the non-yielding metal. 

Article Link To Reuters:

Oil Heads For Biggest Weekly Loss Since Mid-January

By Florence Tan 
September 2, 2016

Crude prices rose on Friday after losses of more than 3 percent a day earlier, with investors treading cautiously ahead of key U.S. employment data that will help gauge the health of the world's largest economy and oil consumer.

Brent crude LCOc1 had climbed 27 cents to $45.72 a barrel by 0426 GMT (0026 ET), while U.S. West Texas Intermediate crude futures CLc1 were up 24 cents at $43.40 a barrel, buoyed by a weaker dollar.

Though rising in this session, Brent and WTI are on track for their biggest weekly losses since mid-January, hit by oil inventory builds and weak U.S. manufacturing data.

"Downward momentum is a feature of the oil market," said CMC Markets analyst Ric Spooner.

"The end of the U.S. driving season and the prospect of building inventories create downward risk for the oil price and may see further pressure on energy stocks today."

Investors are looking ahead to non-farm payroll data later in the day for a sense of the direction of the U.S. economy, with a strong reading seen boosting the chance of a Federal Reserve interest rate hike soon. [MKTS/GLOB]

A rate rise may strengthen the U.S. dollar, which could depress oil prices as it would make the dollar-denominated commodity more expensive for holders of other currencies.

Friday's oil price gains may be capped by concerns of slowing global economic growth. There is also growing scepticism among traders that the Organization of the Petroleum Exporting Countries (OPEC) and other producers such as Russia will agree to freeze production at a meeting in Algeria later this month.

However, lending credence to a freeze, Saudi Arabia, the world's biggest crude exporter, has appeared to change its stance and is likely to support production stabilization at the meeting.

But further clouding the issue, Russian Energy Minister Alexander Novak on Friday played down the potential for talks on a possible output freeze.

Additionally, more U.S. supply will return to the market as some producers in the eastern parts of the Gulf of Mexico are restarting operations after Hurricane Hermine is set to make landfall.

Manufacturing activities in parts of Asia, which accounts for most of the world's oil demand growth, has also slowed.

"Most of Asia depends on exports, and without demand picking up in the west and on the mainland (of China), it's hard to see a sustained rebound in trade," HSBC economist Frederick Neumann said in a note.

Article Link To Reuters:

Key BOJ Policymaker Signals Fine-Tuning, Not Overhaul, Of Stimulus

By Leika Kihara and Sumio Ito 
September 2, 2016

The Bank of Japan can maintain its base money target and utilize existing tools to expand stimulus, rather than use this month's policy review for a major overhaul of its monetary framework, a board member who could cast a decisive vote said.

Makoto Sakurai, a former think-tank executive considered an advocate of ultra-loose policy, told Reuters that more radical options such as foreign bond purchases or "helicopter money", in which the central bank directly underwrites government debt, were off the table for now.

Instead, the BOJ will likely focus on refining current policy steps and consider ways to fix a bond yield curve that has flattened too much as a result of its negative interest rate policy, he said.

"I don't think we're now seeing any limit to or facing any problems with having a base money target. There is no need to remove the target," Sakurai said in his first media interview since joining the board in April.

"There's plenty of room to take action not just in terms of buying more exchange-traded funds but in terms of deepening negative rates and buying more assets. I don't think we are reaching any limit."

Pivotal Position 

Sakurai's views are important due to his pivotal position on the board, which at a crucial rate-review on Sept. 20-21 will comprehensively assess its policy framework in a bid to speed achievement of its 2 percent inflation target.

He sits somewhere in the middle of a nine-member board split between those favoring Governor Haruhiko Kuroda's radicalism and those wary of topping up stimulus.

Sakurai's comments suggest the BOJ is leaning toward maintaining the status quo rather than make big changes proposed by some academics, such as having a cap on long-term interest rates.

The September's review won't lead to a retreat from the BOJ's aggressive easing stance or a change in its inflation target, Sakurai stressed. But he suggested it may abandon a two-year timeframe for hitting the goal, as inflation has slid despite three years of aggressive money printing.

"We're undoubtedly seeing some delays due to external factors," he said. "But we're still aiming to hit the price target at the earliest date possible."

In January, the BOJ decided to add negative interest rates to its massive stimulus program, under which it pledges to increase base money by 80 trillion yen ($772.65 billion) a year via purchases of government bonds and risky assets.

But the move failed to arrest an unwelcome yen rise and drew criticism from commercial banks for crushing long-term rates and flattening the yield curve, squeezing already-thin margins.

No Helicopter Money

Sakurai is the first BOJ policymaker to publicly admit negative rates have flattened the yield curve more than hoped for, a sign the central bank is becoming more mindful of the cost of its policies.

"One thing we could consider as a policy option is ways to change the shape of the yield curve," Sakurai said.

He did not elaborate on how this could be done. But the remark suggests the BOJ could warm to some ideas floated by markets, such as changing its base money target to a range or be more flexible about what type of bond it buys.

The BOJ assessment will decide which tools - topping up asset purchases, buying more risky assets and deepening negative rates - work best in what circumstances and in what combination, Sakurai said.

The board's analysis on negative rates will be crucial to its decision on whether to ease again as early as this month, he added.

"The BOJ shouldn't ease recklessly. We need to make policy decisions after looking carefully at the effects of past policy decisions," he said.

Little has been known on Sakurai's views. He has been perceived as favoring aggressive easing due to ties with reflationalist-minded academics.

However, he was cautious about the BOJ taking radical steps, and called helicopter money "impossible" under Japanese law.

Buying foreign bonds, proposed by an adviser of premier Shinzo Abe, was tantamount to currency intervention and breaching the finance ministry's jurisdiction on exchange-rate policy, Sakurai said.

"It's not something that's in our tool-kit."

Article Link To Reuters:

U.S. Banks Need Better Defenses Against Rates Shock, Regulators Warn

By Patrick Rucker and Kouichi Shirayanagi
September 2, 2016

Years of stubbornly low interest rates and expectations they will remain low for years to come have prompted U.S. banks to shift their balance sheets in ways that put them at risk if rates suddenly spike, regulators are warning.

Banks have been stocking up on long-term loans, often tied to real estate and property development that promise higher yields than the miniscule returns on short-term debt.

However, the widening gap between long-term loans and mostly short-term funding means higher interest rates could trap banks in a corner: forcing them to pay more to cover their immediate financing needs than they earn on their loans.

The dynamic "raises the interest rate risk issue that we are very focused on," Martin Gruenberg, chairman of the Federal Deposit Insurance Corporation(FDIC), said this week.

Banks are broadly positioned according to the signals the Federal Reserve has been sending — that it will lift rates only gradually and spread the increases over a long period.

Regulators point out, though, that central banks can move quickly too, even if that now appears unlikely. Short-term rates could also climb in a weakening economy, they say.

"(There) could be impacts on the economy apart from monetary policy," Gruenberg said.

The Office of Financial Research, an independent watchdog within the Treasury Department, says banks could be tested by a surprise upheaval like the recent Brexit vote.

"Investors (are) open to heavy losses from large jumps in interest rates, whether from surprises in the Federal Reserve's monetary policy or other shocks," the OFR wrote in a recent report.

The Office of the Comptroller of the Currency also counts interest rate risk among market perils.

This week, Boston Fed president Eric Rosengren warned that banks might already be too exposed to long-term, commercial real estate that could sour and hit the broader economy.

The savings and loan crisis of the 1980s and the early 1990s was the most prominent U.S. example how a spike in short-term rates could wreak havoc in the financial industry.

When the Fed pushed its benchmark rate above 19 percent in the early 1980s, many lenders switched to riskier credits to keep up with a spike in costs. Those loans later soured and contributed to the collapse of hundreds of lenders.

Most recently, banks got a glimpse of the risks of rate swings in June 2013 when then-Fed Chairman Ben Bernanke suggested that the central bank could start scaling back its government debt purchases. As bond yields whipsawed in response, banks saw their long term assets briefly lose billions of dollars in value.

Even so, banks have been extending the duration of their loans since the Fed pegged its rates near zero in late 2008, assuming that rates will stay low for some time.

FDIC data shows roughly a quarter of the loans on bank balance sheets will not mature for at least five years – a record level - and many lenders remain comfortable offering long-term loans to bolster earnings. (Graphic:

"We are relatively convinced that we may not be this low forever, but...our expectation is lower for longer," Wells Fargo's finance chief, John Shrewsberry, said last month.

Regulators do not require banks to set aside capital for potential losses if interest rates rise and let them use their own models to calculate risks, so approaches vary across the industry.

While JPMorgan Chase & Co (JPM.N), the nation's largest lender, has lately increased its protection against rising rates, Bank of America Corp (BAC.N), the nation's No. 2 lender, has been steadily paring it back. (Graphic:

Crying Wolf?

Analysts say it is difficult to tell whether regulators see risks that banks do not or whether they are just doing their job - worrying about a threat that may never materialize.

Government-backed lenders, though, have also been nudging banks to better prepare for eventual rate hikes.

"We've had eight years of low rates. And the bank model - relying on core deposits - has not been tested," said Robert Dozier of the Federal Home Loan Bank of Atlanta.

Analysts point to Bank of America as a lender bearing the brunt of low rates.

But as the bank has delved deeper into long-term assets, the lender has shrunk its book of certain interest rate derivatives to below $400 billion from $1 trillion in the last three years, according to FDIC data. Bank of America says that any hit it takes on a rate spike would quickly be offset by new loans made at higher rates.

"We constantly evaluate the trade-offs between earnings, interest rate risk, capital and liquidity," said spokesman Jerome Dubrowski.

Bank of America could save about $20 billion over the next two years now that it has dropped some of those hedges, according to Rob Pratt of Harbor Derivatives who brokers some of those same swaps.

But the lender may wish that it had held onto those hedges if interest rates do climb quickly, said David Hendler, a bank analyst with Viola Risk Advisors of New York.

The bank can buy more of those swaps later but they might be more costly.

"That's the thing about insurance: you'll pay more when you need it most," said Hendler.

Article Link To Reuters:

Samsung Electronics Considers Galaxy Note 7 Recall

By Se Young Lee
September 2, 2016

Tech giant Samsung Electronics Co Ltd is considering a recall of its new flagship Galaxy Note 7 devices amid reports that some of the premium phones are catching fire due to battery problems, a person familiar with the matter said on Friday.

The person, who declined to be identified as the deliberations were not yet finalised, told Reuters the firm had not decided specifics such as the timeline for a potential recall or how many phones could be affected.

Samsung declined to comment on any recall plan for the high-end gadget, which has been the subject of online complaints from users claiming their phones had caught fire while charging.

While analysts expect the Note 7 problems to be resolved quickly, ongoing major problems could derail Samsung's mobile recovery after a string of product successes had reversed the smartphone leader's declining market share.

The South Korean firm has pinned its hopes on the Note 7 to maintain strong sales momentum in the second half against stiffening competition from the likes of Apple Inc, which is expected to release its latest iPhone next week.

"They need to nip it in the bud right now. The last thing they want is for memes to be spreading on the internet associating the Samsung name with an exploding battery or injury," IDC analyst Bryan Ma said.

On Wednesday Samsung said it had halted supply of the new phone to the top three South Korean carriers and that shipments were being delayed as it conducted additional quality testing.

It did not elaborate on any problems it may have found with the gadget, which was launched in South Korea and other markets on Aug. 19 and has been generally well-received by critics.

Investors stripped about $7 billion off Samsung Electronics' market value on response to the shipment delays on Thursday, but sentiment appeared to have recovered in Friday trading. The shares were up 0.3 percent compared with a 0.1 percent rise for the broader market.

Shipping Delays

South Korea's Yonhap News Agency reported separately that Samsung Electronics had pushed back the Note 7's launch in key European markets such as Britain and France. Shipments to the United States appear to have halted as well, Yonhap said, without citing a direct source.

Samsung said in a statement to Reuters it was "conducting a thorough inspection" with its partners on the Note 7 and would share its findings as soon as possible. The company did not immediately comment on Yonhap's report.

Credit Suisse said a recall or major shipping delays could wipe 1.5 trillion won ($1.34 billion) off the firm's 2016 operating profit estimate of 30.2 trillion won.

But the brokerage said this was the "absolute worst case" scenario and was unlikely to materialize, as it expected the firm to resolve issues with the phone before the fourth quarter.

Hyundai Securities also said in a report released on Thursday that the Galaxy Note 7's problems should be resolved within a "few weeks". The brokerage retained its third-quarter operating profit forecast of 8.5 trillion won.

The mobile division accounted for about 54 percent of Samsung Electronics' January-June operating profit of 14.8 trillion won.

Article Link To Reuters:

Solid U.S. Employment Gains Expected In August; Jobless Rate Seen Falling

By Lucia Mutikani
September 1, 2016

U.S. employment growth likely moderated in August after two straight months of hefty gains, but was probably still strong enough to push the Federal Reserve to raise interest rates later this year.

Nonfarm payrolls likely increased by 180,000 jobs last month, according to a Reuters survey of economists, around this year's monthly average job growth. The unemployment rate is forecast falling one-tenth of a percentage point to 4.8 percent.

The Labor Department will release its closely watched employment report on Friday and readings in line with expectations would reinforce views that the economy has regained speed after almost stalling in the first half of the year.

"It would lead people to the conclusion that the economy is continuing to grow at a moderate pace and to expect a December rate hike from the Fed rather than September," said David Donabedian, chief investment officer of Atlantic Trust Private Wealth Management in Washington.

The report will come more than two weeks before the U.S. central bank's Sept. 20-21 policy meeting. Rate hike probabilities for both the September and December meetings have risen after remarks last Friday by Fed Chair Janet Yellen that the case for raising rates had strengthened in recent months.

The Fed lifted its benchmark overnight interest rate at the end of last year for the first time in nearly a decade, but has held it steady since amid concerns over persistently low inflation.

The step-down in employment would come after the economy created a total of 547,000 jobs in June and July. With the labor market near full employment and the economy's recovery from the 2007-09 recession showing signs of aging, a slowdown in job growth is normal.

Yellen has said the economy needs to create just under 100,000 jobs a month to keep up with population growth. There are, however, risks that August payrolls will undershoot expectations, given what some economists believe are challenges adjusting the data for shifts in school calendars.

Over the last several years, the government's August payrolls estimates have been weak prior to upward revisions. In addition, the Institute for Supply Management said on Thursday factory employment declined in August for a second straight month.

Eyes On Wages

The timing of the next rate hike could also be determined by wage growth. Average hourly earnings are expected to have increased 0.2 percent in August after a solid 0.3 percent rise in July. But a calendar quirk could mean a soft reading, which would pull down the year-on-year from 2.6 percent in July.

"The reference week for the payroll survey ended August 13. Since the 15th of the month falls after the survey period, increases in bi-monthly pay are less likely to have been captured, skewing the result lower," said Michelle Girard, chief U.S. economist at RBS in Stamford, Connecticut. "We expect average hourly earnings to have been flat."

The labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, will also be scrutinized for signs of when wage growth will accelerate. Despite some gains, the participation rate remains near multi-decade lows, in part reflecting demographic changes.

Economists said the low participation rate partially explains why wage growth has been sluggish.

"We expect the labor market to reach full employment by early 2017 and to surpass it thereafter," said Elad Pashtan, an economist at Goldman Sachs in New York.

A solid payrolls gain would add to July consumer spending, residential construction and durable goods orders in suggesting a pick up in economic growth after output rose 1.0 percent in the first half of the year.

The Atlanta Fed is forecasting gross domestic product rising at a 3.2 percent annual rate in the third quarter.

Last month, manufacturing sector employment was likely flat after rising for two straight months. Construction payrolls probably rose for a second consecutive month, while mining likely shed more jobs in August.

Government payrolls are forecast rising 2,000 in August, extending the streak of job gains in the public sector to four months.

Article Link To Reuters:

U.S. Imposes Sanctions On 'Putin's Bridge' To Crimea

By Jack Stubbs and Yeganeh Torbati
September 2, 2016

Companies building a multi-billion dollar bridge to link the Russian mainland with annexed Crimea, a project close to the heart President Vladimir Putin, were targeted by the United States in an updated sanctions blacklist on Thursday.

The U.S. Department of the Treasury added dozens of people and companies to the list, first introduced after Russia annexed the Crimean peninsula from Ukraine in 2014 and expanded over its support for separatist rebels in the east of the country.

As well as multiple subsidiaries of Russian gas giant Gazprom (GAZP.MM) and 11 Crimean officials, the Treasury named seven companies directly involved in the construction of the 19 km (11.8 miles) road-and-rail connection across the Kerch Strait, dubbed "Putin's bridge" by some Russians.

Chief among those were SGM-Most, a subsidiary of lead contractor Stroygazmontazh which is already under U.S. sanctions, and sub-contractor Mostotrest (MSTT.MM), one of Russia's biggest bridge builders.

"Treasury stands with our partners in condemning Russia's violation of international law, and we will continue to sanction those who threaten Ukraine's peace, security and sovereignty," said John Smith, acting director of the Treasury's Office of Foreign Assets Control, which levies sanctions.

The Russian Foreign Ministry was not immediately available for comment, but Moscow has previously said sanctions levied over its actions in Ukraine undermine efforts to resolve the conflict.

Set to be the longest dual-purpose span in Europe when completed, the Kremlin sees its 212-billion rouble ($3.2 billion) bridge as vital to integrating Crimea into Russia, both symbolically and as an economic lifeline for the region. Putin has called the undertaking an historic mission.

But the project has had to contend with Western sanctions since the construction contract was handed to Stroygazmontazh last year, a firm controlled by Arkady Rotenberg, a close ally of Putin's and his former judo partner.

Rotenberg is already under U.S. sanctions because of his links to the Russian leader, which the Treasury says have helped him win billions of dollars in state contracts. He cannot raise capital in the West or hire Western sub-contractors to help his firm complete the project.

Officials linked to the bridge's construction say they have all the skills, equipment and supplies required to build it without Western help.

"The sanctions will not affect the construction of the bridge," Crimea Bridge infocentre, the organization responsible for communications about the project, said in a statement on Thursday. "The contractor has all the resources necessary for the timely completion of the project."

Rotenberg and his brother Boris have denied getting help from the Russian leader for their businesses.

Gazprom did not reply to a request for comment.

The restrictions on the energy giant and its subsidiaries prevent U.S. firms or citizens from providing goods or services supporting the firm's deepwater, arctic offshore, or shale oil projects.

The restriction does not apply to financial services, such as clearing transactions or providing insurance for such projects.

Article Link To Reuters:

Noonan: Can Anxiety Beat Depression In November?

Trump inches up in the polls. Perhaps the reason is not him but Hillary.

By Peggy Noonan
The Wall Street Journal
September 2, 2016

By tradition the presidential campaign begins in earnest on Labor Day. This year I questioned that premise. Its assumption is that normal people don’t start paying attention until September. That’s probably been true in the past. But this time normal people have been paying attention all year. Donald Trump’s candidacy was a sensation—you couldn’t not see him or hear him. In another way people have been paying attention for a quarter-century, which is how long Hillary Clinton and Mr. Trump have been famous in America. Everyone knows what they think; everyone knows their impression of Mrs. Clinton and Mr. Trump.

But not everyone knows how they’ll vote—him, her, third- or fourth-party, write-in. The polls are tightening and no one is sure why. A Reuters/Ipsos poll through Aug. 29 had Mrs. Clinton at 40%, Mr. Trump at 38% among likely voters. A Rasmussen poll ending Aug. 31 had Mrs. Clinton at 39%, Mr. Trump at 40%. A Fox News poll ending the same day had Mr. Clinton at 41% and Mr. Trump at 39%. As to the battleground states, a Marquette University Law School poll out this week had Mrs. Clinton leading Mr. Trump 45% to 42% in Wisconsin among those who said they’ll definitely vote in November. That sounds solid, but three weeks ago Mrs. Clinton had a 15-point lead.

And Mr. Trump’s successful trip to Mexico, in which he stood at separate podiums with a president, trading niceties, seeming comfortable—seeming like a normal political figure—followed by his base-rousing immigration speech in Arizona, came after these polls were taken. A Trump supporter told/spun me that it was a Nixon-to-China moment, which it was not. Nixon knew exactly what he was doing and why, the diplomacy of it had been long and secretly arranged, and it wasn’t driven by immediate political need but by America’s strategic requirements.

But if the polls are right, things are moving, and not in Mrs. Clinton’s direction. I’d thought people’s views of Mr. Trump were by now indelible and unchangeable: He’d been branded, by himself. Maybe that’s true. We’ll know in retrospect. But maybe he can nudge his numbers a little. Can Mrs. Clinton?

We’re used to attributing everything by default to Mr. Trump—what’s he done now? But maybe the fact of Trump isn’t driving things, but the central fact of Hillary. It is a fact we all know so well that we factor it in and forget it. It is that people view her as both untruthful and untrustworthy. A Fox News poll out this week said an astounding 74% of respondents said they believe Mrs. Clinton would do anything to be president (68% said the same of Mr. Trump). A Washington Post/ABC News poll also this week showed Mrs. Clinton’s image at an all-time low. Among registered voters, 59% view her unfavorably (60% view Mr. Trump unfavorably). The Post: “If it weren’t for Trump, in fact, Clinton would be the most unpopular major-party presidential nominee in modern American history.” Think of that, in someone well known to Americans for 25 years.

Reading the Fox story reminded me of a moment last February in New Hampshire, during the primaries. It was a weekend night. I was at one of her rallies in a high-school gym in a handsome suburb. It was well-organized—good lighting and security, a buzzy crowd. Mrs. Clinton was introduced and she bounded out—blue pantsuit, well made-up, high-energy, pointing out friends, real or imagined, in the crowd. I thought: Give it to her, she’s 60-something, she’s out in America working the room, making the speech, enacting the joy, when she could be home on a Saturday night watching TV.

Then it struck me. If she weren’t here, she’d be in an empty house in Chappaqua, N.Y., the focus of no eyes—not important, not glamorous, no aides or staffers. I thought: She needs to run, it’s this or reruns on Bravo. I thought: This is why you pick up that there is no overarching purpose, theme or mission to her candidacy—because there isn’t. There is only her need—not to be powerless, not to be away from the center. It’s not The America Project, it’s The Hillary Project.

You see that a lot in politicians, but not always those running for president. That night I think I saw it in her.

This connects in my mind with 1992. By November of that year I thought the close presidential contest would come down to a battle between depression and anxiety. If you imagined picking up a newspaper the morning after the election and saw “Bush Re-elected,” you might feel blue—same old same old, 12 years of Republican rule turning into 16. If it said “Clinton Wins,” you might feel anxiety—we never even heard of this guy until six months ago, an obscure Arkansas governor! I figured that in America anxiety beats depression because it’s the more awake state.

There may be an aspect of that dynamic in this race. Mrs. Clinton is depression: You know exactly who she is, what trouble she brings—she always brings that sack full of scandal—and she won’t make anything better. Mr. Trump is anxiety: If you back him you know you’re throwing the long ball, a real Hail Mary pass to the casino developer and reality TV star who may or may not know how to catch the ball when catching the ball means everything. But he’s entertaining—he scrambles all categories, makes things chaotic. He has fun with his audience.

The crowd Wednesday night in Arizona reacted with joy when he asked if they were ready for the part about Mexico. His own supporters will tell you he may be a little crazy but not Caligula crazy, only drunk-uncle crazy. The Clinton campaign has a strong television ad out that shows Mr. Trump yelling and making faces. It warns at the end that a president only needs one mistake to make things go terribly wrong. It’s the sort of ad that would impress voters already convinced that he’s disqualified by temperament. But others might just think: Yeah, he talks like that sometimes, it’s part of the act.

Last week the pollster Peter Hart did a focus group, for the Annenberg Public Policy Center, of a dozen independent voters in Wisconsin. They saw 2016 as a fear-and-loathing election, loathing Mrs. Clinton (depression) and fearing Mr. Trump (anxiety). They thought Mrs. Clinton would win but described her as a lying and untrustworthy career politician. They saw Mr. Trump as reckless, inexperienced, “a bully and a loudmouth,” in the words of one participant. (Another compared him to the drunk uncle.) They had little optimism about America right now, using words like “political turmoil,” “unrest” and “downhill.” Asked if the 2016 election had a smell what would it be, their answers included “rotten eggs,” “skunk,” “stink” and “garbage.” Asked which political figures they admired in their lifetimes, one said Gerald Ford, one Bill Clinton, and about half said Ronald Reagan. They seemed to miss the idea of character.

Actually there seemed an undertone of fear that we’re not raising Fords and Reagans now, we’re raising Clintons and Trumps and it doesn’t bode well.

Article Link To The Wall Street Journal:

Krauthammer: The Only Immigration Solution

By Charles Krauthammer 
The Washington Post
September 2, 2016

The one great service of Donald Trump’s extended peregrinations on immigration policy is to have demonstrated how, in the end, there’s only one place to go.

You can rail for a year about the squishy soft, weak-kneed and stupid politicians who have opened our borders to the wretched refuse of Mexico. You can promise to round them up — the refuse, that is, not the politicians (they’re next) — and deport them. And that may win you a plurality of Republican primary votes.

But eventually you have to let it go. For all his incendiary language and clanging contradictions, Trump did exactly that in Phoenix on Wednesday. His “deportation task force” will be hunting . . . criminal aliens. Isn’t that the enforcement priority of President Obama, heretofore excoriated as the ultimate immigration patsy?

And what happens to the noncriminal illegal immigrants? On that, Trump punted. Their “appropriate disposition” will be considered “in several years when we have . . . ended illegal immigration for good.” Everyone knows what that means: One way or another, they will be allowed to stay.

Trump’s retreat points the way to the only serious solution: enforcement plus legalization. The required enforcement measures are well known — from a national E-Verify system that makes it just about impossible to work if you are here illegally, to intensified border patrol and high-tech tracking.

The one provision that, thanks to Trump, gets the most attention is a border wall. It’s hard to understand the opposition. It’s the most venerable and reliable way to keep people out. The triple fence outside San Diego led to a 90 percent reduction in infiltration. Israel’s border fence with the West Bank has produced a similar decline in terror attacks into Israel.

The main objection is symbolic. Walls, we are told, denote prisons. But only if they are built to keep people in, not if they are for keeping outsiders out. City walls, going back to Jericho, are there for protection. Even holier-than-thou Europeans have conceded the point as one country after another — Hungary, Macedonia, Bulgaria, Austria, Greece, Spain, why even Norway— has started building border fences to stem the tide of Middle Eastern refugees.

The other part of the immigration bargain is legalization. What do you do with the 11 million already here? In theory, you could do nothing. The problem ultimately solves itself as the generation of the desert — those who crossed the border originally — is eventually replaced by its American-born children who are automatically legal and landed.

But formal legalization is a political necessity. It gets buy-in from Democrats who for whatever reason — self-styled humanitarianism or bare-knuckled partisanship — have no interest in real border enforcement. Legalization is the quid pro quo. If they want to bring the immigrants “out of the shadows,” they must endorse serious enforcement.

Such a grand bargain could and would command a vast national consensus. The American public will accept today’s illegal immigrants if it is convinced that this will be the last such cohort.

This was the premise of the 1986 Reagan amnesty. It legalized almost 3 million immigrants. Because it never enforced the border, however, three has become 11.

And that’s why the Gang of Eight failed. They too got the sequencing wrong. The left insisted on legalization first. The Gang’s Republicans ultimately acquiesced because they figured, correctly, this was the best deal they could get in an era of Democratic control.

The problem is that legalization is essentially irreversible and would have gone into effect on Day One. Enforcement was a mere promise.

Hence the emerging Republican consensus, now that Trump has abandoned mass deportation: a heavy and detailed concentration on enforcement, leaving the question of what happens to those already here either unspoken (Trump on Wednesday) or to be treated case by case (Trump last week).

The Trump detour into — and retreat from — mass deportation has proved salutary. Even the blustering tough guy had to dismiss it with “we’re not looking to hurt people.”

The ultimate national consensus, however, lies one step farther down the road. Why leave legalization for some future discussion? Get it done. Once the river of illegal immigration has been demonstrably and securely reduced to a trickle, the country will readily exercise its natural magnanimity and legalize.

So why not agree now? Say it and sign it. To get, you have to give. That’s the art of the deal, is it not?

Article Link To The Washington Post:

Eugene Robinson: Trump Can’t ‘Soften’ Bigotry

By Eugene Robinson
The Washington Post
September 2, 2016

Donald Trump’s diatribe on immigration Wednesday night dispelled any conceivable doubt: He is a dangerous demagogue who rejects the values of openness and inclusion that made this country great. Rarely has an American politician given such an un-American speech.

Foreigners who come here seeking a better life are the scapegoats he blames for problems real and imagined. Never mind that Trump’s mother was an immigrant, or that two of his three wives came from overseas. Ronald Reagan saw this country as a shining city on a hill; Trump wants us to cower in fear behind a Berlin-style wall. Reagan invited millions of undocumented immigrants to stay and contribute to their adopted land; Trump wants to round them up, all 11 million, and ship them home.

That’s what he wants his loyal followers to believe, at least. Like any effective demagogue, Trump is fluent in doublespeak.

At one point, to thunderous applause, he said this: “For those here illegally today, who are seeking legal status, they will have one route and one route only: to return home and apply for reentry like everybody else, under the rules of the new legal immigration system that I have outlined.”

A few sentences later, though, he appeared to take it back. Only after he has built the Great Wall of Trump on the southern border, which isn’t going to happen, and persuaded Congress to approve a whole new immigration system, which also isn’t going to happen — only then, he said, “will we be in a position to consider the appropriate disposition of those individuals who remain.”

See what he’s trying to do? He allows listeners to believe whatever they want about his true intentions. Xenophobes can dream of mobs wielding pitchforks and torches while apologists can assure moderate voters that Trump doesn’t really propose a vast pogrom of ethnic cleansing.

I choose to believe the first version — that Trump is saying all 11 million have to go — because the whole point of the speech was to convince his most fervent supporters that he is “hardening,” not “softening,” his position on immigration. Fear and loathing of the “other” is his core appeal.

Trump also told us who would go first: up to 2 million undocumented “criminals,” in addition to 4.5 million individuals who are here because they overstayed their visas. Also, any undocumented person stopped by law enforcement for any reason would be detained pending deportation. It is not alarmist to note that actually trying to do all of this would require the creation of a police state.

Of course, that’s not what he intends — unless you happen to like the idea of a police state, in which case it’s exactly what he intends. Policy positions are just words to Trump, and words are just paving stones on the road to power.

Trump’s support base is mostly white and working-class, and he skillfully exploits these voters’ fears of demographic change.We must “be honest about the fact that not everyone who seeks to join our country will be able to successfully assimilate,” he said. “Sometimes it’s just not going to work out. It’s our right, as a sovereign nation, to choose immigrants that we think are the likeliest to thrive and flourish and love us.” He warned ominously that “immigration as a share of national population is set to break all historical records.”

Translation: Doesn’t it tick you off to hear so many so-called Americans speaking Spanish?

Trump’s antipathy toward Hispanic immigrants, however, is nothing compared to what he thinks about Muslims. He has changed his proposed Muslim ban into a country-specific ban — that happens to cover only Muslim countries. And he wants screening to include “an ideological certification to make sure that those we are admitting to our country share our values and love our people.”

Ideological certification? Approved by whom, the thought police?

Earlier in the day, Trump tried his best to sound sober and statesmanlike in his meeting with Mexican President Enrique Peña Nieto. By evening, though, he was back to insisting that Mexico would pay for the border wall, although “they don’t know it yet.” And on Thursday morning, Trump was again touting a “softening” in his immigration views.

But you can’t soften bigotry. You can’t soften jingoism. You can’t soften Trump’s naked appeal to anger and resentment. You can’t soften the fact that he rejects American exceptionalism, which is based on creed, in favor of tribalism based on ethnic purity.

He can’t be George Wallace one day and Thomas Jefferson the next.

Article Link To The Washington Post: