Biggest U.S. Banks Seen Adding to Reserves for Pain Yet to Come

“When it comes to loan losses sparked by the Covid-19 pandemic, U.S. banks aren’t taking any chances.

The nation’s four biggest lenders probably set aside about another $10 billion for bad loans in the third quarter, according to analysts’ estimates compiled by Bloomberg, even though stimulus moves by the government and Federal Reserve have so far staved off a spike in missed payments.

While the third quarter’s tally is well below the pace of the first half, it means that the banks will not only have covered the losses they’ve seen since the start of the pandemic, but also added almost $50 billion to reserves for future pain. Investors’ big question will be whether that comes from typical caution, or if the banks are seeing worrying signs as forbearance programs wind down and stimulus efforts get bogged down in a partisan fight.”

“Banks may be setting aside more than they need for loan losses to take advantage of strong trading revenue and the fact that they can’t return excess capital to shareholders. The Fed this month extended through the rest of the year its unprecedented constraints on dividend payments and share buybacks for the biggest U.S. lenders.”

How Hatred Came To Dominate American Politics

“there are three trends that we can point to. The first is the steady nationalization of American politics. The second is the sorting of Democrats and Republicans along urban/rural and culturally liberal/culturally conservative lines, and the third is the increasingly narrow margins in national elections.

The combination of these three trends has turned Washington, D.C., into a high-stakes battle where cross-party compromise is difficult, and both sides are increasingly holding out for complete control.

Sixty years ago, state and local politics loomed larger than they do now, which meant national parties operated more like loose labels whose main function was to come together every four years to argue over who should run for president under that party. As President Eisenhower reportedly quipped as late as 1950, “There is not one Republican Party, there are 48 state Republican parties.” The same was true of the Democratic Party at the time. By the 1970s, in fact, many political observers declared that partisan politics had reached their end, with split-ticket voting hitting record-high levels as candidates successfully ran on local issues and pledges to better serve their constituents.

But beneath the surface, the parties were realigning. The civil rights movement of the 1960s and the culture wars of the 1970s and 1980s not only turned conservative Democrats into Republicans and liberal northeastern Republicans into Democrats, it also shifted the focus of politics such that Washington became the arbiter of national values. National parties began building up major fundraising and campaign consultant-driven operations, helping to standardize their messaging so that it actually meant something to vote for a Democrat or a Republican.”

“Cultural values are much more connected to geography than economic values. Both the rich and poor live in cities, suburbs and exurbs. But those who are socially liberal tend to live in cities, whereas those who are socially conservative tend to inhabit small towns. This partisan sorting on cultural issues has thus generated a significant partisan density divide. And because geography also corresponds to racial and ethnic diversity (basically, cities are multicultural and exurbs are mostly white), this adds another division onto the partisan divide: race.

With all these identities accumulating on top of each other, partisanship has become a kind of “mega-identity,” as political scientist Lilliana Mason argues, with party identification standing for much, much more. In fact, it’s reached the point that when you meet somebody, you can immediately size them up as a “Trump voter” or a “Biden voter.” That kind of easy stereotyping leads us to see the other party as distant and different. And typically, things that are distant and different are also more threatening.”

“the parties themselves actually have a lot of internal division, which means they share a version of the same dilemma: Republicans and Democrats can’t please all the different voters and groups who fall into their party and want their issue to be prioritized. But in a polarized two-party system, they can make it clear why the other party is bad.”

Tofurky is suing Louisiana for the right to label its veggie burgers “veggie burgers”

“As of October 1, a new law in Louisiana bans grocery stores from calling veggie burgers “veggie burgers,” as well as many similar product labels like “plant-based sausages” or “seitan-based vegan bacon.”

The justification? That consumers might get confused about whether veggie burgers are made of beef. It’s the latest of a series of attempts by meat companies to ban their plant-based competitors from grocery store shelves — and many legal experts say it’s probably unconstitutional.”

“Last year, Arkansas tried a nearly identical law, and Tofurky sued. A judge issued an injunction a few months later, finding that the law violated the free-speech protections of the US Constitution and telling Arkansas it may not enforce the law while the case proceeds through the courts. Mississippi tried a similar law, too, and backed down, promising to revise it, when sued. That didn’t stop Louisiana from proceeding with its own, nearly identical law, but it is likely no more constitutional than the Arkansas or Mississippi ones.

Why are we fighting about Tofurky? There are no indications that consumers are confused about whether veggie burgers are made out of meat. But as plant-based products get more popular, these labeling laws are one of the meat industry’s favorite tools to fight back — even though courts keep on soundly rejecting them.”

“The First Amendment can be applied to commercial speech — though the law is a bit complicated. In the 1940s, the Supreme Court ruled unanimously that there were no First Amendment protections for purely commercial speech. By the 1970s, the Court had reconsidered that and overturned it in 1976.

In 1980, the Court supplied the rules for First Amendment protections on commercial speech that are still applied today. Those rules are called the “Central Hudson” test because they were laid out in Central Hudson Gas and Electric Corp. v. Public Service Commission.

Here are the rules: First, commercial speech “must concern lawful activity and not be misleading.” Supporters of Louisiana’s law might argue that the term “almond milk” is misleading, while opponents argue that consumers know perfectly well what almond milk is — that, as Utah Sen. Mike Lee (R-UT) put it, “No one buys almond milk under the false illusion that it came from a cow. They buy almond milk because it didn’t come from a cow.”

“There’s nothing misleading about the name of a veggie burger, or vegan hot dog, or seitan bacon,” Jessica Almy, an attorney and director of policy at the Good Food Institute, told me when we spoke about a similar Missouri case. “The packages clearly disclose that this is plant-based food that has the taste or texture of this familiar food.”

“There is not one consumer complaint to the AG’s office ever filed,” Amanda Howell, co-counsel on the Louisiana case, told me. “All plant-based products I’ve seen are doing their best to make sure consumers know that they’re plant-based.”

Even if the speech concerns lawful activity and is not misleading, the government can still regulate it. But it has to meet the following standards: The government must have a “substantial interest” at stake, the regulation must “directly and materially advance the government’s substantial interest,” and “the regulation must be narrowly tailored.””

America’s third Covid-19 surge is here. It was predictable — and preventable.

“As of October 20, the seven-day average of coronavirus cases was more than 60,000 — a new peak since the summer surge of Covid-19 abated. That’s up from a recent low in the seven-day average of fewer than 35,000 cases on September 12. The increase doesn’t appear to be driven by a single state or region — although the Dakotas, Montana, and Wisconsin appear to be in particularly bad shape — but rather spikes across much of the country at once, with increases reported across the Northeast, Midwest, South, and West. (Some of the spike is also caused by more testing exposing more cases.)”

“The current surge seems to be a repeat of the summer spike. Cases started to fall in late August, eventually reaching a brief plateau between mid-August and mid-September. But that plateau was still much higher than the peak of Covid-19 cases in the spring (partly, but likely not entirely, due to more testing). Yet states seemingly declared victory and started to reopen anyway — and now cases are rapidly climbing again.
MacDonald is now repeating the same thing she told me in the summer: “We never got to low enough levels [of Covid-19] to start with in most places.”

Of particular interest is indoor dining at restaurants and bars, which are reopening at varying levels across the country. Experts characterize these settings as perhaps the worst imaginable spaces for Covid-19 spread: People are close together for long periods of time; they can’t wear masks as they eat or drink; the air can’t dilute the virus like it can outdoors; and alcohol could lead people to drop their guards further. It was a recognition of all these risks that led many states to scale back and close indoor dining and bars during their summer outbreaks.”

“None of the ideas to prevent all of this are shocking or new. They’re all things people have heard before: More testing and contact tracing to isolate people who are infected, get their close contacts to quarantine, and deploy broader restrictions as necessary. More masking, including mandates in the 17 states that don’t have one. More careful, phased reopenings. More social distancing.”

“While experts all agreed that there’s zero political appetite for a lockdown right now, a massive surge in the fall and winter could leave the US with no other option. Israel, for example, shut down in September after seeing a massive increase in cases, and several European countries are now considering or enacting similar measures as their cases rise.”

How Joe Biden can rescue the economy in the face of Republican obstruction

“Reconciliation is weird. First, Congress needs to adopt a budget resolution (which it doesn’t always do) laying out tax and spending priorities for the future. These resolutions are not laws, the president doesn’t have to sign them, and they pass by simple majority vote. Then with a budget in place you get to write one — but only one — bill that aims to “reconcile” national tax and spending priorities with the framework laid out in the budget. This reconciliation bill cannot be filibustered. It also cannot change Social Security, or otherwise make big legislative changes that are not directly focused on the budget.

At Vox, we have often focused on the limits the reconciliation process places on what can be achieved on climate policy or aspirations for Medicare-for-all. A reconciliation bill also can’t increase the budget deficit over the long run.

But while these limits are very real, they also do open up some fairly large horizons.”

“a reconciliation bill can do the following:
Increase the generosity of the social safety net
Raise taxes on the rich
Impose the tax increases after the safety net increases, generating short-term stimulus”

“Consider the following ideas Biden has embraced:
Creating a new universal child allowance to help parents and slash child poverty.
Creating a fully funded rental housing voucher program to ensure that every family that needs help gets it.
Expanding the Affordable Care Act to cover millions more and make coverage more generous for those who get it.
A climate plan that centers investments in clean energy, rather than taxes on dirty energy.
A huge increase in funding to low-income school districts.
Biden does not need to treat these ideas as separate from the short-term need to stimulate the economy. He can simply do all five of them, and throw in a short-term boost to unemployment insurance and state/local budgets and some cash for specific public health interventions. Then the long-term increases in spending can be offset by enacting his proposed tax increases on the rich. That will ensure the deficit falls over the long run. But since the short-term deficit is not a problem and the whole idea is to stimulate the economy, the tax cuts can be delayed until 2023.”

“To get it done, Biden needs to convince members of Congress that it’s in their collective interest for him to have a successful presidency with a roaring economy and real accomplishments. And if they don’t want to curb the filibuster, they need to get the job done with a massive reconciliation bill.”

“if Biden thinks that his personal charm can bring back the low-polarization Senate he remembers from his service there in the 1970s and ’80s he’s mistaken. And if he genuinely tries to do that, he’s setting himself up for catastrophic failure. Times have changed, the media has changed, institutions have changed, and incentives have changed. The good old days aren’t coming back.

Still, Biden can break the toxic allure of obstruction by refusing to be obstructed.”

Pennsylvania’s naked ballot problem, explained

“If you’re voting by mail in Pennsylvania this year, and you want your vote to actually count, you need to remember one crucial thing: the secrecy envelope.

Once you fill out the ballot itself, you must place it inside the provided secrecy envelope, which contains no information about your identity. Then you put the sealed secrecy envelope inside a different postage-paid addressed return envelope, on which you have to sign your name and write your address.

If you forget the secrecy envelope — simply dropping your ballot in the ordinary return envelope — your ballot will be deemed a “naked ballot.” And, according to a recent Pennsylvania Supreme Court ruling, election officials will have to throw it out.

The reason for the secrecy envelope, in theory, is to preserve the secret ballot and to prevent potential fraud. That is: once election officials receive the mail-in ballot, they use the outer envelope to verify that the person voting is registered and hasn’t already voted, without being able to see who the vote is for. Only later will the secrecy envelope actually be opened and counted.

But the risk is that if the rule is implemented very strictly, many voters’ non-fraudulent ballots will be thrown out on what’s essentially a technicality, simply because they misunderstood the rules.

So in the wake of the state Supreme Court ruling on the topic last week, Democrats are calling on the Republican-controlled state legislature to change the law to allow naked ballots to be counted. Yet GOP legislators do not seem eager to take any such step. (Both sides suspect discarding naked ballots will disadvantage Democrats more than Republicans, since more Biden supporters have told pollsters they are interested in voting by mail.)

And this could potentially be very consequential. A Philadelphia official recently raised concerns that as many as 100,000 “naked ballots” could be thrown out — and pointed out that Donald Trump won Pennsylvania in 2016 by just 44,000 votes.”

The rise in murders in the US, explained

“A new report, by the Council on Criminal Justice, found that the homicide rate increased sharply this summer across 27 US cities: “Homicide rates between June and August of 2020 increased by 53% over the same period in 2019, and aggravated assaults went up by 14%.” Other data, from crime analyst Jeff Asher, found that murder is up 28 percent throughout the year so far, compared to the same period in 2019, in a sample of 59 US cities. A preliminary FBI report also found murders up 15 percent nationwide in the first half of 2020.

The increase in homicides is large and widespread enough to raise serious alarms for criminologists and other experts”

“Some experts have cited the protests over the police killings of George Floyd and others — which could’ve had a range of effects, from officers pulling back from their duties to greater community distrust in police, leading to more unchecked violence. Others point to the bad economy. Another potential factor is a huge increase in gun purchases this year. Still others posit boredom and social displacement as a result of physical distancing leading people to cause more trouble.

Above all, though, experts caution it’s simply been a very unusual year with the Covid-19 pandemic. That makes it difficult to say what, exactly, is happening with crime rates.”

“There’s a lot of variation from city to city. Minneapolis, Milwaukee, New York City, and Philadelphia are on the high end of homicides or seeing a flat-out increase. Baltimore, Boston, and Columbus are in line with historical trends or actually down.”

What Trump’s taxes tell us about his foreign entanglements

“Trump has back-slapped the authoritarian leaders of the three main countries cited by the Times’s report: the Philippines, India, and Turkey. It’s less clear now if the bonhomie stems from their diplomatic relationships or because they lead nations that are lucrative for the president.

Turkey is perhaps the best example of this conundrum.

Trump said last year that he was a “big fan of” President Recep Tayyip Erdoğan, but their relationship hit some snags over Ankara’s attacks on US allies in Syria and its unlawful imprisonment of an American pastor.

When US-Turkey ties were low, the Times recalled a few curiosities:

“[In 2018,] a Turkish business group canceled a conference at Mr. Trump’s Washington hotel; six months later, when the two countries were on better terms, the rescheduled event was attended by Turkish government officials. Turkish Airlines also chose the Trump National Golf Club in suburban Virginia to host an event [in 2017].”

In other words, countries like Turkey can potentially find ways to Trump’s heart by ensuring money goes into his family’s pocket in hopes of altering US foreign policy. The Trump Organization, then, gives nations an unprecedented extra leverage point to influence an American president.”

“If the president makes decisions based on his private interests, and not the public’s, then he’s subjugating the demands of US foreign policy for the bottom line of his family’s business.”

“That issue becomes more acute when you factor in Trump’s $421 million in debt, much of it owed in the next four years. It’s unclear exactly who he owes that money to, but it’s not unreasonable given the scope of the Trump Organization’s foreign business to assume some of the debt is held by foreign lenders”

What Trump has done to the courts, explained

“In less than four years as president, President Trump has done nearly as much to shape the courts as President Obama did in eight years.

Trump hasn’t simply given lots of lifetime appointments to lots of lawyers. He’s filled the bench with some of the smartest, and most ideologically reliable, men and women to be found in the conservative movement. Long after Trump leaves office, these judges will shape American law — pushing it further and further to the right even if the voters soundly reject Trumpism in 2020.”

“Both Obama and Trump appointed two justices to the Supreme Court, but Trump’s impact on the highest Court far exceeds Obama’s, because Trump replaced the relatively moderate conservative Justice Anthony Kennedy with the hard-line conservative Brett Kavanaugh (after appointing conservative Neil Gorsuch to fill Antonin Scalia’s vacant seat). Obama’s appointees — Sonia Sotomayor and Elena Kagan — largely maintained the balance of power on a conservative Court, while Trump has shoved that Court even further to the right.

And that’s not counting Trump Supreme Court nominee Amy Coney Barrett, who is likely to be confirmed soon.

On the courts of appeal, the final word in the overwhelming majority of federal cases, more than one-quarter of active judges are Trump appointees. In less than four years, Trump has named a total of 53 judges to these courts, compared to the 55 Obama appointed during his entire presidency.

In their first terms, Obama appointed 30 appellate judges; President George W. Bush filled only 35 seats on the federal appellate bench; President Clinton, 30; President George H.W. Bush, 42; and President Reagan, 33.”

“Before he became president, Trump promised to delegate the judicial selection process to the Federalist Society, a powerful group of conservative lawyers that counts at least four Supreme Court justices among its members. “We’re going to have great judges, conservative, all picked by the Federalist Society,” Trump told a radio show hosted by the right-wing site Breitbart while he was still a candidate.

The Federalist Society spent decades preparing for this moment, and they’ve helped Trump identify many of the most talented conservative stalwarts in the entire legal profession to place on the bench.”

” “The average age of circuit judges appointed by President Trump is less than 50 years old,” the Trump White House bragged in early November, “a full 10 years younger than the average age of President Obama’s circuit nominees.”

Trump’s nominees will serve for years or even decades after being appointed. Even if Democrats crush the 2020 elections and win majorities in both houses of Congress, these judges will have broad authority to sabotage the new president’s agenda.

There is simply no recent precedent for one president having such a transformative impact on the courts.”

“Broadly speaking, there are two reasons Trump has had such an outsize influence on the federal courts.

The first reason is the effective blockade Senate Majority Leader Mitch McConnell imposed on appellate court confirmations the moment Republicans took over the Senate. McConnell’s effort to block Supreme Court nominee Merrick Garland is well-known. Less well-known are the many lower court nominees who received similar treatment. Under Trump, McConnell has turned the Senate into a machine that churns out judicial confirmations and does little else — he’s ignored literally hundreds of bills passed by the House. Under Obama, by contrast, McConnell’s Senate was the place where judicial nominations went to die.

The numbers here speak for themselves. In the final two years of the Obama presidency, when Republicans controlled the Senate, Obama successfully appointed only two federal appellate judges — and one of those judges, Kara Farnandez Stoll, was confirmed to a highly specialized court that primarily deals with patent law.

By contrast, 10 such judges were confirmed during the same period in the George W. Bush presidency, a period when Democrats controlled the Senate.

The second reason for Trump’s outsize impact on the judiciary is that when Democrats last controlled the Senate, one especially important Democrat — Judiciary Chair Patrick Leahy (VT) — took an unusually expansive view of the rights of the minority party.”

“Leahy, who chaired the Committee for most of the Obama presidency, gave home-state senators a simply extraordinary power to block judicial nominees. Under Leahy, a single senator of either party could veto any nominee to a federal judgeship in their state”

“Red-state Republicans used the power Leahy gave them to hold many judicial seats open until Obama left office. Sen. Ron Johnson (R-WI) effectively held a seat on the United States Court of Appeals for the Seventh Circuit open for eight years until Trump could fill it.”

“The Eastland Rule also weakened Obama’s hand in negotiations with Senate Republicans, and sometimes forced him to name relatively conservative judges in order to placate senators who could veto judicial nominees.”

“While Trump has been very successful at filling the bench with brilliant Republican partisans, a Democratic president is unlikely to enjoy similar success.

A badly malapportioned Senate means that to get even a bare majority in the Senate, Democrats have to win commanding popular vote majorities — and if Democrats don’t control the Senate, Democratic nominees could face the Merrick Garland treatment. Just look at the last two years of the Obama presidency if you want to know how a Republican Senate is likely to treat Democratic judicial nominees.”

The K-shaped economic recovery, explained

“wealthier people and those with white-collar jobs are doing fairly well during this — their jobs are sticking around, they’re cutting some spending, and life is generally fine. Stockholders’ wealth is even going up.

But for less well-off Americans and people who have lost their jobs, it’s different. The stock market isn’t helping them, and for those who are unemployed, expanded unemployment benefits dried up at the end of July. With Congress not in a particular hurry to provide fiscal support, that means a drag on the economy.”