Tuesday, December 10, 2019

News Update on the Ongoing Political Battle in the US

We have repeatedly said that we prefer to avoid politics as much as possible on this blog since the blog is not intended to have any kind of political agenda and is intended to be informational in nature.

We do however, have to monitor political events in the US because they can potentially significantly impact markets and even systemic stability if something very dramatic does take place.

We have reported here during the Trump Administration that the ongoing political battle between the President and his political opponents is ramped up beyond the normal political fighting that really goes on all the time so we have to monitor any impact related to impeachment proceedings and the counter claims that improper actions were taken by high US government officials against the Trump Campaign including claims that some of those actions may have been criminal in nature.

Our take on all this so far has been to advise readers to monitor markets to see if they detect anything truly disruptive is really happening. By this we mean something that could rattle markets to the point that there is actually systemic risk to the entire system. We pointed out that so far markets have mostly ignored everything related to this ongoing political war indicating there is no serious belief that President Trump will eventually be removed from office or that high officials in the previous Administration are likely to be convicted of serious criminal activity.

This week we have a lot of news relevant to this ongoing political battle but still no major impact on markets. So we see no reason to change what we have said here for some time. If we see a major stock market decline (far beyond a normal correction) and/or a major sharp move higher in gold and silver, that would be an indicator that markets are rattled.

This week final impeachment proceedings have led to a vote to impeach the President that will likely end in his acquittal in the Republican controlled Senate since it takes a 2/3 vote to convict and there is no indication the votes are there to convict. It appears that markets are discounting that as the logical outcome and are not indicating any signs of distress.

Also this week we had the release of the report of the Inspector General on the activities of various Justice Department employees in conducting ongoing monitoring of the Trump Campaign leading up to and even following his election. The Inspector General found a lot of problems with the way the investigation was handled, but his report said it did not find evidence of political bias in starting up the investigation.

Attorney General William Barr reacted to the IG report with this statement (pasted in below):

Monday, December 9, 2019

Statement by Attorney General William P. Barr on the Inspector General's Report of the Review of Four FISA Applications and Other Aspects of the FBI’s Crossfire Hurricane Investigation

Attorney General William P. Barr issued the following statement:
"Nothing is more important than the credibility and integrity of the FBI and the Department of Justice.  That is why we must hold our investigators and prosecutors to the highest ethical and professional standards.  The Inspector General’s investigation has provided critical transparency and accountability, and his work is a credit to the Department of Justice.  I would like to thank the Inspector General and his team.
The Inspector General’s report now makes clear that the FBI launched an intrusive investigation of a U.S. presidential campaign on the thinnest of suspicions that, in my view, were insufficient to justify the steps taken.  It is also clear that, from its inception, the evidence produced by the investigation was consistently exculpatory.  Nevertheless, the investigation and surveillance was pushed forward for the duration of the campaign and deep into President Trump’s administration.  In the rush to obtain and maintain FISA surveillance of Trump campaign associates, FBI officials misled the FISA court, omitted critical exculpatory facts from their filings, and suppressed or ignored information negating the reliability of their principal source.  The Inspector General found the explanations given for these actions unsatisfactory.  While most of the misconduct identified by the Inspector General was committed in 2016 and 2017 by a small group of now-former FBI officials, the malfeasance and misfeasance detailed in the Inspector General’s report reflects a clear abuse of the FISA process.
FISA is an essential tool for the protection of the safety of the American people.  The Department of Justice and the FBI are committed to taking whatever steps are necessary to rectify the abuses that occurred and to ensure the integrity of the FISA process going forward.
No one is more dismayed about the handling of these FISA applications than Director Wray.  I have full confidence in Director Wray and his team at the FBI, as well as the thousands of dedicated line agents who work tirelessly to protect our country.  I thank the Director for the comprehensive set of proposed reforms he is announcing today, and I look forward to working with him to implement these and any other appropriate measures.
With respect to DOJ personnel discussed in the report, the Department will follow all appropriate processes and procedures, including as to any potential disciplinary action."

US Attorney John Durham who was tasked by Attorney General Barr to look into the possible criminal abuse of the system during all this activity also issued this statement (pasted in below):

Monday, December 9, 2019

Statement of U.S. Attorney John H. Durham

“I have the utmost respect for the mission of the Office of Inspector General and the comprehensive work that went into the report prepared by Mr. Horowitz and his staff.  However, our investigation is not limited to developing information from within component parts of the Justice Department.  Our investigation has included developing information from other persons and entities, both in the U.S. and outside of the U.S.  Based on the evidence collected to date, and while our investigation is ongoing, last month we advised the Inspector General that we do not agree with some of the report’s conclusions as to predication and how the FBI case was opened.” 

My added comments: It appears that there is still nothing that has upset markets that has emerged from all this. However, the statements by the Attorney General and the U.S. Attorney do imply that a criminal investigation is still ongoing and is looking into activities beyond the scope of the investigation released by the Inspector General.  It is interesting to note that U.S. Attorney Durham states that he is looking at information "from other persons and entities, both in the U.S. and outside of the U.S." The Inspector General would not have access to people outside the U.S. Justice Department for his investigation so the result of that investigation will be closely watched in coming months.

So, we will just continue to monitor events to see if anything significant enough to disrupt markets does eventually emerge.


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