DealBook: A Push to Let the U.S. Charge Foreign Officials With Bribery

Peter J. Henning

5-7 minutes - Source: THE NEW YORK TIMES

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DealBook|A Push to Let the U.S. Charge Foreign Officials With Bribery

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The Foreign Corrupt Practices Act’s prohibition on paying bribes abroad is limited to companies in the United States and those acting in this country.CreditCreditManuel Balce Ceneta/Associated Press

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One of the hallmarks of the Foreign Corrupt Practices Act has been that it cannot be used against a foreign official who demands or takes a bribe for helping a company win a contract or retain business.
A bill introduced in Congress this month seeks to change that. Called the Foreign Extortion Prevention Act, the legislation would expand the prohibition on bribery to foreign officials who demanded or solicited bribes.
The Foreign Corrupt Practices Act’s prohibition on paying bribes abroad is limited to companies in the United States and those acting in this country. It has always excluded the foreign official who takes the bribe, and courts over the years have reaffirmed that.

In United States v. Castle, a 1991 decision, the United States Court of Appeals for the Fifth Circuit found that two Canadian officials could not be prosecuted for a conspiracy to violate the F.C.P.A. because Congress exempted foreign officials. In United States v. Hoskins, a 2018 ruling, the federal appeals court in Manhattan held that a foreign national who was never in the United States could not be prosecuted under the foreign bribery law because “Congress did not intend for persons outside of the statute’s carefully delimited categories to be subject to conspiracy or complicity liability.”
The bill, which has both Democrats and Republicans as sponsors, would put the prohibition on a foreign official’s accepting a bribe under the federal anti-bribery statute, 18 U.S.C. § 201, rather than the Foreign Corrupt Practices Act. The proposal would also make it a crime for a foreign official “otherwise than as provided by law for the proper discharge of official duty” to demand or accept anything of value for being influenced in the performance of official responsibilities.
But putting the prohibition under the federal anti-bribery statute would subject it to the limitations the Supreme Court placed on the law in its 2016 ruling in McDonnell v. United States. That case overturned the conviction of a former governor of Virginia by rejecting a broad reading of what is an “official act.” The justices explained that it must involve “a formal exercise of governmental power that is similar in nature to a lawsuit, administrative determination or hearing.” They found that “merely setting up a meeting, hosting an event or contacting an official — without more — does not count as an ‘official act.’”
Favoring a business by arranging meetings or contacting other foreign officials to help it win a contract may not rise to the level of an “official act,” especially if the foreign official who received the bribe did not have the direct authority to decide who should be awarded a contract. So the potential limitations on the federal bribery statute could be read into prosecutions of foreign officials for accepting bribes that violated the F.C.P.A.
The F.C.P.A. also contains two defenses that were added in 1988. One is the “local law” defense, which allows a defendant to show that under the written laws and regulations of the place where the bribe occurred that it was not illegal. Another defense permits small “facilitation payments” to obtain routine government action in the country. In both situations, a foreign official could argue that these defenses should preclude liability for accepting a payment.

A greater potential issue for the Justice Department if the legislation becomes law is whether a foreign official will be brought to the United States to face a criminal charge. If the person is still in office, a foreign government may be reluctant to send the person to America. But a criminal indictment would most likely limit where the foreign official could travel. The person would need to avoid countries that have an extradition treaty with the United States.
The Department of Justice has not been without tools to punish foreign officials who engage in bribery. The money-laundering statute allows a foreign official receiving money through bribery, misappropriation or theft of public funds to be charged with a crime. Federal prosecutors could also use the Travel Act, which prohibits traveling into the United States to engage in bribery.
Both statutes, though, require either travel to the United States or a financial transaction using the United States financial system.
The new legislation would make it much easier to pursue a foreign official. The Justice Department would not have to show a connection to the United States beyond a payment by an American company.
Whether it would result in an increase in prosecutions is a different question. Still, simply charging the official could have the effect of identifying who was responsible in a country for accepting illegal bribes. That should make it easier for American companies and their employees to demand fairness from foreign officials rather than being extorted for payments.

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News: What Will Powell Do at Jackson Hole and What Will It Mean for Gold? Analysts Weigh In

agolubova@kitco.com

6-8 minutes - Source: KITCO

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(Kitco News) - With the Federal Reserve's September rate decision looming, Chair Jerome Powell is likely to leave a lot of room for the central bank to maneuver during his address at the Jackson Hole symposium on Friday, according to analysts.
Analysts do not see Powell opening the door to more than a 25-basis-point cut in September during his Jackson Hole address titled "Challenges for Monetary Policy."
Powell's appearance on Friday could be guided by the same theme as his July press conference, which was not committing the Fed to anything specific, Rhona O'Connell, INTL FCStone head of market analysis for EMEA and Asia, told Kitco News.
"What Powell was doing at that July 31st press conference lays the groundwork for Friday. He, very prudently, did not commit the Fed. He gave himself breathing space, which is a sensible thing to do because he is not in control of the global economy. And he has to give the Fed the flexibility to deal with developments as they come along," O'Connell said.
During the Jackson Hole address, Powell is likely to open the door to another 25-basis-point cut but avoid promising anything more.
"Powell will be aware of the fact that the first rate cut in July almost triggered uncertainty amongst the consumers because it raised concern around whether they should be spending right now," O'Connell noted.
The Fed wants to get more stimulus into the market, but avoid any fear that could postpone any big purchases.
"Another 25 basis points is probably prudent to get more stimulus into the market, but a 50-point cut might send red flashing lights into consumer sentiment and might be self-defeating," O'Connell added.
Robust U.S. economic data will also force Powell to avoid "paining [the Fed] into another corner," BBH head of global currency strategy Win Thin said on Monday.
"While the door has and should be left open to further action, we do not think Powell will paint the Fed into a corner again, not when the data suggest otherwise," Thin wrote. "Indeed, the picture painted last week by the U.S. data is a good one. Headline retail sales rose 0.7% m/m vs. 0.3% expected … The so-called control group used for GDP calculations jumped 1.0% m/m vs. 0.4% expected."
Plus, the Federal Reserve is still trying to figure out how it should be reacting to the global trade tensions, Thin added.
"No one can really say what the Fed's likely reaction function is right now with any degree of confidence. Markets clearly believe the Fed will bail Trump out again, but we are not so sure. We do not think that the Fed should reward bad trade and fiscal policies with rate cuts," he said.
Meanwhile, U.S. President Donald Trump has not let up when it came to putting more pressure on the Fed to cut rates more aggressively.
"The Fed Rate, over a fairly short period of time, should be reduced by at least 100 basis points, with perhaps some quantitative easing as well," Trump said in a Twitter post.
BBH, however, views the Fed as reluctant to cut rates again so soon, adding that the central bank will want to observe the actual impact of the trade tariffs first.
"We do not think the Fed wants to be seen as caving to Trump's demands. The Fed is also correct to note that the impact of the tariffs has yet to be fully felt and so remains unknown," Thin said.
Powell will most probably be more hawkish than markets are anticipating, said Pepperstone head of research Chris Weston. "With a 32% chance of a 50bp cut priced into the rates markets for the September FOMC, it feels on balance, that if anything, Powell will be more hawkish than current pricing is suggesting and it could be a USD positive affair," Weston said in a note on Monday.
On Monday afternoon, however, the market sentiment seemed to shift towards a less dovish one. At the time of writing, markets were pricing in a 95% chance of a 25-basis-point cut and just a 5% chance of a 50-point cut, according to CME FedWatch Tool.

Gold, Silver Prices Pull Back as Global Stock Markets Rally https://t.co/44g21I7spA #kitconews #gold #silver #mining #metals #economics #finance #investing

— Kitco NEWS (@KitcoNewsNOW) August 19, 2019

What Does All Of This Mean For Gold?
A more hawkish Powell could translate into more gold price consolidation this week, analysts pointed out.
"At some point when the price fails to deliver further momentum, then you will start seeing some profit-taking. To be up that much in such a short period of time, you would normally have expected a bigger pullback. We hadn't had one," O'Connell said.
It will still be a bull market, added O'Connell, highlighting the next support being at $1,480-$1450.
"Market that has got enough uncertainty. Any downturn will be a correction. We've changed range in gold. In the current environment, it is impossible to call a bear market. $1,600 may well happen, but we won't get that in a straight line," she said.
This week, gold is battling against rebounding equity markets and risk-on sentiment, Kitco's senior technical analyst noted.
"Gold and silver prices are lower in midday U.S. trading Monday, as trader and investor risk appetite has up-ticked markedly to start the trading week … Bull markets, even the strong ones, don't see prices go up every day. In fact, corrective chart consolidation is healthy and suggests the uptrend can be sustained," Wyckoff said.
At the time of writing, December Comex gold was trading at $1,507.20, down 1.08% on the day.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication

Business | White House officials eyeing payroll tax cut in effort to reverse weakening economy

By Damian Paletta Damian 

8-10 minutes - Source: THE WASHINGTON POST

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Several senior White House officials have begun discussing whether to push for a temporary payroll tax cut as a way to arrest an economic slowdown, three people familiar with the discussions said, revealing growing concerns about the economy among President Trump’s top economic aides.

The talks are still in their early stages and have included a range of other tax breaks. The officials also have not decided whether to formally push Congress to approve any of these measures, these people said, speaking on condition of anonymity because they weren’t authorized to disclose internal discussions. But the White House in recent days has begun searching for proposals that could halt a slowing economy.

Even though the discussions within the White House had begun, the White House released a statement disputing that the payroll tax idea was actively under “consideration.”

“As (National Economic Council Director Larry Kudlow) said yesterday, more tax cuts for the American people are certainly on the table, but cutting payroll taxes is not something under consideration at this time,” the statement said.

Discussing whether to cut payroll taxes is part of a rapidly evolving effort within the White House to both exude confidence about the economy’s strength while simultaneously hunting for ways to rescue business and consumer confidence. Business spending already has pulled back, in part because of fears about the trade war, but consumer spending has remained robust. If ordinary Americans begin to tighten their belts later this year, the economy could suffer new strain.

Millions of Americans pay a “payroll tax” on their earnings, a 6.2 percent levy that is used to finance Social Security programs. The payroll tax was last cut in 2011 and 2012 during the Obama administration to 4.2 percent, as a way to encourage more consumer spending during the recent economic downturn. But the cut was allowed to reset back up to 6.2 percent in 2013.

Workers pay payroll taxes on income up to $132,900, so cutting the tax has remained a popular idea for many lawmakers, especially Democrats, seeking to deliver savings for middle-income earners and not the wealthiest Americans. But payroll tax cuts can also add dramatically to the deficit and – depending on how they are designed – pull billions of dollars away from Social Security.

The payroll tax cuts during the Obama administration reduced taxes by more than $100 billion each year, but the Obama administration directed the lost revenue to Social Security programs, so those initiatives didn’t lose money. The cuts added to the deficit, however.

The size of the cut could equate to a bigger tax cut for many families than the 2017 tax law.

The Trump administration discussions about whether to pursue a new payroll tax cut have only begun in recent days, the three people said, and specific details about the design have not been reached yet.

Trump and top aides have spent the past few days trying to convince the public that the economy is strong and that fears about a recession are misguided. But White House officials quietly have begun scrambling for new ideas to reverse public concerns and boost business confidence.

Some administration officials have felt that planning for an economic downturn would send a negative perception to the public and make things worse, but Trump has spent much of the past week conferring with business executives and other confidants seeking input on what they are seeing in the economy.

There are signs the U.S. economy is slowing, and economists fear that Germany and the United Kingdom already are tipping towards a recession. So far, consumer spending has remained one of the U.S. economy’s bright spots, and White House officials are aware that Trump’s reelection chances could hinge on the economy staying strong into next year.

Payroll tax cuts have remained popular with Democrats largely because they are seen as targeting working Americans, and the money is often immediately spent by consumers and not saved. That way, the money gives consumers more spending power, but it also helps businesses who rely on the income.

The White House talks are at such an early stage that they have not begun consulting with key lawmakers yet.

A spokesman for Senate Finance Committee Chairman Chuck Grassley said the lawmaker had not discussed a payroll tax cut with the White House, and that “at this point, recession seems to be more of a political wish by Democrats than an economic reality.”

White House officials have become acutely focused on protecting strong levels of consumer spending. That’s because one of the biggest causes of economic downturns is a pullback in consumer spending. That hurts businesses, which then lay off workers, who then cut back on spending — a painful economic loop.

In the past, Democrats have strongly supported payroll tax cuts, while Republicans have been more resistent. Republicans have complained that these cuts do not help the economy and disproportionately harm the deficit.

White House officials have shifted wildly in recent days with varying assessments about the economy. White House economic adviser Larry Kudlow has sought to convey optimism, but Trump has been less consistent.

The president on Monday sought to play down the risk of a recession while also pinning the blame for a potential economic downturn on the Federal Reserve, chastising the central bank’s chairman, Jerome H. Powell, for a “horrendous lack of vision.”

In a tweet, Trump also called for the Fed to reduce interest rates by at least 100 basis points, marking an escalation of his demands on the central bank. Trump has frequently lashed out at Powell but had never used the phrase “basis points” in a tweet or made such a specific demand.

“Our Economy is very strong, despite the horrendous lack of vision by Jay Powell and the Fed, but the Democrats are trying to ‘will’ the Economy to be bad for purposes of the 2020 Election,” Trump tweeted. “Very Selfish! Our dollar is so strong that it is sadly hurting other parts of the world.”

He then declared that interest rates, “over a fairly short period of time, should be reduced by at least 100 basis points, with perhaps some quantitative easing as well.”

“If that happened, our Economy would be even better, and the World Economy would be greatly and quickly enhanced-good for everyone!” he said.

The Fed funds rate, which Trump is trying to tell central bankers to cut, is currently set at 2.25 percent. Slashing it 100 basis points would lower this rate to 1.25 percent, giving them very little additional wiggle room to maneuver if a full-fledged recession began.

His directive for them to launch a new phase of “quantitative easing” is shorthand for asking the Fed to pump more money into the economy, a step that could weaken the U.S. dollar. This is also seen as an extreme step that central bankers take when they are trying to urgently address a slumping economy, not a tactic that is employed when the economy is still growing.

Fed officials have said they do not make decisions based on political pressure, but Trump has taken his attacks on the central bank to new extremes, particularly this month amid numerous signs that the U.S. economy is weakening more than expected.

After a tumultuous week in the markets suggested that the economy is heading onto shaky ground, Trump and his top officials have touted what they believe are the economy’s strengths, particularly consumer spending, and predicted that a recession will not occur.

As concerns mount, Kudlow has scheduled briefing calls this week with state and local business leaders, conservative groups, and others to both guage the economy’s strength and seek more input.

White House spokesman Judd Deere said the calls, which “have been long-planned,” will focus on Trump’s economic agenda, including issues such as deregulation and energy production.

But even as the White House has dismissed the notion that the country may be headed toward a recession, Trump and his aides have sent mixed messages.

In an exchange with reporters in Morristown, N.J., shortly before taking off for Washington on Sunday evening, Trump brushed aside the possibility of a downturn, saying, “I don’t see a recession.”

“I mean, the world is in a recession right now — although that’s too big a statement,” he added, in a remark that appeared to undercut his effort to calm fears.

- Felicia Sonmez contributed to this report.

FX | Currency: Yen, Swiss franc fall on optimism about central bank action

3 minutes - Source: CNBC

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The safe-haven yen and Swiss franc retreated against the dollar on Monday, as risk sentiment gradually improved after a week of turmoil on hopes that major central banks would look to launch fresh stimulus measures to lift their sluggish economies.
The Japanese currency fell for a third straight session versus the greenback, while the Swiss unit slid to a two-week low against the dollar.
Optimism about government action to avert recession concerns in the United States, which was triggered U.S. Federal Reserve’s symposium in Jackson Hole, Wyoming, toward the end of the week, where central bankers could announce key measures.
China also unveiled interest rate reforms expected to lower corporate borrowing costs, which helped lift the market’s mood, while the prospect of Germany’s coalition government ditching its balanced budget rule to take on new debt and launch stimulus steps also boosted risk appetite.
“We think the more accommodative central bank backdrop should help insulate the downside in risk markets,” said Mazen Issa, senior FX strategist at TD Securities in New York. “With markets fixated on the (Jackson Hole) symposium later this week and little data to deter focus, we are biased to see an extension of (last) Friday’s relief rally in risk extend in the coming days, barring another Trump Tweet-bomb,” he added, referring to U.S. President Donald Trump’s penchant for announcing policy or making market-moving comments on Twitter.
In morning trading, the dollar rose 0.1% against the yen to 106.51 yen, helping push the dollar index trade higher on the day to 98.239. The euro was up versus the greenback at $1.1101, after falling 1% last week, its biggest weekly drop since early July.
Against the Swiss franc, the dollar climbed 0.2% to 0.9801 franc. Sight deposits at the Swiss National Bank posted another big weekly rise, indicating more intervention from policymakers.

FED EYED

Investor optimism is also likely to be capped before a speech by Fed Chairman Jerome Powell later this week at the Jackson Hole conference.
Market strategists believe his comments will be aimed at reassuring nervous markets that the Fed will remain in an easing stance and set the stage for more rate cuts after a quarter-percentage-point rate cut in July.
“Powell’s speech will set the stage for, at the minimum, a 25 basis-points-rate cut at the September meeting, stressing that quantitative tightening is over,” said Elsa Lignos, global head of FX strategy at RBC Capital Markets.
Money markets are pricing in a cumulative 67 basis points of rate cuts from the Fed by the end of the year.

Bonds | U.S. Treasury Yield Report: US Treasury yields climb as recession fears ease

Thomas Franck

3-4 minutes - Source: CNBC

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U.S. government debt yields climbed on Monday as a more positive market and economic outlook goaded investors back into riskier assets.
The yield on the benchmark 10-year Treasury note rose 6 basis points to 1.6% while the rate on Treasurys maturing in two years rose 5 basis points to 1.541%. The yield on the 30-year Treasury bond, which hit new all-time lows last week, was also higher at 2.083%.
The spread between the 2-year Treasury yield and that of the 10-year inverted in intraday trading on Wednesday for the first time in over a decade, a sign many consider a reliable recession indicator. That portion of the yield curve steepened on Monday and was last seen positive at 8 basis points.
Market focus is largely attuned to global central banks, as hopes of more stimulus from major economies such as China and Germany soothed investors’ concerns about a global economic downturn.
The Commerce Department was preparing to extend the length of a license that has allowed Huawei to continue business with the U.S. companies to service existing customers despite the White House’s concerns over national security, according to report from the Wall Street Journal and Reuters.
Huawei’s business in the U.S. is one of the most contentious points in the ongoing trade war with China.
On Saturday, China’s central bank unveiled a key interest rate reform to help drive borrowing costs lower for companies.
Meanwhile, market participants are likely to closely monitor the Federal Reserve’s Jackson Hole symposium this week in order to get greater clarity on the future path of interest rates. U.S. central bank officials cut interest rates in July and indicated at the time that they’d be open to future easing if warranted.
To be sure, investors see about a 74% chance of a quarter-point rate cut next month.
A spell of weaker-than-expected data, agitation in U.S.-China trade relations and elevated recession fears sent Treasury yields tumbling to multiyear lows last week. For his part, however, President Donald Trump said Sunday he doesn’t see a recession on the horizon in the U.S. after a volatile week for markets.
“I don’t think we’re having a recession,” Trump told reporters. “We’re doing tremendously well. Our consumers are rich. I gave a tremendous tax cut and they’re loaded up with money.”

U.S. Markets Overview: Treasurys chart

TICKER	COMPANY	YIELD	CHANGE	%CHANGE
US 3-MO	U.S. 3 Month Treasury	1.907	0.036	0.00
US 1-YR	U.S. 1 Year Treasury	1.751	0.052	0.00
US 2-YR	U.S. 2 Year Treasury	1.547	0.069	0.00
US 5-YR	U.S. 5 Year Treasury	1.475	0.061	0.00
US 10-YR	U.S. 10 Year Treasury	1.605	0.065	0.00
US 30-YR	U.S. 30 Year Treasury	2.085	0.085	0.00

Dow | Markets | Wall Street Market Report | Dow rallies more than 200 points as Wall Street continues rebound from August sell-off

Fred Imbert

4-5 minutes - Source: CNBC

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Stocks rose sharply on Monday as Treasury yields rebounded, quelling fears of a possible recession. Equities also got a boost after the U.S. agreed to extend a temporary reprieve to Chinese telecom giant Huawei.
The Dow Jones Industrial Average traded 280 points higher, or 1.1%, led by Cisco Systems and Walgreens Boots Alliance. The S&P 500 gained 1.3% as the energy and tech sectors outperformed. The Nasdaq Composite advanced 1.4%.
These gains add to a rebound that started last week after the Dow posted its worst session of 2019. The 30-stock index plummeted 800 points, or 3.1% on Wednesday before regaining some of the lost ground on Thursday and Friday. The S&P 500 is still down 1.9% in August and off more than 3% from a recent record.
The benchmark 10-year Treasury yields rose to about 1.6% from around 1.54%. Bank shares rose along with yields. Bank of America traded 0.8% higher while J.P. Morgan Chase gained 1.1%. Citigroup climbed 1.3%.
“We’re seeing more stabilization, and it’s really off the back of more stimulus in the air,” said Gregory Faranello, head of U.S. rates at AmeriVet Securities. “We’re just taking a little bit of a break but I’m not entirely convinced that the move lower on rates is over.”
The People’s Bank of China unveiled an interest-rate reform over the weekend aimed at lowering borrowing costs for Chinese companies. In Germany, the government is reportedly preparing fiscal stimulus measures in case the country’s economy falls into a recession. Economic growth in China and Germany has slowed down this year amid tighter trade conditions, leading investors to rush into safe havens like the 10-year Treasury note.
Last week, the 10-year yield fell to its lowest level in more than three years and briefly traded below its 2-year counterpart. This is referred to as a yield-curve inversion and is seen by traders as a potential signal that a recession may be on the horizon.

Traders work on the floor of the New York Stock Exchange (NYSE) as the Federal Reserve Board Chairman Jerome Powell holds a news conference on December 19, 2018 in New York City.
Spencer Platt | Getty Images

Ed Yardeni, president and chief investment strategist at Yardeni Research, thinks it might be premature to call for a recession now.
“An inverted yield curve has predicted 10 of the last 7 recessions. In other words, it isn’t as accurate a predictor of economic downturns as widely believed,” Yardeni wrote in a note to clients. “It can be misleading, having given three false signals of a recession.”
President Donald Trump said Sunday he doesn’t see a recession on the horizon in the U.S. after a volatile week for markets.
“I don’t think we’re having a recession,” Trump told reporters. “We’re doing tremendously well. Our consumers are rich. I gave a tremendous tax cut and they’re loaded up with money.”
Fears of a recession come as the U.S. and China engage each other in a trade war. Over the past year, the two countries have slapped tariffs on billions of dollars worth of their goods. The U.S. has also targeted Huawei in the trade war, making it more difficult for U.S. companies to do business with the Chinese telecom.
“I’m not convinced that we’re going to get out of this mess unless we get a full-blown trade agreement, which I don’t think will happen this calendar year,” said Randy Frederick, vice president of trading and derivatives at Charles Schwab. “Every few minutes something changes and that creates volatility.”
“We’re going to continue to have big up days and big down days. That’s what volatility means,” he said.
However, Commerce Secretary Wilbur Ross said the U.S. extended a license for 90 days that allows Huawei to continue business with the U.S. companies to service existing customers.
Shares of chipmakers rose on the news. On Semiconductor and AMD gained 2.9% and 0.9%, respectively. Micron Technology rose 3.4%. The VanEck Vectors Semiconductor ETF (SMH) advanced 1.6%.
Apple also advanced 2.2%. The move up comes after CEO Tim Cook spoke with Trump on Sunday. The U.S. president said Cook made a “good case” that it would be hard for Apple to pay tariffs, when Samsung does not face the same level of duties given its manufacturing in South Korea.

—CNBC’s Silvia Amaro and Spencer Kimball contributed to this report.