Econ 101: SVB and bank runs

What is a bank run and how can we prevent them? A bank run, as I am sure you all know, is a rush by depositors to withdraw their deposits for fear that the bank will not have the money to give them. But there is a lot to unpack there in order to understand what is going on and how runs might be prevented.

It is important to understand the difference between debt and equity—between lending a specific amount of money with specific terms and investing an amount of money in exchange for a share of the earnings (or losses) of the recipient. When you buy shares in a company, it has no obligation to return your money. If you no longer want to invest in that company, you can sell your shares to someone else or the company might, at its discretion, buy them back. Its failure to “return” your money cannot be the cause of a company’s bankruptcy (take over by creditors to collect what the company is no longer able to return).

The deposits that we make in our banks are a special case of debt finance of whatever the banks do with our money. As we know, they lend much of it to people and companies for one thing or another and invest some in hopefully safe assets like Treasury bills and keep a tiny bit on hand for when you need cash. But the deposit contract says that you have the right to withdraw (or pay to someone else) any or all of it whenever you want to. Thus, banks must keep sufficient liquid assets in order to satisfy such withdrawals by selling them in the market when you demand your money back. The Federal Reserve, our lender of last resort, also has facilities for lending to banks needing cash against the collateral of bank assets.

The difference between illiquidity and insolvency is critical as well. A bank is solvent when the value of its assets match or exceed the value of its liabilities (such as your deposits). But having sufficient good assets doesn’t mean that that bank can always honor your deposit withdrawal demand. That is a question of liquidity. Does the bank have enough of its assets backing your deposit in forms that it can pay out immediately (cash in its vault, deposits at the Federal Reserve that it can transfer to another bank or use to buy cash, or assets it can quickly sell such as t-bills, or credit lines with other banks or the Fed, etc.)? “The difference between bank liquidity and capital” Thus, even a solvent bank (positive capital) might fail to honor your withdrawal demand if it doesn’t have sufficient liquid assets. “The big bailout-what next?”

Usually, a bank becomes insolvent when more of its loan assets default than the bank has capital to cover such losses. But as we will see in the case of Silicon Valley Bank, insolvency can also result from a decline in the current market value of a “good” asset. When depositors suspect that their bank might be insolvent, they will withdraw their money while they still can. This tends to use up the bank’s liquid assets compounding the risk of default. As the word spreads the classical bank run takes off (electronically these days rather than long lines outside the bank as in the old days).

The SVB, which specialized in financial services to start-ups and technology companies, enjoyed a huge increase in its deposits over the last four years, increasing from $49 billion in 2018 to $189.2 billion in 2021 dropping back to $175.4 billion at the end of 2022. It invested most of those deposits in “safe” long term government and similar debt. While the default risk for these assets was negligible, the risk of a loss in current market value if market interest rates increased was high. No one will pay the face value of a 3% ten-year bond while current market rates for the same maturity are 4%. The rapid increase in interest rates as the Federal Reserve reversed money growth to fight inflation tanked the current market value of a large share of SVB’s assets making it impossible for it to come up with the cash depositors might demand if they “ran”. That is how runs work. On March 10 SVB was put into receivership.

The original sin of modern banking is financing long term loans/investments with money (demand and savings deposits). Islamic banking, what uses equity investing, is wiser in this regard. During the Savings and Loan crisis in the U.S. in the 1980s and early 90s (financing mortgages with deposits) more than 1000 S&Ls failed when interest rates increased. But in fact, the U.S. bank regulation regime has some good features. While bank risk taking is subject to many, often costly, regulations, the ultimate check on risk taking comes from the knowledge of bank owners that they will lose their entire stake if their bank becomes insolvent. The Federal Deposit Insurance Corporation (FDIC), which oversees America’s deposit insurance scheme, has developed effective bank bankruptcy and resolution procedures that allow it to take over and resolve insolvent banks with barely a ripple. A favorite tool is the so-called purchase and assumption transaction by which a healthy bank buys the assess of the insolvent one and assumes its liabilities (deposits), usually over a weekend. Thousands of insolvent banks have been resolved by the FDIC in the last fifty years. See “Institutional and Legal Impediments to Efficient Insolvent Bank Resolution and Ways to Overcome Them” by Warren Coats and Arno Liuksilo “Warren Coats-17”

Most bank depositors pay no attention to the financial condition of their bank because their deposits are insured against losses, which until last week had been raised to $250,000. But the government has now implicitly extended such insurance to all deposits via accounting and other tricks, thus removing any remaining check on bank risk taking from all depositors. On Monday, President Biden announced that no depositors in SVB (and Signature Bank of New York) would lose any of their deposits. Following the banking crisis of 2008, the Dodd-Frank law further strengthened financial sector regulations. The most important and helpful provisions of this 2,300 page law provided for significant increases and strengthening of bank capital requirements.

The overuse of debt rather than equity financing is a more general weakness in our economy. The IRS should stop subsidizing it. Interest on borrowing is deductible from taxable income while dividends on equity financing are not. While increasing bank capital makes them less run prone, a simpler and easer to regulate approach is to remove the cause of runs all together by eliminating any risk that your bank can’t honor its obligation to return your money on demand. Another few thousand pages of laws and regulations might catch the last mistakes (though it is hard to see why regulators didn’t address the obvious duration risks taken by SVB), but there is an easier, less costly solution. Bank failures result from the mistakes of banks (their owners and managers) and the failure of depositors to more carefully evaluate the soundness of the bank in which they deposit their money. But depositors have little competence to evaluate bank soundness, and why should they be expected to?

Money (bank deposits) should be fully separated from credit. Deposits should not finance loans. Those financing investments should share in its risks (and rewards) via equity financing. “More than decade ago Professor Kotlikoff and [John Goodman] proposed “limited purpose banking” in The New Republic and in Investment News. The idea is that credit market institutions should be intermediaries between savers and investors and should not themselves use depositors’ money to make risky investments.”

When we deposit money in banks for safekeeping and making payments there should never be any doubt about the bank’s ability to return it on demand and thus no reason to “run” on the bank to protect our deposits. This is the essence of the Chicago Plan which would replace so call fractional reserve banking with 100% reserves (deposits at the central bank). When my bank deposit is backed totally by my bank’s deposits at the Fed, I would know with certainty that they were 100% safe and instantly available. The “Chicago Plan” and New Deal Banking Reform | Levy Economics Institute (levyinstitute.org) Narrow banking schemes have a similar motivation. “A proposal for the feds balance sheet”

The District of Columbia

A foreigner dropping into “The District” from wherever, would be flabbergasted by the local debate over Statehood, home rule, etc. for the District.

The powers of Congress enumerated in Article 1, Section 8, of the U.S. Constitution include the power to govern a federal district:

“Clause 17: To exercise exclusive Legislation in all Cases whatsoever, over such District (not exceeding ten Miles square) as may, by Cession of particular States, and the Acceptance of Congress, become the Seat of the Government of the United States, and to exercise like Authority over all Places purchased by the Consent of the Legislature of the State in which the Same shall be, for the Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful Buildings;”

The Residence Act passed by Congress on July 17, 1790, established what is now called the District of Columbia, or Washington D.C., as the capital of the United States. Maryland and Virginia ceded between them 100 square miles of their territory for this purpose. Congress moved from its first capital in Philadelphia to Washington in December 1800. On February 27, 1801, 212 years ago today, the so-called Organic Act was approved giving control of the District to Congress “and took away the right of residents to vote in federal elections.” District of Columbia retrocession – Wikipedia

And in 1812 our British friends burned down the White House forcing James Madison to live in what is now the Arts Club of Washington (of which Ito and I are members).

In March 1847, Congress and Virginia’s General Assembly approved the return (“retrocession”) of Virginia’s contribution to the District of Columbia but the retrocession of Maryland’s contribution failed to pass Congress. Turning Maryland’s part of the district into a new state makes no sense to me at all. But neither does Congress’s continued control over all of Maryland’s portion of the District.

The provisions of the Constitution giving Congress legislative power over the lands needed for and occupied by its facilities would be fully met by returning most of the District to Maryland (thus restoring full voting and other citizen rights to its residents). Virginia did it and so can (and should) Maryland.

Trade once again

Everyone understands that without trade they would be dirt poor. If everyone had to be self-sufficient, they would be lucky to survive. It’s almost as obvious that the wider we can trade the more we can specialize in our comparative advantage raising the incomes of everyone. Where many stumble is at their national borders (though within national borders of large countries some regions restrict trade with other national regions to protect otherwise less efficient enterprises thus lowering incomes in general).

Why should trade be restricted across national borders? Three reasons stand out: two legitimate and one not. A potentially legitimate reason concerns national security. Requiring that products necessary for defense be domestically produced, even at greater cost, reduces the risk of supply chain disruptions. The risk is that this excuse is easily abused to the extent that such protection can turn illegitimate or corrupt.

A second legitimate reason also concerns resilience. The most efficient allocation of productive resources must take account of the risks of disruption to supply chains. We buy insurance for many assets and activities, thus incurring a certain cost, to protect our incomes from risks (large or small) of interruption and potentially larger losses. When buying goods or inputs from cheaper producers located far away, we are exposed to larger risks of supply interruptions. American manufacturers, for example, take these risks into account in deciding where to produce and purchase inputs to their products sold in the U.S.

A government bestowed financial favor on a firm or industry (trade protection, industrial policy) is always part of a quid pro quo. The firm delivers favors to the politicians who favor it. Government protection of otherwise uncompetitive firms increases their viability and profits but at the expense of lower income for the rest of us. Countries that heavily indulge in such protection have suffered lower levels of income. “Trade protection and corruption”

Following World War II, and the establishment of what became the World Trade Organization, barriers to trade (domestic protectionism) were gradually reduced via bilateral and multilateral trade agreements. In the 62 years from 1959 to2021, real United States’ per capita personal income, when measured in constant 2012 dollars to adjust for inflation, increased 297.1%, from $13,971 in 1959 to $55,477 in 2021. This huge increase is the result of increased productivity per worker. But such productivity gains are only possible because of trade (within or across national borders). “The case for trade”

Weaknesses in government programs to facilitate worker adjustments that are a necessary part of a dynamic, growing economy and other geopolitical factors are undermining the freest and most efficient trade (domestic and global) that our prosperity has depended on. “Geo Economic Fragmentation and the Future of Multilateralism” “End globalization?”

The Economist magazine has argued that: “One problem [with protectionism and industrial policies] is their extra economic costs. The Economist estimates that replicating the cumulative investments of firms in the global tech-hardware, green-energy and battery industries would cost $3.1trn-4.6trn (3.2-4.8% of global gdp). Reindustrialisation will raise prices, hurting the poor most. Duplicating green supply chains will make it costlier for America and the world to wean themselves off carbon. History suggests that vast amounts of public money could go to waste…. Yet rescuing the global order will require bolder American leadership that once again rejects the false promise of zero-sum thinking. ” “The destructive new logic that threatens globalisation”

Misinformation and corruption are undermining the basis of our incredible prosperity just when we need to pull together to deal with global warming. We must resist and fight back to restore and preserve our efficient market economies. They would not exist without trade.

Who Decides?

Who decides what we eat, drink, and how to go about being merry? Societies range from those that rely heavily on government determination to those that leave most choices to individuals. At one end of the spectrum, the government determines what it is healthy or safe for us to consume and do and at the other end each person freely makes their own decisions about most aspects of their life. Neither of these extremes is absolute, of course. At the freedom end we are not free to violate the freedom of others (steal their property, assault their bodies, etc.). At the cradle-to-the-grave -government-protection end we safely eat, drink, and enjoy the activities the government allows us to.

America flourished economically and culturally because we were largely free to make our own decisions. Government largely enforced property rights and public safety and provided information on which we could make better informed private choices. We innovated and took calculated risks with the deployment of our ideas and flourished.

In recent decades the government has increasingly restricted our choices to what it determined was good or safe. The superiority of our private choices depends on how well informed and responsible we are. While we and the government may both think we are motivated to act in our personal best interest, the incentive to get it right is stronger for the individual actor. And incentives always matter.

Take but one example—the “War on Drugs.” Despite this war, 11,712 people died from drug overdoses in 2000 rising in two decades to 83,558 in 2020 (from 6,190 to 64,183 for opioids). “Drug overdose deaths-fentanyl-Greenville NC” I believe, with many others, that ending the drug war (legalizing the purchase and consumption of them) and instead educating the public about their effects (honest, fact-based information) would reduce such deaths.

The growing, selling and consuming of Cannabis is now legal in 21 states. When I gave into the social pressure in college to take a drag as a joint was passed around, I learned that it makes me less social. Wine was my better option. Not only do I enjoy wine, but I appreciate its socializing properties. So, it has probably been 50 years since I have smoked marijuana. Its not clear whether its legalization along with better information and education on its pros and cons will increase or decrease or leave unchanged its consumption. The destructive prohibition of alcohol and the organized crime syndicates that grew up to circumvent it and its subsequent repeal did not eliminate the damage that alcoholism visited on some people. However, Americans have generally benefited from the reliance on education and persuasion rather than government coercion. Rather than crime syndicates to distribute illegal booze, we have AA and health facilities to help those who have not been able to resist overusing it.

Challenging and sensitive examples concern racial, sexual and religious discrimination. The Civil Rights Law of 1964 attempted to address racial discrimination but in some ways overreached. The case of same sex marriage and the cake baker come to mind. We are still struggling to find the best balance between potentially conflicting individual rights. I fail to see how the refusal of a baker to cook for the marriage of two men (which violates his religious beliefs), interferes with their right and ability to marry —an arrangement society has always seen as beneficial and important (and thus not to be denied to homosexuals).

The case of affirmative action also provides a challenging example of addressing a problem with social attitudes vs coercion. The Supreme Court decided in 1978 that the prohibition against racial discrimination could be violated for a temporary period in the interest of greater racial diversity and balance. Harvard University chose to discriminate against Asian students, who would have been overrepresented if admitted on the basis of academic merit only, in order to admit a larger number of African Americans. Asian students have challenged Harvard’s policy and the Supreme Court is expected to rule next year in “STUDENTS FOR FAIR ADMISSIONS, INC., Petitioner, v. PRESIDENT & FELLOWS OF HARVARD COLLEGE, Respondent” on the question “Should this Court overrule Grutter v. Bollinger, 539 U.S. 306 (2003), and hold that institutions of higher education cannot use race as a factor in admissions?”

I believe that a public discussion of the benefits of diversity to schools and other institutions as well its contribution toward overcoming earlier and existing negative discrimination against African Americans is the more promising and flexible approach to this issue than government coercion. I find it interesting that many federal court judges take race into account in hiring their clerks. “Appeals court judges consider race of their clerks” This is also an interesting perspective: “How liberals lost their way on affirmative action”

The times are changing

In 1978 China began to free up and open its economy to move its economic policies toward ours. Although the Communist Party of China remained in complete control of the political domain, the growth in China’s economy was dramatic. “According to the World Bank, more than 850 million Chinese people have been lifted out of extreme poverty; China’s poverty rate fell from 88 percent in 1981 to 0.7 percent in 2015, as measured by the percentage of people living on the equivalent of US$1.90 or less per day in 2011 purchasing price parity terms.” “Poverty in China”

As I wrote 11 years ago: “Chinese people strike me as more like us than most any other people (including Europeans) I have met. And who do I mean by “us?” I don’t mean just Anglo Saxons like myself. I mean the hard working, innovative, entrepreneur types who are creating most of the wealth in this country like Google founders, Larry Page (American born Jew) and Sergey Brin (Russian born Jew), or Steve Jobs, who was born in San Francisco to a Syrian father and German-American mother, as well as many Anglo Saxons like myself.” ‘My G20 trip to China”

Sadly, Xi Jinping has been reversing this free market trend with very damaging results to economic growth and personal privacy and freedom in China.

Sadder still, the United States has reversed direction since 9/11 as well, though more slowly. Not only has our government increasingly intruded into our privacy (it didn’t end with Edward Snowden’s revelations: “Civil rights-Brennan-domestic terror-white supremacy”), but it has flooded the economy with excessive regulations, increasing trade restrictions and even the launch of industrial policies and subsidies that violate WTO rules. “US chip war to hit allies as hard as it does China” “Competing with China” Our championing of the rule of law is growing increasingly hollow. Asset forfeiture provides but one example: Coats on the abuse of civil forfeiture” and George Will on civil forfeiture nightmare”

How can this be? Why do we seem to want to be more like China? Many of today’s voters had not been born when the Berlin Wall fell in 1989. We must make the case for free markets and limited government again and again, but in a way that is understood by, and appeals to the concerns and sensitivities of, generations X and Z and our future children. “Global protests-democracy-autocracy”

Econ 101: Student Loan Forgiveness

“The Biden administration recently announced it will forgive roughly $500 billion in student debt…. Borrowers whose income was under $125,000 ($250,000 if married) in either 2020 or 2021 are eligible.” “Does Biden’s student debt forgiveness achieve his stated goals” Biden would forgive this government guaranteed debt by executive order. Congress has not passed a law authorizing it. In my opinion, it should be and presumably will be overturned by the Supreme Court as an overreach of executive authority.

Many people who claim to champion social justice and more equal income distribution favor Biden’s proposal. I assume that they don’t really understand what they wish for. While I covered these issues seven years ago, perhaps some memories should be refreshed: “Two approaches to American governance-the case of higher education financing”

The basic facts are that, aside from the idle rich who might attend college solely for cultural enrichment (which is nice if you can afford it), people attend college to acquire the knowledge and skills that enable them to earn higher incomes than otherwise. “According to new data from the Federal Reserve Bank of New York, the median annual wage for a full-time worker ages 22 to 27 with a high school diploma is $30,000. For a full-time worker with a bachelor’s degree, it’s $52,000…. The return on investment for a college degree is substantial — worth upwards of $800,000 or more in increased earnings over a lifetime.” “Wage gap-college-high school grads” For taxpayers to pay for this education would transfer income from the middle-income class to the higher-income class, not something that social justice champions can justify. Multiple private and government programs pay for low-income students to attend college.

As the amount of student borrowing has skyrocketed, so has the cost of college. “Over the past several decades, the cost of higher education has increased dramatically, more than doubling since 1985 at both public and private universities.” While some have attributed the incomes in the cost of college to the easy access to government guaranteed loans (especially if they don’t have to be repaid), evidence: “points instead to administrative growth as reactive to consumer demand and regulatory requirements…. Most colleges today operate their own systems of justice to comply with federal regulations like Title IX, and HR departments have grown apace with changes in federal regulations about hiring practices.” “A new theory of rising college costs”

“Administrative spending comprised just 26% of total educational spending by American colleges in 1980-1981, while instructional spending comprised 41%. Three decades later, the two categories were almost even: administrative spending made up 24% of schools’ total expenditures, while instructional spending made up 29%…. The factors that drive universities to hire more administrators can be boiled down to a few main explanations, often reflecting a shifting landscape in the higher education, including government regulations, competition between schools, and a modern population of students with increasing needs…. Perhaps most controversial is an increasing raft of federal and state regulations that universities must abide by: the Clery Act, which requires campuses to report their crime activity; new Title IX regulations that govern the handling of sexual assault; and Family Educational Rights and Privacy Act (FERPA) requirements for providing educational records…. A Vanderbilt study of 13 colleges and universities found that regulatory compliance comprises 3 to 11% of schools’ nonhospital operating expenses, taking up 4 to 15% of faculty and staff’s time…. And on a deeper level, colleges and universities are simply being asked to do more. Families expect their sons and daughters to have access to career assistance, readily available health services or counselors if they’re struggling with a mental illness.” “Bureaucrats and buildings-the case for why college is so expensive”

Those choosing to invest in college who are not helped by family and friends and have not worked and saved enough to cover the cost, generally have no credit record or collateral to offer banks or other outside lenders. This is what motivated the government guaranteed student loan program. For the future we should consider college financing arrangements in which the lender has “skin in the game.” To repeat from my blog seven years ago: Milton Friedman in 1955 and repeated in Capitalism and Freedom in 1962 made an interesting proposal for sharing the risk of investing in higher education between the borrowing student and the lender. “Enter income-share agreements ( ISAs ), which are essentially equity instruments for human capital. Investors finance a student’s college education in return for a percentage of their future income over a fixed period. ISAs are not loans and there is no outstanding balance. If students earn more than expected, they will pay more, but they also will pay less—or nothing—if their earnings do not materialize.” “from the Wall Street Journal”

The Student Success Act proposed by Sen. Marco Rubio (R., Fla.) and Rep. Tom Petri (R., Wis.) almost a decade ago (but never adopted) would provide for the collection and publishing of information on the cost and average earnings of graduates of different colleges and fields, which would help students choose where and how to invest in their futures. We need to improve the information on which young people base their college and career choices and ensure that those who would benefit from college but can’t afford it at the time are not there by prevented from doing so. But otherwise, students choosing to benefit from college should pay for their investment.

The difference between Bitcoin and FTX

Bitcoin is a digital currency (cryptocurrency) that can be paid to another bitcoin user willing to accept it via a blockchain account. It is backed by nothing and promises nothing. Its US dollar value has fallen from $65,496 on November 14, 2021, to $15,630 on November 21, 2022.

“FTX Exchange was a leading centralized cryptocurrency exchange specializing in derivatives and leveraged products. Founded in 2018, FTX offered a range of trading products, including derivatives, options, volatility products, and leveraged tokens. It also provided spot markets in more than 300 cryptocurrency trading pairs such as BTC/USDT, ETH/USDT, XRP/USDT, and its native token FTT/USDT.12 In early November 2022, the exchange and the companies in its orbit began a steep fall from grace…. According to its bankruptcy filing, FTX, which was once valued at $32 billion and has $8 billion of liabilities it can’t pay, may have as many as 1 million creditors…. On November 16, a class-action lawsuit was filed in a Florida federal court, alleging that Sam Bankman-Fried created a fraudulent cryptocurrency scheme designed to take advantage of unsophisticated investors from across the country. ” “FTX exchange”

The difference between Bitcoin and FTX is that Bitcoin is a digital coin/token that some believe might achieve wide adoption as money and thus a stable demand that could stabilize its price. In my opinion, this is HIGHLY unlikely. I explained this potential eight years ago: “Cryptocurrencies the bitcoin phenomena” “The future of bitcoin exchanges” But most people buying Bitcoin are gambling that they can sell it for a higher price than they paid for it (first cousins to slot machine addicts).

On the other hand, FTX and its related products and services promised real things and to play by known rules (contracts). On November 11, FTX and its affiliated firms were put into bankruptcy. Billions of dollars where missing? Founder Sam Bankman-Fried (SBF) claims that he was just careless. It appears more likely that he was a lying fraudster. “An attorney also said the firm had been run as a ‘personal fiefdom’ of Bankman-Fried with $300 million spent on real estate such as homes and vacation properties for senior staff.” “Crypto lender genesis says no plans to file bankruptcy imminently” Presumably to promote himself as a good guy and to win influential friends, SBF also contributed millions to charities and politicians.

Most crypto product and service providers want regulations that will give potential investors and customers more confidence in their products but that will not stifle the potential creativity of a dynamic industry. Hopefully congress will get on with it — carefully. “Crypto bill criticized”

“Sam Bankman-Fried, the founder of the FTX exchange and Alameda Research, a cryptocurrency trading platform, seemed to confuse his bank and his companies. According to John Ray, the new CEO in charge of the restructuring of his empire which went bankrupt on November 11, Bankman-Fried received a personal loan of $1 billion from Alameda. He is not alone: the firm, which is a kind of cryptocurrency hedge fund, has also lent $543 million in personal loan to Nishad Singh, an associate of Bankman-Friend, and $55 million to Ryan Salame, the co-CEO of FTX Digital Markets, one of FTX’s affiliates.

“’Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,’ Ray wrote. ‘From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.’” “Bankman-Fried received 1bn in personal loan from his company”

“Bankman-Fried’s net worth peaked at $26 billion.^[11] In October 2022, he had an estimated net worth of $10.5 billion.^[12] However, on November 8, 2022, amid FTX’s solvency crisis, his net worth was estimated to have dropped 94% in a day to $991.5 million, according to the Bloomberg Billionaires Index, the largest one-day drop in the index’s history.^[13]^[10] By November 11, 2022, the Bloomberg Billionaires Index considered Bankman-Fried to have no material wealth.^[14]” “Sam Bankman-Fried”

I assume that jail is next, perhaps in the cell previously used by Bernie Madoff.

If you subscribe to The Economist you can read fascinating details here: “The failure of ftx and Sam Bankman-Fried will leave deep scars”

Lockdown Lessons Learned During Covid

We are two and a half years into the Covid-19 pandemic. Data has accumulated on the effectiveness of lockdowns in reducing deaths and of the costs associated with lockdowns. The overall effectiveness of lockdowns must consider both aspects. Moreover, lockdowns took different forms in different places—total, targeted, etc. Dyani Lewis has provided a very careful review of the major studies of these data in Nature “What Scientist have Learnt from Covid Lockdowns”

To overcome issues of correctly attributing deaths to Covid, excess deaths is generally used (excess from all causes each period over the recent—usually five year– average for the same period). “The pre-vaccine period of the pandemic does show that countries that acted harshly and swiftly — the ‘go hard, go fast’ approach — often fared better than those that waited to implement lockdown policies. China’s harsh lockdowns eliminated COVID-19 locally, for a time.” But the economic and public moral costs in China are very large and continue to mount. “The most effective measures were policies banning small gatherings and closing businesses and schools, closely followed by land-border restrictions and national lockdowns. Less-intrusive measures — such as government support for vulnerable populations, and risk-communication strategies — also had an impact. Airport health checks, however, had no discernible benefit….

“The impacts of lockdowns also differed from one pandemic wave to the next. By the time second waves emerged, so much had been learnt about the virus that people’s behaviour was quite different…. These changes dampened the extent to which countries benefited from lockdowns” because people adjusted on their own.

“There’s a fundamental difficulty with analysing the effects of COVID-19 lockdowns: it is hard to know what would have happened in their absence…. [Many studies] could have overstated the size of the benefit because it assumes that without lockdown mandates, people wouldn’t have reduced their social contacts. In reality, rising deaths would probably have changed people’s behaviour….

“And lockdown policies did bring costs. Although they delayed outbreaks, saving lives by allowing countries to hang on for vaccines and drugs, they also brought significant social isolation and associated mental-health problems, rising rates of domestic violence and violence against women, cancelled medical appointments and disruption to education for children and university students. And they were often (although not always) accompanied by economic downturns….

“Pure economic analyses of whether lockdowns were worth it generally try to estimate the value of lives saved and compare that with the costs of economic downturns. But there is no consensus on how to make this comparison…. Not all harms can be [objectively measured]. Loss of education because of school closures might indirectly harm children in the long run, potentially decreasing their future earnings and placing them at greater risk of poorer health outcomes…. Such harms are so far off — decades, in some cases.”

Learning the lessons that experience teaches us is very important when formulating public policy. But extracting those lessons can be difficult. Lewis’s summary is the best I have read, and I urge you to read it. I continue to believe that when we are provided the best understanding available (which obviously grows over time) we will each make the best decisions for ourselves and our families, striking the balance that is best for each of us.

Affirmative Action

Like most Americans I believe that our laws should be color blind. That means that race should not be a factor in who to hire or who to admit to college. But put aside what is required by the law for a moment and ask: what is good admission policy for a university? What we consider “good policy” itself depends on the purpose or objective of the policy.

Let me focus on private universities and colleges that are not benefiting from taxpayer (our) money, if there are any, who are thus free to determine what they consider “good policy.” Such universities are likely to want to provide the best educational experience for their students possible. Having smart, motivated students is an important component of an enriching intellectually stimulating environment. Diversity of ideas, personalities, and ethnic backgrounds is also a good component of such an environment.

Basing student admissions solely on SAT scores or such metrics will, unfortunately, over-represent Asians and underrepresent blacks. The goal would not necessarily be exact proportionality of the share of these groups in the population (U.S. population or global population??), but it might well be sensible given the desire for diversity, to shade admissions a bit toward more blacks and fewer Asians. Enlightened university admissions officers might well operate this way. Catholic and Hebrew schools have a different purpose, but it is expressed more on the side of applicants than admissions officers. My point is that there can be a good and proper place for such judgements in a “good” society.

“In 2003, Justice Sandra Day O’Connor, writing the majority opinion upholding affirmative action in Grutter v. Bollinger, expressed the hope that race-conscious admissions would be unnecessary 25 years hence.” “Harvard UNC affirmative action admissions before Supreme Court” Because of earlier discrimination against blacks, in part through inferior elementary and secondary education, it was accepted as OK to temporarily discriminate modestly in favor of blacks when admitting students to a college or university. Such “affirmative action” has increased black college enrollment considerably. “Affirmative action-supreme court cases”

But 40 years of affirmative action (the waving of equal treatment under the law) is stretching the notion of temporary and the SC is likely to end it. In many respects it is about time. However, it also illustrates that the rigidity of a legal remedy in place of more nuanced judgement can be second best. This is a dilemma.

While enjoying an intellectually stimulating time in college may help attract good students, the real test of a college’s success is the extent to which the experience promotes a richer (in all senses) life after graduation. This requires admitting students who will benefit most from what the college offers, whatever their starting point. It requires looking deeper than such indicators as SAT scores. Prof. Roland Fryer’s experience suggests possible approaches. “Affirmative action-Supreme Court and college admissions”

As he often does, George Will confronts us with the frequent contradictions in our thinking on such tricky issues: “College racial discrimination and affirmative action”

The Role of Social Media

With Elon Musk’s purchase of Twitter, the discussion of whether and how to regulate such platforms is intensifying. “Social media and false information” Francis Fukuyama, Barak Richman, and Ashish Goel have reviewed this issue in the current issue of Foreign Affairs: “Fukuyama-How to save democracy from technology” Their review is well worth reading. They offer a new suggestion for shifting control from Facebook, Twitter, etc. to their users (us) that deserves attention.

“If regulation, breakup, data portability, and privacy law all fall short, then what remains to be done about concentrated platform power? One of the most promising solutions has received little attention: middleware. Middleware is generally defined as software that rides on top of an existing platform and can modify the presentation of underlying data…. Middleware could allow users to choose how information is curated and filtered for them. [Middleware] would step in and take over the editorial gateway functions currently filled by dominant technology platforms whose algorithms are opaque.”

There are many issues to resolve with this approach, but they should be explored. I already rely on a service that reports on the trustworthiness of news sources (does the source adhere to high journalistic standards, etc.) https://www.newsguardtech.com/. The proposed middleware would put what we see on Facebook, Twitter, Instagram, etc. in our own hands where it belongs. But, as we must never forget, our freedom produces results no better than how wisely we use it. If we chose to see only comments and articles with views we agree with, we will remain in the bubble these social media platforms already put us in.

Young people (and old) should be taught the importance of checking “other” views along with what they already believe. I am reminded of the left-wing dad who complained that his kids graduated from college with all the “right” views but having heard nothing else they were totally unable to defend any of them. “Social media and fake news”

The Mar-a-Lago Raid

Former President Trump is under investigation for a number of possible crimes—e.g., tax evasion, attack on the Capital on Jan. 6, illegal removal or destruction of federal government records. This note, written together with Odell Huff, deals only with the possible crimes in relation to which the FBI raided Trump’s home at Mar-a-Lago. The FBI obtained the search warrant for Mar-a-Lago as part of an investigation into Trump’s handling of presidential documents. The search warrant listed three federal criminal statutes:

violations of the Espionage Act regarding unauthorized retention of national defense information;
destroying or concealing records “with the intent to impede obstruct or influence” federal government activity;
illegal removal or destruction of federal government records (without respect to cause).

See Wikipedia’s extensive report: “FBI search of Mar-a-Lago.”[1]

An immediate outcry from Donald Trump asked why such a raid was needed, claiming it was political, and called for a comparison of the mistreatment of government emails by then Secretary of State Hillary Clinton.

In Hillary Clinton’s case, which is reviewed in more detail in the second half of this note, her improper use of her personal computer for State Department messages, many of which she destroyed, was, in essence, forgiven. The FBI Director James Comey concluded (inappropriately, as it was properly a decision for the Justice Department to make) that: “Although there is evidence of potential violations of the statutes regarding the handling of classified information, our judgment is that no reasonable prosecutor would bring such a case.”[2]

Donald Trump

Was the raid on a former President justified and should Donald Trump be charged for the crimes he committed?

Executive Summary of Trump’s Document Handling

All documents and communications of American Presidents must be preserved and are the property of the National Archives and Records Administration (NARA). “The Presidential Records Act (44 USC §22) establishes that presidential records belong to the United States and must be surrendered to the Archivist of the United States at the end of a president’s term of office (or second term of office, if consecutive). Unauthorized removal and retention of classified information of the United States government is a criminal offense under U.S. federal law; it has been a felony since the enactment of the FISA Amendments Reauthorization Act of 2017, which was signed into law by President Donald Trump in January 2018 and increased the maximum term of imprisonment for this offense from one year to five years.”[3]

In violation of the Presidential Records Act, “Trump regularly shredded ‘both sensitive and mundane’ papers while at the White House, at Mar-a-Lago, and on Air Force One.”[4] Moreover, upon leaving the White House at the end of his term, Trump sent two vans full of White House material to Mar-a-Lago in what White House aides described as a chaotic rush (as if he didn’t think he would really be leaving).

In May 2021 NARA realized that they had not received all the documents they were required to preserve and began discussions with Trump’s documents team to get them. “Trump reportedly went through the boxes at Mar-a-Lago at the end of 2021…. In January 2022, NARA retrieved 15 boxes of documents, gifts, and other government property from Mar-a-Lago…. From these 15 boxes, archivists and federal agents determined that 184 unique documents (totaling 700 pages) had classification markings, of which 25 documents were marked ‘top secret’, 92 ‘secret’ and 67 ‘confidential’….

Among the more than 11,000 government documents recovered since January 2022, over 100, and possibly over 320, were classified and some included nuclear-related material. The seized documents also included FBI, CIA, and NSA information about national security interests. Two-thirds of the recovered classified material was obtained in the first half of 2022, while the rest (103 documents) was seized in the August search of Mar-a-Lago.”[5]

In short, Trump’s promises to return all of the documents he had illegally taken where not honored and the raid on Mar-a-Lago was a last resort effort to obtain them. It proved to be the only way of obtaining them and was thus necessary and justified.[6]

Trump has clearly violated the Presidential Records Act. He is also guilty of the unauthorized removal and retention of classified information of the United States government. With regard to the second of these crimes—unauthorized removal and retention of classified information—Trump’s claim that he had declassified everything is without merit. “A sitting president has broad Constitutional powers to classify (and declassify) information. However, stemming from claims by former President Trump that documents at Mar-a-Lago were declassified, a Congressional Research Service policy paper on the Mar-a-Lago search warrant highlights that the declassification process is bound by regulations: per 32 CFR §2001.25, it requires markings that are ‘uniformly and conspicuously applied to leave no doubt about the declassified status of the information and who authorized the declassification.’”[7]

We do not yet know whether Trump’s possession of Top Secret and Secret documents has jeopardized our national security.

Should Trump be charged for these crimes?

Donald Trump should be held to the same standards as was Hillary Clinton, who was not charged for her crimes.Clinton’s use of her own computer clearly violated State Department rules and procedures and her resistance and delay in turning over what phone records she didn’t destroy does not reflect well on her to say the least. According to The Washington Post’s Fact Checker, Glenn Kessler, “Clinton, in her tweet, suggests none of her emails were marked classified. That’s technically correct…. Clinton has good reason for making a distinction with Trump.” [8] However, both Kessler and Clinton are technically incorrect because at least three emails were marked with, according to FBI Director Comey, “portion markings,” and another “110 messages contained information that was classified at the time it was sent.”[9]

Nevertheless, Trump’s violations of record keeping requirements were dramatically more numerous and serious. The government-owned documents Trump sent to his Mar-o-Lago residence contained hundreds of conspicuously marked Top Secret, Secret, and Confidential documents, some of which could jeopardize American security and the security of allies (at this writing the official assessment of such potential damage has not been completed). These violations of the law were of an entirely different magnitude than those of Hillary Clinton.

Surely Trump should be indicted for these crimes (separately from whether he should be indicted for his efforts to overturn the election of 2020, Trump University fraud, and/or tax fraud). Equal treatment under the law seems to demand it. Former Presidents should not be above the law. The Justice Department would have to present its case and evidence in a court of law in front of a jury where Trump could defend himself under oath (if he chose to). Especially given the political overtones of the case and the fact that the Attorney General was appointed by Trump’s successor, the case would need to be strong enough to convince the vast majority of American’s that Trump was being treated fairly.

The pros and cons of charging Trump are explored in more detail in the attached articles.[10]^,[11]

So Garland has a dilemma: Indict or don’t indict. Risk losing or decline to prosecute and let Trump walk away. In concluding that “Donald Trump Is Not Above the Law” and should be indicted, The New York Times acknowledged last month, “Pursuing prosecution of Mr. Trump could further entrench support for him and play into the conspiracy theories he has sought to stoke. It could inflame the bitter partisan divide, even to the point of civil unrest. If viewed as illegitimate, a trial could also further undermine confidence in the rule of law, whatever the eventual outcome.”[12]

Such a trial runs the risk of provoking significant civil unrest (yes, we seem to have sunk so low). It is not impossible that one of the twelve jurors would refuse to convict Trump. Thus, an alternative suggestion is to hold a Grand Jury hearing in which all of the evidence is laid out for all to see, leaving it to voters to determine Trump’s ultimate fate. We would personally prefer to see this dangerous man behind bars.

Chronology

The following is excerpted from the CNN published timeline of the case.[13]

May 2021

An official from NARA contacts Trump’s team after realizing that several important documents weren’t handed over before Trump left the White House. The missing documents include some of Trump’s correspondence with North Korean leader Kim Jong Un, as well as the map of Hurricane Dorian that Trump infamously altered with a sharpie pen.

Fall 2021

NARA grows frustrated with the slow pace of document turnover after several months of conversations with the Trump team. NARA reaches out to another Trump attorney to intervene. The archivist asks about several boxes of records that were apparently taken to Mar-a-Lago during Trump’s relocation to Florida. NARA still doesn’t receive the White House documents they are searching for.

January 2022

After months of discussions with Trump’s team, NARA retrieves 15 boxes of Trump White House records from Mar-a-Lago. The boxes contained some materials that were part of “special access programs,” known as SAP, which is a classification that includes protocols to significantly limit who would have access to the information. NARA says in a statement that some of the records it received at the end of Trump’s administration were “torn up by former President Trump,” and that White House officials had to tape them back together. Not all the torn-up documents were reconstructed, NARA says.

February 9, 2022

News outlets, including CNN, report that NARA asked the Justice Department to investigate Trump’s handling of White House records and whether he violated the Presidential Records Act and other laws related to classified information. The Presidential Records Act requires all records created by a sitting president to be turned over to the National Archives at the end of their administration.

April and May 2022

On April 7, NARA publicly acknowledges for the first time that the Justice Department is involved, and news outlets report that prosecutors have launched a criminal probe into Trump’s mishandling of classified documents. Around this time, FBI agents quietly interview Trump aides at Mar-a-Lago about the handling of presidential records as part of their widening investigation.

April 11, 2022

The FBI asks NARA for access to the 15 boxes it retrieved from Mar-a-Lago in January. The request was formally transmitted to NARA by President Joe Biden’s White House Counsel’s office, because the incumbent president controls presidential documents in NARA custody.

April 29, 2022

The Justice Department sends a letter to Trump’s lawyers as part of its effort to access the 15 boxes, notifying them that more than 100 classified documents, totaling more than 700 pages, were found in the boxes. The letter says the FBI and US intelligence agencies need “immediate access” to these materials because of “important national security interests.” Also on this day, Trump lawyers ask NARA to delay its plans to give the FBI access to these materials. Trump’s lawyers say they want time to examine the materials to see if anything is privileged, and that they are making a “protective assertion of executive privilege” over all the documents.

May 10, 2022

Debra Steidel Wall, the acting Archivist of the United States, who runs NARA, informs Trump’s lawyers that she is rejecting their claims of “protective” executive privilege over all the materials taken from Mar-a-Lago, and will therefore turn over the materials to the FBI and US intelligence agencies. In a four-page letter, Wall says she reached this decision after consulting with top lawyers from the Justice Department and the White House Counsel’s office.

May 11-12, 2022

The Justice Department subpoenas Trump, seeking documents with classification markings that are still at Mar-a-Lago. Trump directs his staff to search for any remaining classified material, to comply with the subpoena, according to a lawsuit he later filed.

News outlets report that investigators subpoenaed NARA for access to the classified documents retrieved from Mar-a-Lago. The subpoena, which is part of the process to allow investigators to take possession of the documents from the NARA, is the first public indication of the Justice Department using a grand jury in its investigation.

June 2-3, 2022

According to a lawsuit the former President later filed, Trump invites FBI officials to come to Mar-a-Lago to retrieve the subpoenaed materials.

Four investigators, including a top Justice Department counterintelligence official, visit Mar-a-Lago seeking more information about classified material that had been taken to Florida. The four investigators meet with Trump’s attorneys and look around the basement room where the documents are being stored. Trump briefly stops by the meeting to say hello to the officials, but he does not answer any questions. During the meeting, the federal officials deal with the grand jury subpoena for some of the sensitive national security documents on the premises, and they take away the subpoenaed documents. At some point later in June, a Trump lawyer sends a letter to the Justice Department inaccurately asserting that there aren’t any more classified documents at Mar-a-Lago.

June 8, 2022

Trump’s attorneys receive a letter from federal investigators, asking them to further secure the room where documents are being stored. In response, Trump aides add a padlock to the room in the basement of Mar-a-Lago.

June 24, 2022

Federal investigators serve a subpoena to the Trump Organization, demanding surveillance video from Mar-a-Lago. Trump’s company complies with the subpoena and turns over the footage. CNN has reported that this was part of an effort to gather information about who had access to areas at the club where government documents were stored.

August 8, 2022

The FBI executes a search warrant at Mar-a-Lago—a major escalation of the classified documents investigation. The search focused on the area of the club where Trump’s offices and personal quarters are located. Federal agents remove boxes of material from the property. The search was the first time in American history that a former president’s home was searched as part of a criminal investigation.

August 11, 2022

Trump sends a message through one his lawyers to Attorney General Merrick Garland, saying he has “been hearing from people all over the country about the raid” who are “angry,” and that “whatever I can do to take the heat down, to bring the pressure down, just let us know,” according to a lawsuit he later filed. Hours later, after three days of silence, Garland makes a brief public statement about the investigation. He reveals that he personally approved the decision to seek a search warrant, and that the Justice Department will continue to apply the law “without fear or favor.” Garland also pushes back against what he called “unfounded attacks on the professionalism of the FBI and Justice Department.” Garland also announces that the Justice Department will ask a judge to unseal some of the search warrant documents, for the sake of transparency.

August 12, 2022

Federal Magistrate Judge Bruce Reinhart approves the unsealing of the Mar-a-Lago search warrant and its property receipt, at the Justice Department’s request and after Trump’s lawyers agree to the release. The warrant reveals the Justice Department is looking into possible violations of the Espionage Act, obstruction of justice and criminal handling of government records, as part of its investigation.

August 22, 2022

Trump files a federal lawsuit seeking the appointment of a third-party attorney known as a “special master” to independently review the materials that the FBI seized from Mar-a-Lago. In the lawsuit, Trump’s lawyers argue that the Justice Department can’t be trusted to do its own review for potentially privileged materials that should be siloed off from the criminal probe.

August 27, 2022

Federal District Judge Aileen Cannon, a Trump appointee who is presiding over Trump’s civil lawsuit, announces her “preliminary intent” to appoint a special master to examine the seized Mar-a-Lago materials.

September 1, 2022

Federal prosecutors clash with Trump’s lawyers at a high-stakes court hearing in Palm Beach, Florida, as part of Trump’s lawsuit seeking the special master appointment.

September 5, 2022

In a major ruling, Cannon grants Trump’s request for a special master to review the seized materials from Mar-a-Lago. She says the special master will have the power to look for documents covered under attorney-client privilege and executive privilege. The outcome is a major victory for Trump.

September 8, 2022

The Justice Department appeals Cannon’s decision in the special master case. Prosecutors also ask Cannon to temporarily block two key parts of her ruling while their appeal plays out: First, the part where she blocked the Justice Department from using any of the seized materials in their criminal probe while the materials were being reviewed by the special master, and second, the part of her ruling that required the Justice Department to hand over classified documents to the special master.

Hillary Clinton

Executive Summary of Hillary Clinton Email Controversy

During her tenure as United States Secretary of State (2009-2013) and later as the 2016 Democratic Presidential Candidate, Hillary Clinton drew controversy by using a private email server while Secretary of State for public communications rather than using official State Department email accounts maintained on federal servers. Clinton’s server was found to hold over 100 emails containing classified information, including 65 emails deemed “Secret” and 22 deemed “Top Secret.” An additional 2,093 emails not marked classified were retroactively designated confidential by the State Department.[14]

At the very beginning of her tenure as Secretary, the Bureau of Diplomatic Security had warned Clinton about the vulnerabilities of her use of a BlackBerry along with a private server, but Clinton ignored it and the Bureau took no action. While members of the Administration knew that Clinton used a private email address (clintonemail.com), no one outside of the State Department, certainly not President Obama, knew that she was using a private server maintained in her home by a private computer services firm. In October 2014, the State Department asked all previous Secretaries of State for all documents related to their time in office. Clinton responded in December 2014 by delivering 55,000 printed pages of emails that had been housed only on her server and its privately maintained backups (but with no copies of such correspondence in State Department records, as required by policy and by law). Omitted were over 30,000 emails she decided were personal. Federal rules required Clinton to preserve work emails before she left office, but she did not turn over her emails until 21 months after she left office. That Clinton used her private server exclusively for official work was not made public until March 2015 (more than two years after she left office), when The New York Times reported that the House Select Committee on Benghazi made the discovery.

The inspector general of the intelligence community reviewed the hardcopies delivered by Clinton and found “hundreds of potentially classified emails.” A “security referral” (but not criminal), to the Justice Department was made in late July 2015. Clinton and her private computer services companies finally relinquished the actual hardware servers and thumb drives to the FBI in August 2015. Clinton’s lawyer David E. Kendall said that emails, and all other data stored on the server, had earlier been erased prior to the device being turned over to the authorities.

Clinton repeatedly stated that her private server was “allowed by the State Department,” and that she never handled anything marked classified through her server. She repeatedly stated during her campaign that turning over 55,000 printed pages and then the hardware to the government “shows that I have been as transparent as I could.”

In May 2016, the Department’s Office of the Inspector General Steve A. Linick released an 83-page report about the State Department’s email practices. Aside from security risks, the report stated that “[Clinton] did not comply with the Department’s policies that were implemented in accordance with the Federal Records Act.” Each of these findings contradicted what Clinton and her aides had been saying up to that point. The FBI, through statements by Director Comey, later determined “Although there is evidence of potential violations of the statutes regarding the handling of classified information, our judgment is that no reasonable prosecutor would bring such a case.”

My own conclusion is that while Secretary of State, Hillary Clinton deliberately and knowingly violated State Department policy by exclusively using a private server to conduct public as well as private business. While there is no evidence her intention was to specifically mishandle classified information, the clear intent was to retain control (delete forever) anything that could be harmful to her expected campaign for president, classified or not. By submitting 55,000 printed pages of official emails, after having deleted over 30,000 emails she alone decided were personal, and then not turning over the (totally erased) hard drives and thumb drives until almost a year later, she successfully circumvented both FOIA and the Presidential Records Act in order to advance and protect her campaign. The world will never know what she erased, only some of which was only partially recovered after forensic analysis of the scrubbed hardware.

Chronology

The following chronology focuses on requests for cooperation with the investigation of her email practices from Secretary and then Presidential Candidate Clinton and her responses. This review largely draws on the cited Wikipedia article and includes other sourced information.

2009 – 2013

At the outset of her tenure as Sec of State, setting up a secure desktop computer in her office was suggested, but Clinton was unfamiliar with their use and opted for the convenience of her BlackBerry, not the State Department and government protocol of a secured desktop computer. Efforts to find a secure solution were “abandoned by Clinton,” and she was warned by State Department security personnel about the vulnerability of an unsecured BlackBerry to hacking. She affirmed her knowledge of the danger, and was reportedly told that the Bureau of Diplomatic Security had obtained intelligence about her vulnerability while she was on a trip to Asia, but continued to use her BlackBerry outside her office. For the first two months of its use – January 2009 through March 29, 2009 – the web page [sign-in portal for users to access the server] was reportedly not secured with a TLS certificate, meaning that information transmitted using the service was unencrypted and may have been vulnerable to interception.

December 2012 – March 2013

Near the end of Clinton’s term, a nonprofit group called Citizens for Responsibility and Ethics in Washington (CREW), filed a FOIA request seeking records about her email. CREW received a response in May 2013: “no records responsive to your request were located.” Emails sent to Clinton’s private clintonemail.com address were first discovered in March 2013, when a hacker named “Guccifer” widely distributed emails sent to Clinton from former President Bill Clinton aide Sidney Blumenthal, which Guccifer obtained by illegally accessing Blumenthal’s email account. The emails dealt with the 2012 Benghazi attack and other issues in Libya and revealed the existence of her clintonemail.com address.

October – December 2014

In October 2014, the State Department sent letters to Clinton and all previous Secretaries of State back to Madeleine Albright requesting emails and documents related to their work while in office. On December 5, 2014, Clinton lawyers delivered 12 file boxes filled with printed paper containing more than 30,000 emails rather than their easier to analyze original electronic version. Clinton withheld almost 32,000 emails deemed to be of a personal nature. Datto, Inc., which provided data backup service for Clinton’s email, agreed to give the FBI the hardware that stored the backups.

March 2015

A March 2, 2015, New York Times article broke the story that the Benghazi panel had discovered that Clinton exclusively used her own private email server rather than a government-issued one throughout her time as Secretary of State, and that her aides took no action to preserve emails sent or received from her personal accounts as required by law.

After the existence of the server became publicly known on March 2, 2015, the Select Committee on Benghazi issued a subpoena for Benghazi-related emails two days later. Clinton chief of staff Cheryl Mills sent an email to PRN [Clinton’s computer services provider, Platte River Networks] on March 9 mentioning the committee’s retention request. The PRN technician then had what he described to the FBI as an “oh shit moment,” realizing he had not set the personal emails to be deleted as instructed months earlier. The technician then erased the emails using a free utility, BleachBit, sometime between March 25 and 31.

At a March 10, 2015 press conference, Clinton said all personal emails were deleted from her server, and she rejected the suggestion that she turn her server over to an “independent arbiter” to prove that she did not destroy any work-related emails and that “the server will remain private.”[15] The Clinton campaign said that she complied with NARA regulations because “more than 90% of those emails should have already been captured in the State Department’s email system before she provided them with paper copies.”

On March 27, 2015, Republican Congressman Trey Gowdy, Chairman of the Select Committee on Benghazi, asserted that sometime after October 2014, Clinton “unilaterally decided to wipe her server [which remained in her possession at that time] clean” and “summarily decided to delete all emails.” Clinton’s attorney, David E. Kendall, said that day that an examination showed that no copies of any of Clinton’s emails remained on the server. Kendall said the server was reconfigured to only retain emails for 60 days after Clinton lawyers had decided which emails needed to be turned over.

April 2015

Dan Metcalfe, a former head of the Justice Department’s Office of Information and Privacy, said this [exclusive use of a private server] gave her even tighter control over her emails by not involving a third party such as Google and helped prevent their disclosure by Congressional subpoena. He added: “She managed successfully to insulate her official emails, categorically, from the FOIA, both during her tenure at State and long after her departure from it—perhaps forever,” making it “a blatant circumvention of the FOIA by someone who unquestionably knows better.” (According to State Department spokesperson Marie Harf, use by government officials of personal email for government business is permissible under the Federal Records Act, so long as relevant official communications, including all work-related emails, are preserved by the agency.)

June – August 2015

On June 22, 2015, the Benghazi panel released emails between Clinton and Sidney Blumenthal, who had been recently deposed by the committee. Committee chairman Gowdy issued a press release criticizing Clinton for not providing the emails to the State Department. Clinton had said she provided all work-related emails to the State Department, and that only emails of a personal nature on her private server were destroyed. The State Department confirmed that 10 emails and parts of five others from Sidney Blumenthal regarding Benghazi, which the committee had made public on June 22, could not be located in the Department’s records, but that the 46 other, previously unreleased Libya-related Blumenthal emails published by the committee, were in the Department’s records. In response, Clinton campaign spokesman Nick Merrill, when asked about the discrepancy said: “She has turned over 55,000 pages of materials to the State Department, including all emails in her possession from Mr. Blumenthal.” Republican Committee members found emails that Clinton failed to produce. Clinton campaign staff accused Gowdy and Republicans of “clinging to their invented scandal.”

A June 29, 2015, memorandum from the Inspector General of the State Department, Steve A. Linick, said that a review of the 55,000-page email release found “hundreds of potentially classified emails.” A July 17, 2015, follow-up memo, sent jointly by Linick and the Intelligence Community (IC) inspector general, I. Charles McCullough III, to Under Secretary of State for Management Patrick F. Kennedy, stated that they had confirmed that several of the emails contained classified information that was not marked as classified, at least one of which was publicly released. On July 24, 2015, Linick and McCullough said they had discovered classified information on Clinton’s email account. Investigators from their office, searching a randomly chosen sample of 40 emails, found four that contained classified information that originated from U.S. intelligence agencies, including the Central Intelligence Agency (CIA) and the National Security Agency (NSA). Their statement said that the information they found was classified when sent, remained so as of their inspection, and “never should have been transmitted via an unclassified personal system.” Clinton’s presidential campaign and the State Department disputed the letter, and questioned whether the emails had been over-classified by an arbitrary process. According to an unnamed source, a secondary review by the CIA and the National Geospatial-Intelligence Agency endorsed the earlier inspectors general findings concluding that the emails (one of which concerned North Korea’s nuclear weapons program) were “Top Secret” when received by Clinton through her private server in 2009 and 2011, a conclusion also disputed by the Clinton campaign.

The inspector general of the intelligence community said her emails contained classified information and made a “security referral” to the Justice Department in late July 2015. Clinton directed her campaign in mid-August to turn over her computer server to the FBI. Clinton said her personal email account was “allowed by the State Department.” Federal rules required Clinton to preserve work emails before she left office, but she did not turn over her emails until 21 months after she left office. Clinton said “turning over my server” to the government shows “I have been as transparent as I could” about her emails.

Clinton’s IT contractors turned over her personal email server to the FBI on August 12, 2015, as well as thumb drives containing copies of her emails. In a letter describing the matter to Senator Ron Johnson, Chairman of the Senate Homeland Security Committee, Clinton’s lawyer David E. Kendall said that emails, and all other data stored on the server, had earlier been erased prior to the device being turned over to the authorities, and that both he and another lawyer had been given security clearances by the State Department to handle thumb drives containing about 30,000 emails that Clinton subsequently also turned over to authorities.

September 2015

Bloomberg News reported in September 2015 that the FBI had recovered some of the deleted emails. Since this episode, Clinton critics have accused her or her aides of deleting emails that were under subpoena, alleging the server had been “bleached” or “acid-washed” by a “very expensive” process in an effort to destroy evidence.

October 2015

On October 22, 2015, Clinton testified before the committee and answered the Select Committee on Benghazi members’ questions for eleven hours before the Committee in a public hearing. The New York Times reported that “the long day of often-testy exchanges between committee members and their prominent witness revealed little new information about an episode that has been the subject of seven previous investigations … Perhaps stung by recent admissions that the pursuit of Mrs. Clinton’s emails was politically motivated, Republican lawmakers on the panel for the most part avoided any mention of her use of a private email server.”

February 2016

Clinton maintained she did not send or receive any confidential emails from her personal server. In a Democratic debate with Bernie Sanders on February 4, 2016, Clinton said, “I never sent or received any classified material.” This statement was false, as had been clearly stated earlier by the inspector general of the security community in July 2015.

May 2016

In May 2016, the Department’s Office of the Inspector General Steve A. Linick released an 83-page report about the State Department’s email practices. Aside from security risks, the report stated that “she did not comply with the Department’s policies that were implemented in accordance with the Federal Records Act.” Each of these findings contradicted what Clinton and her aides had been saying up to that point. The report also stated that Clinton and her senior aides declined to speak with the investigators, while the previous four Secretaries of State did so.

June – July 2016

In various interviews, Clinton has said that “I did not send classified material, and I did not receive any material that was marked or designated classified.” However, in June and July 2016, a number of news outlets reported that Clinton’s emails did include messages with some paragraphs marked with a “(c)” for “Confidential.” The FBI investigation found that 110 messages contained information that was classified at the time it was sent. Sixty-five of those emails were found to contain information classified as “Secret;” more than 20 contained “Top-Secret” information. Three emails, out of 30,000, were found to be marked as classified, although they lacked classified headers and were only marked with a small “c” in parentheses, described as “portion markings” by FBI Director Comey. Comey added it was possible Clinton was not “technically sophisticated” enough to understand what the three classified markings meant which is consistent with Clinton’s claim that she wasn’t aware of the meaning of such markings.

In a Meet the Press interview on July 2, 2016, she stated: “Let me repeat what I have repeated for many months now, I never received nor sent any material that was marked classified.”

On July 5, 2016, FBI Director Comey announced in a statement he read to press and television reporters at FBI headquarters in Washington, DC, that the FBI had completed its investigation and was referring it to the Justice Department with the recommendation “that no charges are appropriate in this case.” He added, “Although there is evidence of potential violations of the statutes regarding the handling of classified information, our judgment is that no reasonable prosecutor would bring such a case.” With regard to mishandling of classified information, Comey said, “there is evidence that they [Clinton and her team] were extremely careless in their handling of very sensitive, highly classified information.” The investigation found 110 emails that should have been regarded as classified at the time they were sent; another 2,000 emails were retroactively classified which means they were not classified at the time they were sent. Comey said that “any reasonable person in Secretary Clinton’s position, or in the position of those government employees with whom she was corresponding … should have known that an unclassified system was no place for that conversation.”

June 2017

On June 23, 2017, several members of the Senate Judiciary Committee opened a bipartisan inquiry into whether former Attorney General Lynch interfered in the FBI’s investigation into Hillary Clinton’s use of a private email server. The investigation found Clinton’s use of personal email server increased the risk of compromising State Department information, but “there was no persuasive evidence of systemic, deliberate mishandling of classified information.”

[1] Wikipedia contributors, “FBI search of Mar-a-Lago,” Wikipedia, The Free Encyclopedia, https://en.wikipedia.org/w/index.php?title=FBI_search_of_Mar-a-Lago&oldid=1109931185 (accessed September 10, 2022).

[2] Wikipedia contributors, “Hillary Clinton email controversy,” Wikipedia, The Free Encyclopedia, https://en.wikipedia.org/w/index.php?title=Hillary_Clinton_email_controversy&oldid=1104229653 (accessed August 10, 2022).

[3] Op. cit. Wikipedia, “FBI Search of Mar-a-Lago.”

[4] Ibid.

[5] Ibid.

[6] CNN, “Bill Barr ‘skeptical’ Trump declassified Mar-a-Lago papers,” YouTube video, 6:38, Sept. 3, 2022, https://www.youtube.com/watch?v=5zJUge5hdzo.

[7] Wikipedia, “FBI Search of Mar-a-Lago.”

[8] Kessler, Glen. “Hillary Clinton’s claim that ‘zero emails’ were marked classified,” Sept. 8, 2022, The Washington Post, https://www.washingtonpost.com/politics/2022/09/08/hillary-clintons-claim-that-zero-emails-were-marked-classified/.

[9] Wikipedia, “Hillary Clinton email controversy.”

[10] Linker, Damon, “The Case Against Prosecuting Donald Trump,” Persuasion, Sept. 2, 2022, https://www.persuasion.community/p/the-case-against-prosecuting-donald?utm_source=email.

[11] Shugerman, Jed, and Rozenshtein, Alan Z., “The Case for Prosecuting Donald Trump,” Persuasion, Aug. 31, 2022, https://www.persuasion.community/p/the-case-for-prosecuting-donald-trump?utm_source=email.

[12] Zurin, James D., “Indict Trump Over the Mar-a-Lago Documents? Don’t Indict? There’s a Third Option.” Washington Monthly, Sept. 7, 2022, https://washingtonmonthly.com/2022/09/07/indict-trump-over-the-mar-a-lago-documents-dont-indict-theres-a-third-option/.

[13] Cohen, Marshall et al, “Timeline: The Justice Department criminal inquiry into Trump taking classified documents to Mar-a-Lago,” CNN, Sept. 8, 2022, https://www.cnn.com/2022/08/09/politics/doj-investigation-trump-documents-timeline/index.html.

[14] Wikipedia, “Hillary Clinton email controversy.”

[15] Kiely, Eugene. “More Spin on Clinton Emails.” FactCheck.org, 8 September 2015. www.factcheck.org/2015/09/more-spin-on-clinton-emails/. Accessed 13 August 2022.

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