In veiled message to Trump, Powell warns against meddling on Fed rates

 Jerome Powell is pictured. | AP Photo

In a speech, Jerome Powell said Americans’ trust in government and public institutions is at an all-time low. | Alex Wong/Getty Images

Federal Reserve Chairman Jerome Powell on Friday issued his sternest warning yet that politicians should not interfere with interest-rate policy, in what appeared to be a precautionary message to President Donald Trump.

In a speech in Sweden, Powell indirectly referred to a previous Fed chairman, Arthur Burns, who was pressured by President Richard Nixon in the lead-up to the 1972 presidential election to keep interest rates low.

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That episode eventually contributed to a rapid rise in prices, requiring one of Burns’ successors, Paul Volcker, to raise interest rates as high as 20 percent to combat inflation.

“For a quarter century, inflation has been low and inflation expectations anchored,” said Powell, a Trump appointee. “We must not forget the lessons of the past, when a lack of central bank independence led to episodes of runaway inflation and subsequent economic contractions.”

The Fed chairman’s remarks come as the central bank continues to gradually hike interest rates to a more normal level, after they sat near zero for almost a decade in an effort to boost the economic recovery. The central bank is widely expected to raise rates again next month.

The White House and congressional Republicans are eager to see economic growth and wages accelerate following the tax cut bill Trump signed into law last year, and the president has said publicly that he would like interest rates to stay low. If the Fed raises rates too quickly, it could slow the expansion.

Kevin Warsh, a former Fed governor who along with Powell was on the short list for the chairmanship, told POLITICO earlier this month that Trump — during an hourlong Oval Office interview — appeared to want to know exactly what Warsh would do on interest rates.

“If you think it was a subject upon which he delicately danced around, then you’d be mistaken. It was certainly top of mind to the president,” Warsh said about Trump’s questioning on interest-rate policy. “The president has a view about asset prices and stock markets. He has a view based on his long history in his prior life as a developer and real estate mogul of the role of interest rates.”

In his speech, Powell said Americans’ trust in government and public institutions is at an all-time low. This dynamic is particularly tricky for the central bank, which is given considerable freedom from day-to-day politics; Fed governors’ time in office is not strictly tied to a particular president and the agency sets its own budget.

“In this environment, central banks cannot take our measure of independence for granted,” said Powell. “For monetary policy, the case for central bank independence rests on the demonstrated benefits of insulating monetary policy decisions from shorter-term political considerations.”

The Fed’s obligation, Powell said, is to communicate as clearly as it can to the public what it is doing and why.

“Public transparency and accountability around both financial stability and monetary policy have become all the more important in light of the extraordinary actions taken by central banks in response to the global financial crisis,” he said.

The White House did not immediately respond to a request for comment.

Laurence Meyer, a former Fed governor who now heads a policy analysis firm, said the remarks underscore Powell’s style of being particularly direct for a Fed chairman. He said there was “no question” that those words were aimed in part at the president.

“He may see this statement as especially important to emphasize that, notwithstanding that Trump nominated him as chair, he is absolutely committed to and will vigorously defend the independence of the Fed as [it] continues to raise rates gradually to avoid an unacceptable rise in inflation,” Meyer said.

Menendez suggests he doesn’t need to pay back anything more to Melgen

Sen. Bob Menendez is pictured. | AP Photo

Paying back Melgen for expensive gifts would be a challenge for Sen. Bob Menendez, whose income is mainly from his $175,000 Senate salary. | AP Photo

RIDGEFIELD — Sen. Bob Menendez suggested Friday that he may not pay back anything more than he already has for private jet flights and gifts he received from Florida eye doctor Salomon Melgen, his friend and co-defendant in last year’s federal corruption trial.

A jury failed to convict Menendez and Melgen on bribery charges for nearly $1 million in political contributions and gifts the senator received from Melgen, allegedly in exchange for official action by the Democratic senator. But the Senate Ethics Committee admonished Menendez, demanding, without going into specifics, that he amend his financial disclosure reports to reflect the gifts and pay them back.

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“I think the Ethics Committee was unaware that there were a series of payments that were made before they continued their review,” Menendez said at an unrelated press conference in Bergen County. “Remember, [the ethics complaint] was filed in 2012 by Republicans here in New Jersey, and I think they’re unaware. We are making them aware.”

Amid media scrutiny in 2013 and after the ethics complaint was filed by a Republican state lawmaker in New Jersey, Menendez reimbursed Melgen $58,500 for two flights on the doctor’s private jet. The Democratic Senatorial Campaign Committee also reimbursed Melgen almost $15,000 for a third flight.

But at Menendez’s trial, prosecutors outlined far more than three flights Menendez took on Melgen’s plane. Some of those flights were different legs of single trips, and some had more passengers on board than just Menendez. Prosecutors also detailed gifts to Menendez that included a Paris hotel room worth thousands of dollars and many stays at Melgen’s villa at a luxury resort in the Dominican Republic.

In demanding repayment, the Ethics Committee did not specify how much Menendez owed.

“My attorney is engaged in conversations with them to let them know everything that was paid,” Menendez said.

The senator then waived off a question from POLITICO, asking him to explain the other gifts, saying “that’s all I have to say about that.”

Paying back Melgen for expensive gifts would be a challenge for Menendez, whose income is mainly from his $175,000 Senate salary.

Menendez‘s legal and ethical troubles seem to have taken a toll on his popularity. According to a Fairleigh Dickinson University poll released Friday morning, Menendez leads his likely Republican opponent, Bob Hugin, by just 4 percentage points, 28 percent to 24 percent, with 46 percent undecided.

Menendez, New Jersey’s senior senator, said he wasn’t worried about the poll, noting that two other recent polls, from Quinnipiac University and Monmouth University, showed him leading Hugin by 17 points and 21 points, respectively.

“You all have to judge whether a poll is actually on point or is an outlier. But [the FDU poll] is a total contrast to every other poll, and all of those polls largely had all the information that’s out there already,” Menendez said. “If you’re going to live your life by polls then you’re going to be either taking a vacation because you’re so far ahead that you don’t have to do anything, or you’ll be worried and paralyzed about what you see. I am neither. I am neither taking a vacation nor worrying. I am fighting on behalf of the people of New Jersey every single day.”

There is a major difference in the timing of the polls. The FDU poll was the only one of the three conducted after the Ethics Committee formally admonished the senator.

Menendez said that as voters become aware of Hugin’s leadership at Celgene — a Summit-based pharmaceutical company that has come under fire for sharply raising prices on cancer drugs, putting up obstacles to generic versions of its products and parking money overseas — they will see the “contrast” between the two candidates.

Menendez also highlighted Hugin’s financial support for President Donald Trump, noting he donated hundreds of thousands of dollars to help elect him, served as a finance chair for Trump’s New Jersey campaign and a Trump delegate to the 2016 Republican National Convention.

“I know he doesn’t like to suggest that he’s a Republican and he won’t answer the question of whether or not Donald Trump is someone he wants campaigning for him, but at the end of the day that’s the challenges we have,” Menendez said. “So when I put on the floor of the Senate a vote — and amendment — to actually restore the state and local property tax [deduction], every single Democrat voted for it. Every single Republican voted against it. We don’t need to send more Republicans to the Senate to be voting with Donald Trump to take a beating on New Jersey.”

Megan Piwowar, communications director for the Hugin campaign, said New Jerseyans are “fed up“ with Menendez.

“If Senator Menendez can look New Jerseyans in the eye and honestly tell them their lives are better after his 25 years in Washington, then he is either clueless or a better liar than we gave him credit for,” Piwowar said. “If Bob Menendez fought as hard for average New Jerseyans as he did for his convicted felon ‘best friend’ from Florida, maybe we wouldn’t be dead last in what we get back from Washington.

“Bob Hugin has the momentum in this race because Democrats, Republicans, and Independents in New Jersey are fed up with being poorly represented by someone whose greatest accomplishment is managing to stay one step ahead of the law.”

Trump proclaims ‘we are not going to apologize for America’

Donald Trump is pictured. | AP

President Donald Trump’s remarks come as he cancelled this week a historic meeting with North Korean leader Kim Jong Un, though he hinted on Friday that the meeting could still take place. | Evan Vucci/AP Photo

President Donald Trump on Friday told U.S. Naval Academy graduates that America has become “a lot” stronger recently and that “we are not going to apologize for America.”

“And we are respected again,” Trump said in a speech to graduates and their families gathered in Annapolis, Md. “I can tell you that. We are respected again.”

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The remarks come as he cancelled this week a historic meeting with North Korean leader Kim Jong Un, though he hinted on Friday that the meeting could still take place. In a letter Thursday to Kim, Trump warned that U.S. nuclear capabilities “are so massive and powerful that I pray to God they will never have to be used.” Earlier in May, Trump also withdrew from the Iran nuclear deal in a move that was widely criticized by world leaders.

Sticking to that message, Trump added that “America is the greatest fighting force” for peace, justice and freedom in the world.

“And in case you haven’t noticed, we have become a lot stronger lately,” he added. “A lot. We are not going to apologize for America. We are going to stand up for America. No more apologies.”

Trump praised efforts to boost defense spending. A $717 billion defense policy bill moving through Congress could mark a peak for defense spending and would boost the Navy’s shipbuilding budget by $1.9 billion above the Pentagon’s budget request.

“We will have the strongest military that we’ve ever had and it won’t even be close,” he said. “And when did we need it more than now?”

Ex-aides say congressman and wife made them his servants

Freshman Rep. Tom Garrett (R-Va.) and his wife turned the congressman’s staff into personal servants, multiple former aides told POLITICO — assigning them tasks from grocery shopping to fetching the congressman’s clothes to caring for their pet dog, all during work hours.

POLITICO has spoken with four former staffers who detailed a deeply dysfunctional office, where the congressman and his wife, Flanna, often demanded that staff run personal errands outside their typical congressional duties. The couple called on staff to pick up groceries, chauffeur Garrett’s daughters to and from his Virginia district, and fetch clothes that the congressman forgot at his Washington apartment. They were even expected to watch and clean up after Sophie, their Jack Russell-Pomeranian mix, the aides said.

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The staffers said feared that if they refused Garrett or his wife’s orders — both were known for explosive tempers — they would struggle to advance in their careers. It wasn’t just full-time staff: many of the allegedly inappropriate requests were made of interns, the former aides said.

“I didn’t know who I was working for: was I working for him? Was I working for her?” said one of those staffers who, like others interviewed for this story, asked not to be named for fear of retribution. “We became their gofers.”

A spokesman for Garrett, Matt Missen, declined to address a detailed list of complaints about the office.

“We see no reason to respond to anonymous, unfounded allegations primarily targeting Congressman Garrett’s wife, made by Politico’s ‘unnamed’ sources,” he said. “It is easy to spread untruths and even easier to exaggerate and imply wrongdoing when none exists.”

The behind-the-scenes turmoil boiled over Tuesday evening, when Garrett’s chief of staff, Jimmy Keady, abruptly parted ways with the congressman. His exit, multiple sources say, came amid a dispute with Garrett over the couple’s alleged misuse of official resources. Multiple sources raised the issue with the congressman, and senior staffers tried to rectify the situation repeatedly.

On Wednesday, Garrett, a 46-year-old Army veteran and former state senator, began telling associates that he was considering not running for reelection — stunning Republicans in Virginia and Washington. But a day later, he reversed course, saying during a rambling 30-minute news conference that he would in fact seek another term.

“There is no way in heck that I’m not going to be back here in 2019 as a member of the Congress representing the 5th District of Virginia. Too darn much is at stake,” Garrett told reporters.

Much of the controversy stemmed from Garrett’s wife, Flanna, a frequent presence in his House office. Former staffers said she comes to work with him on most weekdays.

Early in his tenure, staffers say, Flanna began asking aides to perform what they considered to be tasks that were unofficial and personal in nature. One staffer recalled an instance in which he had been asked to pick her up from the grocery store, drive her to the couple’s apartment and help her unload groceries. Garrett was at a baseball game and was unable to help, the staffer was told at the time.

Garrett also had staffers run errands for him. From time to time, two former staffers recalled, the congressman would arrive to work having forgotten to wear a belt or with a stain on his shirt, they said. Garrett, they said, would dispatch aides to his apartment to pick up fresh clothes for him.

Aides also grew acquainted with the couple’s dog, Sophie, who often came to the office with Garrett and Flanna. Staffers were expected to watch the dog during office hours, and one aide did so over a weekend. Several aides said the couple would sometimes seem to forget the dog was in the office. When that happened, at the end of the day, aides were responsible for transporting it back to Garrett’s Washington apartment.

One source said the dog occasionally defecated on the floor and aides had to clean up the mess.

Aides also served as drivers for the congressman’s older daughters from a previous marriage, according to three sources with direct knowledge of the matter. Interns or other staffers were sent to Scottsdale, Virginia, where the two lived in Garrett’s district, to pick them up and bring them to Washington. Scottsdale is a three-hour drive from D.C.

Garrett’s conduct could raise ethics concerns. The House Ethics manual prohibits lawmakers from using staff for anything other than official congressional duties. Members are explicitly barred from instructing aides to do personal errands in the manual, which also recounts situations in which staff were wrongly told to fetch personal mail, clean a member’s home and pay a member’s bills.

Missen said there is “no ethics investigation” into the office and that “to ensure that all staff follow the rules, Congressman Garrett has had lawyers from the House Ethics Committee to meet with him and his staff (to include district staff via telephone) to brief everyone on the ethics rules pertaining to congressmen and staff, and to answer any questions.”

Staffer say the atmosphere in the office was toxic, however, and the demands were far outside what should reasonably be expected of congressional aides. Flanna would reach out to aides at all hours of the night, according to two former staffers. One person recalled an incident in which Flanna lashed out at a staffer for not picking up the congressman from his apartment after he overslept.

Former aides said they were afraid to refuse Flanna’s instructions. Some said they performed them without protest because they worried they’d be fired.

Others, however, left because they couldn’t take it anymore. Since taking office in Jan. 2017, Garrett has had among the highest levels of turnover in the House, according to records compiled by legislative data company Legistorm. More than 60 percent of his staff left in 2017, compared to the House’s typical 25 percent turnover rate that year, making the office fourth out of more than 400 legislative shops.

“I came aboard because I really, really believed in the message being presented and believed in Garrett as a person and as congressman,” said one the former aide. “I can take hard work. What I can’t put up with is these just mundane tasks that [were] being asked to be completed by him and his wife that had nothing to do with the job.”

That same staffer said he told a senior aide that running the Garretts’ personal errands was “effed up.” The senior staffer responded that if he couldn’t handle it, this was not the job for him.

Just hours before his news conference on Thursday, Garrett decided he wanted one of his departed staffers back.

That morning, he tried to hire back Keady, the former chief of staff who objected to the congressman’s use of office resources.

Keady declined the offer.

John Bresnahan contributed to this report.

FBI issues formal warning on massive malware network linked to Russia

The FBI on Friday issued a formal warning that a sophisticated Russia-linked hacking campaign is compromising hundreds of thousands of home network devices worldwide and it is advising owners to reboot these devices in an attempt to disrupt the malicious software.

The law enforcement agency said foreign cyber actors are targeting routers in small or home offices with a botnet — or a network of infected devices — known as VPNFilter.

Cybersecurity experts and officials say VPNFilter has infected an estimated 500,000 devices worldwide.


“The FBI recommends any owner of small office and home office routers reboot the devices to temporarily disrupt the malware and aid the potential identification of infected devices,” the bureau’s cyber division wrote in a public alert.

“Owners are advised to consider disabling remote management settings on devices and secure with strong passwords and encryption when enabled. Network devices should be upgraded to the latest available versions of firmware.”

Earlier this week, the Department of Justice (DOJ) announced the bureau was working to disrupt the malware, which officials have linked to the cyber espionage group known as APT 28 or Sofacy. Some cybersecurity firms have already determined this hacking group is being sponsored by the Russian government.

Experts at Cisco’s threat intelligence arm Talos on Wednesday first called attention to VPNFilter, warning that hackers are ramping up malware attacks against Ukraine, infecting thousands of devices ahead of an upcoming national holiday in the country.

“While this isn’t definitive by any means, we have also observed VPNFilter, a potentially destructive malware, actively infecting Ukrainian hosts at an alarming rate, utilizing a command and control infrastructure dedicated to that country,” Talos wrote in a blog post.

“Both the scale and the capability of this operation are concerning. Working with our partners, we estimate the number of infected devices to be at least 500,000 in at least 54 countries.”

The firm warned that VPNFilter could wreak havoc in a number of ways, from stealing website credentials to causing widespread internet disruption.

“The malware has a destructive capability that can render an infected device unusable, which can be triggered on individual victim machines or en masse, and has the potential of cutting off internet access for hundreds of thousands of victims worldwide.”