Powell says he would reject any Trump request to resign
By MARTIN CRUTSINGER
AP Economics Writer
Saturday, January 5
WASHINGTON (AP) — Federal Reserve Chairman Jerome Powell said Friday that he will not resign if asked to do so by President Donald Trump, and that he is prepared to be patient in deciding when to raise interest rates again.
Both of those messages cheered stock market investors who had been worried about Trump’s repeated attacks on his hand-picked choice to lead the nation’s central bank and also the Fed’s seemingly inexorable march to higher rates.
“There is no pre-set path for policy,” Powell said during an appearance at a conference of economists in Atlanta. “With the muted inflation readings we have seen coming in, we will be patient as we watch to see how the economy evolves.”
Private economists viewed Powell’s comments as a strong signal that the Fed, which in December had projected another two rate hikes in 2019, may end up deciding to pause hikes for several months.
“With Chairman Powell’s remarks today, I would say they will do just one hike or maybe no hikes this year,” said Sung Won Sohn, chief economist at SS Economics. “Powell is definitely trying to calm the markets.”
Wall Street, which opened sharply higher after a report showing 312,000 jobs gained in December, surged even higher during Powell’s appearance. The Dow Jones industrial average finished the day up 746 points or 3.3 percent.
Powell called the jobs report “very strong” and said he was also encouraged by the rise in the labor force participation rate and gains in wages, which he said “for me at this time does not raise concerns about too high inflation.”
Trump has complained that the Fed has pushed rates higher despite the fact that there is no evidence that inflation was getting out of control.
The president’s attacks had become so intense that they had raised concerns that he might be considering firing Powell, a development which could send the market into a tailspin.
Trump would appear to be on shaky legal ground if he tried to fire Powell. Under the law that governs the Federal Reserve, a president can only remove a Fed chairman for cause. Courts in cases that involved other agencies have interpreted that language to not cover policy differences.
Asked if he would resign if Trump asked him to do so, Powell responded with a short “no.”
Powell’s willingness to be flexible on interest rates was welcome news to investors, many of whom worried that Fed chair risked cutting off the current economic expansion by continuing to raise interest rates despite signs the U.S. economy was cooling off a little.
On Friday, Powell said, “We are always prepared to shift the stance of policy and to shift it significantly if necessary” to meet the goals of maximum employment and stable prices.
Powell gave as an example the fact that in 2016, when Janet Yellen was Fed chair, the central bank began the year with a projection that it would raise rates four times that year but ended up raising rates only once because the economy hit a soft-patch.
Appearing on a panel with his two predecessors — Yellen and Ben Bernanke — Powell also said that the Fed could alter its approach to trimming its huge balance sheet if it determines such a change is needed.
The pace of Fed rate hikes and the lowering of the balance sheet, which tends to put upward pressure on interest rates, had both been concerns of investors in recent months. The stock market has seen stomach-churning declines since October, a development that Trump has blamed on the Fed’s continued rate hikes, although the president’s trade dispute with China as well as concerns about global economic growth also played a part in the market volatility.
The Fed had increased the size of its balance sheet four-fold to a record $4.5 trillion in an effort to push long-term interest rates lower. But it has been gradually reversing that stance over the past year, although the balance sheet still remains above $4 trillion. But some investors have worried that that process could push long-term rates higher at a time when the economy was slowing.
Powell on Friday stressed that the Fed was prepared to adjust the pace at which it trimmed the balance sheet if necessary to support economic growth.
While Trump has sent out a number of tweets criticizing Powell and calling the Fed the biggest threat to the economy, Powell said that he had not received any direct pressure from the White House. Asked if he had had any face-to-face meetings with Trump, Powell said he had not although he said previous Fed leaders have had discussions from time to time with previous presidents.
Asked if any future meeting with Trump was scheduled, Powell said, “I have no news on that. Nothing is scheduled.”
Each side accusing other of giving no ground on shutdown
By CATHERINE LUCEY and LISA MASCARO
Sunday, January 6
WASHINGTON (AP) — A first round of talks between White House officials and congressional aides has made little progress toward ending the government shutdown, with each side accusing the other of giving no ground.
More discussions were planned for Sunday, while President Donald Trump, who did not attend the negotiating session, was scheduled to be at Camp David for a retreat with White House staff on border security and other topics.
With the talks stalled, House Speaker Nancy Pelosi, D-Calif., said House Democrats intend to start passing individual bills to reopen agencies. The first would be the Treasury Department, to ensure people receive their tax refunds.
“Not much headway made today,” Trump tweeted on Saturday after receiving a briefing from the team led by Vice President Mike Pence.
Democrats said the White House did not budge on the president’s key demand, $5.6 billion to build a wall along the U.S.-Mexico border. The White House said money was not discussed in depth, but the administration was clear about the need for a wall and the goal of resolving the shutdown all at once, not piecemeal.
Acting chief of staff Mick Mulvaney told NBC’s “Meet the Press” that he believes Democrats “think they’re winning the PR battle and they’re willing to drag this out because they think it hurts the president.” Democrats familiar with the meeting said the White House position was “untenable.”
A White House official said the meeting included a briefing on border security by Homeland Security Secretary Kirstjen Nielsen. Democrats sought written details from the Department of Homeland Security on their budget needs; the White House said it would provide that.
Mulvaney said Trump was willing to forgo a concrete wall for steel or other materials.
“If he has to give up a concrete wall, replace it with a steel fence in order to do that so that Democrats can say, ‘See? He’s not building a wall anymore,’ that should help us move in the right direction,” Mulvaney told NBC.
The president has suggested his definition of the wall is flexible, referring to slats and other “border things.” Democrats have made clear they see a wall as immoral and ineffective and prefer other types of border security funded at already agreed upon levels.
Trump had campaigned on the promise that Mexico would pay for the wall. Mexico has refused. He’s now demanding the money from Congress.
New House Dems get early political lesson
By LAURIE KELLMAN
Saturday, January 5
WASHINGTON (AP) — The education of the star-studded class of House freshmen has begun.
Lesson one: Speaking with the bluntness of a candidate can produce swift and uncomfortable results.
Rep. Rashida Tlaib learned that before lunch Friday, when her profane remarks the night before vowing to impeach President Donald Trump drew almost no support, and plenty of pushback, from members of her party.
“It’s been pretty intense,” Tlaib, D-Mich., told The Associated Press in a brief hallway interview Friday as she reported to the House to face her colleagues.
Hours after Tlaib was sworn in as part of the history-making class of freshmen that helped flip the House to Democratic control, she ran afoul of the widespread sense among her colleagues that they should focus for now on health care and other policies rather than impeachment — at least until special counsel Robert Mueller’s investigation concludes.
“We’re gonna impeach the motherf—-er,” Tlaib exclaimed during a party Thursday night hosted by the liberal activist group MoveOn, according to video and comments on Twitter.
It was a striking coda to the Democrats’ heady ascendance to the House majority Thursday, sparking unusually public corrections from House veterans.
“I disagree with what she said,” said House Judiciary Committee Chairman Jerrold Nadler, D-N.Y., during a CNN interview. His committee would be the one to begin impeachment proceedings.
“It is too early to talk about that intelligently,” Nadler said. “We have to follow the facts.”
Newcomers routinely stumble as they learn how things are done on Capitol Hill. But Tlaib and her classmates have been celebrated in magazine profiles for their independence and their promises to stand up to the powers that be. By rebuking one, the more seasoned Democrats were effectively warning the others.
“I think some of our new members probably don’t realize that you are always on, that when you are a member of Congress, there’s always someone listening,” said Rep. Jan Schakowsky, D-Ill. She said she hopes Tlaib’s remarks aren’t news for long.
More than Tlaib’s profanity, it was her vow to impeach Trump that drew her colleagues’ disapproval.
Tlaib’s defiance flew in the face of Speaker Nancy Pelosi’s warning to focus on policies the candidates had promised ahead of the Nov. 6 elections. The timing also chafed, just hours before congressional leaders were headed to the White House to try to resolve the standoff over the border wall Trump is demanding in exchange for reopening the government. Republicans pounced, using the occasion to question the Democrats’ true priorities and Pelosi’s leadership.
With a tight smile, Pelosi rejected Tlaib’s profanity and her impeachment vow.
“That is not the position of the House Democratic caucus,” Pelosi said on MSNBC of Tlaib’s comments. “I don’t think we should make a big deal of it.”
Rep. Gerry Connolly, D-Va., served up a reminder to the new members that seniority rules in Congress.
“She’s a freshman. It’s her first day here,” Connolly said of Tlaib. “She went in front of an enthusiastic crowd of her supporters and it was red meat for them. She yielded to that temptation.”
“I’m sure upon reflection,” Connolly suggested, “she might choose other words to describe her feelings.”
Talk of impeachment remains in the air, fueled by a handful of Democrats on Pelosi’s left flank who are pressuring her to more aggressively pursue the issue. But such proceedings appear unlikely for now. Even if the House advances any articles of impeachment, a two-thirds-majority vote to convict Trump in the Republican-controlled Senate and remove him from office would seem out of the question, barring astonishing new revelations.
Tlaib wasn’t the only freshman who got a lesson in how one comment can upend Capitol Hill.
Some of Tlaib’s classmates were pursued for reaction — standard results when a political ally says something that raises eyebrows.
“I am not talking about those things,” laughed Rep. Abigail Spanberger, D-Va., when asked Friday to respond to Tlaib’s remarks.
She said she was elected because she talked about preserving health care. “I’m not going to tell anyone else what to do, but certainly, I think, it would behoove all of us to really be working for the people who need” Congress’ help.
Associated Press Writers Alan Fram and Kevin Freking contributed to this report.
Follow Kellman on Twitter at http://www.twitter.com/APLaurieKellman
US service firms grew at slower pace in December
By MARTIN CRUTSINGER
AP Economics Writer
WASHINGTON (AP) — U.S. service firms grew in December at the slowest pace in five months, a possible indication that various headwinds from turbulent markets to trade tensions could be having an impact on economic activity.
The Institute for Supply Management, which is composed of purchasing managers, reported Monday that its service index fell to 57.6 percent last month, down from a November reading of 60.7 percent. It was the lowest reading since the index stood at 55.7 percent in July.
Any reading above 50 signals growth. So even with the December decline, the index shows that service industries, where most Americans work, has been expanding for 107 consecutive months.
The fall in the services index was led by a big drop in the component that tracks business activity. Other components such as the key new orders index actually rose in December. While the employment component did decline, it was only a modest fall and stood in contrast to Friday’s jobs report which showed the economy created a sizable 312,000 jobs during the month.
The report showed that 16 service industries reported growth in December and only one — mining — reported a decline.
Still, economists said the slowdown in activity in services could be a signal that the economy will slow in 2019 after a strong performance in 2018.
“Virtually everyone is expecting growth to slow this year, but how much and how far the slowdown takes us is still anyone’s guess,” said Chris Rupkey, chief financial economist at MUFG Union Bank in New York.
The weaker reading on the service economy followed a report last week that the ISM index for manufacturing slowed to the slowest pace in more than two years, with some manufacturers complaining about the impact of President Donald Trump’s trade policies.
Navy SEAL pleads not guilty to killing captured ISIS teen
By JULIE WATSON
Saturday, January 5
SAN DIEGO (AP) — A decorated Navy SEAL pleaded not guilty Friday to charges of premeditated murder and other crimes in the stabbing death of a teenage Islamic State prisoner in Iraq last year and the shooting of unarmed Iraqi civilians.
Special Operations Chief Edward Gallagher will stand trial Feb. 19 before a jury that will be one-third enlisted personnel. Gallagher has been jailed since his arrest on Sept. 11, and a judge said he will determine next week whether the 19-year Navy veteran should be released before trial.
The case is unusual because of the seriousness of the allegations against an elite special warfare operator and because prosecutors’ case includes the accounts of fellow Navy SEALs, an extremely tight-knit group even by military standards.
At Friday’s arraignment, prosecutors handed over 1,700 pages of documents, including text messages they say show Gallagher trying to intimidate witnesses. They say the information shows why he should not be released.
His attorney, Phil Stackhouse, dismissed the documents as “hearsay and double hearsay statements.” He said Gallagher is being falsely accused by disgruntled SEALs who wanted to get rid of a demanding platoon leader and that several of the government’s witnesses have now indicated they don’t clearly remember what happened.
“He didn’t murder anyone,” Stackhouse told reporters outside the courtroom. “He didn’t shoot at innocent people in the street.”
Stackhouse told the judge that his client was venting when he sent text messages to friends that called the SEALs who reported the allegations liars and that since then he has learned coping skills after getting treatment for a traumatic brain injury last summer.
Stackhouse suggested Gallagher be released with a protective order to stay away from witnesses.
Navy prosecutors have painted a picture of a highly trained fighter and medic going off the rails on his eighth deployment, indiscriminately shooting at Iraqi civilians and stabbing to death a captured Islamic State fighter estimated to be 15 years old, then posing with the corpse, including at his re-enlistment ceremony.
Defense attorney Colby Vokey said about 20 bodies were within sight at the ceremony in a war zone.
Gallagher, who was awarded the Bronze Star twice, showed little emotion as he sat in the courtroom in a Navy dress uniform covered in medals. The judge asked defense attorneys to describe the awards at the start of the court-martial. If convicted, Gallagher faces a life sentence.
At a two-day preliminary hearing at the Navy base in November, investigators said Gallagher stabbed the teen in the neck and body with a knife after he was handed over to the SEALs in the Iraqi city of Mosul to be treated for wounds sustained by the Iraqi Army and its prisoners during an airstrike in May 2017.
Naval Criminal Investigative Service Special Agent Joe Warpinski told the court that a SEAL medic told him he believed he had just stabilized the teen when Gallagher “walked up without saying anything at all” and started stabbing him.
Afterward, prosecutors say he took photos of himself with the corpse, holding up his knife in one hand and propping up the body by holding the head with his other hand and bragged, “I got this one with my knife, with my hunting knife.”
Warpinski, who spoke to nine members of SEAL Team 7, said he was told Gallagher would fire into crowds of Iraqis. He is accused of shooting an elderly man carting a water jug in Mosul in June 2017 and a girl walking along a riverbank in the same area a month later.
Prosecutors also have accused Gallagher’s platoon commander, Navy Lt. Jacob Portier, of not acting on the allegations. His attorney, Jeremiah Sullivan, said Portier was the first to report them to superiors and did so as soon as he learned of them. His arraignment has not been scheduled yet.
Several SEALs testified for the defense Friday that Gallagher had an outstanding reputation and they would want him with them on the battlefield. None had served under him or was on the 2017 deployment with him.
Defense attorneys said they plan to call fellow SEALs on that deployment to testify at the trial.
Talks to resume after Trump says shutdown could last ‘years’
By CATHERINE LUCEY, LISA MASCARO and JILL COLVIN
Saturday, January 5
WASHINGTON (AP) — White House officials and congressional staffers will continue negotiations Saturday over the government shutdown, even after President Donald Trump declared he could keep it going for “months or even years.”
Trump met Friday with congressional leaders from both parties as the shutdown hit the two-week mark amid an impasse over his demand for billions of dollars for a border wall with Mexico. Democrats emerged from the meeting, which both sides said was contentious at times, to report little if any progress.
Trump has designated Vice President Mike Pence, Homeland Security Secretary Kirstjen Nielsen and adviser Jared Kushner to work with a congressional delegation at a meeting set for 11 a.m. Saturday.
Trump is framing the upcoming weekend talks as progress, while Democrats are emphasizing families unable to pay bills.
The standoff has prompted economic jitters and anxiety among some in Trump’s own party. But he appeared Friday in the Rose Garden to frame the weekend talks as progress, while making clear he would not reopen the government.
“We won’t be opening until it’s solved,” Trump said. “I don’t call it a shutdown. I call it doing what you have to do for the benefit and the safety of our country.”
Trump said he could declare a national emergency to build the wall without congressional approval, but would first try a “negotiated process.” Trump previously described the situation at the border as a “national emergency” before he dispatched active-duty troops in what critics described as a pre-election stunt.
Trump also said the hundreds of thousands of federal workers who are furloughed or working without pay would want him to “keep going” and fight for border security. Asked how people would manage without a financial safety net, he declared, “The safety net is going to be having a strong border because we’re going to be safe.”
Democrats called on Trump to reopen the government while negotiations continue. Senate Democratic Minority Leader Chuck Schumer said, “It’s very hard to see how progress will be made unless they open up the government.”
Friday’s White House meeting with Trump included eight congressional leaders — the top two Democrats and Republicans of both chambers. People familiar with the session but not authorized to speak publicly described Trump as holding forth at length on a range of subjects but said he made clear he was firm in his demand for $5.6 billion in wall funding and in rejecting the Democrats’ request to reopen the government.
Trump confirmed that he privately told Democrats the shutdown could drag on for months or years, though he said he hoped it wouldn’t last that long. Said Trump, “I hope it doesn’t go on even beyond a few more days.”
House Democrats muscled through legislation Thursday night to fund the government but not Trump’s proposed wall. However, Senate Majority Leader Mitch McConnell has said those measures are non-starters on his side of the Capitol without the president’s support.
A variety of strategies are being floated inside and outside the White House, among them trading wall funding for a deal on immigrants brought to the country as young people and now here illegally, or using a national emergency declaration to build the wall. While Trump made clear during his press conference that talk on DACA (the Deferred Action for Childhood Arrivals program) would have to wait and that he was trying to negotiate with Congress on the wall, the conversations underscored rising Republican anxiety about just how to exit the shutdown.
Some GOP senators up for re-election in 2020, including Cory Gardner of Colorado and Susan Collins of Maine, have voiced discomfort with the shutdown in recent days.
But with staff level talks there is always an open question of whether Trump’s aides are fully empowered to negotiate for the president. Earlier this week, he rejected his own administration’s offer to accept $2.5 billion for the wall. That proposal was made when Pence and other top officials met with Schumer at the start of the shutdown.
During his free-wheeling session with reporters, Trump also wrongly claimed that he’d never called for the wall to be concrete. Trump did so repeatedly during his campaign, describing a wall of pre-cast concrete sections that would be higher than the walls of many of his rally venues. He repeated that promise just days ago.
“An all concrete Wall was NEVER ABANDONED, as has been reported by the media. Some areas will be all concrete but the experts at Border Patrol prefer a Wall that is see through (thereby making it possible to see what is happening on both sides). Makes sense to me!” he tweeted Dec. 31.
Trump was joined by Pence in the Rose Garden, as well as House Republican leaders Kevin McCarthy and Steve Scalise. McConnell, who went back to the Capitol, unaware of the press conference, said it was encouraging that the White House officials and the congressional contingent would meet over the weekend “to see if they can reach an agreement and then punt it back to us for final sign off.”
Schumer said that if McConnell and Senate Republicans stay on the sidelines, “Trump can keep the government shut down for a long time.”
“The president needs an intervention,” Schumer said. “And Senate Republicans are just the right ones to intervene.”
Adding to national unease about the shutdown are economic jitters as analysts warn of the risks of closures that are disrupting government operations across multiple departments and agencies at a time of other uncertainties in the stock market and foreign trade.
Associated Press writers Alan Fram, Mary Clare Jalonick, Laurie Kellman, Kevin Freking, Matthew Daly, Deb Riechmann and Eileen Putman contributed to this report.
Jailed American spent years collecting Russian contacts
By LYNN BERRY
Saturday, January 5
WASHINGTON (AP) — A U.S. corporate security executive and former Marine who has been jailed in Moscow on spying charges has spent more than a decade cultivating friends and contacts in Russia, both virtual and real.
Paul Whelan sought out friends throughout the country, most often through a social networking site that is similar to Facebook and popular largely in Russia. Several told The Associated Press that the American never seemed sinister, merely someone who was interested in Russia and wanted to be pen pals.
“I know him as a friendly, polite, educated, and easygoing guy,” said one of his contacts, who, like the other Russians interviewed for this story, spoke on condition of anonymity because of Whelan’s legal troubles.
Whelan was arrested Dec. 28 while on a two-week visit to the country and has been charged with espionage. The Russian government has so far given no details about the allegations against him, but a close look at his social media history suggests why he might have come to the attention of the Russian security services, regardless of his motives.
He has collected dozens of contacts on the social media site, nearly all of them men, many of whom have at least some connection to the military.
His family back home says he was nothing more than a tourist. In a Washington Post op-ed published Friday, his twin brother, David, urged the U.S. government to pressure Russia to release him.
“Paul is a kind and considerate brother, son and uncle, and a generous and loyal friend,” he wrote. “He travels as often as he can, both for work and pleasure. He is many things to many people, but he is not a spy.”
Whelan, 48, could face up to 20 years in prison if convicted of spying. He is also a citizen of Britain, Canada and Ireland, which brings international pressure on Russia from several fronts. He was born in Canada to British parents, but grew up in Michigan, where he now lives.
His family said he was in Moscow over the holidays for the wedding of a fellow former Marine and had planned to travel to St. Petersburg before flying home this weekend. Instead he’s in Lefortovo, a notorious prison run by the KGB in Soviet times and still used for foreigners accused of spying.
Whelan has been visiting Russia since at least 2007, when he took advantage of a military program for Marines deployed in Iraq that gave them 15 days of leave and paid for the travel.
Even before then, he had begun developing a network of contacts throughout Russia. Some said they met him online in 2006 and became “pen pals,” trading practice in English for Russian. Whelan seemed fascinated with Russia and its culture, they said.
For nearly a decade, he has had an account on VKontakte, which means In Contact. Of his 58 friends at the time of his arrest, 54 were men. Many attended universities affiliated with the military, civil aviation or technical studies. Many share his interest in sports and firearms.
“We was guys with guns,” wrote another of his friends, who said he was a student working nights as a security guard when he first met Whalen online.
Both men, who live in separate Russian cities far from Moscow, said they first met Whelan in person in 2008 when he traveled around the country to meet some of his new friends. Others said they have only communicated online.
Whelan’s brother said it would not be surprising to find Russian soldiers among his contacts.
“I’m pretty sure that some of the people he knows through social media are probably Russian soldiers because there are a lot of Russian soldiers and he probably knows one,” David Whelan said in an interview.
One of Paul Whelan’s friends on VKontakte said he believed the arrest was a mistake because a true spy would never act as openly as he did. He said Whelan gave him his home address and they exchanged Christmas cards.
Former CIA officers also have expressed doubts that Whelan was working for U.S. intelligence. They note that the CIA would be unlikely to use someone in Russia without diplomatic immunity and leave them vulnerable to arrest.
Whelan’s Marine record also would likely prevent U.S. intelligence from hiring him. He began active duty with the Marines in 2003 and was deployed twice to Iraq, rising to staff sergeant. But his military career ended with a court martial in 2008, when he was convicted on charges that included attempted larceny and dereliction of duty.
Court documents released by the military show he was accused of attempting to steal more than $10,000 while on duty in Iraq, where he worked as a clerk, in September 2006. He was also convicted of using a false social security number and profile for a military computer system to grade his own examinations, and of writing 10 bad checks totaling around $6,000.
He was dropped two grades in rank and given a bad conduct discharge from the Marine Corps.
“This guy is not an intel asset,” said Malcom Nance, a veteran intelligence officer. “He’s not the type of person you would use as an asset. There is no way.”
Nance said he suspects Russian intelligence officers have been watching Whelan for years, wondering if they could use him in some way and maybe trying to flip him.
A member of Russia’s parliament suggested Friday that once the investigation into Whelan was completed, he could be swapped for Maria Butina, a Russian woman jailed in the U.S. since July. She pleaded guilty last month to conspiring to act as a foreign agent by trying to infiltrate conservative circles and the National Rifle Association to influence U.S. politics.
However, she has been cooperating with federal prosecutors and is unlikely to spend too much time behind bars. Federal sentencing guidelines call for no jail time to six months.
After his discharge, Whelan returned to his job in the temporary staffing company Kelly Services, based in Troy, Michigan, where he had worked since 2001 in the IT department until taking the leave of military absence. He was Kelly’s head of global security and investigations until 2016.
Early the following year, Whelan joined auto parts supplier BorgWarner as global security director. BorgWarner, based in Auburn Hills, Michigan, has facilities around the world but none in Russia and he never traveled to the country for business, company spokeswoman Kathy Graham said.
Associated Press writer Deb Riechmann contributed to this report.