Monthly Archives: December 2014
by Raul Ilargi Meijer via The Automatic Earth blog
There are many things I don’t understand these days, and some are undoubtedly due to the limits of my brain power. But at the same time some are not. I’m the kind of person who can no longer believe that anyone would get excited over a 5% American GDP growth number. Not even with any other details thrown in, just simply a print like that. It’s so completely out of left field and out of proportion that you would think by now at least a few more people understand what’s really going on.
And Tyler Durden breaks it down well enough in Here Is The Reason For The “Surge” In Q3 GDP (delayed health-care spending stats make up for 2/3 of the 5%), but still. I would have hoped that more Americans had clued in to the nonsense that has been behind such numbers for many years now. The US has been buying whatever growth politicians can squeeze out of the data and their manipulation, for many years. The entire world has.
The 5% stat is portrayed as being due to increased consumer spending. But most of that is health-care related. And economies don’t grow because people increase spending on not being sick and/or miserable. That’s just an accounting trick. The economy doesn’t get better if we all drive our cars into a tree, even if GDP numbers would say otherwise.
All the MSM headlines about consumer confidence and comfort and all that, it doesn’t square with the 43 million US citizens condemned to living on food stamps. I remember Halloween spending (I know, that’s Q4) was down an atrocious -11%, but the Q3 GDP print was +5%? Why would anyone volunteer to believe that? Do they all feel so bad any sliver of ‘good news’ helps? Are we really that desperate?
We already saw the other day that Texas is ramming its way right into a recession, and North Dakota is not far behind (training to be a driller is not great career choice going forward), and T. Boone Pickens of all people confirmed today at CNBC what we already knew: the number of oil rigs in the US is about to do a Wile E. cliff act. And oil prices fall because global demand is down, as much as because supply is up. A crucial point that few seem to grasp; the Saudis do though. Good for US GDP, you say?
What I see more than anything in the 5% print is a set-up for a Fed rate hike, through a variation on the completion backward principle, i.e. have the message fit the purpose, set up a narrative that makes it make total sense for Yellen to hike that rate. And Wall Street banks (that’s not just the American ones) will be ready to reap the rewards of the ensuing chaos.
And I also don’t understand why nobody seems to understand what Saudi Arabia and OPEC have consistently been saying for ever now. They’re not going to cut their oil production. Not going to happen. The Saudis, probably more than anyone, are the guys who know what demand is really like out there (they see it and track it on a daily basis), and that’s why they’ll let oil drop as far as it will go. There’s no other way out anymore, no use calling a bottom anywhere.
In the two largest markets, US demand is down through far less miles driven for a number of years now, while domestic supply is way up; at the same time, real Chinese demand is way below what anybody projects, and oil is just one of many industries that have set their – corporate – strategies to fit expected China growth numbers that never materialized. Just you watch what other – industrial – commodities fields are going to do and show in 2015. Or simply look at prices for iron ore, copper etc. today.
In an unusually frank interview, Ali al-Naimi, the Saudi oil minister, tore up OPEC’s traditional strategy of keeping prices high by limiting oil output and replaced it with a new policy of defending the cartel’s market share at all costs. “It is not in the interest of OPEC producers to cut their production, whatever the price is,” he told the Middle East Economic Survey. “Whether it goes down to $20, $40, $50, $60, it is irrelevant.” He said the world may never see $100 a barrel oil again.
The comments, from a man who is often described as the most influential figure in the energy industry, marked the first time that Mr Naimi has explained the strategy shift in detail. They represent a “fundamental change” in OPEC policy that is more far-reaching than any seen since the 1970s, said Jamie Webster, oil analyst at IHS Energy. “We have entered a scary time for the oil market and for the next several years we are going to be dealing with a lot of volatility,” he said. “Just about everything will be touched by this.”
Saudi Arabia is desperate alright, but not nearly as much as most other producers: they have seen this coming, they’ve been tracking it hour by hour, and then made their move. And they have some room to move yet. Many other producers don’t. Not inside OPEC, and certainly not outside of it. Russia should be relatively okay, they’re smart enough to see these things coming too, and adapt accordingly. Many other nations don’t and haven’t, perhaps simply because they have no room left. Anatole Kaletsky makes quite a bit of sense at Reuters:
… the global oil market will move toward normal competitive conditions in which prices are set by the marginal production costs, rather than Saudi or OPEC monopoly power. This may seem like a far-fetched scenario, but it is more or less how the oil market worked for two decades from 1986 to 2004.
Whichever outcome finally puts a floor under prices, we can be confident that the process will take a long time to unfold. It is inconceivable that just a few months of falling prices will be enough time for the Saudis to either break the Iranian-Russian axis or reverse the growth of shale oil production in the United States. It is equally inconceivable that the oil market could quickly transition from OPEC domination to a normal competitive one.
The many bullish oil investors who still expect prices to rebound quickly to their pre-slump trading range are likely to be disappointed. The best that oil bulls can hope for is that a new, and substantially lower, trading range may be established as the multi-year battles over Middle East dominance and oil-market share play out. The key question is whether the present price of around $55 will prove closer to the floor or the ceiling of this new range. [..]
… the demarcation line between the monopolistic and competitive regimes at a little below $50 a barrel seems a reasonable estimate of where one boundary of the new long-term trading range might end up. But will $50 be a floor or a ceiling for the oil price in the years ahead?
There are several reasons to expect a new trading range as low as $20 to $50, as in the period from 1986 to 2004. Technological and environmental pressures are reducing long-term oil demand and threatening to turn much of the high-cost oil outside the Middle East into a “stranded asset” similar to the earth’s vast unwanted coal reserves. [..]
The U.S. shale revolution is perhaps the strongest argument for a return to competitive pricing instead of the OPEC-dominated monopoly regimes of 1974-85 and 2005-14. Although shale oil is relatively costly, production can be turned on and off much more easily – and cheaply – than from conventional oilfields. This means that shale prospectors should now be the “swing producers” in global oil markets instead of the Saudis.
In a truly competitive market, the Saudis and other low-cost producers would always be pumping at maximum output, while shale shuts off when demand is weak and ramps up when demand is strong. This competitive logic suggests that marginal costs of U.S. shale oil, generally estimated at $40 to $50, should in the future be a ceiling for global oil prices, not a floor.
As Kaletsky also suggests, there is the option of a return to an OPEC monopoly and much higher prices, but I personally don’t see that. It would need to mean a return to prolific global economic growth numbers, and I simply can’t see where that would come from.
Meanwhile, there’s the issue of ‘anti-Putin’ sanctions hurting western companies, with an asset swap between Gazprom and German chemical giant BASF that went south, and a failed deal between Morgan Stanley and Rosneft as just two examples, and that leads me to think pressure to lift or ease these sanctions will rise considerably in 2015. Why Angela Merkel is so set on punishing her (former?) friend Putin, I don’t know, but I can’t see how she can ignore domestic corporate pressure to wind down much longer. Russia is part of the global economic system, and excluding it – on flimsy charges to boot – is damaging for Germany and the rest of Europe.
Finally, still on the topic of oil and gas, Wolf Richter provides another excellent analysis and breakdown of US shale.
It’s showing up everywhere. Take Samson Resources. As is typical in that space, there is a Wall Street angle to it. One of the largest closely-held exploration and production companies, Samson was acquired for $7.2 billion in 2011 by private-equity firms KKR, Itochu Corp., Crestview Partners, and NGP Energy Capital Management. They ponied up $4.1 billion. For the rest of the acquisition costs, they loaded up the company with $3.6 billion in new debt. In addition to the interest expense on this debt, Samson is paying “management fees” to these PE firms, starting at $20 million per year and increasing by 5% every year.
KKR is famous for leading the largest LBO in history in 2007 at the cusp of the Financial Crisis. The buyout of a Texas utility, now called Energy Future Holdings Corp., was a bet that NG prices would rise forevermore, thus giving the coal-focused utility a leg up. But NG prices soon collapsed. And in April 2014, the company filed for bankruptcy. Now KKR is stuck with Samson. Being focused on NG, the company is another bet that NG prices would rise forevermore. But in 2011, they went on to collapse further. In 2014 through September, the company lost $471 million, the Wall Street Journal reported, bringing the total loss since acquisition to over $3 billion. This is what happens when the cost of production exceeds the price of NG for years.
Samson has used up almost all of its available credit. In order to stay afloat a while longer, it is selling off a good part of its oil-and-gas fields in Oklahoma, North Dakota, Wyoming, and Colorado. It’s shedding workers. Production will decline with the asset sales – the reverse of what investors in its bonds had been promised. Samson’s junk bonds have been eviscerated. In early August, the $2.25 billion of 9.75% bonds due in 2020 still traded at 103.5 cents on the dollar. By December 1, they were down to 56 cents on the dollar. Now they trade for 43.5 cents on the dollar. They’d plunged 58% in four months.
The collapse of oil and gas prices hasn’t rubbed off on the enthusiasm that PE firms portray in order to attract new money from pension funds and the like. “We see this as a real opportunity,” explained KKR co-founder Henry Kravis at a conference in November. KKR, Apollo Global Management, Carlyle, Warburg Pincus, Blackstone and many other PE firms traipsed all over the oil patch, buying or investing in E&P companies, stripping out whatever equity was in them, and loading them up with piles of what was not long ago very cheap junk bonds and even more toxic leveraged loans.This is how Wall Street fired up the fracking boom.
PE firms gathered over $100 billion in their energy funds since 2011. The nine publicly traded E&P companies that represent the largest holdings have cost PE firms at least $12.7 billion, the Wall Street Journal figured. This doesn’t include their losses on the smaller holdings. Nor does it include losses from companies like Samson that are not publicly traded. And it doesn’t include losses pocketed by bondholders and leveraged loan holders or all the millions of stockholders out there.
Undeterred, Blackstone is raising its second energy-focused fund; it has a $4.5 billion target, Bloomberg reported. The plunge in oil and gas prices “has not created a lot of difficulties for us,” CEO Schwarzman explained at a conference on December 10. KKR’s Kravis said at the same conference that he welcomed the collapse as an opportunity. Carlyle co-CEO Rubenstein expected the next 5 to 10 years to be “one of the greatest times” to invest in the oil patch.
The problem? “If you have an asset you already own, it’s probably going to go down in value,” Rubenstein admitted. But if you’ve got money to invest, in Carlyle’s case about $7 billion, “it’s a great time to buy.” They all agree: opportunities will be bountiful for those folks who refused to believe the hype about fracking over the past few years and who haven’t sunk their money into energy companies. Or those who got out in time.
We live in a new world, and the Saudis are either the only or the first ones to understand that. Because they are so early to notice, and adapt, I would expect them to come out relatively well. But I would fear for many of the others. And that includes a real fear of pretty extreme reactions, and violence, in quite a few oil-producing nations that have kept a lid on their potential domestic unrest to date. It would also include a lot of ugliness in the US shale patch, with a great loss of jobs (something it will have in common with North Sea oil, among others), but perhaps even more with profound mayhem for many investors in US energy. And then we’re right back to your pension plans.
For years, we’ve been warning here at PeakProsperity.com that the economics of the US ‘shale revolution’ were suspect. Namely, that they’ve only been made possible by the new era of ‘expensive’ oil (an average oil price of between $80-$100 per barrel). We’ve argued that many players in the shale industry simply wouldn’t be able to operate profitably at lower prices.
Well, with oil prices now suddenly sub-$60 per barrel, we’re about to find out.
Using the traditional corporate income statement, it is difficult to determine if shale drilling companies make money. There are a lot of moving parts, some deliberate obfuscation at some companies, and the massive decline rates make analysis difficult – since so much of reported profitability depends on assumptions made regarding depreciation and depletion.
So, can shale oil be profitable? If so, at what price? And under what conditions?
I try to deconstruct all this: here
Dec 14, 2014 9:36 a.m. ET
NEW YORK (MarketWatch)—Talk about an oil spill. The spectacular unhinging of crude oil prices over the past six months is weighing mightily on the U.S. stock market.
And while it may be too early to abandon all hope that the market will stage a year-end Santa rally, it appears that if Father Christmas comes, there’s a good chance his sleigh will be driven by polar bears, instead of gift-laden reindeer.
Wall Street’s gift: a major stock correction.
Indeed, the Dow Jones Industrial Average DJIA, -1.79% already endured a bludgeoning, registering its second-worst weekly loss in 2014, shedding 570 points, or 3.2%, on Friday. That’s just shy of the 579 points that the Dow lost during the week ending Jan. 24, earlier this year. It’s also the second worst week for the S&P 500 this year SPX, -1.62% which was down about 58 points, over the past five trading days, or 2.83%, compared to a cumulative weekly loss of 61.7 points, or 3.14%, during the week concluding Oct. 10.
But all that carnage is nothing compared to what may be in store for the oil sector as crude oil tumbles to new gut-wrenching lows on an almost daily basis. On the New York Mercantile exchange light, sweet crude oil for January delivery settled at $57.81 on Friday, its lowest settlement since May 15, 2009.
Moreover, the largest energy exchange traded fund, the energy SPDR XLE, -1.86% is off by 14% over the past month and has lost a quarter of its value since mid-June.
The real damage, however, is yet to come. By some estimates the wreckage, particularly for the oil-services companies, may add up to a stunning $1.6 trillion annual loss, at oil’s current $57 low, predicts Eric Lascelles, RBC Global Asset Management chief economist.
Since it’s a zero-sum game, that translates into a big windfall for everyone else outside of oil players.
In his calculation, Lascelles includes the cumulative decline in oil prices since July and current supply estimates of 93 million barrels a day. It’s a fairly simplistic tally, but it gets the point across that the energy sector is facing a serious oil leak. Here’s a look at a graphic illustrating the zero-sum, wealth redistribution playing out as oil craters: Source and more
In space, no one can hear you scream… unless you happen to be Venezuela’s (soon to be former) leader Nicolas Maduro, who has been doing a lot of screaming this morning following news that UAE’s Energy Minister Suhail Al-Mazrouei said OPEC will stand by its decision not to cut crude output “even if oil prices fall as low as $40 a barrel” and will wait at least three months before considering an emergency meeting.
In doing so, OPEC not only confirms that the once mighty cartel is essentially non-existant and has been replaced by the veto vote of the lowest-cost exporters (again, sorry Maduro), but that all those energy hedge funds (and not only) who hoped that by allowing margin calls to go straight to voicemail on Friday afternoon, their troubles would go away because of some magical intervention by OPEC over the weekend, are about to have a very unpleasant Monday, now that the next oil price bogey has been set: $40 per barrell.
Luckily, this will be so “unambiguously good” for the US consumer, it should surely offset the epic capex destruction that is about to be unleashed on America’s shale patch, in junk bond hedge funds around the globe, and as millions of high-paying jobs created as a result of the shale miracle are pink slipped.
According to Bloomberg, OPEC won’t immediately change its Nov. 27 decision to keep the group’s collective output target unchanged at 30 million barrels a day, Suhail Al-Mazrouei said. Venezuela supports an OPEC meeting given the price slide, though the country hasn’t officially requested one, an official at Venezuela’s foreign ministry said Dec. 12. The group is due to meet again on June 5.
“We are not going to change our minds because the prices went to $60 or to $40,” Mazrouei told Bloomberg at a conference in Dubai. “We’re not targeting a price; the market will stabilize itself.” He said current conditions don’t justify an extraordinary OPEC meeting. “We need to wait for at least a quarter” to consider an urgent session, he said.
And with OPEC’s 12 members pumped 30.56 million barrels a day in November, exceeding their collective target for a sixth straight month, according to data compiled by Bloomberg. Saudi Arabia, Iraq and Kuwait this month deepened discounts on shipments to Asia, feeding speculation that they’re fighting for market share amid a glut fed by surging U.S. shale production.
The above only focuses on the (unchanged) supply side of the equation – and since the entire world is rolling over into yet another round of global recession, following not only a Chinese slowdown to a record low growth rate, but also a recession in both Japan and Europe, the just as important issue is where demand will be in the coming year. The answer: much lower.
OPEC’s unchanged production level, a lower demand growth forecast from the International Energy Agency further put the skids under oil on Friday, raising concerns of possible broader negative effects such as debt defaults by companies and countries heavily exposed to crude prices. There was also talk of the price trend adding to deflation pressures in Europe, increasing bets that the European Central Bank will be forced to resort to further stimulus early next year.
And while the bankruptcy advisors and “fondos buitre” as they are known in Buenos Aires, are circling Venezuela whose default is essentially just a matter of day, OPEC is – just in case its plan to crush higher cost production fails – doing a little of the “good cop” routing as a Plan B.
According to Reuters, OPEC secretary general tried to moderate the infighting within the oil exporters, saying “OPEC can ride out a slump in oil prices and keep output unchanged, arguing market weakness did not reflect supply and demand fundamentals and could have been driven by speculators.”
Ah yes, it had been a while since we heard the good old “evil speculators” excuse. Usually it appeared when crude prices soared. Now, it has re-emerged to explain the historic plunge of crude.
Speaking at a conference in Dubai, Abdullah al-Badri defended November’s decision by the Organization of the Petroleum Exporting Countries to not cut its output target of 30 million barrels per day (bdp) in the face of a drop in crude prices to multi-year lows.
“We agreed that it is important to continue with production (at current levels) for the … coming period. This decision was made by consensus by all ministers,” he said. “The decision has been made. Things will be left as is.”
Some say selling may continue as few participants are yet willing to call a bottom for markets.
There is some hope for the falling knife catchers: “Badri suggested the crude price fall had been overdone. “The fundamentals should not lead to this dramatic reduction (in price),” he said in Arabic through an English interpreter. He said only a small increase in supply had lead to a sharp drop in prices, adding: “I believe that speculation has entered strongly in deciding these prices.””
Unfortunately for the crude longs, Badri is lying, as can be gleaned from the following statement:
Badri said OPEC sought a price level that was suitable and satisfactory both for consumers and producers, but did not specify a figure. The OPEC chief also said November’s decision was not aimed at any other oil producer, rebutting suggestions it was intended to either undermine the economics of U.S. shale oil production or weaken rival powers closer to home.
“Some people say this decision was directed at the United States and shale oil. All of this is incorrect. Some also say it was directed at Iran and Russia. This also is incorrect,” he said.
Well actually… “Saudi Arabia’s oil minister Ali al-Naimi had told last month’s OPEC meeting the organization must combat the U.S. shale oil boom, arguing for maintaining output to depress prices and undermine the profitability of North American producers, said a source who was briefed by a non-Gulf OPEC minister.”
And as Europe has shown repeatedly, not only is it serious when you have to lie, but it is even worse when you can’t remember what lies you have said in the past. That alone assures that the chaos within OPEC – if only for purely optical reasons – will only get worse and likely lead to least a few sovereign defaults as the petroleum exporting organization mutates to meet the far lower demand levels of the new normal.
In the meantime, the only question is how much longer can stocks ignore the bloodbath in energy (where there has been much interstellar screaming too) because as we showed on Friday, despite the worst week for stocks in 3 years, equities have a long way to go if and when they finally catch up, or rather down, with the crude reality…
President accused of ‘sleight of hand’ to protect self from impeachment
NEW YORK – Did President Obama just set up Department of Homeland Security Secretary Jeh Johnson to be a candidate for impeachment instead of himself if conservatives convince the Republican majorities in the House and the Senate that his “executive actions” on immigration are unconstitutional?
The inquiry begins with the question: Where are the executive orders Obama supposedly signed to permit up to 5 million parents of young illegal aliens to remain in the United States for three years?
The White House appears to have engaged in administrative sleight of hand, changing U.S. immigration law not by executive order but by a memorandum “exercising prosecutorial discretion” Johnson signed the day of Obama’s Nov. 20 nationwide address that so far has not been filed in the Federal Register.
Tom Fitton, president of Washington-based watchdog institution Judicial Watch, told WND in an interview the legal status of Johnson’s memo is a serious constitutional question that deserves to be adjudicated.
“The entire implementing authority involves a memorandum published by DHS Secretary Jeh Johnson that changes the immigration law, directing federal money to be spent that has not been appropriated by Congress,” he said.
“In my view, there is a serious question whether Jeh Johnson should be impeached for taking this action, and a criminal investigation should be initiated to determine how and why federal funds are being misappropriated,” he declared.
Fitton said DHS “is being hijacked to implement actions Congress has neither authorized nor appropriated funds to accomplish.”
“All remedy options need to be on the table when attacking this threat to the Constitution,” he said.
On Wednesday, attorneys general in 17 states joined in a lawsuit filed by Texas attorney general and governor-elect Greg Abbott that charges the Obama’s immigration action violated the U.S. Constitution’s “Take Care” clause and failed to follow the Administrative Procedure Act’s guidelines for implementing new policies, including a comment period to outline the changes’ benefits, National Review’s Andrew Johnson reported.
Abbot said in a statement the president “is abdicating his responsibility to faithfully enforce laws that were duly enacted by Congress and attempting to rewrite immigration laws, which he has no authority to do — something the president himself has previously admitted.”
The 16 other states are Alabama, Georgia, Idaho, Indiana, Kansas, Louisiana, Maine, Mississippi, Montana, Nebraska, North Carolina, South Carolina, South Dakota, Utah, West Virginia and Wisconsin.
Showtime in Vegas
The White House drew attention to President Obama’s trip to Las Vegas Nov. 21, where he was expected to sign two executive orders that would revise his Deferred Action for Childhood Arrivals, or DACA. But a close examination of the executive actions Obama actually signed shows they had nothing to do with implementing the move he announced in his Nov. 20 White House address to the nation.
According to the White House website, on Nov. 21 Obama signed a presidential proclamation titled “Creating Welcoming Communities Fully Integrating Immigrants and Refugees” and a presidential memorandum titled “Modernizing and Streamlining the U.S. Immigration Visa System for the 21st Century.”
The first of the presidential actions, “Creating Welcoming Communities Fully Integrating Immigrants and Refugees,” filed Nov. 26 in the Federal Register at Vol. 79, No. 228, in the category “Presidential Documents” at page 70769, created a White House Task Force on New Americans to “engage with community, business, and faith leaders, as well as State and local elected officials.” The task force is designed to “help determine additional steps the Federal Government can take to ensure its programs and policies are serving diverse communities that include new Americans.”
The second of the presidential actions, “Modernizing and Streamlining the U.S. Immigration Visa System for the 21st Century,” filed Nov. 26 in the Federal Register at Vol. 79, No. 228, in the category “Presidential Documents” at page 70765, empowered the secretaries of State and Homeland Security, in consultation with the director of the Office of Management and Budget, the director of the National Economic Council, the assistant to the president for homeland security and counterterrorism, the director of the Domestic Policy Council, the director of the Office of Science and Technology Policy, the attorney general, and the secretaries of Agriculture, Commerce, Labor and Education, to make a series of recommendations “to reduce government costs, improve services for applicants, reduce burdens on employers, and combat waste, fraud, and abuse in the system” of issuing immigrant and non-immigrant visas.
The only Obama administration document relevant to altering DACA to accommodate the legislative changes announced in Obama’s address to the nation Nov. 21 is a DHS memorandum signed by DHS Secretary Johnson titled “Exercising Prosecutorial Discretion with Respect to Individuals Who Came to the United States as Children with Respect to Certain Individuals Who Are the Parents of U.S. Citizens or Permanent Residents.”
The Federal Register lists 26 executive orders President Obama has signed this year, with the most recent being “Improving the Security of Consumer Financial Transactions,” signed Oct. 17 and published in the Federal Register Oct. 23.
The last item DHS filed in the Federal Register relevant to DACA was a form revision filed April 4 that had nothing to do with the actions Obama announced Nov. 20.
Who has the authority?
“What is clear is that Jeh Johnson was the vehicle chosen by the Obama administration to extend temporary residency status and work authorization to millions of illegal immigrants currently in the country,” Fitton told WND.
The “Guide to the Federal Rulemaking Process” published by the Office of the Federal Register specifies agencies “get their authority to issue regulations from laws (statutes) enacted by Congress.”
The guide states further:
In some cases, the President may delegate existing Presidential authority to an agency. Typically, when Congress passes a law to create an agency, it grants that agency general authority to regulate certain activities within our society. Congress may also pass a law that more specifically directs an agency to solve a particular problem or accomplish a certain goal.
An agency must not take action that goes beyond its statutory authority or violates the Constitution. Agencies must follow an open public process when they issue regulations, according to the Administrative Procedure Act (APA). This includes publishing a statement of rulemaking authority in the Federal Register for all proposed and final rules.
Johnson’s Nov. 20 implementing memo is technically the announcement of a decision to exercise prosecutorial discretion, not a change in rules.
“Deferred action is a long-standing administrative mechanism dating back decades, by which the Secretary of Homeland Security may defer the removal of an undocumented immigrant for a period of time,” Johnson’s memo noted.
Fitton said an important question is whether or not the Johnson memo is subject to public comment provisions.
“This is a legal question given the impact of the Johnson memo is to stop effectively deportations of illegal immigrants that have been in the United States prior to Jan. 1, 2010, and are parents of children who are U.S. citizens or legal U.S. residents,” he said.
Johnson’s memo attempts to make the deferred prosecution decision announced for the DACA program equivalent to an executive action taken by two recent Republican presidents.
“A form of administrative relief similar to deferred action, known then as ‘indefinite voluntary departure,’ was originally authorized by the Reagan and Bush administrations to defer the deportations of an estimated 1.5 million undocumented spouses and minor children who did not qualify for legalization under the Immigration Reform and Control Act of 1986,” the memo said “Known as the ‘Family Fairness’ program, the policy was specifically implemented to promote the humane enforcement of the law and ensure family unity.”
The memo then attempted to further distinguish deferred action from rulemaking by noting the temporary aspects of the prosecutorial discretion involved:
Deferred action is a form of prosecutorial discretion by which the Secretary deprioritizes an individual’s case for humanitarian reasons, administrative convenience, or in the interest of the Department’s overall enforcement mission. As an act of prosecutorial discretion, deferred action is legally available so long as it is granted on a case-by-case basis, and it may be terminated at any time at the agency’s discretion. Deferred action does not confer any form of legal status in this country, much less citizenship; it simply means that, for a specified period of time, an individual is permitted to be lawfully present in the United States. Nor can deferred action itself lead to a green card.
Finally, the memo acknowledges that the actions taken with respect to the DACA program are not specifically authorized in any legislation passed by Congress and signed into law by the president.
Although deferred action is not expressly conferred by statute, the practice is referenced and therefore endorsed by implication in several federal statutes.
Fitton told WND that while Obama has maintained that his administration has issued executive orders just as prior administrations have done,” he’s now saying the memo signed by Johnson ‘”changed the law.”
In a speech in Chicago after his Nov. 20 announcement, Obama told hecklers, “I took action to change the law.” Confronted with the statement by reporters, White House press secretary Josh Earnest insisted the president was “speaking colloquially.”
But Fitton said there is nothing comparable to Obama’s admission in recent presidential history.
“Obama’s statement is an admission of tyranny.”