SERIOUSLY?!

UK
Laughing gas to be banned under Government plans to crack down on anti-social behaviour

REACTIONARY REJECTION OF DRUG DECRIMINALIZATION

Amy Gibbons
Sun, March 26, 2023 

Communities Secretary Michael Gove said the inappropriate sale and use of the substance will be forbidden to stop public areas becoming drug-taking 'arenas' - Jeff Overs/BBC/PA

Laughing gas will be banned against expert advice under Government plans to crack down on anti-social behaviour, a Cabinet minister has confirmed.

Communities Secretary Michael Gove said the inappropriate sale and use of the substance will be forbidden to stop public areas becoming drug-taking “arenas”.

Ministers have decided to press ahead with the move against the recommendation of the independent Advisory Council on the Misuse of Drugs (ACMD).

Asked whether nitrous oxide would be banned, Mr Gove told Sky News’ Sophy Ridge On Sunday programme: “Yes.”

He said: “I think any of us who have had the opportunity to walk through our parks in our major cities will have seen these little canisters, these silver canisters which are examples of people not only despoiling public spaces but also people taking a drug which can have a psychological and neurological affect and one that contributes to anti-social behaviour overall.”

Labour backed the decision, with shadow culture secretary Lucy Powell telling Ridge: “I think we want to see it banned as well because I think it does cause a huge amount of littering, of disruption and of anti-social behaviour challenges as well.”

Mr Gove said ministers had not yet decided which drug classification level would apply to the substance.

“We want to make sure the sale and use can be restricted for its appropriate purpose,” he said.

'Drug-taking arenas'

“We can’t have a situation, we mustn’t have a situation where our parks, our public spaces become drug-taking arenas. And that is why we need to crack down on new manifestations of drug taking and these laughing gas canisters are an increasing scourge and one that has been reported to me as a constituency MP.”

He accepted that ministers had been advised not to ban the drug, but said the Government had taken a different view - opting to make it illegal under the Misuse of Drugs Act 1971.

“It is the case that we need to be clear that there are types of activity, particular types of activity that cause distress to others in public which are unacceptable,” he said.

“Of course it is absolutely right that we uphold the law in this case.

“Yes, the advisory committee offered their advice, but ultimately it is ministers who are responsible.

'Vital that we deal with this scourge'

“And we believe collectively that it is absolutely vital that we deal with this scourge and in the same way.”

Following a Government-commissioned review, the ACMD said the substance “should not be subjected to control under the Misuse of Drugs Act 1971”.

It concluded that the sanctions for offences under the act would be disproportionate with the level of harm associated with the drug, and that such control could create “significant burdens” for its legitimate uses - such as for anaesthetic purposes and as a gas for whipped cream in cooking.

The non-legitimate sale of nitrous oxide is currently controlled under the Psychoactive Substances Act 2016, which the council said “remains the appropriate legislation”.

This means the production, supply and importation of the drug for its psychoactive effects is illegal, but not possession.

Mr Gove - who has previously admitted taking cocaine - said he had learned through his own experience that it was a “mistake” to “regard drug taking as somehow acceptable”.

Asked whether some might view ministers’ stance on laughing gas as “hypocritical” if they had confessed to taking illegal substances in the past, he told Ridge: “No, I think it is because I have learned... that it is a mistake - worse than a mistake - to regard drug taking as somehow acceptable.”

A MORE EXPERIENCED ENGLISHMAN WROTE 

(99+) The diary of a drug fiend | Aleister Crowley - Academia.edu

 

KICK A JUNKIE TO THE CURB LAW

Rishi Sunak pledges to end ‘scourge of anti-social behaviour’ with new action plan

Josh Salisbury
Sat, March 25, 2023

(PA)

Offenders blighting their communities will be put to work in jumpsuits or hi-viz jackets to clean up their crimes within 48 hours of being handed punishments, Rishi Sunak will pledge.

The Prime Minister said his plan, due to be announced on Monday, would “crack down" on anti-social behaviour “once and for all".

A key plank of the measures will be making justice "immediate" and ensuring that communities can visibly see efforts to clean up vandalism and graffiti.

Other punishments could include picking up litter, washing police cars or doing unpaid work in shops, according to Downing Street.

Officials said the UK Government's anti-social action plan was about establishing a “zero-tolerance approach where offenders know they will face the full consequences of their actions".

Speaking ahead of the plan's publication, the Prime Minister said: “For too long, people have put up with the scourge of anti-social behaviour in their neighbourhoods.

“These are not minor crimes. They disrupt people's daily lives, hold businesses back and erode the sense of safety and community that brings people together.

“That's why I'm bringing forward a new plan to crack down on this behaviour once and for all - so that everyone can feel proud of where they live."

Mr Sunak will announce an approach known as immediate justice to be piloted in 10 areas before a rollout across England and Wales next year.

The plan is set to include new funding for police and crime commissioners (PCCs) to ensure those responsible for offences that blight communities are punished as soon as possible.

The Prime Minister has set the target of having offenders who are slapped with community orders starting reparation work within 48 hours of being handed the punishment.

Mr Sunak dedicated a portion of his new year speech, setting out his five pledges ahead of the next election, on his ambitions to tackle anti-social behaviour.

He said that low-level offences made "life miserable for so many" and argued the destructive form of behaviour could "be a gateway to more extreme crimes".

According to officials, Mr Sunak's plan will see offenders having to wear jumpsuits or hi-vis jackets and work under supervision as part of efforts to give the public confidence that justice is being done.

Where possible, low-level criminals will be tasked with cleaning up the mess they created.

If their anti-social activity has already been removed or repaired, they will instead be assigned projects to assist their community in other ways.

Ministers have pledged that victims and affected communities will get a say in deciding what type of punishment or consequences offenders should face.

The immediate justice pilots come in addition to an expansion of the so-called community payback scheme for more serious criminals.

Currently, offenders are sentenced by courts to do unpaid work that directly benefits their local communities, such as cleaning up public places and removing graffiti.

Under Mr Sunak's pilots idea, teams of offenders will be rapidly deployed to clean up more urgent incidents of anti-social behaviour, with the Probation Service delivering the work alongside selected councils.

According to Government figures, last year saw 1,500 offenders spend almost 10,000 hours on 300 community clean-up projects, with plans to double that this year.

https://www.theguardian.com/books/2014/feb/01/william-burroughs-junky-will-self

William Burroughs - the original Junkie - The Guardian 

Feb 1, 2014 ... Burroughs wrote Junky on the very brink of a transformation in western culture. His junkies were creatures of the depression, many of whose ...

(99+) Junkie by Burroughs: Alienation and the use of drugs | Susana Casesnoves - Academia.edu

In Defense of Destruction: How Addiction Propels Natural Cycles of Death and Renewal in William S. Burroughs' Junky

Date

2020-08

Author

 West-Israel, Beatrice J.

William Burroughs’ novel Junky is humorous and meticulously detailed in portraying its protagonist’s spiral to rock bottom. However, within the otherwise dispassionate narrative, readers encounter an undercurrent of pure need, with characters and narrator/protagonist Bill Lee at once repelled and empowered by the powers of destruction that junk has over their lives. The book is structured as a descending spiral, ever-inward and downward, as Lee wanders from New York to Mexico: one instance of the text’s overarching depiction of a journey from stability to destruction and back again. Burroughs portrays human need as the propellant of this cycle, a catalyst that causes individuals to move because of their own suffering. In attempting to keep himself stable and well, for instance, Lee must always have more junk: his need for junk is what drives him to the very ends of his resources, and propels him out of the phase of stability. When he runs out of junk, withdrawal sickness sets in, signifying the death of his addict self and rebirth into a new life. Just as quickly, his addiction may be reborn in subsequent chapters. In exploring this text, I document both the forms and functions of this cycle. The protagonist’s environment, for example, is analogous to his mindset, moving him from an iconic image of stability (suburban Midwestern U.S.) to a jewel of chaos, Mexico. Bill Lee equates his childhood home in the Midwest with atrophy, and to end the stagnation he engages in violent lifestyles that, like pruning a plant, initiate growth through destruction. Lee finally escapes to Mexico, fleeing a court case: agents of stability and law in the U.S. After he reaches Mexico, he begins to atrophy again, with “nothing to do" and “no place to go,” since his life is no longer driven by his junk habit (117). Soon after this, driven by a need for junk imposed on him by his environment, Lee is back in the cycle of destruction. “Junk” serves as a signifier for destruction in Junky, a metaphor for human needs which propel the larger cycles in which the text operates. According to Burroughs, kicking junk is a violent process that causes the death of junk-dependent cells. As the text suggests, the entropy that follows is a kind of rotting away as part of a natural cycle of matter. The junk always runs out, and the body goes through the violence of junksickness before renewing itself, which is a "suffering of the cells alone” (Junky 3). The effect of this suffering appears on the face of Lee associate Jack, who exhibits a “conscious ego that look[s] out of the glazed, alert-calm hoodlum eyes—would have nothing to do with the suffering of his rejected other-self” (3). Junk-sickness creates an undercurrent of violence at the cell level, and all the while Jack is helping Bill Lee to sell a “Tommy gun” (1), invoking a violence beyond the cellular. In a similar manner, the violence that morphine-sickness brings to another Lee associate, Roy, is positioned in the narrative directly after Jack’s homicide story, in which he admits to bashing someone’s head with a pipe. Violence, signifying death, is positioned before Roy’s junk-sickness, signifying rot. The circumstances of Lee’s narrative follow natural cycles of death, renewal, and life, implying that the spirals of suffering Lee transcends are analogies for the universal suffering and rebirth which transforms all of existence.

Citation

West-Israel, B. J. (2020). In defense of destruction: How addiction propels natural cycles of death and renewal in William S. Burroughs' Junky (Unpublished thesis). Texas State University, San Marcos, Texas.

PDF DOWNLOAD

In Defense of Destruction: How Addiction Propels Natural Cycles of Death and Renewal in William S. Burroughs' Junky (txstate.edu)

Analysis-Coinbase, SEC on collision course for 'existential' clash over crypto industry

Chris Prentice and Hannah Lang
Fri, March 24, 202


 The logo for Coinbase Global Inc is displayed on the Nasdaq MarketSite

 jumbotron and others at Times Square in New York

NEW YORK/WASHINGTON (Reuters) -Coinbase debuted on the U.S. stock market on April 14, 2021 - the same day U.S. senators confirmed Gary Gensler to lead the Securities and Exchange Commission (SEC), the country's top markets regulator.

Gensler, who has called the crypto sector a "Wild West" riddled with fraud, is now embroiled in a battle with the world's largest publicly-traded crypto firm over a core debate: whether digital assets are investment contracts akin to stocks or bonds that should be regulated by the SEC.

Friction between crypto proponents and the regulator have been brewing under Gensler's leadership, with both sides growing increasingly loud in their criticisms.

The escalating tension exploded into public view on Wednesday when Coinbase CEO Brian Armstrong and the company's chief legal officer Paul Grewal posted online that the firm had been told that SEC staff intend to recommend enforcement action, adding that Coinbase was willing to fight it in court.

Coinbase shares have tumbled 12% since Wednesday's disclosure.

SEC and Coinbase spokespeople declined to comment. For months, the two have been in discussions over regulation and the agency's investigation into Coinbase, according to two sources.

In July, the firm disclosed an SEC probe into its asset listing processes, staking programs and yield-generating products.

Discussions between the SEC and Coinbase broke down in recent weeks, with one source saying the two sides had moved "further apart." The SEC appears to be going after Coinbase's entire business as operating outside of U.S. laws, the source said.

The crypto industry believes it operates in a regulatory gray area not governed by existing U.S. securities laws - and that new legislation is needed to regulate the industry.

"We continue to think rulemaking and legislation are better tools for defining the law for our industry than enforcement actions," Coinbase's Grewal said on Wednesday. "But if necessary, we welcome the opportunity for Coinbase and the broader crypto community to get clarity in court."

Prior to Gensler's arrival, the SEC engaged in targeted enforcement, but the Democratic chair has ratcheted up focus on crypto platforms themselves. The SEC's crackdown on crypto gathered pace after November's collapse of Sam Bankman-Fried's FTX exchange.

Gensler has raised questions over whether crypto firms rely on a business model that is fundamentally non-compliant with the law, adding that crypto intermediaries provide a range of functions, such as operating as an exchange, broker-dealer, clearing agent and custodian, that should be regulated by the SEC.

"This is probably existential for Coinbase," said Joshua White, a finance professor at Vanderbilt University. "It’s perhaps existential for the industry, at least in the U.S."

The SEC on Thursday issued an investor alert warning that firms offering crypto asset securities may not be complying with U.S. laws.

Kristin Smith, the CEO of the Blockchain Association, voiced the crypto industry association's support for Coinbase, noting: "The SEC doesn't make the law – it only makes allegations, which ultimately must be tested in the courts."

The SEC has gone to court against many crypto firms, including a case against San Francisco-based crypto and cross-border payments company Ripple Labs Inc that some say could offer clarity on when a digital asset is considered a security.

But the SEC and Coinbase debate over an "unspecified portion" of its listed digital assets sets the stage for a more expansive and potentially defining courtroom battle. Coinbase's website lists over 150 crypto assets for trading.

Coinbase flagged potential regulatory risks when it filed to go public in 2021, and noted on Wednesday that its staking and exchange services are "largely unchanged" since then.

"There couldn't be a more significant development for crypto markets and crypto investors," said Philip Moustakis, former SEC enforcement lawyer and partner with Seward & Kissel LLP in New York.

(Reporting by Chris Prentice and Hannah Lang; editing by David Gaffen and Nick Zieminski)

IMF chief warns risks to financial stability have increased


AFP
Sun, March 26, 2023 


International Monetary Fund chief Kristalina Georgieva warned on Sunday that risks to financial stability had increased and stressed "the need for vigilance" following the recent turmoil in the banking sector.

Speaking at a forum in Beijing, the IMF managing director said she expected 2023 "to be another challenging year", with global growth slowing to below 3.0 percent due the war in Ukraine, monetary tightening and "scarring" from the pandemic.

"Uncertainties are exceptionally high," with the outlook for the global economy likely to remain weak over the medium term, she told the China Development Forum.

"It is also clear that risks to financial stability have increased," she added.

"At a time of higher debt levels, the rapid transition from a prolonged period of low interest rates to much higher rates -- necessary to fight inflation -- inevitably generates stresses and vulnerabilities, as evidenced by recent developments in the banking sector in some advanced economies."

Her comments came after the financial sector was shaken by the collapse of Silicon Valley Bank and the enforced takeover of Swiss bank Credit Suisse by rival UBS, leading to fears of contagion.

Bank shares tumbled on Friday as fears about the health of the financial sector resurfaced, with German Chancellor Olaf Scholz forced to give reassurances about Deutsche Bank after the long-troubled lender became a focus of investor concerns.

Georgieva said policymakers had acted decisively in response to financial stability risks.

"These actions have eased market stress to some extent, but uncertainty is high which underscores the need for vigilance," she said.

The IMF chief, however, pointed to China's rebound as a bright spot for the world economy.

The IMF forecasts China's economy to grow 5.2 percent this year, driven by a rebound in private consumption as the country reopens after its pandemic isolation.

"The robust rebound means China is set to account for around one third of global growth in 2023 -- giving a welcome lift to the world economy," she said.

"A 1.0 percentage point increase in GDP growth in China leads to 0.3 percentage point increase in growth in other Asian economies, on average -- a welcome boost."

Georgieva urged China's policymakers to seek to raise productivity and rebalance the economy away from investment and towards more durable consumption-driven growth.

"Market-oriented reforms to level the playing field between the private sector and state-owned enterprises, together with investments in education, would significantly lift the economy's productive capacity," she said.

ehl-mtp/smw

I'm an SVB employee who lost more than $1 million. Here's the inside story of our struggle to survive.

Why Silicon Valley Bank collapsed, and why it matters


Darius Rafieyan, Mattathias Schwartz
Sat, March 25, 2023 

Police officers outside SVB's headquarters in Santa Clara, California on Friday.

Getty Images

An anonymous Silicon Valley Bank employee gave Insider a firsthand view of the bank's collapse.

The intensity meant two or three hours of sleep each night. Some workers forgot to eat.

Rank-and-file employees felt that management did a "dismal" job of keeping them in the loop.

Over the last two weeks, Insider has conducted a series of interviews with an employee of Silicon Valley Bank who gave a firsthand account of the bank's March 10 implosion as experienced by rank-and-file staff. Their identity is known to Insider, which agreed to keep them anonymous due to the sensitivity of client relationships. Their account has been edited for length and clarity.

The messages I was getting that first weekend, it was like being at your own wake. "You were so wonderful to work with." "SVB has been such a great pillar of support." These are the kinds of things people say about you when you're no longer here!

Now, we've gone through that moment, and we're kind of resurrected. The best-case outcome, which I think is unlikely given the brand's tarnishing, is that we operate as a wholly owned subsidiary. The more realistic hope is that we get sold off. The bidding has been opened up to non-bank institutions. It closed on Friday.

At first, the communication from management was dismal, both to our clients, and to us. We didn't know what was going to happen to us. We didn't know what we could say to clients, yet we had every client under the sun calling us. All wires had stopped. Nobody could get any money out. We were on the front line.

Now, my boss has said that top management will communicate with us more directly. My boss is part of what's become known as the "war room" at the Palo Alto, California office. That is the only office that's remained open during all this. It's where the department heads are sitting down with the folks from the Federal Deposit Insurance Corporation, or FDIC, and trying to figure everything out. The head of product, the head of credit, and so on are meeting with them.

In fact, we had no idea in advance that any of this was going to happen. My team learned that the FDIC had taken us over during an internal-team call, when it was on the news. We didn't get an internal email about it from management until a few minutes later. We had no way to get ourselves ready — they kept us in the dark. So there was shock, and some tears, as well.

During the first few days, the greatest frustration on our team was that no one was telling us what we could tell our clients. It was never, "you're not telling me what's going to happen to me, personally." The people who were actually working at SVB weren't asking about their own homes, or their kids' college educations, even though those things were at risk as well. Until today, everybody's focus has been the clients. Selfish behavior, during that first week, did not exist. It was chaos. I ate one bagel each day, and slept for maybe two or three hours each night.

The weekend after the FDIC takeover was crazy. Originally there was a list of 13 VC firms, which said they were willing to sign a statement saying that they supported us. We needed to grow that number. We spent a whole weekend on the phone, email, chat, any sort of way to get in touch with the VC firms, partners of the VC firms, operating partners, CFOs, anybody we could to try and get them to rally. I think the number is at 630 supporters as of today. It's been amazing to see the VCs themselves rally and create this awareness. Many folks had our back from the beginning. Once they knew their money was safe again, other folks changed their tune.

I wouldn't even say that they were rallying for SVB. It was for an institution like SVB to exist, for the sake of the innovation economy. Our goal that first weekend was to get as many clients as we could on board. Because if they're on board for support, that will help send a signal to the Fed or the FDIC to step in in some capacity. And they did — it worked. On Sunday, when the Fed said, "We'll make depositors whole," that was a huge sigh of relief for VCs trying to make payroll. We'd had so many clients tell us that they might have to shut down or cover payroll by borrowing with a personal guarantee.

You would expect irate clients, because their money is stuck and their operations are stuck. This is their lifeblood. Yet, I have not had a single frustrated or irate call with a customer. Every call I've been taken has been full of empathy and support. It's been calm. And that makes you feel even shittier, because if someone is angry at you and being a jerk, you can think, "Whatever, there's only so much I can do." But everybody was so empathetic, so I was like "I really, really want to help you. I just don't know what I can do." My team has called, emailed, and texted hundreds of clients. It hasn't been complaints so much as questions — but not irate questions.

The secret sauce of SVB has always been the people. Now I am hearing from former customers who rushed to open up accounts at Wells Fargo, Chase, JP Morgan, you name it, saying that the beginning was great in opening the accounts. But now it's been a few days, and they don't have a person to call. They have to go through the 800 number. These founders are not used to that. They've been getting the red-carpet, silver-platter treatment at SVB. Whether you've raised $5 million or you've raised $500 million, you have a dedicated person. That doesn't exist in traditional banking. The founders are learning that now — they don't have someone to go to for their wants and their needs.

Last weekend, I was finally able to get a good night's sleep. I ate some actual food. I went to an event and ate a full lunch — falafel, chicken shawarma. I'd been eating nothing but bagels for days. No one was eating those first few days — higher-ups had to remind us to keep eating.

I've tried to ignore the personal side of this, but we've lost a lot. Many employees get more than 50% of their salaries in equity — SVB stock — every year. My equity in the few years I've been here used to be worth more than $1 million. Now it's gone to zero. So here you have a whole group of people who lost everything personally, in terms of equity, and still the focus was, "Can my client make payroll?" That's the culture here. On an internal call, someone said that if we can stop the bleeding and the deposit outflow, that will be the greatest story ever told. It will be the people who worked here that saved it — this should be a Harvard Business School case study in customer service. I have never seen an organization come together like this. There is an internal poster, similar to The Avengers, except it has all the faces of leadership on it.

It's been said that we're too cozy with our customers. That's not how I see it. What's true is that a certain amount of our business involves investor support — having trust and faith in them. It is something that you build up over decades, working with someone through the good and the bad, having those tough conversations. The nature of our business is lending based on the customer's ability to raise the next round. That's not cozying up with the investors; it's getting to know your customers and their companies so you can know who leans in when it matters.

First Republic got a capital injection, Signature sold, Credit Suisse sold. And here we are, the people who started it. We still don't have someone. We're still in this state of uncertainty.

This week, for the first time, I went back into a physical SVB office. I just wanted to be with my colleagues. There were tears and hugs. I'd hoped there would be more laughter. There is still a lot of personal apprehension and stress for us. People are just now starting to think of themselves and their futures. The adrenaline rush has worn off now, and the reality is starting to sink in.

SVB's Collapse Wasn't Black People's Fault, But It Did Hurt Black Founders

Jessica Washington
Sat, March 25, 2023

3/25/2023

Everyone is talking about the collapse of Silicon Valley Bank and for good reason. Silicon Valley Bank, also known as SVB, is the largest bank to fail since the 2008 financial crash (which most of you will remember didn’t go so well).

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New reporting into mismanagement at the bank is raising some serious concerns. But while it’s wise to have a healthy dose of curiosity about why an outwardly stable bank went under in a matter of days, it’s not time to panic just yet.

Why This isn’t The 2008 Crash

If you want to understand what makes this different than the implosion of Lehman Brothers that kicked off the 2008 crash, you’ll need a few more details about SVB.

Most of SVB’s clients weren’t like you and me (i.e., ordinary people with modest checking and savings accounts). The company primarily did banking services to big tech start-ups and venture capitalist-backed firms.

The most important thing to know about SVB is that while it’s definitely a large bank, it’s not, say, JP Morgan Chase large. SVB had roughly $209 billion in assets before its collapse, which accounted for less than 1 percent of all banking assets in the U.S. For comparison, JP Morgan Chase has more than $3 trillion in assets.

Because of its size, most experts aren’t predicting that SVB’s failure will lead to a widespread banking collapse. (Although it did precipitate the end of the somewhat smaller tech bank, Signature Bank).

Why Did Silicon Valley Bank ACTUALLY Collapse?

So why did the bank actually fail? The answer is not that it had “1 Black” on their board like The Wall Street Journal editorial pages suggested.

The bank failed for the reason pretty much all banks fail; people requested to pull out more money than the bank had on hand.

The reason they didn’t have enough money is a little complicated and definitely contested. Essentially, the bank bought a ton of treasury securities (which are generally a safer bet). But when the Federal Reserve began to raise interest rates to combat inflation, the value of those securities decreased. Couple that with trouble in the tech industry, their decision to have a ton of uninsured depositors, other serious mismanagement issues, and the bank took a massive financial hit.

Once they announced their losses, depositors began to pull out their money fast (in what’s known as a bank run). Since SVB didn’t have enough funds to pay those people back, regulators closed down the bank.

Will The Bank’s Closure Hurt Black Founders?

There is some talk that the closure of SVB could hurt Black entrepreneurs who banked with them. The bank was known for working with and supporting entrepreneurs of color who often have difficulty accessing banking resources.

Not only will some of these businesses take a massive hit, but these CEOs will also have to search for new banking relationships that can be difficult to find.

“I’m very nervous that I will not be able to raise the money I need to keep my company going,” Barbara Jones-Brown, founder and CEO of the IT retail fraud prevention company Freeing Returns, told NBC News, “and it’s so scary after the beautiful, amazing year we had last year.”

Isa Watson, a Black founder of a voice-only social messaging app Squad, told CNBC that Black founders like herself who banked with SVB had a different reaction to the bank’s collapse than white founders:

“This is so sad,” Watson recalls a fellow Black founder telling her following the bank’s failure. “You know how it is for us. You know, we don’t really find people that back us up like that in a big way.”

Finding someone else to work with won’t be easy, she says. “It took me about two years and 400 no’s for the first VC to take me seriously,” Watson told CNBC.

Should The SVB Collapse Scare the Average Black American?

Black CEOs who banked with the California-based bank aside, the average Black American doesn’t need to be super concerned just yet.

First and foremost, unless you’re holding over $250,000 in a single bank account, your money is likely insured by the Federal Deposit Insurance Corporation. (Most large banks are insured, but it doesn’t hurt to check)

At this point, it doesn’t look like the Silicon Valley Bank contagion will spread to the really big banks. However, that doesn’t mean that the issues that led to SVB’s collapse couldn’t harm other similarly sized and situated banks.

We know that when the U.S. economy gets cold, Black bank accounts get pneumonia. So it certainly doesn’t hurt to pay attention to larger economic issues like high inflation, the debt ceiling fight, and whether other banks start to suffer.

But in the meantime, there’s no need to start stuffing your paychecks under the mattress.

My small business banked at SVB and almost lost $300,000. I worry some banks will never take care of Black of women founders.

Alexandra York
Sat, March 25, 2023 

Mitch Gilbert, the founder of Oya Femtech Apparel, banked with SVB.courtesy of Oya

Startup founder Mitchella Gilbert almost lost $300,000 in the Silicon Valley Bank collapse.

Today's uncertain banking market does not bode well for founders of color, they said.

Gilbert revealed how other founders of color can protect themselves amid banking uncertainty.

Switching business bank accounts from Silicon Valley Bank to Chase Bank was a to-do list item in Mitchella "Mitch" Gilbert's notebook prior to the fallout earlier this month.

The startup founder knew it was time to diversify their capital for financial security. But they were too late. When Gilbert arrived at SXSW on March 10, they learned of the crash alongside their investors.

"It was actually a really great way to learn that you potentially lost over $300,000," Gilbert told Insider, adding that they were happy to have investor support in such a tumultuous time.

Gilbert, who is the cofounder and CEO of the femtech and athletic apparel company Oya, regained access to their funds on March 13, after the Federal Deposit Insurance Corporation said it would protect depositors with funds in SVB. They transferred their funds to Chase Bank and plan on moving half of that money into First Women's Bank.

However, the experience has altered Gilbert's business mindset and financial plans, they said.

"We're already in an economy that is having a detrimental effect on founders of color," Gilbert said, noting the decrease in venture capital investments in Black-owned businesses. "When you're adding in this additional volatility, those numbers are in no way going to get any better."

Gilbert, who has raised $1.3 million in pre-seed VC, revealed how other founders can protect themselves amid banking uncertainty. This is an as-told-to story based on an interview with Gilbert that has been edited for length and clarity.
SVB's detrimental impact on founders of color

I could have lost over $300,000, which would've cut my runway from 14 months of capital to about six months and drastically changed our strategy.

Payroll was the biggest concern: Even investors were texting us ensuring we knew how important it was to make payroll despite the news.

I know multiple other founders who gave up additional equity that weekend for bridge capital (a interim form of financing a founder can use until permanent funds are available), negatively impacting their balance sheets. They were trying to do the right thing in order to pay employees but it was discouraging to see venture capitalists who were essentially acting like sharks and taking advantage of that need.

Many of the women who were impacted by SVB, specifically the Brown women, noticed how quickly our government reacted. It was this crazy feeling of "I think we'll get the money back because our government doesn't let rich white men fail.

Yet still, the uncertain banking market does not bode well for the future of investments in diverse founders.

Founders need to find opportunities that will serve them

It's important that founders find opportunities that will protect them along the way.

There's a lot of fear, sadness, and frustration right now. But I advise entrepreneurs to go after non-dilutive capital (funding that doesn't require the recipient to give up equity in the company), which can be won through business and pitch competitions. I also advise them to go after low-interest or interest-free loans. These alternative methods of generating money are especially important post-SVB-collapse and while speculation spreads about other banks.

I am excited about a new bank called First Women's Bank that opened in 2021. It was started by women to support underfunded entrepreneurs. When SVB closed, I was pushed toward FWB by my investors as the bank opened floods of accounts for other women founders and founders of color.

What that really means is that our community has just become that much tighter. We don't expect these other big groups to take care of us. So we have to band together and figure out how to take care of ourselves.

The Fed sees a looming credit crunch. 

What's that?


Federal Reserve Chair Jerome Powell holds a news conference

Reuters
Fri, March 24, 2023 

(Reuters) - It's an old saw: A credit crunch is when your bank won't lend to you. A credit crisis is when banks won't lend to each other.

Federal Reserve Chair Jerome Powell said Wednesday Silicon Valley Bank's collapse and the banking system upheaval it triggered "are likely to result in tighter credit conditions for households and businesses, which would in turn affect economic outcomes."

In other words: a credit crunch is coming.

Credit crunches are not new. They are frequent fellow travelers with recessions, but not always so. They also come with varying severity and durations, key factors Powell said remain unknown at the current time. Some small and concentrated crunches can weigh on growth without bringing the full economy to a standstill. Deeper lending clamp-downs can hobble the economy for years.

Here's a look at some of the dynamics from past credit crunches in comparison with what has been observed to now in the current episode.

CRUNCH VS CRISIS

Total credit from commercial banks - consisting of their bond holdings and the full scope of loans to businesses and consumers, from routine business credit and commercial real estate loans to residential mortgages and credit cards - is just off its record high from mid-February.

But the credit growth rate has recently fallen below its historic average to a level that has often been associated with a recession. Overall annual credit growth rarely turns negative, but when it decelerates into the low single-digits as it has now, it shows that the lending that helps fuel overall economic growth is under strain.

Only once since the early 1970s has it actually turned negative, in the aftermath of the 2007-2009 financial crisis. That was indicative of the lasting restraint that episode had on the recovery in credit and economic growth overall.

Graphic: Bank credit growth is slowing already - https://www.reuters.com/graphics/USA-ECONOMY/CREDIT/klvygqbgwvg/chart.png

LESS RISK

When credit conditions tighten, among the first categories of borrowers to feel the pinch are those with lower means or with poorer credit profiles as banks pull back from risk. One place to watch for that dynamic is in the issuance of subprime auto loans.

New York Federal Reserve data shows those volumes hit the highest in nearly two decades in the middle of last year, but had slowed somewhat by year end, though on balance were at the upper end of volumes seen before the pandemic. In the last big credit clamp-down, those loan volumes fell by two-thirds between 2005 and 2009.

Graphic: Taking less risk - 

https://www.reuters.com/graphics/USA-ECONOMY/CREDIT/byvrlmbokve/chart.png

CONSUMERS VS BUSINESS

When overall credit conditions tighten, banks usually rein in loans to both consumers and businesses alike, though not always to the same degree and not always at the same moment.

And sometimes special factors will create a pinch for one but not the other. That was the case 8-10 years ago when low oil prices triggered a credit crunch among U.S. oil fracking companies, weighing heavily for a period on overall commercial loan growth while consumer loan growth kept improving.

Excluding the COVID-19 recession - when commercial loan volumes were distorted by pandemic relief efforts for businesses - business credit has suffered the bigger blow in the recessions so far this century. Consumer credit was particularly slow to recover from the 2007-2009 meltdown because of the centrality of residential mortgages and the housing market to that crisis.

Annual growth in the two categories appears to have peaked around the middle of last year, though both remain at around 10% or more - well above the historic average growth rate of about 6.5%.

Graphic: Consumer vs commercial credit - 

https://www.reuters.com/graphics/USA-ECONOMY/BANKS/lgpdkjqwjvo/chart.png

BANKS IN NEED

When banks find they cannot get the funding they need from traditional sources - one another - they turn to the Fed, borrowing from its "discount window," long dubbed the lender of last resort.

In 2008, the explosion of its use was a clear signal that crunch had turned to crisis as it showed that banks, wary of the stigma associated with turning to the discount window, had run out of other options.

But the Fed has since taken steps to de-stigmatize the discount window, including lowering the penalty interest rate it traditionally charged. It saw widespread use during the early months of the pandemic and usage spiked again in the last two weeks after Silicon Valley Bank's collapse.

Graphic: Credit crisis: Banks turn to the Fed for cash - https://www.reuters.com/graphics/USA-FED/xmvjkbjzgpr/chart.png

(Reporting By Dan Burns, Ann Saphir and Howard Schneider; Editing by Andrea Ricci)

How Deutsche Bank caught fire as Europe’s banking crisis spreads

Simon Foy
Fri, March 24, 2023 

Deutsche Bank chief Christian Sewing - Stefan Wermuth/Bloomberg

When Christian Sewing took the reins at Deutsche Bank in April 2018, his promise was simple: to make Germany’s biggest lender more boring.

Once a titan of the banking industry that rivalled Wall Street’s biggest beasts, Deutsche never really recovered from the 2008 financial crisis.

In the face of heavy fines, sluggish performance, sweeping restructuring costs and competition from more agile US rivals, Sewing was forced to return the struggling lender to its roots as a provincial German bank.

Less than four months into the job he announced a radical restructuring plan, which included laying off a fifth of Deutsche’s workforce, closing down large parts of its investment banking division – including equities trading – and setting up a “bad bank” with €74bn (£65bn) of toxic assets.

“What we have announced is nothing less than a fundamental rebuilding of Deutsche Bank through which we are ushering in a new era for our bank,” Sewing said at the time.

After years of pain, the plan appeared to be bearing some fruit. Last year, Deutsche posted profits of €5.7bn (£5bn) – its best performance in 15 years.

But the German lender has become the latest flashpoint in Europe’s banking crisis following a sharp jump in its credit default swaps, which investors buy to protect themselves from a company defaulting on its debts. Shares in the bank fell by as much as 14pc on Friday before paring some losses.

Analysts were scrambling for reasons to explain the sudden investor flight. Andrew Coombs, at Citigroup, said concerns about Deutsche’s commercial real estate exposure and a US Justice Department investigation into banks and Russian sanctions did not appear significant enough to explain the move.

He blamed it instead on an “irrational market”. As with Credit Suisse, “the risk is if there is a knock-on impact from various media headlines on depositor psychologically, regardless of whether the initial reasoning behind this was correct or not”, he said.

Indeed, it was contagion fears that drove Credit Suisse into the arms of its fiercest rival last week after customers pulled funds from the scandal-hit bank at a rate of knots, rather than any fundamental concerns around its financial position.

German officials dismissed comparisons between Deutsche and the Swiss lender on Friday. Asked whether the German bank was the new Credit Suisse, Chancellor Olaf Scholz said: “Deutsche Bank has fundamentally modernised and reorganised its business and is a very profitable bank. There is no reason to be concerned about it.”

However, amid the market panic triggered by the collapse of Silicon Valley Bank (SVB), Credit Suisse became a target in part thanks to the litany of scandals that befell the bank in recent years.

If the Swiss lender was regarded as the European banking industry’s weakest link, then Deutsche Bank could be seen as the industry's problem child thanks to its own notorious catalogue of blunders and missteps.

The bank’s share price has been on a rollercoaster ride for years amid a steady drumbeat of embarrassing scandals and poor financial results.

Over the past decade the German lender has been forced to stump up billions of dollars in fines for money laundering, bond mis-selling, interest rates manipulation, mortgage fraud and sanctions violations, with its Frankfurt headquarters having been raided twice in the past five years.

Deutsche paid up $630m to UK and US regulators in 2017 for its unwitting role in spiriting roughly $10bn of illicit cash out of Russia between 2012 and 2015, after bank staff missed multiple warning signs of so-called “mirror trading”.

The scheme saw the lender convert roubles into dollars on behalf of wealthy Russian clients, using thousands of apparently pointless, paired equity trades in Moscow and London. It was “highly suggestive of financial crime” and should have raised red flags, the Financial Conduct Authority later said.

In another case, Deutsche agreed to pay US regulators $150m for “inexcusable” failures to prevent suspicious transactions by the late paedophile financier Jeffrey Epstein, and again for clearing hundreds of billions of dollars for Danske Bank, a lender implicated in one of the world’s largest-ever money laundering scandals.

Like many other German institutions, the bank was also left with egg on its face when its asset management arm suffered €600m of losses when its shares in payments company Wirecard – which was built on a multibillion dollar fraud – turned sour in 2020.

And the bank last year opted to settle a class action lawsuit brought by US investors for $26m, following allegations it had failed to carry out proper “know your client” checks on Epstein, Russian oligarchs including Roman Abramovich, and businesses with links to terrorist group Hezbollah.

The investors claimed Deutsche had provided banking services to a revolving carousel of “unsavoury characters”, including some engaged in criminal activity “in reckless disregard of the financial crimes they helped perpetrate”.

“Deutsche Bank has been the subject of repeated scandals, investigations and regulatory enforcements for years,” the complaint filed by investors added.

“Neither Deutsche Bank nor its top commanders have learned from past misconduct. At Deutsche Bank, history keeps repeating itself.”

As part of the settlement, Deutsche denied wrongdoing.

Analysts tried to reassure investors on Friday that Deutsche's capital and liquidity remained strong.

Stuart Graham of Autonomous Research said: “Investors are worrying about the health of the bank. We are relatively relaxed in view of Deutsche’s robust capital and liquidity positions.

“We have no concerns about Deutsche’s viability or asset marks. To be crystal clear – Deutsche is not the next Credit Suisse.”

Paul de la Baume, senior market strategist at FlowBank, told Bloomberg: “It is a clear case of the market selling first and asking questions later.

“Traders do not have the risk appetite to hold positions through the weekend, given the banking risk and what happened last week with Credit Suisse and regulators.”

On weekends, Sewing is known to enjoy a few beers at a local Greek restaurant in Osnabrueck, the rural city in northwest Germany where he lives with his wife and four children.

Rather than embarking on his usual 475-mile commute to spend the weekend back home, the 52-year-old might want to stay closer to Deutsche’s Frankfurt HQ in case contagion fears cause any more damage to Germany’s biggest lender.

Letters to the Editor: 

America is polarized because the right doesn't accept reality

Los Angeles Times Opinion
Sun, March 26, 2023 

Supporters of former President Trump are seen in front of Trump Tower in New York on March 17. (Anadolu Agency / Getty Images)

To the editor: In addressing political polarization, columnist Jean Guerrero recommends that we have "more faith in our ability to connect with the other." The implication is that chasms can be bridged between Democrats and Republicans. "The only other options," she writes, "are national divorce or civil war."

Guerrero also acknowledges, "The two sides are not equally situated — Republicans have moved farther to the right than Democrats have to the left, and right-wing extremists are the most likely to embrace violence.”

She cites other differences, but fails to point out the biggest: The former president attempted to overthrow the 2020 election, and he still has a lot of support. Many members of Congress, all Republicans, voted against certifying President Biden's victory. Just last month, a Republican lawmaker actually proposed a national divorce.

As there is no common ground between arsonists and firefighters, a constructive conversation is not possible between those who value democracy, the Constitution and the rule of law, and those who do not.

Guerrero's aspiration is noble, but her effort will fail as long as members of one tribe do not accept the principles on which the nation is governed.

Mike Diehl, Glendale

..

To the editor: In Guerrero's column, I found a long discussion about polarization but no solution other than the obvious — we all need to be more open-minded and tolerant. Let me suggest a solution.

How about eliminating the ability for voters to register with a political party?

We create the polarization ourselves by self-declaration. We should not think of ourselves as a Democrat or a Republican. We are free to vote progressively or conservatively on any issue or candidate.

Of course, Congress would never allow this because we all would be thinking more about the election issues than what political party we subscribe to.

Dwight Abbott, Palos Verdes Estates

..

To the editor: Guerrero acknowledges that "right-wing extremists are the most likely to embrace violence."

Most likely? According to the Anti-Defamation League, in 2022 100% of extremism-tied murders were committed by right-wing extremists.

Don't ask me to "see them as equals."

Cynthia Carle, Los Angeles

..

To the editor: I applaud the effort by Guerrero to reverse polarity on the Democratic and Republican acrimony machine.

I cannot say how this wild ride of Mr. Toad's got started, but I know it is a lot harder getting off than it was getting on. Thanks to Guerrero for trying to light the path away from this collision that is taking place in our society.

Paul Skophammer, Malibu

Letters to the Editor: If we're a nation 'under God,' what about nonbelievers?

Los Angeles Times Opinion
Sun, March 26, 2023 

Attendees of a Neighborhood Council town hall meeting in Los Angeles recite the pledge of allegiance in 2019. (Dania Maxwell/Los Angeles Times)

To the editor: Thanks to Nicholas Goldberg for addressing an issue that I contended with throughout my years in public school. As a lifelong atheist, I have always objected to forced public displays of religious belief. ("Is the Pledge of Allegiance just an empty, performative ritual?" Opinion, March 20)

The words "under God" should be removed from the Pledge of Allegiance. And, as Goldberg argues, perhaps we should remove the entire pledge and replace it with an ode to the Bill of Rights.

Frances Segal, Rancho Mission Viejo

..

To the editor: Goldberg could not be more wrong about the Pledge of Allegiance. I have always interpreted "one nation, under God," to mean "one nation, under a power greater than our individual selves." This applies to everyone, regardless of religion or lack thereof.

We must value the national rituals that bind us together. Reciting the pledge and singing the national anthem are the opposite of performative, empty symbolism — because without them we're a nation fractured into millions of myopic, quarrelsome individuals nursing their personal grievances.

I'm not sure what will put us back together, but it sure doesn't help to keep attacking reminders like the pledge that this nation, with so much progress still to be made, remains something larger and better than any of us.

Let's stress our commonalities and celebrate our country, which allows for broad criticism while striving always to become better.

Ann Bowman, Santa Monica

..

To the editor: During my tenure as a teacher in the Fontana Unified School District, I taught several students who did not recite the Pledge of Allegiance due to their Jehovah's Witnesses faith. The students would stand at attention, would not place their hand over their heart, and remain silent.

The Supreme Court decision in the 1943 case West Virginia State Board of Education vs. Barnette, which Goldberg cites, centered on Jehovah's Witnesses. As a result of this decision, my students' right not to recite the pledge was protected.

Rather than question my students' loyalty to the U.S., I welcomed the chance for my classroom to serve as a laboratory where daily successful experiments were conducted protecting my Jehovah's Witnesses students' constitutional rights. In the process, students of other faiths exercised their rights and observed how the Constitution should work.

Emilio Alvarez Jr., Fontana

..

To the editor: Goldberg writes, "As a nonbelieving American, I'm put off, to say the least, by the reference to God in the pledge."

As a believing American — a born-again Christian — I refuse to pledge allegiance to the flag of a temporal nation because my primary allegiance is to the Lord Jesus Christ.

While I am willing to stand with my fellow Americans as they recite this litany of performance patriotism, I choose to remain silent because such a pledge is contradictory to my Christian faith.

Emery J. Cummins, San Diego

This story originally appeared in Los Angeles Times.

Israeli group asks court to punish Netanyahu over legal plan


Israeli police use a water cannon to disperse demonstrators blocking the freeway during a protest against plans by Prime Minister Benjamin Netanyahu's government to overhaul the judicial system in Tel Aviv, Israel, Saturday, March 25, 2023.

 (AP Photo/Ariel Schalit) (ASSOCIATED PRESS)

TIA GOLDENBERG
Sun, March 26, 2023

TEL AVIV, Israel (AP) — An Israeli good governance group on Sunday asked the country's Supreme Court to punish Prime Minister Benjamin Netanyahu for allegedly violating a conflict of interest agreement meant to prevent him from dealing with the country's judiciary while he is on trial for corruption.

The request by the Movement for Quality Government in Israel intensifies a brewing showdown between Netanyahu's government and the judiciary, which it is trying to overhaul in a contentious plan that has sparked widespread opposition.

The Movement for Quality Government in Israel, a fierce opponent of the overhaul, asked the court to force Netanyahu to obey the law and sanction him either with a fine or prison time for not doing so, saying he was not above the law.

“A prime minister who doesn’t obey the court and the provisions of the law is privileged and an anarchist,” said Eliad Shraga, the head of the group, echoing language used by Netanyahu and his allies against protesting opponents of the overhaul. “The prime minister will be forced to bow his head before the law and comply with the provisions of the law.”

Netanyahu is barred by the country’s attorney general from dealing with his government’s plan to overhaul the judiciary, based on a conflict of interest agreement he is bound to, and which the Supreme Court acknowledged in a ruling over Netanyahu’s fitness to serve while on trial for corruption.

But on Thursday, after parliament passed a law making it harder to remove a sitting prime minister, Netanyahu said he was unshackled by the attorney general's decision and vowed to wade into the crisis and “mend the rift” in the nation. That declaration prompted the attorney general, Gali Baharav-Miara, to warn that Netanyahu was breaking his conflict of interest agreement by entering the fray.

The fast-paced legal and political developments have catapulted Israel into uncharted territory and to a burgeoning constitutional crisis, said Guy Lurie, a research fellow at the Israel Democracy Institute, a Jerusalem think tank.

“We are at the start of a constitutional crisis in the sense that there is a disagreement over the source of authority and legitimacy of different governing bodies,” he said.

If Netanyahu continues to intervene in the overhaul as he promised, Baharav-Miara could launch an investigation into whether he violated the conflict of interest agreement, which could lead to additional charges against him, Lurie said. He added that the uncertainty of the events made him unsure of how they were likely to unfold.

It is also unclear how the court, which is at the center of the divide surrounding the overhaul, will treat the request to sanction Netanyahu.

Netanyahu is on trial for charges of fraud, breach of trust and accepting bribes in three separate affairs involving wealthy associates and powerful media moguls. He denies wrongdoing and dismisses critics who say he will try to seek an escape route from the charges through the legal overhaul.

The overhaul will give the government control over who becomes a judge and limit judicial review over government decisions and legislation. Netanyahu and his allies say the plan will restore a balance between the judicial and executive branches and rein in what they see as an interventionist court with liberal sympathies.

Critics say the plan upends Israel's fragile system of checks and balances and pushes Israel down a path toward autocracy.

The government has pledged to pass a key part of the overhaul this week before parliament takes a month recess, but pressure has been building on Netanyahu to suspend the plan.

Israel's military reservists are joining protests – potentially transforming a political crisis into a security crisis

Dan Arbell, Scholar-in-residence at the Center for Israeli Studies, American University

THE CONVERSATION
Sun, March 26, 2023 

A member of Israel's military reserves takes part in a protest on March 16, 2023 in Bnei Brak, a city east of Tel Aviv. Photo by Eyal Warshavsky/SOPA Images/LightRocket via Getty Images

The judicial overhaul plan of Israeli Prime Minister Benjamin Netanyahu’s government, introduced in January, has thrown the country into its most severe domestic crisis since 1973.

The plan has incited an unprecedented wave of controversy among Israelis, as hundreds of thousands of protestors have gathered for a 12th straight week across the country in opposition to the plan. Yet it’s not simply the persistence and size of the protest that is evidence of the crisis. It’s who is protesting.

The demonstrations have brought together groups representing almost all sectors of Israeli society. But among protesters is a group of individuals rarely seen at anti-government protests over the country’s almost 75-year history: Israeli Defense Forces reservists. They include former combat pilots, members of elite units and special forces, cyber-security forces and military intelligence, who announced they will not volunteer for reserve duty service if the legislation passes in the Knesset, Israel’s parliament.

Further demonstrating the unprecedented aspect of the response by reservists: Among those protesting are members of Israeli Air Force Squadron 69. All but three of the 40 reservist pilots in the squadron announced that they would not conduct training exercises and would instead join anti-government protests, claiming they are not prepared to serve in what they say would be a “dictatorial regime.”

“We have no contract with a dictator. We would be happy to volunteer when the democracy is safeguarded,” an open letter from the reservists said.

The highly controversial judicial reform plan would significantly weaken the Israeli judiciary’s oversight over the legislative and executive branches.

The plan calls for near total control over future laws, constitutional amendments and judicial appointments to be concentrated in the hands of the governing coalition in the Knesset. Critics and protesters say the plan undermines the 75-year delicate balance between the three government branches, ends liberal democracy as they know it and pushes Israel towards autocratic rule.

Despite the growing protests, Netanyahu has defiantly promised to push the reforms through the Knesset. As the country inches closer towards a constitutional showdown between the executive and legislative branches and the judicial branch, the presence of former members of elite military units in these protests is evidence that the crisis’ implications extend far beyond the domestic political arena.

Besides threatening to undermine the economy and deepen societal divides, it threatens to erode Israeli national security and provoke a constitutional crisis that could ensnare the military as well.

Israel Defense Minister Yoav Gallant called for an immediate halt in the judicial overhaul legislation process. Gil Cohen-MAGEN/AFP via Getty Images)

‘The people’s army’

Israel’s military, known as the “IDF,” has been described for decades as the “people’s army.” That’s because young Israeli men and women, when they turn 18, are mandated by law to serve in the military. Men serve for two years and eight months and women for two years.

Upon completion of their regular military service, men and women are assigned to the reserve forces. The reserves are designed to provide reinforcements during emergencies and maintain preparedness through routine training and security assignments. While the number of Israelis serving as reservists has decreased over the years due to cutbacks and people finding ways to be exempted, reserve military service has been an integral part of the national ethos and folklore.

The threat to the government articulated by the protesting reservists is unprecedented. It represents a powerful step by former military and intelligence officials who pride themselves on their independence from politics and commitment to protocol.

Nevertheless, the reservists’ view is that there is an unwritten contract between those who serve and the state: they are willing to risk their lives to defend a liberal democratic Israel. But if Israel becomes a dictatorship, this contract is null and void.

It is possible that other security services like the police or Shin Bet, the internal security service, will take similar actions to protest the reforms. Depending on how long these protests last, the situation could unfold into an uncharted security crisis with high risks of domestic instability and, as Israeli President Isaac Herzog warned, civil strife.

Israelis protest the proposed judicial reform, in Tel Aviv on March 25, 2023. 

Gitai Palti/Anadolu Agency via Getty Images

Defense of democracy - or insubordination?

Minister of Defense Yoav Gallant, addressing the situation on March 25, 2023, expressed deep concern that the heated political debate is infiltrating the rank and file of the IDF. And that, Gallant said, may undermine and jeopardize Israel’s security at a time when the country faces external threats from Iran, Palestinian terrorism and Lebanese Hezbollah.

“The events taking place in Israeli society do not spare the Israel Defense Forces — from all sides, feelings of anger, pain and disappointment arise, with an intensity I have never encountered before,” Gallant said.

Gallant called for an immediate halt in the judicial overhaul legislation process. Instead, he proposed a dialogue between the two sides in order to reach a broadly agreed reform.

As a veteran of the IDF, a former Israeli diplomat and a longtime analyst of Israel’s security situation, I believe the crisis poses a profound question of where the line is between legal political activism in defense of democracy and insubordination.

The bigger question is what will happen with the military if the legislation passes in the Knesset, but is then struck down by Israel’s supreme court, the High Court of Justice. Should Netanyahu’s government request that institutions like the IDF act in contradiction to decisions made by the High Court, it is unclear to which authority these institutions would adhere.

For example: if the High Court rules that a Jewish outpost in the West Bank was built illegally and needs to be dismantled, yet the government orders the IDF not to do it, what will the IDF commanders on the ground do?

This tension is starkly displayed by the reservists who are refusing to partake in their usual duties.

In light of Gallant’s call to halt the legislation process, it is unclear whether the voting on the changes in the makeup of the Judges Selection Committee, scheduled for the week of March 26, 2023, will take place as planned.

The reservists’ active participation in the protests and their vocal opposition to the government’s plan have clearly made an impact on the defense minister. But at the same time, Gallant came out strongly against insubordination. Undoubtedly, the coming days will be critical in determining the direction of Israeli democracy.

This article is republished from The Conversation, an independent nonprofit news site dedicated to sharing ideas from academic experts. The Conversation is trustworthy news from experts, from an independent nonprofit. Try our free newsletters.

It was written by: Dan Arbell, American University.

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