Whistleblowing From Home

Plus: A new zen koan: “when is a rate hike not a rate hike?” ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

December 21, 2022

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TOGETHER WITH

Good morning.

Far from the front lines of Ukraine, Russian hackers are helping New York cabbies cut long airport lines.

Two New York City cabbies were arrested Tuesday by the FBI and charged with two counts of conspiracy for their alleged role in working with Russian nationals to hack the taxi dispatch system at JFK Airport and move up the long line to pick up fares. “This sophisticated, internationally coordinated conspiracy allegedly targeted hard-working taxi drivers trying to earn an honest living,” Port Authority Inspector General John Gay said in a statement. It’s still unclear who tipped the feds and whether taxi drivers were also adequately tipped.

Morning Brief

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Japan finally pivots its fiscal policy.

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Working from home gives whistleblowers a boost.

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Buckle up. Boeing just got an extension from Congress.

Fiscal Policy

Bank of Japan Begins to Break From its Ultra-loose Fiscal Policy

Japan’s central bank has spent the entire year zigging while the rest of the world zags, maintaining an ultra-loose fiscal policy as its peers cranked up interest rates to combat inflation. But now, the nation is starting to fall in line… depending on who you ask.

On Tuesday, the Bank of Japan didn’t yield to calls to increase interest rates with the yen still falling in value, but it did adjust its yield curve control policy, allowing 10-year bond yields to fluctuate plus-or-minus 0.5%, up from 0.25%. The move stunned markets, even though no one agrees on what it means.

Trouble with the Curve

Japan is something of an inflation-slaying veteran, successfully stamping out runaway prices in the 1970s. But then came Japan’s white-hot economic growth in the 80s and 90s, which forced the nation to confront the suddenly-enviable problem of deflation. In the years preceding the pandemic, its central bank tried and failed to increase inflation to a target 2%. Now it’s trying to bring inflation rates down to that level. Rate hikes have been the anti-inflation weapon of choice the world over but BoJ governor Haruhiko Kuroda has long chosen a different tactic, arguing against rate hikes until he sees robust wage growth.

Now, Kuroda is getting on board with fiscal policy fine-tuning — even if he doesn’t want to admit it. Earlier this year, he claimed adjusting the yield curve would effectively be the same thing as increasing the interest rate, but on Tuesday, he denied the equivalency: “This measure is not a rate hike,” he said in a press conference. “Adjusting the YCC does not signal the end of YCC or an exit strategy.” Markets were shocked nonetheless, with most major players not expecting such a move out of Japan until at least this Spring when Kuroda will step down from his post. Ripple effects were immediate:

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The yen jumped as much as 3% compared to the US dollar, marking the Japanese currency’s biggest single-day gain since March of 1995, according to FactSet currency data. Meanwhile, the US’ 10-year bond note climbed 7 basis points to around 3.66% while the 30-year bond increased 8 basis points to 3.70%

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“We view this decision as a major surprise, as we had expected any widening of the tolerable band to be made under the new BoJ leadership from spring next year, similar to the market,” Naohiko Baba, chief Japan economist at Goldman Sachs, told the Financial Times.

Not So Bad: All said, Japan may have reason enough to eschew the typical inflation-fighting strategies. While core inflation in the country (which excludes food prices) has remained above the BoJ’s 2% for seven consecutive months, it hit only 3.6% in October, good for a 40-year high. Experts expect November’s figures to elevate slightly to 3.7%. Considering the rest of the world is facing inflation rates of at least double that figure, the turmoil in Tokyo seems rather quaint.

– Brian Boyle

Regulation

Whistleblowing Spikes Post-Pandemic

(Photo Credit: Kate Ter Haar/Flickr)

Ask not for whom the whistle blows. It blows for thee.

Official whistleblower complaints to the SEC have soared in the last three years and pandemic-era remote work could be a driving factor, as highlighted by an Insider report published Tuesday.

Whistle While You Work

The SEC Office of the Whistleblower is a baby of the Obama Administration, born in 2010 as part of the Dodd-Frank Act, a sweeping set of reforms aimed at curtailing Wall Street following the financial crisis of 2008. In 2012, the first year it released data, the SEC received 3,000 tips. This fiscal year it logged over 12,300 and there’s been a 136% uptick since 2019, correlating almost perfectly with the onset of the pandemic.

The past few years have seen some high-profile whistleblowers make headlines, especially at Big Tech companies. Facebook’s Frances Haugen became a major news story after she leaked thousands of documents in late 2021, and Twitter’s ex-head of security Peiter “Mudge” Zatko filed an incendiary complaint this year. Tech companies in particular have retained pandemic-era flexible working arrangements, with a few notable exceptions, like Elon “Hardcore” Musk:

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A contractor for Facebook who filed a whistleblower complaint following the January 6 riots told Insider working from home made it easier to arrive at his decision because he was free of the “conformity signals” that go with working in an office.

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The SEC seems glad for the extra paperwork — in August, it rewrote the rules of the program to offer whistleblowers more money for coming forward, and reduce the risk of their awards getting watered down.

Ghost Town: Remote work may be a boon for the SEC, but it’s deflating other sectors. Bloomberg reports the city of San Francisco is struggling with a sudden dearth of tech workers caused partly by a permanent move towards working from home and partly by waves of layoffs. California, here we don’t come…

– Isobel Asher Hamilton

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Aviation

Congress Will Waive Safety Deadline for Boeing MAX Models

Next time you book a flight, maybe check the model of the plane.

Congress is set to waive a looming certification deadline for two planes from Boeing that don’t use modern cockpit alert systems. It’s a load off Boeing’s mind, and balance sheet, but a major setback for pilots and flyers pushing for higher safety standards.

Safety First?

In 2018, Boeing ran into extreme turbulence. In just five months, two 737 MAX crashed in Indonesia and Ethiopia, resulting in 346 deaths. Investigators found that when the planes nosedived, a cacophony of alerts from the old-fashioned safety system overwhelmed pilots and contributed to the crashes. In 2020, Congress responded to the changes by passing legislation requiring all planes certified by the Federal Aviation Administration to have an updated alert system that conforms to modern standards by the end of 2022, meaning Boeing still had time to get planes with the old safety systems certified and in the air.

All planes in the MAX series were grounded from March 2019 to December 2020, Boeing CEO David Mullenberg was fired, and the company faced more than 150 lawsuits from families of victims. The Department of Justice piled on, charging Boeing with fraud conspiracy, forcing the one-time global leader in air travel to pay up more than $2.5 billion. And that’s all before you factor in the tens of billions of dollars Boeing lost during the pandemic.

In short, Boeing really needs to keep MAX 7s and 10s in the air:

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The mid-sized MAX 8 and 9 are already approved, but the smaller MAX 7 and larger MAX 10 are not. Congress’s decision on Tuesday means Boeing will have even more time to get its planes certified while likely not replacing its antiquated tech.

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Worried about job availability, the union representing 10,000 Southwest Airlines pilots favored the extension, citing that because the MAX 8 and 9 are already certified, it makes more sense for all planes in the MAX family to have the same old cockpit safety system. On the other hand, families of the crash victims and Chelsey “Sully” Sullenberger, the pilot behind the “Miracle on the Hudson,” opposed extending the deadline and said the MAX 7 and 10 should have updated alert functions.

Paper and Planes: Despite a likelihood of delays on MAX 7 and 10 orders, of which there are about 1,000 so far, airlines don’t seem too worried about jet inventory. Melius Research analyst Robert Spingarn told the Financial Times airlines will either just switch their orders to the MAX 8 or 9 or purchase from Airbus, the now-leading global plane seller. And even though Boeing is $57 billion in debt, he said losing some business to Airbus is “not the end of the world.” In fact, Air India is set to purchase 190 MAX jets in one of the largest deals ever recorded in the aviation realm.

– Griffin Kelly

Extra Upside

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Baby, No: Justin Bieber calls H&M “trash” for allegedly stealing his image.

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Facial recognition kept a girl scout mom from seeing a Rockettes show.

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