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It is easy to forget that until about 18 months ago, Russia’s interference in US politics was on the front pages almost every day. One stillborn Robert Mueller report and a failed Ukraine-related impeachment later and we barely think about Russia at all. That is a pity because in the final three weeks of the 2020 election, something comparable is taking place under our noses.

I don’t think Russia’s ill-concealed intrusions on the November 3 voting process will make a big difference to the outcome this time. Unlike in 2016, the gap between Donald Trump and the Democratic frontrunner is too wide today for such story-planting to make a difference. But there is stuff happening with Russia’s fingerprints all over it.

Last week Ron Johnson, the Republican senator from Wisconsin, who is also chairman of the Senate committee on homeland affairs, wrote in The Wall Street Journal that Hillary Clinton in 2016 asked Barack Obama’s administration to “stir up a scandal” linking the Trump campaign to Russia. Johnson’s committee is still investigating the “Obamagate” scandal, in which the then-president allegedly plotted with Mrs Clinton and to create a fake US intelligence investigation into Trump-Russia ties. Johnson’s source for this is John Ratcliffe, the director of national intelligence, who last week declassified heavily redacted analysis by CIA Russia analysts from the time that said there might be a connection.

It turns out that their likely source for this — and therefore Ratcliffe’s and Johnson’s — was misinformation from Russia itself. This is about as circular as it gets. The Russians plant disinformation about themselves that the head of US intelligence then uses to discredit the idea that the Russians plant disinformation. If you want a good precis read an opinion article by Michael Morell, a former deputy head of the CIA, and Mike Vickers, a former under-secretary of defence for intelligence, in The Washington Post. They describe Ratcliffe as being “up to no good — undertaking the most blatant and egregious politicisation of intelligence that we, two career intelligence officers, have ever seen”.

Then there is this week’s notorious New York Post story alleging that Hunter Biden had persuaded his father Joe Biden, then US vice-president, to push for the firing of Ukraine’s top prosecutor to stop an investigation of Burisma, the Ukrainian gas company on whose board Hunter served. Like any good disinformation, this story included plenty that is true. Hunter undoubtedly monetised his father’s name and led a dissolute lifestyle. But the core allegation — which comes, unsurprisingly, from former New York mayor and Trump’s personal lawyer Rudy Giuliani, who has been a reliable pipeline for such journalism since Trump entered politics — is nonsense.

Biden’s push for Ukraine to fire its chief prosecutor, Viktor Shokin, who was seen as corrupt, was part of a broader international effort that included the EU. The push to fire Shokin did not originate with Biden but was an IMF condition for releasing its next tranche of money to Ukraine.

The timing of this latest story, which comes from an unidentified computer repair store owner in Delaware who passed on the laptop’s hard drive to Giuliani, is, of course, optimal. My best guess is that its ultimate source is located somewhere to the east of Poland. I have not linked to the story — Swampians can use Google if they want to read it directly — since it is disinformation. Twitter, to its credit, has banned links to the story on its platform.

The FBI has repeatedly warned that Russia is actively interfering in the 2020 election. Nobody has yet managed to find out to whom Trump owes the $421m in personally guaranteed loans that are coming due in the next four years. We can only guess at that. It is a fair bet that at least a third of Swamp Notes readers will have discarded this email when they saw it was about Russia. I do not blame you. Repetition is numbing and the Russia story has been nothing if not endless.

This week I received a new book by David Rothkopf, former editor of Foreign Policy, and host of the Deep State Radio podcasts on which I appear from time to time. It is on the same subject. The title, Traitor: A History of American Betrayal from Benedict Arnold to Donald Trump, leaves little doubt as to where Rothkopf stands. Then I started reading it. I had forgotten how much I had forgotten.

Had Mueller not bottled his conclusions, his report would have led to several Trump impeachments. In fewer than half the pages it took Mueller to run himself into the sand, Rothkopf does a brilliant job of defining precisely how Trump has been aiding and abetting the enemy. He also gives a limpidly concise potted history — from Arnold to Aaron Burr and James Buchanan — of the history of American treason.

He writes:

“It is my conviction that, upon reviewing the facts, the only objective conclusion that can be drawn is that wittingly or otherwise Donald Trump, those closest to him in his White House, his campaign and his family, and the leaders of the Republican party in the United States have committed the highest-level, greatest, most damaging betrayal in the history of the country. They are traitors. And as of this writing they continue to damage the United States as no other actors in the world can.”

I will leave Swampians to make up their own minds. Even if you strenuously disagree, or would prefer to forget, Rothkopf’s history is compelling. In the meantime, let me leave you with Alexander Hamilton’s quote about what happens when a man “unprincipled in his private life and desperate in his fortune” holds executive power. It still serves as one of the most timeless warnings against tyranny:

“The truth unquestionably is, that the only path to a subversion of the republican system of the country is, by flattering the prejudices of the people, and exciting their jealousies and apprehensions, to throw affairs into confusion, and bring on civil commotion . . . ”

Rana, I presume you do not subscribe to the New York Post. But I imagine you’re also a fan of Hamilton (not just the musical). My question is whether we should pay heed to his warning in the coming weeks?

Join Peter Spiegel, Lauren Fedor and Michael Peterson from the Peter G Peterson Foundation for the next instalment of the FT’s New Economic Reality series. Register and tune in on October 26 at 12pm EST.

Recommended reading

  • My column this week warns that even if Trump loses, Trumpism will still live on. I also wrote this weekend’s FT Magazine cover story on America’s slow burn constitutional crisis: will America tear itself apart?

  • Elsewhere, I strongly recommend Rush Doshi in Foreign Policy about how China believes Trump is accelerating America’s decline. Chinese leaders are split between wanting America to decline “in an elegant and decent way” under Biden, Doshi reports, or risk more “star performances” from Trump. It is a fascinating analysis which reveals split views in Beijing on whether Trump is causing America to nosedive too quickly for its tastes.

  • You should read that piece in conjunction with the FT’s series on the New Cold War between the US and China that includes excellent pieces from several of my colleagues. 

  • Catch up on the latest US presidential race polling and the rest of our election coverage.

Line chart showing how Trump and Biden are doing in the US national polls

Rana Foroohar responds

Ed, I don’t subscribe to the NY Post, though I did once apply unsuccessfully for a job as a headline writer there (I’m far better at policy analysis than coming up with zingers such as “Headless Body in Topless Bar”, though I admire those who can).

But in terms of your Hamilton question, what strikes me is that “flattering the prejudices of the people and exciting their jealousies and apprehensions” reads like an official mission statement for Facebook and the other social media platforms on which nefarious actors, both foreign and domestic, spread much of their disinformation.

I’m ultimately less worried about Russian influence than Big Tech influence. Regulate them properly (meaning make them take full legal responsibility for disinformation just as traditional media does) and a good chunk of the problem would go away. Let’s hope Biden wins, and that he does.

Even if the election is contested, I’m feeling hopeful — a source today told me that Democrats have marshalled four times as many lawyers as Republicans in anticipation of any battle over the transition of power. 

Your feedback

And now a word from our Swampians . . . 

In response to: ‘Republicans are about to rediscover fiscal religion’:

“I don’t disagree about the problems brought by capitalism. But the real problem is that capitalism has been enormously successful in its core mission — increasing the power of capital . . . Successful systems don’t reform themselves. They persist until replaced. We need a new ‘ism’. Socialism, environmentalism, stakeholderism?” — Paul O’Brien, Wilson, Wyoming

“I fervently hope that your premise that Joe Biden will win is correct. But as a citizen of the EU, I would hope that just as Brexit has helped focus EU minds on strengthening the EU in economic, political and social terms, a Trump victory would be a further encouragement for the EU to invest more in becoming a credible participant in a global threesome of China, Europe and the US.” — Michael Clarke, East Flanders, Belgium

We’d love to hear from you. You can email the team on swampnotes@ft.com, contact Ed on edward.luce@ft.com and Rana on rana.foroohar@ft.com, and follow them on Twitter at @RanaForoohar and @EdwardGLuce. We may feature an excerpt of your response in the next newsletter.





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FC Barcelona and Real Madrid will be forced to pay back illegal state aid

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FC Barcelona and Real Madrid will be forced to pay back millions of euros in illegal state aid after the EU’s highest court ruled Brussels was right to declare that beneficial tax arrangements they enjoyed for a quarter of a century were illegal.

The decision by the European Court of Justice upholds previous rulings by the European Commission and comes as Barcelona, the world’s highest-earning football club, is enduring one of the biggest crises in its history. 

This week police arrested the club’s former president, its current chief executive and its general counsel, in connection with a separate legal case ahead of a vote on Sunday to decide its next president. Barcelona, which recorded a loss of €100m last year, also has to contend with a debt pile of more than €1bn.

In 2016 Margrethe Vestager, the EU’s competition chief supremo, ordered four Spanish football clubs to pay back tens of millions of euros received since the 1990s in the form of sweetheart property deals, tax breaks and soft loans.

FC Barcelona subsequently contested the decision before the General Court, the EU’s second-highest tribunal, which annulled the commission’s judgment. However, after a final appeal from Brussels the ECJ ruled in favour of the EU.

In its decision on Thursday — which is final — the ECJ deemed the tax scheme “liable to favour clubs operating as non-profit entities over clubs operating in the form of public limited sports companies”, holding that it could therefore qualify as illegal state aid under EU rules.

The General Court had previously annulled Brussels’ decision over what it said was lack of sufficient evidence that the tax arrangements offered to the four football clubs, which also include CA Osasuna and Athletic Bilbao, were illegal.

But the commission had questioned the court’s “heavy burden of proof” on regulators in its appeal, arguing that a lower tax rate was obviously more favourable than a higher one.

The ECJ argued that the difficulty in assessing the extent of state aid — because of the complexity of tax deductions — did not preclude the commission from banning government practices that it considered gave sports clubs unfair advantages. 

It said: “The impossibility of determining, at the time of the adoption of an aid scheme, the exact amount, per tax year, of the advantage actually conferred on each of its beneficiaries, cannot prevent the commission from finding that scheme was capable, from that moment, of conferring an advantage on those beneficiaries.”

The Spanish government said on Thursday it had “absolute respect” for the court’s decision. FC Barcelona and Real Madrid did not immediately respond to requests for comment.

The judgment will be seen as a big win for regulators in Brussels who have for years been trying to stop highly successful commercial clubs from freeriding on the back of taxpayers.

The European Commission said on Thursday it noted “the judgment by the Court of Justice to follow the Commission’s arguments”.

Thursday’s ruling is the second time Brussels has won an appeal of its state aid decisions in recent weeks. Last month judges at the General Court rejected a legal challenge by budget airline Ryanair to state aid given to rivals on discriminatory grounds.

At present Barcelona is dealing with the fallout of what the Spanish media dubs Barçagate — allegations, denied by the club, that it corruptly hired outside groups to defame former president Josep Maria Bartomeu’s adversaries on Facebook.

Bartomeu was temporarily detained by the Catalan police earlier this week. He, the club, and other individuals in the case, which is being investigated by a Barcelona court, have all denied any wrongdoing.



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Italy raises €8.5bn in Europe’s biggest-ever green bond debut

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Investors flocked to Italy’s inaugural environment-focused government bond offering on Wednesday, allowing the country to raise more than €8bn.

The banks running the issuance chalked up around €80bn in orders for €8.5bn of debt. It was the biggest debut sovereign green bond from a European issuer to date, according to Intesa Sanpaolo, which worked on the deal.

Other recent Italian bond sales have also attracted strong demand, after former European Central Bank president Mario Draghi became prime minister last month.

Demand for the debt highlights the popularity of green bonds, which provide funding for environmental projects and require borrowers to report to investors on how the funds are used. 

Tanguy Claquin, head of sustainable banking at Crédit Agricole, which was a co-manager on the transaction, said the sale was met with “very strong support” from investors, particularly those that are required to consider environmental factors in their portfolios.

The bond, which matures in 2045, was issued with a yield of 1.547 per cent. The underwriters were able to reduce the premium against a normal Italian government bond maturing in 2041 to 0.12 percentage points, a slimmer premium than the 0.15 points initially mooted.

Italy follows several European countries, including Poland, Ireland, Sweden and the Netherlands, into the green debt market. France has issued 11 green bonds since 2017, totalling $30.6bn according to Moody’s Investors Service. Germany joined the market last year with two green Bunds. In its budget on Wednesday, the UK announced plans to sell at least £15bn of green bonds in two offerings this year. 

Italy is the first riskier southern-European government to tap the green market. The spreads on Italian debt relative to the eurozone benchmark German bonds fell to a six-year low of less than 0.9 percentage points in early February in a sign of investors confidence in Draghi’s leadership of the EU’s third-largest economy. The spread widened during last week’s volatile bond market trading but remains low by recent standards.

Spain plans to follow Italy with a green bond offering in the second half of 2021. Analysts expect an initial €5-10bn sale at a 20-year maturity. Johann Plé, senior portfolio manager at AXA Investment Managers said the demand for Italy’s sale “should reinforce the willingness of Spain and others to follow suit.”

Plé said the price investors paid for the Italian green bond “remained fair” and that this “highlights that strong demand does not necessarily mean investors have to pay a larger premium”.

Green bonds often command higher prices, and therefore lower yields, than their conventional equivalents from the same issuer. The German green Bund currently trades with a “greenium” around 0.04 to 0.05 percentage points, roughly double the gap when it was initially issued, according to UniCredit analysis, while French government green debt is roughly 0.01 percentage points lower in yield than conventional bonds.

Italy’s pitch on the environmental impact and reporting of its green projects drew positive reactions from some investors. Saida Eggerstedt, head of sustainable credit at Schroders, which invested in the bond, said the details provided on projects including low-carbon transport, power generation, and biodiversity were “really impressive”.



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German regulator steps in as Greensill warns of threat to 50,000 jobs

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Germany’s financial watchdog has taken direct oversight of day-to-day operations at Greensill Bank, as the lender’s ailing parent company warned that its loss of $4.6bn of credit insurance could cause a wave of defaults and 50,000 job losses.

BaFin appointed a special representative to oversee Greensill Bank’s activities in recent weeks, according to three people familiar with the matter, as concern mounted about the state of the lender’s balance sheet.

The German-based lender is one part of a group — advised by former UK prime minister David Cameron and backed by SoftBank — that extends from Australia to the UK and is now fighting for its survival.

On Monday night Greensill was denied an injunction by an Australian court after the finance group tried to prevent its insurers pulling coverage.

Greensill’s lawyers said that if the policies covering loans to 40 companies were not renewed, Greensill Bank would be “unable to provide further funding for working capital of Greensill’s clients”, some of whom were “likely to become insolvent, defaulting on their existing facilities”.

In turn that may “trigger further adverse consequences”, putting over 50,000 jobs around the world at risk, including more than 7,000 in Australia, the company’s lawyers told the court.

A judge ruled Greensill had delayed its application “despite the fact that the underwriters’ position was made clear eight months ago” and denied the injunction.

Greensill Capital is locked in talks with Apollo about a potential rescue deal, involving the sale of certain assets and operations. It has also sought protection from Australia’s insolvency regime.

Greensill was dealt a severe blow on Monday when Credit Suisse suspended $10bn of funds linked to the supply-chain finance firm, citing “considerable uncertainties” about the valuation of the funds’ assets. A second Swiss fund manager, GAM, also severed ties on Tuesday. Credit Suisse’s decision came after credit insurance expired, according to people familiar with the matter.

While the bulk of Greensill’s business is based in London, its parent company is registered in the Australian city of Bundaberg, the hometown of its founder Lex Greensill.

In Germany, where Greensill has owned a bank since 2014, BaFin, the financial watchdog, is drawing on a section of the German banking act that entitles the regulator to parachute in a special representative entrusted “with the performance of activities at an institution and assign [them] the requisite powers”.

The regulator has been conducting a special audit of Greensill Bank for the past six months and may soon impose a moratorium on the lender’s operations, these people said.

Concern is growing among regulators about the quality of some of the receivables that Greensill Bank is holding on its balance sheet, two people said. Regulators are also scrutinising the insurance that the lender has said is in place for its receivables.

Greensill Bank has provided much of the funding to GFG Alliance, a sprawling empire controlled by industrialist Sanjeev Gupta.

“There has been an ongoing regulatory audit of the bank since autumn,” said a spokesman for Greensill. “This regulatory audit report has specifically not revealed any malfeasance at the bank. We have constructive ongoing dialogue with all regulators in all jurisdictions where we operate.”

The spokesman added that all of the banks assets are “unequivocally” covered by insurance.

Greensill, a 44-year-old former investment banker, has said that the idea for his company was shaped by his experiences growing up on a watermelon farm in Bundaberg, where his family endured financial hardships when large corporations delayed payments.

Greensill Capital’s main financial product — supply-chain finance — is controversial, however, as critics have said it can be used to disguise mounting corporate borrowings.

Even if an agreement is struck with Apollo, it could still effectively wipe out shareholders such as SoftBank’s Vision Fund, which poured $1.5bn into the firm in 2019. SoftBank’s $100bn technology fund has already substantially written down the value of its stake.

Gupta, a British industrialist who is one of Greensill’s main clients, separately saw an attempt to borrow hundreds of millions of dollars from Canadian asset manager Brookfield collapse.

Executives at Credit Suisse are particularly nervous about the supply-chain finance funds’ exposure to Gupta’s opaque web of ageing industrial assets, said people familiar with the matter.

The FT reported earlier on Tuesday that Credit Suisse has larger and broader exposure to Greensill Capital than previously known, with a $160m loan, according to two people familiar with the matter.

Additional reporting by Laurence Fletcher and Kaye Wiggins in London



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