Why We’re Unlikely to See an October Surprise

October 29, 2018 Updated: October 30, 2018

News Analysis

There are several material investigations underway, most notably that of Department of Justice (DOJ) Inspector General Michael Horowitz and special counsel Robert Mueller.

Horowitz is looking into alleged FISA abuses on the part of the FBI, DOJ, and others, while Mueller is continuing the FBI’s investigation into alleged collusion between Russia and President Donald Trump’s 2016 campaign.

Regardless of one’s opinion of Deputy Attorney General Rod Rosenstein, the May 17, 2017, appointment of Mueller accomplished one very significant thing: It shifted control of the Russia investigation from the FBI and then-acting FBI Director Andrew McCabe to Mueller.

Rosenstein’s apparent concerns about the involvement of the FBI and McCabe appear to have been borne out through subsequent events.

On July 27, 2017, Horowitz notified Mueller of the discovery of thousands of text messages sent between FBI lawyer Lisa Page and FBI agent Peter Strzok, which immediately resulted in Strzok being removed from the special counsel investigation. Horowitz had discovered the texts sometime earlier, on or before July 14, 2017.

On July 28, 2017, McCabe lied to Horowitz while under oath, regarding authorization of leaks to the Wall Street Journal. At this point, Horowitz knew McCabe was lying.

McCabe, who would later be fired for lying under oath at least three different times, is currently the subject of a grand jury investigation. McCabe’s participation in leaks would later be disclosed in the inspector general’s report, “A Report of Investigation of Certain Allegations Relating to Former Deputy FBI Director Andrew McCabe.”

On Aug. 2, 2017, Rosenstein secretly issued Mueller a memo on the “scope of investigation and definition of authority” that remains heavily redacted. The full purpose of this memo remains unknown. On the same day, Christopher Wray was named the new FBI director.

Two days later, on Aug. 4, 2017, Attorney General Jeff Sessions announced the formation of a newly established leak task force. Rosenstein and Wray were tasked with overseeing all leak investigations.

The start of 2018 presented us with a lengthy list of high-level resignations and firings at the FBI and DOJ. Some of the more notable include the following:

• James Rybicki: Chief of staff to former FBI Director James Comey and his successor, Wray. Rybicki resigned and/or was forced out on Jan. 23, 2018.

• Josh Campbell: Special assistant to Comey. Campbell resigned on Feb. 2, 2018. Campbell wrote an op-ed in The New York Times on why he was leaving but failed to disclose his position with Comey, or that he had been offered a lucrative job at CNN.

• David Laufman: DOJ National Security Division, deputy assistant attorney general in charge of counterintelligence. Laufman resigned on Feb. 7, 2018. Laufman “played a leading role in the Clinton email server and Russian hacking investigations.” Laufman would later represent Christine Blasey Ford’s friend Monica McLean during the Kavanaugh hearings.

• Michael Kortan: FBI assistant director of public affairs. Kortan resigned on Feb. 8, 2018, effective on Feb. 15, 2018. Kortan served as assistant director for public affairs, an influential job that controlled media access.

• Rachel Brand: Associate attorney general, No. 3 official behind Deputy AG Rosenstein. Brand resigned on Feb. 9, 2018. She “played a critical role in Congress’ reauthorization” of section 702 of the Foreign Intelligence Surveillance Act.

• McCabe: Deputy FBI director. He was forced to resign his active position on Jan. 29, 2018. He was fired on March 16, 2018.

• Greg Brower: FBI assistant director for the Office of Congressional Affairs. Brower resigned suddenly on March 30, 2018. He was the FBI’s liaison with Congress.

• James Baker: FBI general counsel (senior legal counsel at FBI). Baker was demoted and reassigned on Dec. 20, 2017, and resigned and/or was fired May 4, 2018. Baker, Brower, Laufman, and McCabe have been referred for interviews to the joint task force of the Committees on Oversight and Government Reform and the Judiciary by House Intelligence Chairman Devin Nunes (R-Calif.).

These are just a few in a series of personnel changes taking place at various federal agencies. But it’s not only the federal agencies undergoing changes.

Since his inauguration, Trump has focused intently on shoring up the judiciary. The 115th Congress has confirmed 84 judges, including two Supreme Court justices, Neil Gorsuch and Brett Kavanaugh.

Trump has overseen the confirmation of 29 of his nominees to the circuit courts, also known as the Court of Appeals, more than any recent president at this point in their first term. The list of judges nominated but still awaiting confirmation remains lengthy, with the majority at the U.S. District Court level.

The Supreme Court now stands at a 5–4 conservative majority and the judicial branch is well into the process of being fundamentally reshaped.

October Surprise?

Much has been made of a potential October surprise, such as the release of the inspector general’s FISA investigation. Although such a release before the midterm elections remains a possibility, the prospect seems unlikely. It comes down to a calculation of risk.

A few months back, prevailing wisdom seemed to indicate that control of the House was in jeopardy and at very real risk of being lost to the Democrats. The Senate was—and is—viewed as a “safe” Republican majority. The loss of the House by Republicans looks less likely today—but we will only know with certainty on Nov. 7.

Although a loss of the House would be significant and most likely all investigations currently ongoing at various House committees would be halted on Jan. 3, 2019, it wouldn’t result in the impeachment of the president, as Democrats have threatened.

The House can vote for impeachment—essentially an indictment—but the “trial” moves to the Senate and requires a two-thirds vote. There is zero chance that a two-thirds vote in favor of impeachment could occur.

Which brings us back to the calculus regarding an October surprise. Does one act in advance of knowing the election outcome. Or is it better to wait and see if the GOP holds both houses of Congress? If it appears fairly certain the House will be lost, one would assume a gamble is worthwhile.

But if it looks like the House will be retained, a pre-midterm election investigative release drops measurably in value. Why show your cards early and risk energizing an opposing voting base?

It’s worth considering outcomes in these simple terms. If you lose the House, you still have a fail-safe in the Senate. If you win the House, well, now you have everything. Either way, you know exactly where you stand.

Whatever might be forthcoming would be substantially easier with a Republican Senate and House, supplemented by a 5–4 Supreme Court lineup brought about by the confirmation of Justice Kavanaugh.

Rosenstein had been scheduled to be interviewed in a classified setting by House Judiciary Chairman Bob Goodlatte (R-Va.) and House Oversight and Government Reform Chairman Trey Gowdy (R-S.C.) and ranking members Jerry Nadler (D-N.Y.) and Elijah Cummings (D-Md.). It is likely that Rosenstein would have provided an update on the ongoing investigations, but the interview was abruptly postponed, as noted in a statement from Gowdy and Goodlatte:

“The Committees are unable to ask all questions of Deputy Attorney General Rod Rosenstein within the time allotted for tomorrow’s transcribed interview, therefore, the interview will be postponed.

“Mr. Rosenstein has indicated his willingness to testify before the Judiciary and Oversight committees in the coming weeks, in either a transcribed interview or a public setting. We appreciate his willingness to appear and will announce further details once it has been rescheduled.”

Important to note, the original interview was to take place prior to the midterm elections and the process was structured as to be leak-proof.

Now, with the very real possibility of a favorable post-election environment, Goodlatte and Gowdy are actively considering public testimony from Rosenstein. There are many who would very much like to hear what he has to say—particularly about the ongoing investigations.

Jeff Carlson is a CFA charterholder. He worked for 20 years as an analyst and portfolio manager in the high-yield bond market. He runs the website TheMarketsWork.com

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