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Column: How Trump’s frenzy of deregulation killed Silicon Valley Bank

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Column: How Trump’s frenzy of deregulation killed Silicon Valley Bank

Late in 2018, two Trump-appointed banking regulators, Federal Reserve Vice Chair Randal Quarles and FDIC Chair Jelena McWilliams, went on a nationwide tour to satisfy with regional financial institution examiners.

In case you’re searching for the roots of the banking disaster that took down Silicon Valley Financial institution and has rattled the complete monetary sector for weeks, that’s nearly as good a spot to start out as any.

The officers’ message to the examiners was: Again off.

Probably the most senior management of the Federal Reserve was…telling the bankers to face as much as the supervisors, and telling the supervisors, ‘Don’t assume we’ve acquired your again.’

— Dennis Kelleher, Higher Markets

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Banks had been bristling for years over what they noticed as overly intrusive supervision by the federal brokers. That included authorities examiners, referred to as supervisors, going over the heads of executives and assembly immediately with boards of administrators to warn them about dangerous habits.

Quarles, the Fed’s Vice Chair for Supervision, had served a number of stints on the Treasury Dept. beneath Republican presidents however got here to his newest submit immediately from the non-public fairness enterprise. He was particularly candid about making supervision extra bank-friendly.

In November 2017, solely a month after taking workplace, he stated at a convention of huge banks that “altering the tenor of supervision will in all probability truly be the largest a part of what it’s that I do,” including that he “perceived fairly an openness within the deep state on the Fed to taking a contemporary look.”

Within the aftermath of SVB’s March 10 collapse, fingers have been pointing in all places. The Fed and different regulators condemn the financial institution’s executives; Fed Vice Chair Michael Barr, in testimony earlier than the Senate Banking Committee on Tuesday, known as the financial institution’s failure “a textbook case of mismanagement.”

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Lawmakers level their fingers on the Fed; as Sen. Tim Scott (R-S.C.), rating member of the committee, inveighed, the warning indicators of SVB’s failure had been “clear as a bell.” He condemned the Fed, bizarrely, for paying extra consideration to the implications of local weather change than financial institution supervision.

Others have pointed to the 2018 rollback of rules imposed by the 2010 Dodd-Frank banking reform act, softening the principles for mid-sized banks resembling SVB. Dodd-Frank was written to avert a repeat of the 2008 banking disaster that just about wrecked the U.S. financial system. The 2018 amendments set the trade up for a brand new disaster.

What everybody appears to be lacking is the general deregulatory ambiance of the Trump administration. On the Fed, the urge to lighten oversight got here from the highest, within the particular person of Fed Chairman Jerome Powell, who had been positioned on the Fed Board by Barack Obama however elevated to the chairmanship by Donald Trump.

Powell has tried to painting himself as one thing of an harmless bystander within the SVB disaster. However he oversaw the deregulatory steps that produced it.

“One of many senators stated the financial institution supervisors had been ‘asleep on the wheel,’” observes Dennis Kelleher, chief government of Higher Markets, a Washington-based monetary watchdog. “No, Powell and Quarles had the wheel, and the supervisors had been within the again seat and had been being advised to close up like youngsters on a trip.”

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It’s helpful to revisit that period. Trump and his acolytes had the knives out for any monetary regulation that burdened the banks. Trump put in his price range director Mick Mulvaney on the head of the Client Monetary Safety Bureau, which Congress had created on the instigation of Sen. Elizabeth Warren (D-Mass.) to journey herd on abusive banking practices.

“I’m the performing director of the CFPB,” Mulvaney crowed to a banking convention, “one thing that’s apparently protecting Elizabeth Warren up late at evening, which doesn’t trouble me in any respect.”

Comptroller of the Foreign money Joseph Otting, one other Trump appointee, moved to melt guidelines on money-laundering and financial institution investments, whereas calling banks his company’s “clients.” In fact, the purchasers of the Workplace of the Comptroller of the Foreign money (OCC) are the general public; banks are its targets.

“From the beginning of the Trump administration, deregulating finance was on the high of the agenda,” notes a truth sheet compiled by Higher Markets. Trump appointed deregulators on the White Home, Fed, FDIC, OCC and elsewhere within the government department.

Their actions had been seldom justified with painstaking analyses of their impression. As a substitute, they had been constructed round “vacuous phrases and phrases” — rules had been “tailor-made,” “streamlined,” “right-sizing,” and made “truthful.”

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The deregulatory adjustments weren’t unanimous on the Fed or FDIC. Fed Governor Lael Brainard, who was appointed in 2014 by Obama, was a constant dissenter. (Brainard left the Fed in February to develop into head of President Biden’s Nationwide Financial Council.)

Martin J. Gruenberg, who was initially appointed to the FDIC board in 2005 by George W. Bush, dissented at the least 15 occasions between 2018 and 2020 from efforts to melt rules. Gruenberg is at present the FDIC chairman.

Though Quarles was the entrance man for deregulation on the Fed, “Chair Powell not solely voted for each single deregulation rule Quarles proposed,” Higher Markets’ truth sheet states, “however he additionally enthusiastically supported that deregulation in speeches, Q&As, and in Congressional testimony.” Certainly, Powell launched the Fed’s deregulatory marketing campaign even earlier than Quarles was sworn in on Nov. 6, 2017.

Powell proposed one key initiative in August 2017. This involved how banking supervisors reviewed financial institution practices and communicated their findings. Mainly at subject had been notices of “Issues Requiring Consideration” (MRA) and “Issues Requiring Instant Consideration” (MRIA).

The latter, in accordance with Fed guidelines, had been points that “have the potential to pose vital danger to the protection and soundness” of the financial institution, might trigger “vital client hurt,” had been repeat complaints, or that deviated from the regulation. MRA notices concerned issues that wanted correcting, however solely over time.

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Previous to Powell’s initiative, each notices sometimes had been delivered to a financial institution’s board of administrators, which was thus tasked with taking them up with administration. Henceforth, the notices solely wanted to be despatched to “senior administration,” with board notification provided that executives persistently didn’t act.

Powell’s rule change reduce boards out of the loop. This had a delicate however necessary impact, for it eradicated the one inner layer of oversight of administration actions. Simply as necessary, it eradicated an important avenue of contact between supervisors and boards.

The change might have performed an particularly necessary function within the collapse of SVB, for MRAs and MRIAs started piling up on the financial institution beginning at the least a yr earlier than the tip. Whether or not administration alerted the SVB board to the accumulating pile isn’t identified (MRAs and MRIAs are usually stored confidential), however the board not needed to know.

Simply as a reminder: SVB’s elementary drawback was that it had an enormous variety of skittish depositors, most of whose cash was uninsured by the FDIC and may very well be withdrawn on demand, and had invested these deposits in treasuries and bonds that had been usually protected, however wouldn’t mature in lower than 10 years. After a collection of rate of interest hikes, the bonds had been exhibiting immense losses on paper. When the depositors pulled their cash — to the tune of $42 billion on March 9 — the financial institution couldn’t liquidate its bond portfolio in a method that wouldn’t convert its paper losses to actual losses, so it ran out of cash to pay the depositors.

At the least a few of the MRA and MRIA notices involved the mismatch between SVB’s illiquid bond portfolio and its doubtlessly excitable deposit base, in accordance with testimony by Barr.

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One other initiative by the Fed, FDIC, OCC and different federal regulators additionally reduce the legs out from beneath the supervisors. This was a joint discover stating that “supervisory steerage” — the method utilized by examiners to drive banks to rein in dangerous actions — couldn’t be used except they might determine a selected regulation or regulation that the actions violated.

That opened the method to nearly infinite authorized dickering. “It despatched the message that the steadiness of energy had modified,” Kelleher advised me.

“Probably the most senior management of the Federal Reserve was now coming down on the facet of the banks, not the supervisors. They had been telling the bankers to face as much as the supervisors, and telling the supervisors, ‘Don’t assume we’ve acquired your again.’”

One different initiative the banks efficiently lobbied for was a rollback of the “Volcker Rule,” a provision of the Dodd-Frank regulation that restricted their dangerous investments in hedge funds, non-public fairness and enterprise funds. The Fed and its fellow regulators eliminated enterprise funds from that listing on the particular request of Silicon Valley Financial institution, which quickly doubled in measurement thanks partly to its involvement within the enterprise sector.

Regardless of this document, analyses of the SVB collapse have paid nice consideration to the “Financial Development, Regulatory Aid, and Client Safety Act” signed by Trump in 2018.

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The regulation, for which SVB executives lobbied strongly, raised the scale threshold for banks topic to heightened regulatory scrutiny to $250 billion in property from Dodd-Frank’s $50 billion. This benefited SVB, which might have been topic to the stringent oversight beneath the unique threshold however not beneath the brand new customary.

The principle sponsors of the rollback, Sen. Mike Crapo (R-Idaho) and Rep. Patrick McHenry (R-N.C.) have taken pains this week to dodge accusations that it opened the door to SVB’s dangerous habits and decreased the Fed’s authority.

Crapo is a member of the Senate committee that grilled Barr, FDIC Chair Gruenberg and Treasury official Nellie Liang on Tuesday; McHenry is chair of the Home Monetary Companies Committee that questioned the identical three witnesses Wednesday. Given their very own complicity in deregulation, they’ve some nerve.

At Tuesday’s Senate committee listening to, Crapo bridled at what he known as “the blame-shifting sport” that pointed to his 2018 invoice. Its function, he stated, was to “cease a one-size-fits-all system” of rules by “tailoring” rules to the precise dangers of the banks beneath scrutiny and had nothing to do with deregulation.

However that’s balderdash. “Tailoring” rules is merely code for loosening restrictions on some banks. Because it was carried out from 2017 to 2021, writes Graham S. Steele, a former Stanford enterprise professor now serving within the Treasury Division, it was a “essentially deregulatory endeavor.”

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The 2018 regulation gave the Fed nice discretion to use its provisions. Within the deregulatory atmosphere of the Trump years, the Fed took that ball and ran with it, going “far past what the regulation required,” Higher Markets exhibits. Powell and Quarles had been the leaders of the pack.

“Popping out of the 2008 disaster, Congress put robust banking guidelines in place,” Warren said at Tuesday’s listening to. “Huge banks hated them, and their CEOs lobbied exhausting to weaken these guidelines. In the end, Congress signed off, after which it acquired unhealthy…. Regulators burned down dozens of safeguards that had been meant to cease banks from making dangerous bets.”

The harvest isn’t solely the collapse of SVB, however of public confidence in the complete banking system.

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On a Hollywood studio lot, a new New York comes to life

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On a Hollywood studio lot, a new New York comes to life

Last summer, when the Hollywood writers’ strike had shut down film and television production, a crew of scenic painters at the legendary Fox Studio Lot took advantage of the lull to mess up New York City.

Work had recently been completed on a new set of façades meant to mimic Manhattan streets, but the result was too pretty and clean. Even the smooth gray concrete curbs looked suspiciously fresh.

“After the curbs were perfectly poured, we had a gentleman with a jackhammer come in here and chip away at them,” said Gary Ehrlich, president of studio operations. “It was slightly heartbreaking to see.”

Today, the curbs are suitably beaten up, with dings and black smears as if tires had been rubbing against them for decades. Fire escapes look corroded and other metal fixtures such as banisters have been coated to look old or rusty, while walls appear water-stained. A patina of age has settled over this faux city.

A film crew gets ready for a shoot at the new New York set at Fox Studios in Los Angeles on March 26, 2024. The new set that is different from conventional backlot façades because it has stages inside the New York “buildings” where filming can take place.

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The painstaking besmirchment of New York Street was one more twist in the long saga of one of filmdom’s most famous outdoor sets. Looming near the front gate like an adult-sized playhouse, an earlier version of the set and now the new one have long served notice to visitors that they have arrived at a movie studio that is itself a leading character in Hollywood lore.

Its lineage is suitably rich in Hollywood flavor: In 1967 Fox was preparing to shoot the film version of “Hello, Dolly!,” a Tony-award winning musical set in 1890s New York City that ran for years on Broadway. The script included a spectacular outdoor parade with thousands of extras, and studio executives determined that it would be impossible to shoot on location in New York because the city had changed too much.

Fox production designer John DeCuir, who had already won Academy Awards for his design of “The King and I” and “Cleopatra,” came up with a streetscape that required more than 500 workers to labor for four months to build. The $2.25-million price tag made it the most costly movie set built to date, the UPI news service reported at the time.

It required more than 300,000 feet of board lumber and 22 miles of telephone wire strung between poles, the way it was in old New York. A painted 11-story office building façade obscured the view of the Century Plaza Hotel looming next to the lot, according to Barbra Archives, which chronicles the career of “Hello, Dolly!” star Barbra Streisand.

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In a black-and-white film still, Barbra Streisand marches with a band in the movie "Hello, Dolly!"

Barbra Streisand marches with a band in a scene from the 1969 romantic comedy “Hello, Dolly!” filmed on Fox’s New York set in Century City.

(John Springer Collection / Getty Images)

Dominating the street was a replica of an elevated train station and a steam locomotive acquired from a sugar plantation in Hawaii, where it had been used to transport workers.

On July 16, 1968, the Valley Times reported, “The parade stretching one-fifth of a mile and comprised of 675 persons in 16 units passed through a crowd of 3,108 film extras” in period costumes. Among the performers were the UCLA marching band and the Budweiser Clydesdales. The director was actor-dancer Gene Kelly.

As impressive as the set was, it was intended to be temporary, said Michael Whetstone, a production designer who worked on building the new version of New York Street.

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“It was supposed to be torn down but wasn’t because it was too expensive” to remove, he said. At the time the studio was reeling from financial setbacks including a $30-million loss on “Hello, Dolly!,” according to the New York Times.

Two men on a scissor lift work on the façade of a brownstone building on Fox's New York set.

Maintenance and prop makers James Scobie, left, and Norm Greene, work on the façade of the new New York set at Fox Studios .

The set enjoyed a second, money-making act in the years that followed as Fox rented it out for use on pictures that included Warner Bros.’ comedy “Up the Sandbox,” starring Streisand, and MGM’s musical “New York, New York,” starring Liza Minnelli and Robert De Niro. Among the television shows that used it were “Charlie’s Angels” and “Moonlighting,” while Bruno Mars, Lady Gaga and other musicians used it for music videos.

But a few years ago, with the set showing its age, the studio started considering its replacement, Ehrlich said. “It had been exposed to the elements for five decades and was past its useful life.”

Fox tapped Culver City architect Nathan Moore of House & Robertson Architects to design something sturdier.

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Construction required 49 tons of rebar and more than 1,000 cubic feet of concrete. The set is held up by 260 tons of structural steel and backed inside with 4,400 square feet of catwalks. Lighting and other electrical functions are supported with 21,000 square feet of conduit and wire, allowing productions to hook up to house power instead of rolling in generators. The set also had to comply with building codes and be tracked by city building inspectors.

The new New York Street was made to look like the city in the mid 20th century, a decision that required detailed craftsmanship such as window heads and sills that would have been carved out of wood in years past but were instead fabricated out of plastic foam and finished with plaster. Windows were installed to be easily replaced so productions can break them when scenes call for it.

Whetstone oversaw the project and, as part of his research, made several trips to New York, spending long hours on foot trying to get a sense of how light plays on buildings at night.

“I was literally walking Lower Manhattan from 10 p.m. to 4 in the morning taking pictures,” he said.

Where the original “Hello, Dolly!” set was based on a commercial section of 1890s New York suitable for a parade, Fox elected to make the new set feel like a neighborhood from a later era.

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“It’s more Lower Manhattan, more Bowery,” Whetstone said. “Definitely the Lower East Side.”

A person leans against the wall of a building made to look like part of a New York City street.

A film crew member waits to set up for a shoot at the new New York set.

While the set is “a default vision of New York City,” said Whetstone, it also is intended to stand in for any major city. Through the years, Fox’s New York Street has subbed for Chicago, Washington, D.C., and Pasadena.

Even though improving camera technology through the years has made it easier to shoot on location, there are reasons filmmakers keep shooting on studio lots, said Jason E. Squire, entertainment podcaster and professor emeritus at USC School of Cinematic Arts.

As filming equipment and cameras got lighter and more portable, the more free-flowing New Wave cinema that emerged in the late 1950s and ’60s employed provocative camerawork.

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“This liberation led to people shooting off the studio lot,” Squire said. “Filmmakers wanted to get away from the studio.”

But it has remained expensive to shoot a large-scale production in the real world with all the vehicles, equipment and personnel required to be transported and managed on-site.

“One of the key decisions early in any production is whether to build sets on a lot or shoot in a real location,” Squire said. “That depends on how intricate the sequences are going to be, how intimate. It’s a judgment call and a money call, and the money usually wins.”

Shooting behind studio gates also prevents uncomfortable collisions between fantasy and reality.

“On the lot you don’t have interference from civilians,” Squire said. “You can control traffic, you can control lighting. All of the equipment is at your beck and call.”

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Whetstone recalled having to flee location shooting in downtown L.A.’s Arts District when working on Season 1 of “New Girl,” a Fox television comedy starring Zooey Deschanel that premiered in 2011.

“We started out shooting in downtown Los Angeles, and by the end of our fifth night shoot we had angered so many of the neighbors around in the community that we ended up building downtown L.A. on the Fox lot,” Whetstone said.

A man stands in an empty studio space, gesturing up at the lighting tracks crisscrossing the ceiling

Gary Ehrlich, president and general manager of studio operations at Fox Studio Lot, shows off the scaffolding for lighting inside one of the buildings in Fox’s new New York Street set.

The makeover of New York Street is in addition to a planned $1.5-billion upgrade of the Fox Studio Lot announced last year by Fox Corp. that is to include more soundstages and offices. Fox Corp. retained ownership of the lot when Walt Disney Co. bought most of 21st Century Fox’s entertainment assets in 2019.

The upgrades come as the real New York mounts an aggressive effort to lure TV and movie producers from L.A. by building new studios and soundstages.

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On New York Street in Los Angeles, Fox also was able to transform the set behind the façades, adding 4,000 square feet of interior space that makes it easier to meld outdoor and indoor action. The studio declined to reveal exactly how much the new multimillion-dollar set cost, but Fox wants it to stand for another half-century at least.

“This project was approached not just as temp architecture but as something more permanent,” Whetstone said. “We want this to last a long time.”

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As job growth in California falls back, unemployment rate remains highest in the country

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As job growth in California falls back, unemployment rate remains highest in the country

California posted another month of anemic job growth in April, keeping the state’s unemployment rate the highest in the country, 5.3%, the government reported Friday.

Statewide, employers added a net of just 5,200 jobs in April, down from 18,200 in March, according to California’s Employment Development Department.

Nationwide, employers added 175,000 jobs in April and 315,000 in March. The U.S. unemployment rate in April was 3.9%.

Major sectors of California’s economy — including manufacturing, information and professional and business services — showed job losses last month, and job opportunities aren’t as plentiful as before, even as the number of unemployed workers in the state has risen by 164,000 over the last 12 months.

In California, there were 140 unemployed workers for every 100 job openings in March, according to federal statistics released Friday. Less than two years ago, there were about two openings for every jobless person.

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Carol Jackson, an unemployed worker in South Los Angeles, says she has been pounding the pavement for months, hoping to make use of her recently minted associate degree in web management and database administration. But despite sending her resume to at least 100 employers, she has not had a single interview.

“I can tell you that California is pretty brutal now,” said Jackson, 57.

Hiring in California has been lagging behind national trends, with one notable exception. The state’s healthcare and social assistance sector added 10,100 jobs last month, bringing the gains over the last 12 months to about 155,000. That’s 75% of all new jobs added since April 2023.

Hospitals and doctors’ offices have been bulking up, but the fastest growth has been at outpatient centers, home healthcare firms, nursing facilities and, especially, social assistance, which includes vocational rehabilitation and child day-care services.

“Healthcare is the big gorilla in the room; it dominates everything,” said Mark Schniepp, director of the California Economic Forecast in Santa Barbara, adding that it’s likely to keep growing robustly with new and expanded medical facilities across the state.

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Leisure and hospitality businesses added 3,100 jobs last month. The gains included employment at hotels and restaurants — despite the added stress employers are feeling from a minimum wage increase to $20 an hour for fast-food workers that went into effect April 1.

While there are fears of layoffs as the food industry adopts technology to replace workers, California’s restaurants are getting a lift from a pickup in tourism. The leisure sector overall is close to fully recovering from the deep losses caused by the COVID-19 pandemic.

Public-sector payrolls also held up well last month, increasing by 2,600. Thus far, state and local government jobs seem to be showing little effects from California’s massive budget deficits.

“But clearly that will be another factor,” said Sung Won Sohn, economics professor at Loyola Marymount University in Los Angeles.

Sohn and other economists worry that there are national, cyclical and state-specific threats to California’s employment and broader economic outlook.

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Key pillars of the state’s economy continue to struggle.

Motion picture producers and other employers in the information sector show few signs of breaking out of the hiring doldrums, despite the film industry’s resolution of labor strikes last fall. Los Angeles’ motion picture and recording studio industries were down by 13,400 employees, or 12%, in April compared with the same month a year earlier. And many workers in the industry say conditions do not appear to be improving.

Large parts of the farm economy in the Central Valley remain sluggish, in part due to rising costs, tighter financial conditions and ongoing climate challenges.

Despite strong investments in artificial intelligence, layoffs have persisted at high-tech firms in the Bay Area and elsewhere. Scientific and technical companies shed jobs last month, and employment at computer systems design work and related services has been gradually declining.

Nationally, economists expect job growth to slow in the coming months, the result of persistently high interest rates and an expected pullback from consumers. The outlook is particularly dim in California.

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“On the ground, there are several signs of even more slowdowns,” said Michael Bernick, an employment lawyer at Duane Morris in San Francisco and former director of the state’s EDD. Among them, he said, “small businesses continue to struggle statewide with higher prices and tightened consumer spending.”

He and other experts have a similar refrain about what ails the state: high costs, excessive regulation and unaffordable home prices, among other factors.

“We just have real challenges here in California that other states don’t face,” said Renee Ward, founder of Seniors4Hire.org, a Huntington Beach-based organization that helps older workers find employment.

She said the number of job seekers registered with her service has jumped 26% so far in 2024 from a year ago.

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New Mexico weighs whether to toss Alec Baldwin criminal charges in 'Rust' shooting

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New Mexico weighs whether to toss Alec Baldwin criminal charges in 'Rust' shooting

A New Mexico judge is weighing whether to dismiss involuntary manslaughter charges against Alec Baldwin for his alleged role in the 2021 shooting death of the “Rust” movie cinematographer.

Baldwin’s attorneys argued during a court hearing Friday that special prosecutor Kari T. Morrissey had abused her power by allegedly withholding “significant evidence,” including witnesses favorable to Baldwin, during a January grand jury proceeding.

The 66-year-old actor‘s lawyers said he was a victim of an “overzealous prosecutor” who steered grand jury proceedings in an effort to win an indictment in the high-profile case. At issue is whether the grand jury had been fully advised that they could hear from Baldwin’s witnesses during the proceedings. The grand jurors spent a day and a half questioning witnesses who were introduced by the prosecutors.

“The fix was in,” Baldwin attorney Alex Spiro told the judge Friday.

The grand jury indicted Baldwin on an involuntary manslaughter charge in the shooting death of Halyna Hutchins, the 42-year-old cinematographer, who was rehearsing a scene with Baldwin on Oct. 21, 2021. Baldwin has pleaded not guilty.

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At the conclusion of Friday’s hearing, New Mexico First Judicial District Judge Mary Marlowe Sommer said she would issue her ruling next week. Should she dismiss the case, it would mark the second time that the felony charges against Baldwin were dropped.

Marlowe Sommer’s decision is expected less than two months before Baldwin is scheduled to go on trial in a Santa Fe courtroom.

During the hearing, which was conducted virtually, Morrissey denied that she had acted in bad faith. She said she didn’t prevent jurors from getting answers to their questions or from seeking additional information. She told the judge that grand jurors had been given written instructions that outlined their ability to quiz other witnesses, including those favorable to the defense.

But because the jurors didn’t ask to hear from the witnesses who were on a list supplied by Baldwin’s lawyers, several key figures in the tragedy, including film director Joel Souza, property master Sarah Zachry and assistant director David Halls, were not called to testify. Instead, jurors heard from police officers, a crew member who was in the church and expert witnesses hired by prosecutors.

On the day of the shooting, Hutchins, Baldwin, Souza and about a dozen other crew members were gathered in an old wooden church at Bonanza Creek Ranch, south of Santa Fe, preparing for a scene. Hutchins, according to the actor, told him to pull his Colt .45 revolver from his holster and point it at the camera for an extreme close-up view. That’s when the gun went off.

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Hutchins died from her wounds. Souza was injured and recovered.

Last month, Marlowe Sommer sentenced the film’s armorer, Hannah Gutierrez, to 18 months in a New Mexico women’s prison for her role in the shooting. Morrissey argued that Gutierrez was criminally negligent by allegedly bringing the live ammunition to the movie production and unwittingly loading one of the lead bullets into Baldwin’s gun. Gutierrez denies bringing the ammunition on set.

Baldwin’s prosecution has long been fraught.

Morrissey and her law partner Jason J. Lewis joined the case last year after the first team of prosecutors was forced to step down due to missteps, including trying to charge Baldwin on a penalty enhancement that wasn’t in effect at the time of the tragedy.

“The government looked a little sophomoric and unprofessional when they charged him for a crime that wasn’t a crime at the time,” said Los Angeles litigator Tre Lovell, who is not involved in the “Rust” shooting matter. “That was embarrassing.”

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The original prosecutors also displayed bluster in media interviews, making statements about the need to hold Baldwin responsible for his actions. Defense attorneys have argued that such commentary was out of line and prejudicial against the actor.

Shortly after Morrissey and Lewis joined the case, they dropped the charges against Baldwin. At the time, they said they needed more time to review evidence and address issues raised by Baldwin’s team. Morrissey and Lewis reserved the right to refile the charges.

Immediately after the charges were dropped, Baldwin traveled to Montana to finish the filming of “Rust.”

On Friday, Morrissey said last year’s decision to drop the charges was made at the request of Baldwin’s lead attorney, Luke Nikas, who had presented evidence that the gun Baldwin was using had been modified. Subsequent tests showed the gun was functional that day, but during FBI testing in 2022, the gun was broken by forensic analysts who wanted to see how much pressure needed to be applied for the hammer to drop.

The damaged gun is one of several complications that prosecutors are facing. Legal experts have said that winning a conviction in Baldwin’s case is expected to be more difficult than in the trial of Gutierrez, whose job was to make sure the weapons were safe.

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Baldwin was handed the prop gun that day and was told that it was “cold,” meaning there was no ammunition inside. In reality, the chamber of the revolver contained six rounds — five so-called dummies and the lead bullet that killed Hutchins.

“The state has not even alleged that Baldwin had a subjective awareness of a substantial risk that the firearm held live ammunition,” Nikas argued in the motion to dismiss the charges. “Without a subjective awareness, he could not have committed the crime of involuntary manslaughter, which requires that the defendant consciously disregarded a substantial and unjustifiable risk that his actions could cause another person’s death.”

Baldwin has argued, with support from Hollywood’s performers’ union SAG-AFTRA, that it wasn’t his job to be the gun safety officer on set.

The actor has said he was relying on other professionals to do their jobs to ensure a safe production.

Prosecutors have an obligation to present evidence in a “fair and impartial manner,” Baldwin’s attorneys said.

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The judge grilled Morrissey on her thinking at the time, including an instance when she had interrupted a sheriff’s deputy and prevented her from answering a question about gun safety measures on set. Morrissey said that deputy was not an expert in film set protocols and that she instead wanted jurors to get “the most accurate information,” which would come from a veteran film crew member who was an expert witness.

Baldwin’s attorneys were also sharply critical of Morrissey for divulging during a media interview the date the grand jury was expected to meet. Morrissey said she took responsibility for providing to a reporter the initial date, which had been scheduled for mid-November. However, the matter was postponed, and the case wasn’t brought before the grand jury until two months later, in mid-January.

Lovell, the L.A. entertainment attorney, said he believes the case will go to trial and that efforts to throw out the indictment will be unsuccessful.

“Courts are really reluctant to dismiss cases brought by a grand jury,” Lovell said. “Courts have limited ability to review what goes to a grand jury unless it was provided in bad faith.”

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