The Wall Street Journal - 02.10.2019

THE WALL STREET JOURNAL. Wednesday, October 2, 2019 |A

Hong Kong

P

resident Xi Jinping wanted
Tuesday—Beijing’s Na-
tional Day—to be a celebra-
tion of the 70th anniver-
sary of communist China.
Instead, it marked an escalation in
violence against Hong Kong. For the
first time, police fired a live round at
a protester, an 18-year-old student,
who suffered a chest wound.
National Day had loomed for
months as a potential milestone for
the protest movement that has roiled
Hong Kong since June. Authorities
wanted to quell the unrest before Oct.
1, while protesters strove to keep it
alive until then—and they prevailed.

Tuesday’s shooting will invigorate
the protests, and Beijing has no obvi-
ous solution to this political crisis.
In a video address Tuesday night,
a police spokeswoman claimed that
protesters had attacked officers, one
of whom fired “to save his own life
and his colleagues’ lives.” She added:
“The police do not wish to see any-
one injured in the incident. It is re-
ally heart-breaking.”

As a live round wounds

a Hong Kong protester,

there’s no obvious solution

to the political crisis.

Escalation From Beijing on Its National Day

Hong Kongers don’t buy it. They

believe only international pressure

has prevented a massacre. They were

especially heartened when President

Trump told reporters in August that

“it would be very hard to deal” with

Beijing “if it’s another Tiananmen

Square” in Hong Kong. Wong Chun

Wing, 20, told me he first regarded

Mr. Trump as crazy but has come to

respect him because he stands up for

human rights and challenges China.

Mr. Wong doesn’t believe Hillary

Clinton would have taken such a hard

line. Protesters now carry American

flags as “a way to say thank you,” he

said.

Emboldened by international sup-

port, Hong Kongers say they will

quit the streets only if the govern-

ment meets their “five demands, not

one less,” as the rallying cry goes.

Beijing is afraid of conceding too

much, lest mainland Chinese learn

that demonstrations and disorder

yield results.

Hong Kong Chief Executive Carrie

Lam acquiesced to one demand last

month, agreeing to withdraw the ex-

tradition bill that triggered the large-

scale protests in June. “That invited

a lot of criticism in China,” said Fu

King Wa, an associate professor at

the University of Hong Kong who has

been tracking online discussion in

the mainland. “They take withdrawal

of the bill as a major concession” and

question why the government would

“back down” in response “to a rioter

who created violence.”

It would be even harder for Beijing

to accede to the protesters’ remain-

ing four demands—for free elections,

an independent inquiry into police vi-

olence, official acknowledgment that

the protests aren’t riots, and amnesty

for those who’ve been arrested. In-

stead authorities are working to dis-

credit the protesters. While the vast

majority have been peaceful, a mi-

nority have brawled with cops,

thrown Molotov cocktails or bricks,

started fires, and damaged property.

Ms. Lam argues that giving them am-

nesty would “run counter to rule of

law.”

Following the lead of their main-

land counterparts, Hong Kong authori-

ties are also attempting to buy legiti-

macy with material blandishments. In

August Hong Kong’s Financial Secre-

tary Paul Chan announced a US$2.

billion spending package, which in-

cludes numerous handouts. In a New

York Times op-ed last week, Ms. Lam

promised “bold initiatives to tackle

deep-seated problems, such as access

to affordable housing,” along with

“numerous major projects and initia-

tives... that will provide thousands of

jobs and opportunities for young peo-

ple to explore for years to come.”

In another effort at appeasement,

Ms. Lam launched a series of “com-

munity dialogue sessions,” where the

public can vent concerns. Some in

Hong Kong have speculated that

without directly addressing protest-

ers’ demands, she may also establish

commissions to explore how Hong

Kong can reform its police depart-

ment or gradually work toward a

more representative government.

But no one braves water cannons,

rubber bullets and tear gas for lis-

tening sessions or the dithering of

bureaucrats. And dialogue, like a

commission or special report, sets

the expectation that the government

will eventually address Hong

Kongers’ concerns. A disappointing

outcome would only exacerbate the

public discontent.

Beijing and its pawns in the

Hong Kong government have tried

to intimidate protesters with nonle-

thal force and wait until their en-

ergy runs out. That strategy has

failed, and Tuesday’s violence will

add to the protesters’ momentum.

Against all odds, Hong Kongers suc-

ceeded in defeating the extradition

bill that presented an immediate

threat to their autonomy, calling

global attention to Beijing’s abuses

of power, and leaving Beijing with

no good way to end an embarrass-

ing spectacle.

The greatest threat to their suc-

cess may be the prospect of a U.S.-

China trade deal. If Mr. Trump suc-

ceeds in striking one, he may be less

eager to take Beijing to task over

Hong Kong. The risk for protesters

is that the world will lose interest

in the confrontation, emboldening

Beijing.

Ms. Melchior is an editorial page

writer at the Journal.

By Jillian Kay Melchior

AFP/GETTY IMAGES

Hong Kong police detain a protester Tuesday.

OPINION

Ringmaster Rashida Tlaib Introduces the Impeachment Circus

President Trump
had to know this
was coming. Hours
after Democrats
took control of the
House in January,
freshman Rep.
Rashida Tlaib told a
room full of pro-
gressives exactly
what the new major-
ity intended to do.
“We’re gonna go in there and we’re
gonna impeach the motherf—.” She
wasn’t bluffing.
Perhaps the president took com-
fort in the fact that a few Demo-
cratic Party elders, like Judiciary
Committee Chairman Jerrold Na-
dler, distanced themselves from Ms.
Tlaib’s remarks. Or maybe Mr.
Trump believed Speaker Nancy
Pelosi when she promised that Con-
gress under her leadership “will be
transparent, bipartisan and unify-
ing” and “will seek to reach across
the aisle in this country, and across
divisions across our nation.” So
much for that.
The plain truth is that Democrats
have been itching for impeachment
since Mr. Trump was inaugurated.
They’ve never accepted the result of

the 2016 election or shown anything

but barely disguised contempt for

his administration and supporters.

All Ms. Tlaib did was shout out loud

what others had been whispering.

For Democrats, the question from

the start has been when, not

whether, to begin this fight. The

question Democrats now face is

whether they waited too long.

We’re 13 months out from the

2020 election, so why the rush?

Isn’t the opinion of voters more im-

portant than that of House Demo-

crats? It’s true that support for a

formal impeachment inquiry has

grown steadily among Democrats in

Congress. But Mrs. Pelosi has said

in the past that any such process

will lack legitimacy without biparti-

san cooperation, which she doesn’t

have. When Congress decided to

move forward with the Richard

Nixon and Bill Clinton impeachment

inquiries, the entire House voted

and both votes won large bipartisan

majorities. Mrs. Pelosi so far has re-

fused to honor this precedent, per-

haps because she fears an over-

whelmingly partisan result.

The Democrats’ decision to move

forward with impeachment is born

of frustration, not principle. And to

do so in response to an anonymous

whistleblower complaint about a

phone call between Mr. Trump and

Ukrainian President Volodymyr Zel-

ensky smacks of desperation. The

contents of the phone conversation

and the complaint are now in the

public domain, and voters can de-

termine whether anything in them

should cost Mr. Trump a second

term. Democrats know they don’t

have the votes in the Republican-

controlled Senate to remove Mr.

Trump from office. This is about

the spectacle. It’s about roughing

up the president for next year’s

campaign.

Democrats never expected the

Trump presidency to last this long.

He wasn’t supposed to survive the

porn-star hush-money scandal or

the Mueller report revelations. His

relentlessly crude behavior on and

off Twitter was supposed to have

caught up with him by now. But Mr.

Trump has governed precisely as he

campaigned while delivering eco-

nomic growth, low unemployment

and higher wages. And his support-

ers don’t seek validation from CNN

and the Washington Post. Demo-

crats and the media want to obsess

over the president’s temperament,

but his supporters weigh other fac-

tors as well. If voters are tired of

his style, they’ll let him know next

November.

Democrats can take some reas-

surance that Mr. Trump continues

to poll in the low to mid-40s, which

is right around where he was poll-

ing at the start of his presidency.

But they also know that his job-ap-

proval rating today approximates

that of other recent presidents who

went on to win second terms. Ac-

cording to Gallup, at this point in

their presidencies, Bill Clinton was

at 46%, George W. Bush was at 51%,

and Barack Obama was at 41%. Mr.

Trump is now at 43%.

The impeachment inquiry puts

House Democrats from swing dis-

tricts at risk, and making it about

Ukraine could also handicap Joe Bi-

den, who might be the Democrats’

best chance at defeating Mr. Trump.

Elizabeth Warren is on Mr. Biden’s

heels, but he remains the front-run-

ner for the Democratic nomination

both in national polls and in most

of the early-voting states. Impeach-

ment could change that. As my col-

league Kimberley Strassel wrote last

week, it will be difficult for Mr. Bi-

den to criticize the president’s deal-

ings with Ukraine given that his son

Hunter is linked to the Ukrainian

gas company at the center of the

scandal. Mr. Biden has a problem

similar to Hillary Clinton’s in 2016,

when she couldn’t draw attention to

Mr. Trump’s tomcatting without

also drawing attention to her hus-

band’s womanizing and her treat-

ment of his accusers.

Meanwhile, on Thursday Ms.

Tlaib began hawking T-shirts that

read “Impeach the MF.” They sell

for $29 and the money goes to her

re-election campaign. Her home-

town newspaper, the Detroit Free

Press, said the stunt is “exactly the

sort of thing Donald Trump might

do, if he were in Tlaib’s position.”

Perhaps. Or maybe it’s an indication

of how seriously Democrats expect

people to take this impeachment

circus.

Big fun under the big

top as Democrats walk a

tightrope. But will there

be enough elephants?

UPWARD
MOBILITY
By Jason L.
Riley

Impeachment Isn’t Futile for the Left

W

hy are Democrats pressing

impeachment when the pos-

sibility of getting 20 Republi-

can Senate votes to convict President

Trump is so remote? Impeachment is

the left’s means of gaining control of

the Democratic Party—which is lib-

eral, but not as far left as many Re-

publicans imagine.

The impeachment probe not only

commits the party to ousting Mr.

Trump but forces moderate Demo-

cratic lawmakers to join the left or

face its wrath. The focus on Ukraine

could also cost Joe Biden the Demo-

cratic presidential nomination, clear-

ing the way for one of their own, like

Elizabeth Warren or Bernie Sanders.

Consider the congressional math.

Democrats hold a 235-197 majority

(with one independent). Two seats

are vacant, so 217 votes are needed

to impeach. Thirty-one Democrats

hold districts Mr. Trump won in

2016. To get to 217 without Republi-
      can help, at least 12 of those 31
      would have to vote for impeachment.
      The pressure to do so will be im-
      mense, making it a defining vote. At
      a trial, Senate moderates would also
      have to take a stand.
      Those who oppose impeachment
      would risk a primary challenge from
      the left. Those who support it would
      endanger themselves in the general
      election. Either way, the left wins by
      converting or purging moderates.
      Controlling both the nominee and
      the Democratic caucuses in Congress
      would strengthen the left’s hand
      considerably, whether or not it was
      good for the party as a whole. Rules,

funding, personnel—all would bend

to the left’s liking.

For years the left has been an im-

portant Democratic constituency, but

it never entirely called the tune. It

could be used in triangulation. With

the establishment secure, the left had

nowhere else to go. As much as those

on the left want to get rid of Mr.

Trump, they need control of the Dem-

ocratic Party more. He will be out of

office in a little more than five years,

if not one. Seizing control of a major

party is a once-in-a-lifetime opportu-

nity that would offer dividends for

decades.

Mr. Young served under President

George W. Bush in the Office of Man-

agement and Budget and Treasury

Department. He was a congressional

staffer from 1987-2000.

By J.T. Young

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To Make Banks Stable, End, Don’t Mend, the Repo Market

‘I

don’t understand how your
‘repo’ market works,” a vet-
eran Scandinavian banker tells
me. “There’s nothing like it at home;
our world is much simpler.”
Repo markets are like pawnbro-
kers for banks. They provide no-
questions-asked cash against pledged
collateral, typically Treasury bonds,
and serve as crucial conduits for the
credit that banks need. Many finan-
cial institutions routinely use repos
to secure overnight loans from
money-market funds and other insti-
tutions with surplus cash looking for
a safe return. Trouble in repo mar-
kets can spill into the “fed-funds”
market, another source of overnight
cash for large banks. Credit problems
can cripple the economy, as in 2008
after repo markets imploded.
Analysts described last month’s
spike in repo rates—from about 2%
to 10% on Sept. 15—as “wild” and
“seismic,” sowing “shock and confu-
sion.” Some blamed high cash de-
mand to pay estimated taxes and set-
tle Treasury bond auctions. More-

esoteric explanations included a

holiday in Japan, the “glut” of safe

assets overwhelming scarce cash re-

serves, the Federal Reserve’s foreign-

repo program for non-U.S. lenders

and central banks, and even the re-

cent attack on Saudi oil facilities.

The risks of another credit col-

lapse that surfaced last month

spurred forceful intervention by the

Fed. For the first time since 2008,

the central bank directly and repeat-

edly made repo loans. In response to

criticism of the Fed’s failure to fore-

see the problem, Chairman Jay Pow-

ell asserted that the Fed understood

repos as well as anyone and ob-

served that market participants had

also been surprised. New York Fed

Chief John Williams declared that

the Fed was “consistently and con-

structively supporting stability” in

repo markets.

Critics who assert that the repo

snafu marked an “unequivocal”

breakdown in the Fed’s control of

monetary policy have demanded

forceful and permanent changes in

repo policy. Some bankers have ar-

gued that the Fed should intervene

in the repo market routinely, not

only during emergencies, and partic-

ularly at the end of financial quar-

ters, when banks’ cash requirements

surge.

But does the repo market really

warrant “constructive support” from

regulators? Markets in physical com-

modities provide valuable price sig-

nals: A rise in the price of tin encour-

ages miners to increase production

and users to reduce consumption of

the metal. But the Fed produces cash

as if out of thin air and requires

banks to hold this cash through its

reserve requirements. Routine Fed

examinations also encourage a ritual-

istic charade that increases the vola-

tility of repo borrowing: Every three

months banks scramble for cash to

pass end-of-quarter checks of their

reserves. The Fed’s monetary policies

affect the availability of Treasury

bonds used as repo collateral. And

regulators set the rules for the repo

market: Intraday borrowing, for in-

stance, is prohibited.

Fiat money, macromonetary poli-

cies and bank reserve requirements

interact with factors that regulators

cannot control—such as tax pay-

ments, Japanese holidays and drone-

and-missile strikes—to make the

repo market complex and unstable.

Complexity tends to beget more

complexity. Temporizing fixes would

only increase the repo market’s com-

plexity and expand the power of in-

siders who claim to know what’s go-

ing on. As we know from 2008,

byzantine complexity can cause fi-

nancial systems to collapse.

Simplifying how banks borrow

would make the banking system more

resilient. The Fed could routinely offer

unsecured short-term loans to banks

at its target fed-funds rate. Now, the

Fed grudgingly lends at its “discount

rate” against eligible collateral

pledged by banks. Regulators could

also decouple overnight borrowing

from collateral pledges by explicitly

guaranteeing all the short-term liabili-

ties banks hold. To discourage over-

borrowing, regulators could charge a

guarantee fee, as the Federal Deposit

Insurance Corp. does.

Free-market purists might regard

such guarantees as an abhorrent

elimination of market discipline. But

there isn’t much market discipline to

eliminate. Besides, we already have

a parallel system that shows banks

can successfully access credit with-

out providing collateral or detailed

financial information to lenders—the

fed-funds market. Banks lending to

each other in that market trust that

regulatory examination, the Fed’s

safety net, and whatever discipline

stock- and bond-holders might pro-

vide are sufficient to make the sys-

tem function properly except in

times of acute stress.

Simple, explicit guarantees would

reduce the complexity of short-term

borrowing by banks. Banks would

gain more-stable funding, and all

would benefit from a sounder bank-

ing system. The way to prevent fu-

ture repo crises, as in Scandinavia, is

to make the market unnecessary.

Mr. Bhidé, a professor of business

at Tufts University, is author of “A

Call for Judgment: Sensible Finance

for a Dynamic Economy.”

By Amar Bhidé