The Wall Street Journal - 02.08.2019

THE WALL STREET JOURNAL. ** Friday, August 2, 2019 |A

majority whip in the Senate.

Sen. James Lankford (R.,

Okla.) said he opposed the

deal because it didn’t include

any effort to reduce the U.S.

debt burden.

“I really think that every

time we get to a debt-ceiling

conversation we should also

be having a conversation

about debt. And we didn’t this

time. We skipped it,” he said.

Mr. Trump tweeted Thurs-

day, calling on Republicans to

vote for the agreement.

“Budget Deal is phenomenal

for our Great Military, our

Vets, and Jobs, Jobs, Jobs!

Two year deal gets us past the

Election. Go for it Republicans,

there is always plenty of time

to CUT!” he wrote.

Mr. Mnuchin had warned

that the U.S. could exceed its

borrowing limit before law-

makers return from August re-

cess in early September, accel-

erating the negotiations with

Mrs. Pelosi to reach a deal be-

fore the end of last week. The

government could begin to

miss payments on its obliga-

tions without the ability to

borrow and trigger a potential

default.

The House left Washington

for its recess on Friday.

Lawmakers paired raising

the borrowing limit with set-

ting new overall spending lev-

els to try to ease passage of

the debt-ceiling suspension.

Without a new agreement

on raising spending levels by

Oct. 1, automatic spending

cuts—a requirement known as

sequestration that was put in

place in 2011—would have cut

roughly 10% of discretionary

spending early next year.

The two-year spending deal

ends the threat of sequestra-

tion after fiscal year 2021, a

victory for Democrats who

have sought to increase spend-

ing on domestic programs.

—Catherine Lucey

contributed to this article.

WASHINGTON—A two-year

agreement to raise federal

spending and at the same time

lift the government’s borrow-

ing limit will go to the presi-

dent’s desk after it passed the

Senate with more Democrats

voting for it than Republicans.

The bill, which provides for

more than $2.7 trillion in dis-

cretionary spending over the

next two years, was the result

of weeks of negotiations be-

tween Treasury Secretary Ste-

ven Mnuchin and House

Speaker Nancy Pelosi (D., Ca-

lif.).

It suspends the debt ceiling

until the end of July 2021 and

sets spending levels roughly

$320 billion above limits set in

a 2011 law.

While President Trump and

Republican leadership have

celebrated the increases in

military spending the deal

calls for, conservatives in the

House and Senate have lam-

basted what they say are un-

sustainable increases in fed-

eral deficits.

Under the Trump adminis-

tration, the annual federal def-

icit is set to reach $1 trillion.

“I am confident it is not ex-

actly the legislation that ei-

ther side of the aisle would

have written if one party held

the White House, the House,

and had 60 votes in the Sen-

ate,” Senate Majority Leader

Mitch McConnell (R., Ky.) said

on the chamber’s floor on

Wednesday. “That’s divided

government. But I am equally

confident that this is a deal

that every one of my col-

leagues should support.”

The bill passed the Demo-

cratic-controlled House last

week, when roughly two-

thirds of House Republicans

opposed the legislation. Mr.

Trump and Vice President

Mike Pence have been calling

skeptical Republican senators

to urge them to support the

deal since it was agreed to, ac-

cording to a person familiar

with the talks. Mr. Trump also

lobbied uncertain House Re-

publicans last week and

tweeted his backing for it.

The legislation ultimately

cleared the Senate with 67

votes. Twenty-eight Senators

voted against it, with 23 Re-

publicans joining five Demo-

crats to oppose the deal. Re-

publicans control the chamber

with a 53-seat majority.

“Any spending vote, debt

limit vote, is not easy. I’ve

been around here a long time,

they’re all hard votes,” said

Sen. John Thune (R., S.D.), the

BYANDREWDUEHREN

Spending

Bill Clears

The Senate

ANDREW HARRER/BLOOMBERG NEWS

Senate Majority

Leader Mitch

McConnell

supported the deal.

They run the databases that

hold customer credit scores

and social-security numbers.

They analyze risk for banks’

traders and process payments.

Cloud computing has made

possible services that custom-

ers now take for granted, like

mobile access to their bank ac-

counts and split-second deci-

sions on their efforts to buy

and sell securities.

Amazon is the biggest

player, controlling nearly half

of the public cloud market in

2018, according to Gartner.

Amazon Web Services came

out of a 2003 brainstorming

session about ways to use the

company’s extra data centers.

It now contributes three-quar-

ters of the company’s overall

profits, helping to support its

low-margin retail business.

Goldman Sachs Group Inc.,

Nasdaq Inc. and payments

company Stripe Inc. all use

Amazon. A competing cloud

service from Microsoft Corp.

counts JPMorgan Chase & Co.

and TD Bank among its clients.

Google, a smaller player, is

also courting banks.

Most big banks use all three

to some extent. Some, like

Capital One, have closed their

proprietary data centers and

moved much of their digital

footprint to the cloud, which

makes Amazon and its com-

petitors crucial to day-to-day

banking.

But Washington hasn’t fig-

ured out yet how to regulate

them. Established bank ven-

dors such as FiServ Inc. have

been subject to inquiries from

financial regulators for years

because they provide the core

software that runs banks’ de-

posit and loan platforms.

Regulators have only lim-

Esper to Review

Cloud Contract

WASHINGTON—Defense

Secretary Mark Esper will re-

view a massive cloud-comput-

ing contract, creating a new po-

tential obstacle for the lucrative

deal that had been questioned

by President Trump.

The contract-award process

for the Joint Enterprise Defense

Infrastructure program, known

as JEDI, had been marred by

conflict-of-interest allegations.

The Pentagon previously identi-

fied Amazon Inc.’s AWS unit

and Microsoft Corp.’s Azure di-

vision as finalists and said it

expected to award the contract

by the end of August.

“No decision will be made

on the program until he has

completed his examination,” a

Pentagon spokeswoman said.

The contract, expected to be

valued at up to $10 billion, had

come under fire over allegations

of conflict of interest involving

a former Pentagon employee

who worked on the contract

and for Amazon. Oracle Corp. in

July lost a legal bid to force a

deeper review of the potential

conflicts.

Some companies were con-

cerned that a single award

would give the winner an unfair

advantage in follow-on work.

The Pentagon has said it

planned to award future cloud

deals to multiple contractors.

President Trump said on

July 18 he had heard “tremen-

dous complaints” about the

process for awarding the JEDI

contract and vowed to ask his

administration “to look at it

very closely.” He cited com-

plaints by Microsoft, Oracle, and

International Business Machines

Corp. Google withdrew last

year, citing its own ethics policy

regarding military work.

Oracle, Microsoft and Ama-

zon declined to comment. IBM

pointed to previous comments

about the contract’s structure.

Sen. Chuck Grassley (R.,

Iowa) said earlier this summer

that emails showing meetings

between Amazon executives

and high-level Pentagon offi-

cials bolstered his belief that

the bidding process should be

restarted. The House Appropria-

tions Committee said in a re-

cent legislative report that it

was concerned with the Penta-

gon’s approach to JEDI.

Nevertheless, the Pentagon

appeared ready to forge ahead.

On July 28, it issued a state-

ment touting a judge’s ruling in

the Oracle case, saying in part:

“The court’s decision unequivo-

cally concludes that JEDI is a

full and open competition and,

despite uninformed speculation

to the contrary, its integrity re-

mains intact.”

The Pentagon has more

than 500 clouds, and JEDI

would serve as an umbrella

system to rationalize that num-

ber and provide the military

with access to services that

keep up with the pace of tech-

nology in civilian markets.

The initial two-year contract

includes three option periods

extending the potential award

over a decade, and the Penta-

gon also wants upgrades at

commercial prices, but with

tough built-in cybersecurity pro-

tections.

—Ryan Tracy

A U.S. Indian Health Ser-

vice manager who subordi-

nates said gave an order not

to report an allegation of

child sexual abuse at an

agency-run substance-abuse

treatment center has re-

signed, employees said the fa-

cility’s CEO announced in a

meeting Thursday.

The manager, Tracey Grant,

had been on leave since June

14, according to an internal

email reviewed by The Wall

Street Journal. A week ear-

lier, an investigation by the

Journal detailed Ms. Grant’s

decisions after an incident at

the IHS’s Unity Healing Cen-

ter in Cherokee, N.C.

In September 2016, suspi-

cions arose about the rela-

tionship between a 16-year-

old female patient and an IHS

employee, a 47-year-old main-

tenance man, after video sur-

veillance showed them enter-

ing a private bathroom,

according to staff members

and documents. Hours after

the girl was questioned about

her interactions with the

man, she attempted to hang

herself, records show.

Several workers said they

suspected sexual misconduct

by the maintenance man, but

that Ms. Grant instructed

them not to report it, despite

legal requirements they do so.

The girl’s counselor, former

IHS therapist Tawna Harri-

son, said Ms. Grant “told me,

‘No, I will handle this. Do not

contact anybody,’ ” the Jour-

nal reported in its June 7 ar-

ticle.

Ms. Grant confirmed in a

brief conversation Thursday

that she had resigned for

“personal reasons.” She de-

clined to comment further on

the events at Unity.

She is also the subject of

an investigation by the North

Carolina Psychology Board for

her role in the 2016 incident,

records show.

The IHS said Ms. Grant’s

resignation was effective July

31. “Sexual assault and abuse
    will not be tolerated at the

Unity Healing Center or else-

where in the IHS,” a spokes-

man said in a statement. He

said the agency was seeking a

contractor to do a review of

sex-abuse reporting practices

at Unity.

The IHS has been under

scrutiny for its handling of

child sex-abuse allegations

against its staff members fol-

lowing a report by the Jour-

nal and the PBS series Front-

line that detailed the agency’s

mishandling of a pedophile

pediatrician.

In that case, managers in

Montana and South Dakota

missed or ignored warning

signs, tried to silence whistle-

blowers and allowed the doc-

tor, Stanley Patrick Weber, to

continue treating children de-

spite the suspicions of col-

leagues up and down the

chain of command.

Mr. Weber was convicted in

Montana last year on charges

of sexual abuse and is appeal-

ing the verdict. He faces an-

other trial on related charges

in South Dakota next month

and has pleaded guilty to

charges there.

After the Journal and

Frontline reported on that epi-

sode, the IHS overhauled its

policies for handling sexual-

abuse case at its facilities. It

implemented nationwide train-

ing on how to handle such al-

legations last month.

Federal law already re-

quires health-care workers,

administrators and others to

report suspicions of sexual

abuse of children under 18 to

law-enforcement authorities.

But some agency employees

have said in interviews they

were instead directed to bring

such concerns to managers.

The maintenance man in-

volved in the 2016 incident,

Nathaniel Crowe, didn’t re-

spond to requests for com-

ment Thursday. In a June

Facebook post, he said he had

been fully cleared and that al-

legations about him were “a

total misconception.”

A federal probe into the

matter continues, said people

familiar with the matter.

BYCHRISTOPHERWEAVER

Official Out Over Abuse Reporting

Some workers at a treatment center run by the U.S. Indian Health Service have said they were deterred from reporting sexual abuse.

CHARLES MOSTOLLER FOR THE WALL STREET JOURNAL

warily at the Amazon offices.

Chaperoned by an Amazon em-

ployee, they were allowed to

review certain documents on

Amazon laptops, but not al-

lowed to take anything with

them, some of the people said.

The examination points to a

culture clash between govern-

ment and big tech, which has

been far less regulated than

the financial sector. Antitrust

investigations are under way

into whether Amazon, Face-

book Inc. and other tech com-

panies have used their size

and influence to stifle compe-

tition.

The examination, headed up

by the Federal Reserve’s Rich-

mond branch, also brings to

the fore the question of where

banks end and where the ven-

dors that power them begin.

The examiners in Virginia

were focused on Amazon’s re-

siliency and backup systems,

some of the people said, de-

scribing the visit as the first of

what is expected to be ongoing

oversight of the tech giant.

Technology companies such

as Amazon are now a crucial

player in the U.S. banking sys-

tem, whether they want to be

or not.

ContinuedfromPageOne

ited power over nonbanks, and

typically rely on banks to vet

their own vendors. A U.S.

Treasury report last year

found that bank regulations

hadn’t “sufficiently modern-

ized to accommodate cloud

and other innovative technolo-

gies.”

Part of that modernization

will require reckoning with a

cultural chasm between Silicon

Valley’s entrepreneurs and

Washington officials: After the

meeting in Virginia, the Feds

sought more documents and

information from Amazon,

people familiar with the mat-

ter said.

The company balked, de-

manding to first see details

about how its data would be

stored and used, and who

would have access and for how

long, some of the people said.

Tech giants have fought

new oversight. When the gov-

ernment weighed new cyberse-

curity standards in 2017, Ama-

zon lobbied against them.

Cloud companies, it argued,

simply sell a system and turn

over the job of running and se-

curing it to their clients.

“Imposing additional cyber-

security requirements...could

unnecessarily lead to redun-

dancy and increases in compli-

ance costs, while potentially

leaving systemically important

financial institutions less se-

cure,” Amazon wrote to regu-

lators in 2017. The proposal

was eventually dropped.

—Emily Glazer

and Telis Demos

contributed to this article.

Fed Team

Checked

Amazon

Amazon controlled nearly half of the public cloud market in 2018,

according to Gartner.

SALVADOR RODRIGUEZ/REUTERS

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