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Republicans may try to block student loan forgiveness

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'There's a lot of people celebrating prematurely': GOP could try to block student loan forgiveness

Arizona Attorney General Mark Brnovich suggested student loan borrowers shouldn’t bank on forgiveness yet, despite President Joe Biden’s announcement last month that he’d cancel up to $20,000 for many.

“I think there’s a lot of people celebrating prematurely,” Brnovich said. “A lot of other people are very upset about this, not only because of legal arguments, but because they believe it’s fundamentally unfair.”

The state’s Republican attorney general said he and others were looking to bring a legal challenge to the president’s plan. “If we can bring a challenge, we will bring a challenge,” Brnovich told CNBC in an interview Tuesday.

GOP attorneys general from states such as Missouri and Texas, as well as Sen. Ted Cruz, R-Texas, and those connected to conservative think tank the Heritage Foundation, have also been reported to be mulling over their options on attempting to block Biden‘s plan.

That is all sure to make anxious the tens of millions of Americans who were just weeks ago celebrating their debt forgiveness.

Student loan borrowers stage an Aug 25, 2022 rally in front of the White House to celebrate President Joe Biden canceling some federal student debt.

Paul Morigi | Getty Images Entertainment | Getty Images

A drawn-out legal challenge would threaten to throw the fate of an estimated 43 million people’s debts into limbo for the foreseeable future, and the issue could make its way to the Supreme Court.

“The uncertainty for borrowers in the meantime is, I’m afraid, considerable,” Laurence Tribe, a Harvard law professor, said in an interview last week.

No lawsuit has been filed yet, but Brnovich admitted that waiting too long could create problems.

“People’s expectations are starting to get set,” Brnovich said. “And I think that means that if we can file a lawsuit, we should file it sooner rather than later.”

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A White House spokesman, Abdullah Hasan, accused the GOP of double standards that punished the middle class.

“Let’s be clear about what they would be trying to do here: The same folks who voted for a $2 trillion tax giveaway for the rich and had hundreds of thousands of dollars of their own small business loan debt forgiven would be trying to keep millions of working middle-class Americans in mountains of debt,” Hasan told CNBC.

The Biden administration, along with its loan forgiveness announcement, released a 25-page memo by the U.S. Department of Justice making the case that debt cancellation is “appropriate” under the Heroes Act of 2003, which grants the president broad power to revise student loan programs.

That law was passed after the Sept. 11, 2001, terrorist attacks and permitted the executive branch to forgive student loans during national emergencies. The Trump administration declared the Covid-19 pandemic a national emergency in March 2020.

Opponents trying to block the forgiveness will likely argue that the Heroes Act doesn’t give the president the power to forgive student debt in the broad way he is trying to, said higher education expert Mark Kantrowitz.

“I think he’s on very, very shaky legal grounds right now,” Brnovich said, about the president.

President Biden announces student loan debt relief plan

The first obstacle for those hoping to bring a legal challenge against Biden’s plan will be finding a suitable plaintiff, Tribe said. It would likely have to be someone who can make the case that student loan forgiveness causes them “personal injury,” and that may not be easy.

“Such injury is needed to establish what courts call ‘standing,'” Tribe said. “No individual or business or state is demonstrably injured the way private lenders would have been if, for instance, their loans to students had been canceled.”

But Brnovich expressed confidence about finding a plaintiff. He said they were looking at ways in which loan forgiveness could hurt state costs and its taxpayers, for example, but suggested they had other options as well.

“There are all sorts of different legal theories as to how you get the standing,” Brnovich said. “But the big question will be, which is the best one?”

Abby Shafroth, an attorney at the National Consumer Law Center, said it would be a mistake for the states to try to block the president from fulfilling a campaign promise. Biden had vowed to cancel $10,000 per borrower in the 2020 presidential election.

“And people voted for him and endorsed this policy,” Shafroth said. “This is better worked out through democracy.”

 — CNBC’s Sharon Epperson and Stephanie Dhue contributed to this report.



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Kim Kardashian, Floyd Mayweather crypto scam lawsuit dismissed

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A federal judge on Wednesday dismissed a proposed class action lawsuit by investors against the founders of the cryptocurrency EthereumMax, as well as celebrity endorsers including Kim Kardashian and boxer Floyd Mayweather Jr. over their promotion of the cryptocurrency on social media.

Investors who bought EMAX tokens alleged they had suffered losses after taking the word of the celebrity influencers about the value of the crypto. The suit claims the defendants engaged in a conspiracy to artificially inflate the value of the EMAX tokens.

Judge Michael Fitzgerald wrote that he recognized that the lawsuit’s claims raised legitimate worries about “celebrities’ ability to readily persuade millions of undiscerning followers to buy snake oil with unprecedented ease and reach.”

“But, while the law certainly places limits on those advertisers, it also expects investors to act reasonably before basing their bets on the zeitgeist of the moment,” wrote Fitzgerald, of the Central District of California.

The judge found that the plaintiffs’ allegations were insufficiently backed, especially “given the heightened pleading standards” for fraud claims, according to his ruling in U.S. District Court in Los Angeles.

In addition to Kardashian, Mayweather and former Boston Celtics star Paul Pierce, the defendants in the case included Steve Gentile and Giovanni Perone, the co-founders of EthereumMax, and Justin French, a consultant and developer for the cryptocurrency, court documents state.

Fitzgerald in his ruling said he would allow lawyers for the plaintiffs to refile their suit after amending some of their claims under a number of the statutes cited in the original complaint, which included the Racketeer Influenced and Corrupt Organizations Act, also known as RICO.

“We’re pleased with the court’s well-reasoned decision on the case,” Michael Rhodes, a lawyer for Kardashian, told CNBC.

The dismissal came weeks after investors in fallen crypto exchange FTX filed a class-action lawsuit against former FTX CEO Sam Bankman-Fried and celebrity advertisers for the company, among them NFL superstar Tom Brady, for allegedly overstating the value of the crypto tokens in promotional messaging.

And the ruling came two months after Kardashian agreed to pay $1.26 million, and not to promote cryptocurrency for three years, to settle claims by the SEC for her failure to disclose a $250,000 payment touting EthereumMax on her Instagram account.

Fitzgerald in his ruling Wednesday said the EthereumMax lawsuit reflects a broader conflict surrounding celebrity and influencer promotional schemes.

“This action demonstrates that just about anyone with the technical skills and/or connections can mint a new currency and create their own digital market overnight,” Fitzgerald wrote in his dismissal.

Investors sued EthereumMax and its celebrity advertisers in January after a slew of influencers started snagging sponsorships to promote cryptocurrencies to their millions of social media followers.

Kardashian’s Instagram post in June 2021 had written, “Are you guys into crypto??? This is not financial advice but sharing what my friends told me about the Ethereum Max token.”

Her post included “#ad” at the bottom, indicating she had been sponsored. But it did not disclose her $250,000 payment from EthereumMax.

Mayweather promoted EMAX at a boxing match and a large Miami bitcoin conference in June 2021.

But by January, the cryptocurrency had lost 97% of its value.

Fitzgerald at a hearing last month indicated he was inclined to dismiss the case.

Bloomberg News, in an article about that hearing, said that an attorney for the plaintiffs in the suit asked the judge to allow him to revise the suit’s racketeering claims to show how the statements by the celebrity defendants harmed the investors.

“If plaintiffs had known the true facts related to the promoters’ financial interest in the tokens, and that they were being paid to shill these tokens, they wouldn’t have paid as much for the tokens as they did,” the attorney, John Jasnoch, told Fitzgerald, according to a transcript cited by Bloomberg.



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Cathie Wood says the Fed is making a serious mistake as bond market flashes worst signal since 1980s

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How the U.S. became a global corn superpower

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The United States has just about 90 million planted acres of corn, and there’s a reason people refer to the crop as yellow gold.

In 2021, U.S. corn was worth over $86 billion, according to calculations from FarmDoc and the United States Department of Agriculture.

According to the USDA, the U.S. is largest consumer, producer and exporter of corn in the world.

“We’re really good at [corn production],” Seth Meyer, chief economist at the USDA, told CNBC. “And that’s why you see big acres, big demand, export competitiveness.”

It’s not just what we eat.

“We turbocharged the value of corn through the application of science,” Scott Irwin, agricultural economist and professor at the University of Illinois, told CNBC.

Corn is in what we buy, including medications and textiles, and corn is turned into ethanol, which helps to fuel cars across the nation.

The rest of the world relies on U.S. corn, too. 

At $2.2 billion in 2019, corn is the most heavily subsidized of all crops in the country.

“A lot of these subsidies … do get embedded into the cost of farmland and they essentially bid up the price of farmland marginally,” Joseph Glauber, senior research fellow at the International Food Policy Research Institute and former USDA chief economist, told CNBC. “So the benefits accrue largely to those who own land.”

The federal crop insurance program’s net spending is forecast to increase to nearly $40 billion from 2021 through 2025, according to the Congressional Budget Office.

At the same time, farmland values have reached all-time record highs.

“Do we get the corn acres because we’ve got the support, or do we have the support because we have the corn acres?” Meyer said, posing the chicken-and-egg question about the nation’s grain superpower.

Watch the video above to learn more about how corn fuels the U.S. economy from its people to its vehicles, the power of the corn belt states, the role of subsidies and where government policy for the industry may go from here.



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