Daily SITREP: Mutiny Grows at the State Department (Tue, 07 November 23) – Forward Observer

Daily SITREP: Mutiny Grows at the State Department (Tue, 07 November 23)


Good morning. Here’s your Daily SITREP for Tuesday, 07 November 2023.

ADMIN NOTE: Veteran’s Day is being observed on Friday, 10 November. The Early Warning brief will be published on Thursday, and the Early Warning Roundtable will begin at 0900 Central on Thursday. We will not be publishing a report on Friday in observance of Veterans Day. – M.S.


  • READ TIME: 5 Minutes, 43 Seconds
  • Inside the Beltway
    • (1) Mutiny Grows at The State Department
    • (2) GOP Super PAC Head: We Can Grow Majority In 2024
    • (3) House GOP Preparing New Stopgap Bill
  • Domestic INTSUM
    • (4) Federal Reserve: U.S. Banking System is Still Vulnerable
    • (5) Las Vegas Culinary Workers Prepare for Strike
    • (6) BofA: How Wealthy Clients Are Navigating Markets
  • Global SITREP
    • (7) Dimon & Fink: Middle East Could Trigger a Global Recession
    • (8) Israeli Defense Forces Split Gaza; Prepare to Enter Gaza City
    • (9) Ukraine’s Zelensky Says No Elections During Wartime


  • (1) MUTINY GROWS AT THE STATE DEPARTMENT: In a new leaked State Department Dissent Channel memo, mid-level staffers criticized the Biden administration’s handling of the Israel-Gaza conflict, saying the “tolerance” of a high civilian death toll in Gaza “engenders doubt in the rules-based international order that we have long championed.”
    • According to a current State Department official, Secretary of State Antony Blinken met last week with a group of State Department officials who are circulating more Dissent Channel cables to gather signatures. 
    • Why It Matters: Dissent is growing at the State Department, emboldened by the public split between Biden and Obama on the Israel-Gaza conflict. If the administration begins to criticize the Israeli response now, it will look like they are abandoning Israel, and the Biden administration already attempted to push a cease-fire, which Israeli Prime Minister Netanyahu rejected. One career official, Director of Congressional Affairs Josh Paul, has resigned over the policy, and more mid-level officials and Foreign Service Officers may follow. – R.C. 
  • (2) GOP SUPER PAC HEAD: WE CAN GROW MAJORITY IN 2024: President of The Congressional Leadership Fund, the GOP leadership Super Political Action Committee (PAC), Dan Conston, said the Super PAC “is in the strongest financial position in its history,” and Republicans will hold and grow the House majority.
    • Conston said battleground state polling was favorable to GOP incumbents, and incumbents in California, Virginia, and New York districts Biden won in 2020 are polling higher than the national Republican Party.
    • Why It Matters: Polling indicates voters in the California, Virginia, and New York seats believe the GOP incumbents are “working to end the chaos in Washington,” so the ability of the GOP to hold onto the House in 2024 likely hinges on Speaker Mike Johnson (R-LA) avoiding a shutdown. Individual incumbents tend to poll higher than Congress as a whole, which could also help Republicans hold onto these battleground seats. The Democrats have a clearer path to taking the House through court-ordered Congressional redistricting and the creation of new minority-majority seats, as seen in Alabama and Georgia. – R.C.
  • (3) HOUSE GOP PREPARING NEW STOPGAP BILL: House Republicans are preparing a new stopgap bill ahead of the 18 November shutdown deadline that would create “funding cliffs” on 07 December and 19 January 2024.
    • House Republicans plan to put contentious spending bills under the longer “funding cliff” and appropriations with bipartisan support under the shorter “funding cliff” to entice Democrats to make a deal.
    • Why It Matters: Congress is now ten days from the 17 November deadline to pass appropriations bills and keep the government open. Speaker Mike Johnson (R-LA) is under the gun to prevent a shutdown and keep GOP control of the House, but must make a deal that satisfies the House Freedom Caucus to prevent a repeat of McCarthy’s ouster from the Speakership. – R.C.


  • (4) FEDERAL RESERVE: U.S. BANKING SYSTEM IS STILL VULNERABLE: The New York Federal Reserve Bank said the U.S. banking sector is stable, but some banks are still vulnerable to funding pressure and capital shortfalls.
    • “In the short-term, banks might suffer losses in their securities portfolio that might, in turn, induce funding dry-ups and substantially weakened effective capital levels,” the authors wrote.
    • Why It Matters: Another round of regional banking failures is possible, as the Federal Reserve likely maintains its “higher for longer” interest rate policy through the first half of 2024. Investment banks expect the first interest rate cuts in the second half of 2024, unless a financial crisis unfolds. – H.B.
  • (5) LAS VEGAS CULINARY WORKERS PREPARE FOR STRIKE: 35,000 Las Vegas hotel and casino workers in the Culinary Workers Union (CWU) are preparing to strike as early as Thursday, 09 November, the first city-wide strike since 1984.
    • CWU Secretary-Treasurer Ted Pappageorge said CWU members are “willing to fight” for a new contract, and the union has a “significant strike fund” that could pay striking members up to $400 a week.
    • Why It Matters: The last city-wide CWU strike lasted more than two months, and with major events like the Superbowl coming up at the beginning of next year, the union is in a strong position to leverage a new contract with higher pay and benefits. The CWU is part of the “Reid Machine,” the Democratic political machine in Nevada which will make it significantly easier for the union to garner political support from state lawmakers. – R.C.
  • (6) BOFA: HOW WEALTHY CLIENTS ARE NAVIGATING MARKETS: Bank of America reported that in October its high-net-worth global wealth and investment management clients invested in municipal bonds and asset-backed securities, and they bought shares of energy, financial, and consumer discretionary companies.
    • Bank of America’s wealthy clients have scaled back on their equities exposure since last year – from a high of 66% to now 59% of asset holdings.
    • Why It Matters: If rates on U.S. Treasury bonds rise, then risk-averse, defensive investors will sell stocks, buy more bonds, and wait on deals. But share prices of U.S. mega cap companies should still hold up, as international capital will seek safety in U.S. financial markets. – H.B. 


  • (7) DIMON & FINK: MIDDLE EAST COULD TRIGGER A GLOBAL RECESSION: JPMorgan CEO Jamie Dimon and BlackRock CEO Larry Fink said separately that an expanding Middle East conflict could tip an already struggling global economy into a recession.
    • Dimon said the world is facing a crisis that is “arguably the most serious since 1938.”
    • A combination of the Hamas attacks on Israel, Israel’s military response in Gaza, and the Russia-Ukraine War has pushed the world “almost to a whole new future,” Fink said.
    • Why It Matters: A greater Middle East conflict could increase global trade restrictions, leading to supply chain issues and shortages in the developed world and an economic collapse in parts of the developing world. – H.B.
  • (8) ISRAELI DEFENSE FORCES SPLIT GAZA; PREPARE TO ENTER GAZA CITY: Israel Defense Forces (IDF) managed to split Gaza on Monday, seizing control of the northern part of the territory and isolating it from the southern half.
    • IDF officials reported they were preparing to enter Gaza City in strength after achieving an encirclement on Sunday.
    • Prime Minister Benjamin Netanyahu said Israel might allow for brief pauses of an hour or two in order to facilitate civilians leaving areas of active combat. Netanyahu reiterated that a ceasefire would not happen. 
    • Why It Matters: Israeli forces are likely planning to take Gaza apart in sections – allowing them to isolate Hamas fighters and destroy their infrastructure before proceeding to follow sections of the country. Despite United Nations efforts to browbeat Israel into accepting a ceasefire, it is highly unlikely that Israeli leaders will agree to even a temporary halt in fighting before Israeli and foreign hostages are released by Hamas. Israel has gained and maintained the advantage over Hamas, but the mounting civilian casualties could set a friction point that Iran and its proxies can not ignore. A wider war in the Middle East will likely lead to significant energy and supply-chain disruptions that will impact the U.S. and European economies. – M.M.
  • (9) UKRAINE’S ZELENSKY SAYS NO ELECTIONS DURING WARTIME: Ukrainian President Volodymyr Zelensky, in a nightly video address, told Ukrainians that there would be no elections while the country was at war with Russia.
    • Ukraine did not hold its scheduled October Parliamentary election, and a first-round Presidential election in 2024 is unlikely.
    • Zelensky’s comments come when Kiev is seeking additional money and weapons from Western nations growing tired of its battlefield failures and habitual corruption.
    • Why It Matters: Many nations have held elections during wartime, and Zelensky’s claim that it would be inappropriate smacks of authoritarianism at a time when his defense and national security cabinet are under investigation for corruption. Previous discussions of Ukraine’s membership in NATO highlighted Kiev’s lack of democratic processes as not to E.U. standards. With several Western nations already urging Ukraine to seek a negotiated settlement to the war, Zelensky could end up being replaced by a more compliant leader – one who is willing to follow the lead of Kiev’s primary patrons in the West. – M.M.


M.S. indicates analyst commentary from Mike Shelby

M.M. indicates analyst commentary from Max Morton

J.V.  indicates analyst commentary from Jared Vaughn

R.C. indicates analyst commentary from Robert Cook

H.B. indicates analyst commentary from Harrison Burge

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