The E.U.'s Dire Political Problem Obscured by the Banking Crisis

In December, 2010, E.U. leaders agreed to propose an amendment wherein the financial emergency rescue fund would be replaced with a permanent crisis-finance program. The amendment would permit the States having the euro as currency to establish a "mechanism" if it is "indispensible" for the health of the euro.  Interestingly, all of the 27 State legislatures would have to ratify the amendment, though no referenda would be required on account of the amendment being of insufficient scope to trigger them.

The full essay is at "Essays on the E.U. Political Economy," available at Amazon.

The Republican Congress and Health Insurance Companies: The Real Agenda

According to Wendell Potter, a former health-insurance company lobbyist, “the new law props up the employer-based system that insurers and large corporations benefit from so greatly. It also guarantees that private insurers will get billions of dollars in new revenue.”[1]  It is no accident that Obama’s health-insurance law works out this way. Potter points out that Republicans will back off from repealing the mandate, but will push for other changes. The reason is that the mandate is in the health-insurers’ interest whereas some other features of the law are not. Private insurance companies would like to keep the mandate that will guarantee them more customers.  At the same time, the insurers would like to go back to refusing to cover kids with preexisting conditions, canceling policyholders’ coverage when they get sick, and setting annual and lifetime limits on how much the insurers have to pay for medical care. Also, the insurance companies do not like having to spend eighty percent of their revenue from premiums on medical care, and the insurers would like to get more from the US government for private medicare plans.

The full essay is at "Congress and Health Insurance Companies."

1. Wendell Potter, “Repeal and Replace?” Newsweek, November 15, 2010, pp. 42-43; see also Jay Newton-Small, “What Does She Want?” Newsweek, December 20, 2010, pp. 38-47

The Affordable Care Act Running Up Against Federalism

According to Newsweek, "Conservatives have been quick to declare that "ObamaCare is on life support" in the wake of federal district court Judge Henry E. Hudson's ruling in Virginia that the Affordable Care Act’s (ACA) requirement to buy health insurance is unconstitutional. But in truth Virginia’s attorney general, Ken Cuccinelli, won only a partial victory. He sought to have the entire law overturned, but instead only the section creating an individual mandate was." This is perplexing to me, as the law contains a clause indicating that if any part is deemed to be unconstitutional, the entire act would fall. Clearly, the health insurance industry didn't want to be forced to pay out without being guaranteed the expanded customer base by the U.S. Government.  

The full essay is at "Obamacare and Federalism."

Military Sacred Cows: A Matter of Contrived Camulflage

"The most significant threat to our national security is our debt."

Micheal Mullen, Jount Chiefs of Staff Chairman, August, 2010.

The defense budget in 2010--$664 billion (not counting the Iraq and Afghanistan wars)--equalled that of the rest of the world combined.  One dollar of every five spent by the U.S. Government was for defense. The amount spent represents 80% growth since 2000. Why?  One reason: the big weapon systems oriented to fighting other empires (e.g., Russia and China). For example, $600 million for the littoral combat ship and $13 billion for amphibious landing vehicles (whose purpose has even been questioned by Sec. of Defense William Gates).  It would seem that the military contractors--the military industrial complex, moreover--are firmly entrenched and in control. That is to say, the defense spending is indicative of the influence of big business over government in the United States.  That this influence goes unhampered may tell us something about the leanings of our societal norms.

The full essay is at "Military Sacred Cows."

Obama Caving to Plutocracy

I contend that Obama caved on his campaign pledge (or promise) not to extend the bush tax cuts for the rich.  The added growth expected in 2011 from ALL of the cuts is just a half of a percent of GNP growth.  I have read that the rich save their tax cuts rather than use them in ways that stimuate the economy.  As for savings, banks have enough capital to lend (this isn't why they are still skittish in 2010).  That the vacuous argument that tax cuts for the rich will somehow create lots of jobs and save the economy from another recession has had any weight or credance really discourages me about American political discourse.  That Obama didn't "just say no" is also discouraging. 

The full essay is at "Obama Caving to Plutocracy."

The American Republican Party: For More Federalism or Less Government?

The stance of Sen. Jim DeMint (SC-R) in 2010 is emblematic of the ambiguity in the hierarchy of goals in the Republican party. DeMint can be taken as being primarily oriented to restoring the balance of federalism by having the federal government do less and the State governments more, at least in terms of domestic policy. This could bring the General Government back to its enumerated powers. Accordingly, Time magazine maintains that DeMint’s real target in 2010 was “a radical downsizing of the federal government.”[1] This downsizing includes “turning education policy over to the states and gradually dismantling safety-net programs like Social Security and Medicare.”[2]

The full essay is at "The American Republican Party."

1. Michael Crowley and Jay Newton-Small, “Leading the Rebel Brigade,” Time, November 29, 2010, pp. 34-37.

2. Ibid.

The Corporate Apology

In classical literature, an apology can mean a defense, such as Plato’s Apology. In modern parlance, an apology is known as an expression of genuine sorrow and an acceptance of responsibility for having caused harm to another person. Consumers should be on guard lest a company use the semblance of an apology for marketing purposes. Robert Bacal advises that an apology be used as a strategy to use “along with other techniques."[1] According to Bacal, “perfunctory or insincere apologies are worse than saying nothing at all.”[2] Accordingly, he advises that a “sincere apology can help calm a customer, particularly when you or your company has made an error. You can apologize on behalf of your company.”[3] However, how can an apology be both sincere and geared to manipulating a customer? I contend that giving a "perfunctory or insincere" apology is unethical because it is essentially a lie spun under the subterfuge of compassion. 

The full essay has been incorporated into On the Arrogance of False Entitlement: A Nietzschean Critique of Business Ethics and Management, available at Amazon.

1. Robert Bacal, Perfect Phrases for Customer Service, 2nd Ed. (New York: McGraw Hill, 2010), p. 19. Italics added.

2. Ibid.

3. Ibid.

An Industry Undoing European Federalism: The Case of Cookies

In 2010, the EU Parliament passed a law to protect internet users from invasive “cookies,” which track computer usage at the expense of privacy. The 27 E.U. states had to implement the directive, but as this involved discretion, the business sector feared at the time that the states “might interpret the law differently, creating a nightmare of conflicting standards.” In other words, business can be intolerant toward federalism.

The full essay is at "Essays on the E.U. Political Economy," available at Amazon. 

1. Paul Sonne and John W. Miller, “EU Chews onWeb Cookies,” The Wall Street Journal, November 22, 2010, pp. B1-2.

President Obama Absent at the EU-US Summit of 2010

I submit that most Americans are unaware that the EU has a Supreme Court, a Parliament and a Council/Senate.   Few Europeans are wont to admit that these institutions constitute a government, so perhaps we can’t be blamed here in America for not taking greater notice of the relatively new government across the pond.  So it is no surprise to read that President Obama decided to skip the 2010 EU-US summit in Europe.  The American president missed an opportunity to educate the American people not only on contemporary political Europe, but also on a potentially fecund new basis of comparison, from which both the U.S. and E.U. could benefit. 


The full essay is at "Essays on the E.U. Political Economy," available at Amazon.

Midterm Elections, 2010: Lessons Unlearned

The Republican surge that gave that party control of the US House of Representatives reflected a shift of some moderate independents, even as Republican leaders portrayed the election as “the American people” having repudiated the policies of the sitting U.S. President, Barak Obama. In other words, that 54% vote for a given Republican and 46% vote for the Democratic opponent does not mean that the 54% constitute “the American People.”

The full essay is at "U.S. Midterm Election."

Democracy and Capitalism: On Managing Equality and Inequality

Both capitalism and democracy claim to maximize individuals’ freedom—capitalism in the economy and democracy in politics.  In spite of this superficial commonality, Henry Brands points out that democracy “depends on equality, capitalism on inequality. Citizens in a democracy come to the public square with one vote each; participants in a capitalist economy arrive at the marketplace with unequal talents and resources and leave the marketplace with unequal rewards.” [1] In fact, a capitalist economy cannot operate without inequality. According to Brands, “The differing talents and resources of individuals are recruited and sorted by the differential rewards, which reinforce the original differences.”[2]

The full essay is at "Democracy and Capitalism."

Corporate Analogies: Money-Making as War-Games as a Sign of Boredom

What to do when analogies go over the top. As an aspiring writer, I was chastised by more than one writing tutor for mixing analogies. The device can add color to otherwise drab prose to be sure, but too many colors at once can be daunting to even a captivated reader. Consider, for example, the following passage from Larry McDonald about the management at Lehman Brothers:

“In a way, Lehman was run by a junta of platoon officers . . . I think of them as battle-hardened, iron-souled regulars”[1] (p. 89). Richard Fuld, Lehman Brothers’ former CEO, was “our spiritual leader and battlefield commander . . . surrounded by a close coterie of cronies, with almost no contact with anyone else. . . . I suppose that was fine so long as the place was chugging along without civil war or mutiny breaking out, and continuing to coin money, which is after all the prime objective of the merchant bank.”[2] Fuld “worked within a tight palace guard, protected from the lower ranks, communicating only through his handpicked lieutenants.”[3] 

The full essay has been incorporated into On the Arrogance of False Entitlement: A Nietzschean Critique of Business Ethics and Management, which is available in print and as an ebook at Amazon. 

1. Lawrence McDonald, A Colossal Failure of Common Sense: The Inside Story of the Colapse of Lehman Brothers (2010), p. 89.

2. Ibid., p. 90.

3. Ibid.

On the Nineteenth-Century Eclipse of Democratic Governance by Capitalism

I contend that a trajectory wherein capitalism came to eclipse or capture democratic governance occurred in the nineteenth century in the United States. President Andrew Jackson’s actions in the early 1830s can be viewed as a benchmark wherein government officials were still willing to relegate the interests of capitalists for the good of the whole. 

The full essay is at "The Nineteenth-Century Eclipse of Democracy."

On the Politics of Hate Speech: Wilders in the Netherlands

Geert Wilders, head of the Party for Freedom (PVV) in the Netherlands, went on trial on October 4, 2010, in the Netherlands on charges of inciting hatred, less than a week after entering parliament as a linchpin in the coalition government. The far right political leader faced five charges of inciting hatred and discrimination against Muslims and people of non-Western immigrant origin, particularly Moroccans. “He divides, he creates hate, he creates conflicts between people,” said Mohammed Rabbae of the National Council for Moroccans. Wilders told the court he was being persecuted for “stating my opinion in the context of public debate,” adding: “I can assure you, I will continue proclaiming it.” In an opinion piece in a Dutch daily, he compared Islam to fascism and the Koran to Adolf Hitler’s book “Mein Kampf.”[1] Wilders also made the film “Fitna” in 2008 which portrayed the Koran as inciting violence and mixed images of terrorist attacks with quotations from the Islamic holy book.

The full essay is at "Wilders on Trial."

1. Natalia Dannenberg and Gabriel Borrud, "Racial Hatred," DW., October 4, 2010.

Is States' Rights in the E.U. Racist?

Thousands of Romania’s Roma people (also known as Gypsies) headed for the wealthier Western E.U. states, setting off a clash within the European Union over just how open its “open borders” really are. Migration within the 27 states of the E.U. became a combustible issue during the economic downturn. The Union’s expansion that brought in the relatively poor states of Romania and Bulgaria in 2007 renewed concern that the poor, traveling far from home in search of work, would become a burden on the state governments of the wealthier states. The migration of the Roma also raised questions about the obligations of Romania and Bulgaria to fulfill promises their governments had made when they joined the Union. Romania, for instance, mapped out a strategy for helping the Roma, but financed little of it.

The full essay is at "States' Rights in the E.U."

Obama's Economic Stimulus: Insufficiently Focused

The $800 billion stimulus law had as much (or more) to do with improving the education system and rail lines, installing universal broadband, and modernizing electrical grids as reducing the unemployment rate.[1] Consequently, the best that can be said regarding the spending is that it probably played a role in keeping unemployment from getting even worse than it did. 

The full essay is at "Obama's Economic Stimulus."

1, Matt Bai, “Crisis Past, Obama May Have Missed a Chance,” The New York Times, September 8, 2010.

A Structural Conflict of Interest inside BP

Mark Bly, BP’s head of safety and operations, released an internal report on September 7, 2010 blaming not only the company, but also its partners for the Deepwater Horizon rig explosion and oil spill. A spokesman at Transocean quickly lashed out, calling it a “self-serving report” that minimized what was critical: BP’s “fatally flawed” well design.[1] Behind the self-serving aspect was a larger conflict of interest—one premised on the structure of two functions: an “objective” investigation and efforts to minimize legal damages.

The full essay is at Institutional Conflicts of Interest, available at Amazon.

1. NBC News, "Transocean: BP Probe 'Self-Serving' and Misleading," September 8, 2010.

The U.S. Tea Party: Anti-War and Pro-States?

When he was the republican nominee for the U.S. Senate from Kentucky, Rand Paul claimed that there was not enough money in entitlement programs to counter the federal government’s deficit for 2010. Approximately 40% of the budget was military. Accordingly, the candidate said, “Part of the reason we are bankrupt as a country is that we are fighting so many foreign wars and have so many military bases around the world.”[1] The Tea Party is animated by opposition to the exorbitant levels of federal spending and indebtedness. Applying their frugality to foreign policy, the party could make a clean break from the neo-cons such as Dick Cheney.

The full essay is at "The U.S. Tea Party: Anti-War and Pro-States?"

1. W. James Antle, “Rand Plan: Will the Tea Parties Turn Anti-war?” The American Conservative (August, 2010), 8-9. See Thomas Di Lorenzo, “Inflating War: Central Banking and Militarism are Intimately Linked,” The American Conservative (August, 2010), 16-18.

Weening Businesses Off Debt: A Difficult Recovery?

We might view the recovery from the financial crisis of 2008 as a systemic correction in which managers were weened off their reliance (i.e., addition) on debt. Of course, the key lies in holding to the correction rather than falling off the wagon. Perhaps there should be an AA for debt-ridden businesses.

The full essay is at "Weening Businesses Off Debt."

Best Buy: A Retail Company Using Apology to Sell Still More

As I was entering a “Bestbuy” store one summer day wearing shorts and a tee shirt and carrying my ubiquitous book bag (as you might expect), the security person, whom the manager later told me also works at a prison, walked after me as though stalking me, practially yelling “Sir! Sir!” Reaching me as I was talking to a salesperson who was treating me as though I were a customer, the lineback demanded to look in my book bag immediately. I stated matter of factly that I had had no opportunity to stash anything from the store in my bag while walking in the front door (after which he saw my every move).  Nevertheless, I opened my pouch for him and he was satisifed. After I left the salesperson, I reported the incident to a manager, whose “company apologizes” was belied by his curtness and fake politieness. Can a company even apologize? 

The full essay has been incorporated into On the Arrogance of False Entitlement: A Nietzschean Critique of Business Ethics and Management, which is available in print and as an ebook at Amazon. 

On the Value of Wealth in American and European Society: Who Should Receive the Trophy in Sports?

Just after winning the World Cup of 2010, FIFA officials handed the trophy to the team captain of the Spanish team rather than to the coach or a team owner (in this case, an official of Spain).  In contrast, at the Kentucky Derby, the honors went to the horse’s owner, rather than to the jockey. The distinctively American value on wealth could not be more evident, and the contrast with the World Cup confirms it.  

The full essay is in Cases of Unethical Business, which is available at Amazon.

The U.S. Supreme Court Deciding Federalism Cases: A Structural Conflict of Interest

Regarding the US Supreme Court being the decider of last resort, Madison’s Report of 1800 reads in part, “this resort must necessarily be deemed the last in relation to the authorities of the other departments of the government; not in relation to the rights of the parties to the constitutional compact, from which the judicial as well as the other departments hold their delegated trusts.”  The government being referred to is the U.S. The parties to the compact are the states.  Therefore, the theory here is that the U.S. Supreme Court can have its say after the U.S. President and the Congress, but not as binding on the States.  John Breckinridge, who sponsored the Kentucky Resolutions in the Kentucky House, wrote, “Who are the judiciary? Who are they, but a part of the servants of the people created by the Federal compact?”[1] The Federal Courts are part of the US Government that was created by the states, so those courts can’t be the final deciders with respect to the states.

The complete essay is at Essays on Two Federal Empires.

1. James J. Kilpatrick, The Sovereign States: Notes of a Citizen of Virginia (Chicago: Henry Regnery, 1957), p. 75.

Immigration and Federalism in the U.S.: Should Border States Participate?

On July 1, 2010, on the precipice of another July 4th celebration, President Obama told an audience that immigration was, in sum, “broken.” Furthermore, “everybody knows it.”  Yet neither he nor the Democratic leadership in Congress had any expectation of passing an immigration law in 2010.  Into this void, Arizona had months earlier passed its own law aimed at tightening enforcement. The New York Times reported that in his speech in July, Obama “used the opportunity to repeat his opposition to Arizona’s new law requiring law enforcement officers to question the immigration status of anyone they stop for other reasons if they suspect that they are in the country illegally, calling it ‘ill conceived’ and ‘divisive’.” The President said, “We face the prospect that different rules for immigration will apply in different parts of the country, a patchwork of different immigration rules where we all know one clear national standard is needed… . Our task then is to make our national laws actually work, to shape a system that reflects our values as a nation of laws and as a nation of immigrants.”  Different rules sounds like different immigration policies—as in who can enter the US.  If the President meant this, then he had a point. However, if he was arguing that tailoring different enforcement mechanisms to different regions, it could be argued counterwise that e pluribus union in a federal system not only allows for it, but thrives by it. In other words, the empire-scale of the US warrants a diversity of approaches. Furthermore, a federal system enables and indeed is strengthened by it.

The complete essay is at Essays on Two Federal Empires.

BP Clips Societal Norms

In Senate testimony on May 11, 2010,  the three companies did their best to point the finger at each other, with the result that neither BP, Transocean or Halliburton would admit, undoubtedly for liability purposes, any contributory role. In the midst of such liability evasion, those of us in the wider society want to get to the bottom of the accident so future such accidents can be prevented. In pointing the finger at the other guy while ignoring one’s own role, the managers of the three companies are added insult to injury.  

The full essay is at "BP Clips Societal Norms"

A Recipe for Regulatory Recidivism: the MMS and FAA

In 2010, the Inspector General of the US Interior Department made public a report on the federal Minerals Management Service, which regulates the oil industry and profits from leases to it.  In addition to this glaring conflict of interest, MMS has apparently not only been “cozy” with the industry it is regulating, the two have been as one.   One inspector said, “We are all the oil industry.” 


The full essay is at Institutional Conflicts of Interest, available in print and as an ebook at Amazon.

Rating Moody’s and S & P: A Structural Conflict of Interest

For years, banks and other issuers have paid rating agencies to rate their securities. This is a bit like restaurants paying food critics to write on their food.  In the wake of the SEC’s charge that  people at Goldman Sachs built the Abacus investment to fall apart so a hedge fund manager, John A. Paulson, could bet against it, the Senate’s Permanent Subcommittee on Investigations questioned representatives from Moody’s and Standard & Poor’s about how they rate risky securities. Carl M. Levin, the Michigan Democrat who heads the Senate panel, said in a statement: “A conveyor belt of high-risk securities, backed by toxic mortgages, got AAA ratings that turned out not to be worth the paper they were printed on.” Throughout the testimony, the institutional conflict of interest was salient whereby credit-rating agencies put market-share considerations foremost in rating securities presented by the banks that are paying the agencies.

The full essay is at Institutional Conflicts of Interest, available at Amazon. 

U.S. Senator Rand Paul on Civil Rights and the BP Explosion

U.S. Sen. Rand Paul (R-KY), was the Tea Party candidate who challenged the Republican establishment to win the party’s Senate nomination in Kentucky on May 18, 2010. A day later, he publicly criticized a plank of the Civil Rights Act of 1964. Specifically, he said in an interview with Rachel Maddow on MSNBC television that he supported the sections of the Civil Rights Act that applied to public accommodations but had concerns when it came to its applicability to private business. He had raised similar concerns earlier in the day about the Americans with Disabilities Act in an interview on National Public Radio. Asked by Maddow if a private business had the right to refuse to serve black people, Mr. Paul replied, “Yes.” In so answering, the new senator failed or refused to distinguish private property that is open to the public from private property, such as a person's home, that is not. 

The full essay is at "Civil Rights and the BP Explosion."

On the Differential Impact of Pro-Business Cultural Values on Financial Regulation in the EU and US

On May 18, 2010, the German state legislature banned naked short-selling of certain euro-debt and credit-default swaps, as well as some financial stocks because it was believed that “excessive price movements” could endanger the stability of the financial system. In an interview with Frankfurter Allgemeine Sonntagszeitung, Wolfgang Schauble, the Finance Minister at the time, said that the “financial market is only concerned with itself, instead of fulfilling its purpose and financing sensible, sustainable economic growth.” The legislation runs counter to a race to the bottom in which governments relax financial regulation to entice the banking sector. At the same time, however, the American state governments and that of their union seemed like apologists for the industry they are supposed to be regulating.  In fact, Tim Geithner, the U.S. Treasury Secretary, did not waste any time in criticizing the E.U. state for the legislation. While doing so, he dismissed the German Chancellor's proposal for a global financial transactions tax (the proceeds of which would go into an emergency fund to divert a collapse of the financial system). To be sure, while the European proposals were a healthy sign of government not enslaved by the money and power of big business, the problem of banks too big to fail still existing was not tackled. Furthermore, whereas Americans may be too insular, the Europeans may be unrealistic in their visions for global regulation. Indeed, many tend to conflate their own union with an international organization.

The full essay is at "Essays on Two Federal Empires."

Regulatory Capture Realized: The Oil Industry and the MMS Regulatory Agency

On May 11, 2010,  U.S. Dept. of the Interior Secretary Ken Salazar announced that he would separate the public safety and environmental enforcement side of the Minerals Management Services (M.M.S.) agency from its leasing and revenue collection function. While this move eliminateed the structural conflict of interest in the agency, it might not do enough to protect the regulatory function of the agency’s public safety and environmental enforcement roles.  The regulator can all too easily be coopted, or captured, by the firms it is regulating.

The full essay is at Institutional Conflicts of Interest, available in print and as an ebook at Amazon.

Is the Moneyed Interest Oriented to Ending American Federalism?

James Madison wrote in Federalist #10, “a rage for paper money, for an abolition of debts, for an equal division of property, or for any other improper or wicked project, will be less apt to pervade the whole body of the Union, than a particular member of it.” That is to say, it is in the interest of the wealthy (and especially creditors) that federalism be replaced by a consolidated central government.

The full essay is at "The Moneyed Interest and Federalism in the U.S."

Fraud as Fair: Lehman as Beneficiary of Society's Pro-Business Cultural Values

In April, 2010, Richard Fuld, the former CEO of Lehman Brothers, told a congressional committee that he had "absolutely no recollection whatsoever of hearing anything" about Repo 105 at the time of the transactions. Lehman's demise, he claimed, was caused by "uncontrollable market forces" and the U.S. government's unwillingness to rescue the firm. Of course, Henry Paulson, the U.S. Treasury Secretary in 2008, had tried in vain to get Fuld to accept a buyer offering a reasonable price; Fuld had been holding out for more in spite of the financial condition of Lehman. It is stunning that a man who had been allowed to reach such a pristine and lofty office in the business world would not even permit himself to acknowledge any contributory role in the downfall of the organization he had run. Such an attitude alone seems worthy of a prison sentence (and the return of his salary and bonuses); how he and his "team" had manipulated the books to make the bank look wealthier than it was would seem to make such a sentence inevitable.

The full essay is at "Essays on the Financial Crisis."

The General Welfare Clause: Is the Power of Congress Constitutionally Unlimited?

Art. 1, Sec. 8. of the US Constitution: Congress “shall have Power to lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States.” Does this clause mean that the US Government can legislate in any way that benefits the Union? According to Thomas Woods, the general welfare clause “was a restriction on the power of the federal government: it had to exercise the powers delegated to it with an eye to the welfare of the country as a whole, not to the particular advantage of one state or section.” That is to say, the Congress could provide for the general welfare of the United States only within its delimited powers listed in the US Constitution.

The complete essay is at Essays on Two Federal Empires.

The Conflict of Interest in a Silent Oligarchy Being Engaged in Its Public Policy

Goldman Sachs, which had played a role in enabling Greece to hide its public debt, urged investors in March of 2010 to buy shares in two big health insurance companies, UnitedHealth Group and Cigna. The reason: their rates were sharply up and competition was down. According to The New York Times, the White House claimed, “ the Goldman Sachs analysis shows that while insurers can be aggressive in raising prices, they also walk away from clients because competition in the industry is so weak.”[1] Rate increases ran as high as 50 percent, with most in “the low- to mid-teens” — far higher than overall inflation. 

The full essay is at Institutional Conflicts of Interest, available in print and as an ebook at Amazon.

1. David Herszenhorn, “Obama Wields Analysis of Insurers in Health Battle,” The New York Times, March 6, 2010.

Regulating Commerce by Mandate: The Death of American Federalism?

The mandate to buy health-insurance may be an unconstitutional encroachment of the U.S. Government onto the liberty of its citizens. Furthermore, the rigid federal rules in the health-insurance reform law of 2010 may represent yet another way by which the state governments have been rendered servile in begging Washington for breathing room in a domain that may be rightly theirs, constitutionally (i.e., beyond the enumerated powers assigned to the U.S. Government). The bigger story in this jurdical piece on healthcare is perhaps whether American federalism itself was finally being extirpated and expunged in favor of consolidation. 

The full essay is at Essays on Two Federal Empires.

On the Health-Insurance Mandate: Nullification or Judicial Review?

A Republican U.S. President pushes hard for the U.S. Government to play a more active role in K-12 education under the rubric of “No Child Left Behind.” A Democratic U.S. President pushes hard for the U.S. Government to require residents to purchase health-insurance. Some of the same Republicans who cry foul on the insurance mandate insist that “marriage” be federalized through an amendment to the U.S. Constitution. From whichever vantage-point one cares to assume, political consolidation at the expense of federalism seems to be the name of the game in American politics.

The full essay is at "On the Health-Insurance Mandate."

Lehman Bros: Insufficient Accountability in Corporate Governance

In an executive meeting at Lehman in the summer of 2008, Skip McGee told Richard Fuld and the other top executives that the market was demanding “that we hold ourselves accountable.”  Essentially, he was pushing for Gregory’s outster.  What strikes me is what he didn’t say–namely, something like, “the stockholders are holding us accountable!”[1]  Had he said this, Fuld might have laughed. Of course, Richard Fuld was a major stockholder, so he might have viewed it as “holding myself accountable to myself.”  Given the inherent ethical conflict of interest in such a statement, I don’t think we can rely on corporate governance as a check on excessive managerial risk-taking when executives hold a substantial share of the stock.  Therefore, in including stock options in executive compensation to align executives' incentives with medium and long-term firm performance, boards should add institutional safeguards or accountability mechanisms to corporate governance. In business-speak, there is a cost incurred that boards may not be aware of in aligning executive compensation (and firm ownership) with future profitability.

The full essay is in Essays on the Financial Crisis.

1. Grace Wong and Aaron Smith, "What Killed Lehman," CNN.com, March 15, 2010. 

Unaccountability at Bank of America

Andrew Cuomo, who was the Attorney General of New York in February of 2010, filed suit then against Bank of America and two of the bank’s employees, Ken Lewis and Joe Price.  In his complaint, Mr. Cuomo said that the bank first chose not to disclose the losses involving Merrill Lynch, which topped $16 billion, to its shareholders who were voting to approve the deal. Then, the bank told federal officials that those same losses had persuaded bank executives to consider backing out of the deal, unless the government provided a second bailout. “Throughout this episode, the conduct of Bank of America, through its top management, was motivated by self-interest, greed, hubris and a palpable sense that the normal rules of fair play did not apply to them,” Mr. Cuomo said. “Bank of America’s management thought of itself as too big to play by the rules and, just as disturbingly, too big to tell the truth.”[1]

The full essay is at "Unaccountability at Bank of America."

1. Louise Story, "Cuomo Sues Bank of America, Even as It Settles With S.E.C.," The New York Times, February 4, 2010.

The Aristocracy of the Moneyed Corporations

“I hope we shall crush in its birth the aristocracy of our moneyed corporations.” 

Thomas Jefferson

In Citizens United v. FEC on January 21, 2010, the US Supreme Court held by 5 to 4 that because US corporations are legal persons, they can contribute to political campaigns.   The assumption here is that corporations are more than the sum of an aggregate of persons—that is, more than citizens associating.  The corporate entity has rights in itself.  Ginsberg and Sotomeyer questioned in oral arguments whether free speech applies to spending money, and, moreover, whether corporations should be considered legal persons, much less citizens.  After all, they can’t be drafted, or vote.

The full essay is at "Aristocracy of the Moneyed Corporations."

A Tax Unfair to Big Banks?

In a political economy in which large concentrations of privately-held capital, such as that of a bank or large corporation, can legally make political contributions, curiously as "free speech," even the President of the United States may actually be a paper tiger. Even when the federal government comes to the resue of a bank, Wall Street can evade any "strings" and even use the funds to pay out bonuses. Meanwhile, the American people take their elected representatives' speeches at face value, and this suites Wall Street just fine.  

The full essay is at "An Unfair Tax?"

Political Campaign Coverage: A Question of Substance

Popular election presumes meaningful discourse on current issues and political philosophy so the voters can distinguish the candidates.  Too often, however, the media takes its eyes off the ball and orients its coverage to the process rather than the content.  

The full essay is at "Political Campaign Coverage."

Hints of a Shift Back to Federalism?

In the US Senate race in Massachusetts between Scott Brown and Martha Coakley, there was some resistance to the proposed federal health care legislation. This pushback was in line with reinvigorating a federal system for the United States.

The full essay is at "Shift Back to Federalism."