A Lawyer Comes Up Short on Obama on the U.S. Supreme Court

As president, Thomas Jefferson campaigned against the U.S. Supreme Court in the pivotal 1800 election after the court let the Alien and Sedition Acts stand. The law criminalized criticizing government officials of the U.S. Government. Lincoln announced during his 1860 campaign that he would not enforce the court’s Dred Scott decision upholding slavery in U.S. territories. In saying that invalidating the Affordable Healthcare Act would represent an unprecedented act of judicial activism, Obama was not going nearly that far. In other words, he was not saying he would ignore the decision. Nor did Obama announce anything like Roosevelt’s unsuccessful court-packing scheme.

The full essay is at "Obama on the U.S. Supreme Court."

Wen and Obama: Breaking Up the Banks

Chinese Premier Wen Jiabao told a radio audience on April 3, 2012 “that China’s state-controlled banks are a ‘monopoly’ that must be broken up.”[1] He also urged other businesses to get into the financial sector. “Let me be frank,” he said. “Our banks earn profit too easily. Why? Because a small number of large banks have a monopoly. To break the monopoly, we must allow private capital to flow into the financial sector.”[2] This included raising the total amount foreigners can bring into China under the Qualified Foreign Institutional Investor program to $80 billion.

The full essay is at "Wen and Obama: Breaking Up the Banks."

1. Dinny McMahon, Lingling Wei, and Andrew Galbraith, “Chinese Premier Blasts Banks,” The Wall Street Journal, April 4, 2012.

2. Ibid.

Tyco’s Kozlowski: Isolation or Work-Release?

L. Dennis Kozlowski, a former CEO of Tyco, was denied parole “due to concern for the public safety and welfare,” according to the New York Department of Corrections.[1] A parole board ruled that releasing him in 2012 would have the effect of minimizing his corporate crimes and affect public safety. The board concluded that early release would “not be compatible with the welfare of society at large, and would tend to deprecate the seriousness” of his offenses.[2] He was convicted in 2005 of looting nearly $600 million in bonuses and other payments from Tyco in the 1990s.

The full essay is at "Tyco's Kozlowski."

1. Chris Dolmetsch, “Former Tyco Chief Kozlowski Is Denied Parole in New York,” Bloomberg, April 5, 2012; Kevin McCoy, “Former Tyco Chief Told No on Parole,” USA Today, April 6, 2012.

2. Ibid.

Experts on the Supreme Court: Lawyers Who Teach

For all the American lawyers and law “professors” who had been predicting on the basis of their "expertise" that the three days of oral arguments before the U.S. Supreme Court meant that the Affordable Healthcare Act would go down, the Court's decision must have been a rude awakening. Immediately after the ruling, the decision came "as something of a surprise after the generally hostile reception the law received during the six hours of oral arguments."[1] This is an understatement at the very least.

The full essay is at "Experts on the Supreme Court."

 1. Mike Sacks, "Supreme Court Health Care Decision: Individual Mandate Survives," The Huffington Post, June 28, 2012.

A Myanmar Spring?

The party of dissident leader Aung San Suu Kyi, the National League for Democracy, won a decisive victory in by-elections on April 1, 2012. The party 40 of the 45 seats reported as of April 3^rd, with the results of five more seats not yet in. The news of the victory reached the outside world, which reacted with optimism. Catherine Ashton, the E.U.’s foreign minister, said “I congratulate the government and people of Myanmar on the conduct of the by-elections.”[1] Meanwhile, the White House indicated that the vote marked “an important step in Burma’s democratic transformation.”[2] Both the E.U. and U.S. approached the outcome as necessary but not sufficient for democracy in the country that had had five decades of harsh military rule.

The full essay is at "A Myanmar Spring."

1. Patrick Barta, “Suu Kyi’s Victory Leads to Rethink About Sanctions,” The Wall Street Journal, April 3, 2012.
2. Ibid.

The E.U. Bailout Fund: The IMF of Europe?

One of the benefits of being in a federation—as distinct from an international organization—is that states in fiscal trouble can benefit from redistribution through a federal center. In other words, federalism provides a safety buffer that is lacking at the international level. E.U. finance ministers agreed on March 30, 2012 to create a permanent bailout fund for states that have adopted the euro. The New York Times reports that questions persisted “about whether the fund, even at about $1 trillion, will be sufficient to deal with crises” in large states like Spain and Italy, which are comparable to Illinois and California in the U.S.[1] Mudding the water, the Times incorrectly refers to the bailout fund as the E.U.’s IMF: “(T)he “bailout mechanism . . .  is meant to be a European equivalent of the I.M.F.”[2] However, the term “bailout fund” itself comes from the TARP, which was not the U.S.’s IMF.

The complete essay is at Essays on Two Federal Empires, available in print and as an ebook at Amazon.

1. James Kanter, “Europe Agrees to Bailout Fund for Euro of Over $1 Trillion,” The New York Times, March 30, 2012. 

2. Ibid.

Batting Better Than Goldman Sachs on Corporate Governance

Companies differ on how they handle personal and institutional conflicts of interest. This difference may reflect disagreement over whether a conflict of interest is inherently unethical, or whether one must be exploited for any conduct to be unethical. I take the former position: that to be in a conflict of interest is indeed inherently unethical. At the very least, being in a conflict of interest can trigger or spawn additional conflicts of interest. I point to Goldman Sachs’ response to an institutional stockholder’s corporate governance proposal as a case in point. That case can be contrasted with how the BATs board reacted in terms of corporate governance to bad public relations and a failed IPO.


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

The Federal Reserve’s Housing Bubble

During one of his lectures to a class at George Washington University in March of 2012, Ben Bernanke, the chairman of the Federal Reserve, claimed that the central bank’s lower interest rates did not trigger the housing bubble that began in the late 1990s and ended in 2006. For one thing, the Fed did not start cutting interest rates until a few years into the twenty-first century. Also, home prices rose after the Fed later began raising interest rates. Bernanke also cited Europe, where housing booms have not been associated with either tight or loose monetary policy.

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

Efficiency and Ethics: On the Fairness of High-Speed Trading

Two months into 2012, the SEC announced that it had been examining the trading activities of high-frequency trading firms.  According to the Wall Street Journal, the SEC was “examining, among other things, whether high-frequency firms benefit from delays in the dissemination of prices from various corners of the markets. . . . High-speed firms use direct feeds from exchanges that can give them a leg up on slower traders.” High-frequency traders “can access prices a split second faster through their access to direct feeds.” This is accomplished by placing the trading computers in the same data center that houses the exchange’s computer servers. Just over a year later, the Wall Street Journal reported that high-speed traders were using “a hidden facet” of the Chicago Mercantile Exchange’s computer system “to trade on the direction of the futures market before other investors get the same information.” Even getting the confirmation of a high-speed trade just one to ten milliseconds faster can enable a computer to know the direction a commodity is going and trade on it. According to the Wall Street Journal, the “ability to exploit such small time-gaps raises questions about transparency and fairness amid the computer-driven, rapid-fire trading that increasingly grips Wall Street and confounds regulators.” Both the increasing use of high-speed trading and the problem of accountability from a regulatory point of view raise the stakes in determining the ethics of the practice. 

The full essay is in Cases of Unethical Business, available in print and as an ebook at Amazon.com.  

Cardiologists as Ethicists: On Cheney’s Heart Transplant

Former U.S. Vice President Dick Cheney had a heart transplant on March 24, 2012, "after five heart attacks over the past 25 years and countless medical procedures to keep him going. Cheney, 71, waited nearly two years for his new heart, the gift of an unknown donor.”[1] At the time, more than 3,100 Americans were on the states’ waiting list for a heart. Of the roughly 2,300 heart transplants performed in 2011, 332 were over sixty-five. On average, heart failure was killing 57,000 Americans a year at the time, so just a fraction of those who could use a heart get one. One might question, therefore, whether the 332 recipients who were over 65, and Cheney, who was 71, should have been allowed to avail themselves of the relatively short supply of available hearts.

The full essay is at "Cardiologists as Ethicists."

                                  

1. Kasie Hunt, “Dick Cheney Heart Transplant: Former VicePresident Recovering After Undergoing Surgery,” The Huffington Post, March 24, 2012.

Wickard vs. Filburn: Federalism vs. Congress

If you are wondering how the Congress got away with taking over so much from the state legislatures, you need look no further than Wickard v. Filburn, on which the U.S. Supreme Court unanimously decided that the interstate commerce clause can reach all the way to penalize a farmer for growing his own wheat.

The complete essay is at Essays on Two Federal Empires.

Fraudulent Foreclosures

Looking at foreclosures from 2008 to 2010 of federally-backed mortgages serviced by five major banks, federal investigators at the Department of Housing and Urban Development (HUD) found that bank managers “ignored widespread errors in the foreclosure process, in some cases instructing employees to adopt make-believe titles and speed documents through the system despite internal objections.” Generally, the banks engaged “in a pattern of unfair and deceptive practices.”[1] This finding contradicts the self-serving statements by managers at the banks that blamed low-level employees. The investigation found that the managers had actually been the active agents. That is, the shortcuts were in many cases formulated and directed by managers. The inspector general at HUD pointed to “simple greed” to explain how so many people could have participated in the misconduct.[2] Considering that millions of Americans were tossed out of their homes as a result, I would sociopathic indifference or even callousness to the mix. Additionally, the rush to sign documents may have undercut the banks’ own positions with respect to both the foreclosure process and the homeowners—adding incompetence to the mix.


The full essay is in Cases of Unethical Business, available in print and as an ebook at Amazon.com.  

1. Nelson Schwartz and J.B. Silver-Greenberg, “Bank Officials Cited in Churn of Foreclosures,” The New York Times, March 13, 2012.

2. Ibid.

Spain’s Deficit: Violating E.U. Law

In early March, 2012, Spanish Prime Minister Mariano Rajoy announced that Spain’s budget-deficit target would not be the 4.4% that had been promised by his predecessor to the E.U. Commission in 2011. Instead, the anticipated deficit in 2012 would be 5.8 percent.[1] That announcement put the state of Spain on a collision course with the enhanced enforcement of deficit limits by the Commission and the ECJ. Even though Rajoy had signed onto the added-enforcement “pact” a month before, he said of the 5.8 percent, “This is a sovereign decision made by Spain.”[2] A few days after his announcement E.U. finance officials met and accepted a 5.3% target.[3] Although it comes with a “tough deficit target” for 2013, one wonders whether the proposed strengthening of the “fiscal pact” will ever be enforced—and in a way that is fair to all of the states.

The complete essay is at Essays on Two Federal Empires.

1. Stephen Fidler, “Spain’s Move Tests Europe’s Mettle on Deficits,” The Wall Street Journal, March 10-11, 2012.

2. Ibid.

3. Matthew Dalton, “Euro-Zone Ministers Press Spain for a Deal on Deficits,” The Wall Street Journal, March 13, 2012.

On Television’s Sunset: Thinking outside the Box

Sometimes I think the human mind is like a train in being limited to the tracks that have already been laid. We are habituated to think it sufficient that we can turn off the main line on to another at the next signal. We think this is change because it involves turning onto a different track, but is it really change if the train is still on track?

The full essay is at "On Television's Sunset."

Justice as Fairness: Writing Down Greek Debt

In 2012, 80% of Greece’s private creditors agreed to “voluntarily” convert their Greek debt into debt of a bit less than half the face-value (plus a lower interest rate). With such a proportion having agreed to the swap without triggering credit default swap insurance payouts, Greece could get the E.U. to agree to force the remaining 20% to involuntary write-downs. That would trigger the credit default swaps, at least in theory.

The full essay is at "Justice as Fairness: Greek Debt."