Red Lion Reports

Fear of Foreclosure

2010-12-10T07:12:00.000-08:00

The prominence of foreclosure in economic news and the skimpy coverage of the breakdown of foreclosure process in the popular press shows the literary force of the word: "foreclosure." It has the visceral impact of a word like "rape," connoting a violent, destructive, faceless goon that comes out of the darkness to destroy the weak and helpless. People are getting "foreclosed on," foreclosure is destroying neighborhoods and cities, and the nation is in a foreclosure crisis. Foreclosure is Voldemort.

Legally, foreclosure is tame and boring. It's a mopping-up operation that has for centuries been relegated to the losers bracket among lawyers, and the museum of antiquities in law. It's no wonder that the reporters don't explain the residential real property foreclosure process, or why law professors roll their eyes when I start to say that joblessness, default, unchecked speculation, arrogance and bad judgment are far scarier than foreclosure. Who wants to think about dirty socks and dust bunnies under the bed when the alternative is to imagine a scary monster?

What do you think? What explains the fear of foreclosure?

Ransom

2010-10-07T12:25:00.001-07:00

Last Monday, the Supreme Court heard argument in In re Ransom. A colleague on the law faculty whose forte is not bankruptcy asked me about the case in advance. He was showing an Australian law professor the sights in D.C. on the First Monday in October and Ransom was on the docket. My colleague expressed disappointment that the First Monday docket was clogged with an unexciting bankruptcy case. I told him that Ransom is exciting to me.

The case is about the meaning of a hideously drawn provision that appeared in the Bankruptcy Code as part of the 2005 Reform Act-- the so-called "means test" that governs a debtor's eligibility for discharge of debt under chapter 7 and chapter 13. In simple terms, a consumer debtor is eligible for debt forgiveness if her income is less than the Census Bureau-reported median income for her state. If her income is greater than the median income, then she is eligible for relief in a chapter 7 liquidation case, only if she doesn't have the "means" to pay down her debts over time while paying her current living expenses. If she wants to keep her property and pay down her debts over time, she is eligible for debt forgiveness in a chapter 13 case only if she pays creditors from her income each month the amount she has the "means" to pay. In both settings, "means" means the difference between the debtor's "current monthly income" and her expenses.

The Code provides a staggeringly unreadable list of the expenses that are to be considered for purposes of this comparison. Rather than relegate to the bankruptcy judge the role of determining which expenses that the debtor actually incurs are "reasonable and necessary" as was the judge's role before the 2005 Reform Act, the Code now describes the expenses that the debtor may deduct by reference to IRS published guidelines for agents (the National and Local Standards) who are trying to settle tax delinquencies with taxpayers based on the amount the taxpayer can realistically pay each month and survive.

In Ransom, the dispute was over the amount the debtor could count as an expense of car ownership. Particularly, the question was whether the debtor should be able to count the amount referenced in the Local Standards for a loan or lease payment even if he owns his car free and clear and doesn't actually make any loan or lease payments. In short, does the Code mean that the debtor should be credited with expenses he doesn't actually have for the purpose of determining his "means?" The bankruptcy court held that a debtor has to have some actual car payment expenses before he can claim the IRS plug amount as an expense. The Ninth Circuit affirmed contributing to a split in the circuits on this issue.

I felt it was important to explain to my colleague why this case is so interesting. So I cut to the chase. The "plain meaning" reading in this case is not easy to see because the statute is so badly drawn. The debtor will benefit from a reading that gives her the largest expense total and the largest deduction from income in calculating her "means." The trustee for the benefit of unsecured creditors like MBNA, the unsecured creditor who paid lawyers to take this case all the way to the Supreme Court, will benefit from a reading that limits debtors to the smallest expense total.

So, my colleague, an afficionado of legislative process and statutory interpretation, watched the argument and concluded that the Justices seemed stumped. The interpretation of the statute offered by both sides led to at least two completely absurd scenarios each. The one indisputable fact is that the statute let everyone down and the Court got the dirty job of cleaning up the mess.

My colleague offered the idea of a post legislative, pre-judicial clean up team -- a panel of "special masters" with bankruptcy expertise who would take the legislation that extrudes out of the Congressional sausage maker, consult with the ALI, lenders, borrowers, practitioners and academics, and draft a recommendation for courts who are put to the task of interpreting and applying the legislation.

My reaction to this idea was not good. I am already footing the bill for Congress and I do not want to pay for another layer of government workers who would be subject to the same political pressures that render the officials we elect to make law obviously and completely incapable of doing it. I think that the time for consultation with interest groups, academics, etc. is before the statute is enacted by Congress.

The problem I see is that legislators are hopelessly unmotivated and unable to understand the legislation they enact. The Supreme Court is now the cleanup operation of last resort for all sorts of badly drawn, ill conceived, utterly impractical and inscrutable legislation.

By way of history, as part of the 1994 amendments to the Bankruptcy Code, Congress ordered the creation of the National Bankruptcy Review Commission. This Commission undertook a complete review of the Code and held hearings at which bankruptcy scholars, practitioners and related industry experts had an opportunity to comment. It issued a comprehensive report and reform proposal with a vigorous dissent. Congress entirely ignored all of it. The bankruptcy bar picked to bits the consumer provisions in the legislation that ultimately became the 2005 Reform Act during the years it floated around Congress before it was enacted. Congress ignored it all. And it was easy, because congressmen and senators do not understand anything about the laws they enact. The voices of those who were advocating for technical amendments or otherwise pointing out absurdity in the proposed revisions to the Bankruptcy Code were no more than refrigerator hum. Bankruptcy, tax, administrative law, market regulation, environmental law, you name it -- it's all refrigerator hum.

The problem is easy to see but hard to fix. Bankruptcy policy is fundamental and richly complex. In a simple and broad sense, bankruptcy law describes whose debts may be forgiven. If you stop there, the politics are already hopeless. In debt as in life, sometimes you are the windshield and sometimes you are the bug. Nobody is always for more forgiveness or always for less. So the politics is really in the details. The problem is that as soon as you move past the core function of bankruptcy law into the practical and administrative issues,the core function becomes quickly lost and inaccessible to non-specialists. Instead of considering the basic contours of debt forgiveness directly, the Code provides for exemptions, avoidance powers, claims processes and, as in Ransom, eligibility for relief stated in nearly incomprehensible and arguably absurd terms. Legislators probably don't even think for a second about the macro implications of the law they are enacting: How does this law affect the question of who is forgiven? Rather, legislators tinker around the edges in response to special interest groups whose requests affect the measure of forgiveness in ways that would take at least a 14 week law school course to explain. In short, there are plenty of experts willing to teach members of Congress how changes in the law will or may affect the measure of forgiveness. The problem is the shortage of members of Congress who really want to make the investment necessary to acquire that information.

The second problem is related to the first. Negotiating legislation, like negotiating anything else is expensive. To reduce transaction costs, legislators translate complicated provisions into broad terms. For example, Republicans can sell to their base the idea that the cost of debt forgiveness is borne by people who find a way to live within their means, and thus, it should be harder to discharge debts in bankruptcy. Democrats can sell to their base (what Elizabeth Warren is selling) that the credit card companies are making oodles on consumer debt and they should bear a little pain to make life worth living for working people who hit hard times. The broad principles on which political bargaining occur are so broad that the actual legislation is left to non-legislator staffers and lobbyists who are primarily interested in getting the deal done rather than getting it done in a way that will not appear absurd to a court. The means test language before the Court in Ransom is a small part of a drafting exercise left to drafters who have no stake in the legislation post-enactment.

After the oral argument before the Court in Ransom, who on the Hill is red-faced about the unmissable disrespect for their work? That's right. Nobody. It's a sad indictment of democracy when citizens accept that legislators of all political persuasions are not personally or politically embarrassed by the shoddy quality legislation they impose on the citizens who elect them.

The Appoinment that Isn't

2010-09-17T11:21:00.000-07:00

President Obama appointed Harvard bankruptcy law professor Elizabeth Warren to serve as special assistant to the president, presumably to avoid a tough confirmation battle in the Senate if he gave her the job he really wants her to do: Director of the newly created Bureau of Consumer Financial Protection.

Professor Warren is without question a very smart, hard hitting champion for the middle class. The whole thrust of her consumer protection vision is that the working guy can’t be expected to read the small print and that it’s time government started “looking out for the folks.” On the merits of her ideas, I can see why the banks are nervous. And I can see why turf-protecting administrators in DC are nervous. But apart from partisan knee-jerkism (and maybe there is nothing happening in DC apart from that), I don’t see a valid objection to her appointment as bureau director. Although I don’t agree with the way she proposes to protect the folks, I greatly admire that she has staked her career on what I see as a noble and selfless project. If we are going to have a new $500 million federal agency to pile more regulation on the consumer credit industry that will have no effect on consumers’ appetite for crack, she’s as qualified as anyone. At least I have a pretty good feeling that her hand will not be in the till.

I also have the feeling that nobody can afford crack and the crack dealers are packing up their tents anyway.

In Re: Eddie Richardson, Penn State Dickinson School of Law, Class of 2009.

2010-09-11T10:51:00.001-07:00

The State College contingent of the Penn State Dickinson School of Law, Class of 2009, showed up on campus in August of 2006- a new thing under the sun. We will be forever bound together, however tenuously as the years march on, by our membership in that class. For now, though, we are tightly bound together by the sad and unexpected news that our classmate and colleague, Eddie Richardson, has died. Two days shy of his twenty seventh birthday.

A light, as they say, has gone out in the world. Yet we may expect that the sky will be a little brighter from now on. Eddie, a luminescent figure in life, has ascended. Perhaps from his new and sky-bound home he will continue to do for us now what he did for us in life: shine his light upon us, and thereby, in the words of that Spanish poem, "...hacer mas claro y luminoso el dia." But now, from up there, he will reach us all at once and always, rather than, as he did in life, shine upon us separately and episodically, through his personal interactions with us.

Many members of our class knew Eddie better than I did. They no doubt can offer meaningful testimony to his life, and they are certainly invited and encouraged to do so here. But I think it says something very positive about Eddie that someone like me, who knew him, but not especially well, remembers him so fondly. He looms large in my memories of law school, and principally for this reason: He was the first person I met at the first orientation event that was held for our class, back in August of 2006. As an older student, and having just left professional life behind, I was nervous walking into the room that day; nervous about fitting in, about being accepted by my new classmates. It was a sort of discomfort I had not felt in years, back to the day I walked, as a stranger in a strange land, into the cafeteria of my new high school. I was all grown-up in 2006 when I walked into the law school orientation event, but in my mind I was right back in my high school cafeteria, embarrassingly desperate for the consolation of a friendly face.

And then there was Eddie. He was sitting at the table I arrived to- maybe he was the reason I arrived at that particular table- already popular with the people there and smiling genuinely back at me. He put me at ease. My nervousness was gone, never to return. That is the sort of kindness a person doesn't forget in life; I haven't and won't. Even if, in Eddie's case, it wasn't so much a kindness done to me as it was an expression of who he was; which was and remains a kindness done to everyone he knew.

I sat next to Eddie in our Administrative Law class during our last semester of law school. He regularly said the best things, most of which betrayed a rare wit and a high intelligence. One of those best things, which however did not tax either his wit or intelligence to conjure, was an occasional and appropriate, "This sucks." And he pronounced the word "sucks" in such a way that anyone unfamiliar with the word or its connotations would nevertheless have known what he meant by it; had he been made to write out his pronunciation, between the 's' and the 'cks' would have been about fourteen pregnant u's.

But then he would smile and go on. Which- in law school and in life- is the thing to do. It's the thing to do not because it's a grand invention, but because it stands well among a limited troupe of truly unpalatable alternatives.

Farewell, gentle-souled Eddie. Shine on down.

Light in August (or September)

2010-09-02T17:34:00.000-07:00

End of Summer

by Stanley Kurtz

An agitation of the air,
A perturbation of the light
Admonished me the unloved year
Would turn on its hinge that night.

I stood in the disenchanted field
Amid the stubble and the stones
Amaded, while a small worm lisped to me
The song of my marrow-bones.

Blue poured into summer blue,
A hawk broke from his cloudless tower,
The roof of the silo blazed, and I knew
That part of my life was forever over.

Already the iron door of the North
Clangs open: birds,leaves,snows
Order their populations forth,
And a cruel wind blows.

Double or Nothing

2010-08-11T07:02:00.000-07:00

This is the year you are going to really study. No more Super Mario Brothers or Zappo.com in class. Goodbye Facebook, Twitter and fantasy football. The weekend shrinks back down to two days, maybe one. It's all going to be different this year, and your grade point average is finally going to show your true potential.

Wanna bet?

Ultrinsic will take that action. This new company, in its beta phase, invites college students to bet that they will beat their statistically predicted grade in a particular course. A student who wants to bet provides information about how he's done in college so far, available data regarding applicable grading curves for various departments, professors, and courses. Ultrinsic runs the data through a formula that predicts how he'll do in a particular course and offers a wager that the student can't beat it. If the student beats the predicted grade, Ultrinsic pays off according to the predicted handicap. If the student doesn't, he pays. The house makes money the old fashioned way, the predictive formula stacks the odds for the house. It wins more than it loses.

During the pilot last year, 600 or so students at NYU and Penn took the bet. This year, Ultrinsic plans to expand to 34 campuses.

How to Get to the Corner Office

2010-08-04T07:31:00.000-07:00

Randy Schrum speaks his mind about social media on MyCorporateMedia. He's a CEO who wants to confess, really explain how blogging, twittering and status updating plays out in the corner office, the boardroom and in the market.

The essence of social media activity is social-- and that's the problem. He says:

"The premise and value of the "social media" movement is the power of the collective in the production, distribution, and ownership of goods, and the reasons executives resist this model is that it flies in the face of their existing worldview which, quite frankly, has been pretty successful to date. . . . Most of us have a pretty big chip on our shoulders, attributing our career success to the years of diligence, education, ambition, delayed gratification and sacrifices we've made to reach the leadership levels we've achieved. Therefore, the anti-capitalistic notion that my work and contributions would be homogenized with the uninspired masses, and that ultimately my value would be determined by the randomness of the collective is a jarring and unplatable departure."

Schrum offers an interesting insight into the psyche of executives. The term "executive" isn't so much a title as a mindset that manifests in childhood. People with executive tendencies spent high school taking AP classes, and working a couple of part time jobs. They spend their college years running student organizations, doing internships and taking an overload of classes to finish early. Executives are compulsive high achievers but they tend to shrink from public recognition of their achievements. Schrum notes that "executives are non-narcissistic in a You-Tube world." "In a society that brags, blogs and Tweets about the tiniest personal minutia, [executives] couldn't care less because, frankly we expect success. . . . It's like Vince Lombardi's admonition to his running back after an overly exuberant display. "Next time you make a touchdown, act like you've been there before."

Executives hate social networking because they hate "networking." They dread the roomful of strangers, the awkward chit chat, never enough food. Executives are introverts who value their privacy and consider the ROI (return on investment) for each moment of time.

Schrum's rant puts a name to a reaction I've observed in myself. I'm not so sure that social networking is or can be a business tool, or that the act of sharing half-baked ideas should substitute for the hard and lonely work of baking them.

Oh, Puleeeeze

2010-08-02T12:25:00.000-07:00

The eye roll is in peril as a form of political speech. In Elmhurst, Illinois, the eye roll may be criminal disorderly conduct. The City Council Chairman ejected a citizen who dared to show her disgust with committee proceedings with a roll/sigh combo. Backpeddling after some backlash, the Chair has sent the City Attorney to the library to do a memo on what exactly constitutes criminal disorderly conduct in Elmhurst. (This is my nominee for worst legal research assignment of the summer-- What's yours?)

The Chicago Tribue editors have this to say:

"Where do you draw that line? (Eyes uplifted, palms outstretched, as if beseeching the heavens.) Menacing others, throwing objects and setting fire to the dais are clearly out of line. But is it disorderly to yawn, fidget, smirk or scowl? To circle an ear with an index finger to signify "cuckoo"? To feign a self-induced upchuck, as we're doing now?

Funny thing about public meetings: They tend to expose disparate viewpoints, especially if the discussion is about something like whether it's a smart idea for one government body to spend taxpayer dollars to lobby another government body for more taxpayer dollars. (Ahem.) Reasonable people can disagree, and before you know it, they're raising their voices and (eyes wide in mock horror) making faces.

Our advice to public servants who think citizen discourse is somehow disrespectful to the democratic process: Get over yourselves. Your job is to heed those opinions, like them or not. If a pair of arched eyebrows can bring the legislative process to a halt, then it's time to throw out the aldermen, not the citizens. And we say that with a completely straight face."

Bundles of Joy

2010-08-02T11:30:00.001-07:00

If you've ever wondered whether practicing law is more interesting and fulfilling than driving kids to the orthodontist, take a look at Moms Who Won't Quit on The Careerist.

My kids asked me once why I wasn't a "real mom." I answered that if I stayed home all day, I'd vacuum holes in the rugs, alphabetize all their books, and stack their toys by color and size. I kept my day job and we all got by.

Too Big to Summarize?

2010-07-31T08:24:00.000-07:00

Skadden, Arps takes a whack at the financial reform legislation.

A Fascinating Subject

2010-07-29T12:08:00.000-07:00

Anyone who is still looking for an interesting Fall course should consider Insurance Law. Of course, I may be biased in saying so, but the subject is not only timely, it is a perfect "capstone" course. Insurance law can be thought of as advanced contracts, advanced torts, as well as a course on policy and complex financial regulations. Insurance touches on all areas of the law, and is sure to raise some thought-provoking issues. For example, Bloomberg just released this story on secret profits in life insurance death benefit payouts. What's not to love?!

Reflecting on the Bar Exam

2010-07-28T07:58:00.000-07:00

For thousands of recent law school graduates, today is day two of the bar exam. The elation of graduating has faded and the reality of the test is upon them. I feel vicarious anxiety for all examinees. I doubt any attorney can think of someone sitting a bar exam without feeling a pang of sympathy. The bar is a rite of passage, and the experience of it is not likely to fade from memory any time soon.

For me, day two of the bar exam was a blur. I sat the exam in California, a three-day state. I couldn’t share in the excitement of my peers in Pennsylvania who were anticipating the glorious feeling of finishing the exam, and my own energy was waning. Day two is the multi-state day, and it was all I could do to stay focused on each question as it was hurled in front of my attention. It was hard to set aside the feelings about my performance on day one, and equally challenging to realize that I had another full day of testing yet to go. Friends and professors had encouraged us all to think of the exam as a “test of minimum competence,” but could we? In retrospect, that is exactly what it was, but that is certainly not how one approaches studying for such an important endeavor.

I would guess hundreds of thousands of dollars are spent on bar preparation each year between the costs of professional bar review courses, hours invested in studying and sitting the test, and lost wages, etc. The period leading up to the bar exam can be a black hole of expense. Expense alone is a strong motivation to pass the thing on the first try. Unfortunately, however, after today (or tomorrow), the takers will have a long time to wait before hearing the results.

For me, the results came out Thanksgiving week – a full four months after I left the San Diego Convention Center. I wish I could say that I left the results in God’s hands and ceased thinking about the test. Sadly, I can still tell you the subjects of each essay and the order in which I wrote them. I replayed the test and my answers in my mind ad nauseam. This exercise in futility did little to ease my stress, though it did occupy my mind.

I can’t honestly encourage examinees to put the test out of their mind completely, because I don’t believe it is feasible or even wise. I think there is something to be gained from reflection. What I wished I would have done, though, is to give myself a time constraint in my own reliving of the experience. And so I will encourage the July 2010 batch of examinees. Give yourself a week or two (at the most) to reflect on the test itself. Talk about the questions with others, look up the “right” answers, if you desire, and then at the end of your set time, let it go. Write down all of your fears and concerns on a piece of paper and then shred it. The die has been cast, and the results will be revealed in time.

For now, sip a sangria and enjoy a much-deserved break. By taking the test, you have joined a fraternity of professionals who are eager to welcome your skills. Be proud of what you have achieved, and look forward to great things.

--

SDG

Making the Grades

2010-06-22T10:43:00.000-07:00

The New York Times reports that at least ten law schools have raised their grade curves in the last two years. The new rationale for this timeworn response is that students need a competitive edge in a tight job market and higher gpa, however contrived, is just the thing. Ironically, by outing the culprit law schools, the New York Times has probably reversed any advantage their students might have reaped from the sudden lift in gpas.

The premise that a law school can give its graduates the edge in the job market simply by raising their gpas across the board is offensive. Rank in class and rank of law school provide much more useful comparative data than gpa, so the premise that higher gpas, all other things equal, will translate into more job opportunities is dubious. Even assuming that raising the grade curve for all students yields a benefit among a segment of the market (gpa fetishists), the benefit to students at a particular school is at best a wash. Students with otherwise lackluster gpas benefit at the expense of the top of the class who find it increasingly difficult and pointless to distinguish themselves from their peers. If everybody is special as a matter of law school policy, why bother with the time consuming ritual of studying?

Raising the grade curve may make a law faculty feel compassionate in the short run. But all it really accomplishes is to make the faculty less relevant to the market as an evaluator of relative quality. Expert faculty differentiation among students (via competitively awarded grades) is a huge part of what makes a JD valuable. If the market doesn’t perceive any meaningful differentiation among students on the basis of the grades we assign, we’ll be out of business in the blink of an eye. At the very least, we won’t be worth our current salaries.

Two things remain true regardless of the winds of grade inflation. I’d hire someone with a C+ in Corporate Tax over another with an A in (fluff of your choice) any day of the week. And, all students want A’s until the day everybody gets them.

Beyond Understanding

2010-06-10T12:54:00.000-07:00

Ironic, isn't it, that proponents of federal overhaul of financial services industry regulation criticize structured finance transactions, derivatives trading and the interconnectedness of national and global financial systems on grounds of complexity. The implication is that mortgage backed securities and other collateralized debt obligation deals were so complicated that even the most sophisticated investors couldn't understand the risks they were incurring.

The bill before the conference committee, Restoring Financial Stability Act of 2010 (H.R. 4173), is over 1600 pages long.

You Not Only Have The Right To Remain Silent, But, If That's Your Choice, Then The Responsibility, Too

2010-06-04T11:15:00.000-07:00

The recent Supreme Court opinion handed down, as they say, in the case of Berghuis v. Thompkins, allows law enforcement to continue questioning a suspect, and to use what that suspect says against him in court, in the absence of an express declaration, either in writing or orally, that the suspect is invoking his right to remain silent.
As with other issues of its kind, this one managed to split nine identically educated lawyers five to four.

Mr. Thompkins, who refused to sign a declaration acknowledging he had been read his Miranda rights, was going along fine maintaining his silence in the face of questioning, until he was done in by the God wheeze:
Detective: "Do you pray to God to forgive you for shooting that boy down?"
Thompkins: "Yes."

The jury at trial was presented with this dialog and, inter alia, finding praying for forgiveness for an act evidence of having committed the act, convicted Mr. Thompkins.

Justice Sotomayor dissented in grand fashion, offering a document longer than the opinion. In it, she at least avoided the tired phrase that the majority had stood (Miranda here, but substitute any statute/rule/doctrine) Miranda on its head. In its place, she offered this equally prosaic but less hackneyed synonym: "Today's decision turns Miranda upside down." Justice Sotomayor, seizing on an apparent contradiction flowing from the ruling, writes, "Criminal suspects must now unambiguously invoke their right to remain silent- which, counterintuitively, requires them to speak."

Of course, criminal suspects could say nothing at all. The guilty ones could add that restraint to their tool kit, already containing, for example, guns and knives and such. Mr. Thompkins, perhaps and poetically, was done in by the same lack of impulse control (his own) that did in his victim.

Now we'll find out if the new principle, universally applied, is on balance salutary or not.

On Property Tax Appeals

2010-04-07T09:34:00.000-07:00

Here is a story concerning the growing trend, in many jurisdictions, of property tax appeals among homeowners. In my own state of New Jersey, property taxes are big potatoes. Here, as elsewhere, property taxes are a significant part of how localities within the state finance their governments. And New Jersey has the highest property taxes in the nation. In many property tax-setting jurisdictions across the state, property tax assessments are yet pegged to home values that were assessed at or near the high-point of the real estate boom. Because many jurisdictions have not conducted new assessments since that time, many homeowners may be paying significantly more in property taxes than they should be paying. Of course, one governmental incentive is to delay any reassessment for as long as legally possible, the better to keep the money coming in to finance local governments; this is especially true at a time when Trenton, under a new governor, is poised to reduce state aid to localities. Nevertheless, more home owners and some businesses in the state are pressing forward with appeals to have their property taxes lowered. As an attorney in the state, I've had occasion to become familiar with the appeal process in the County of Mercer.

Homeowners may bring appeals on their own before the county assessment board, and, generally speaking, they will be opposed at the hearing by the relevant township assessor's office. Chances for homeowners of prevailing are not great. For one thing, state law allows a 15% margin of error to the township assessor, which diminishes not just the number of appeals, but can also affect any write-down. Moreover, townships are likely to aggressively contend any appeal, because revenue is scarce. And if you are a corporation and want to appeal your property tax assessment, you are required to have a lawyer licensed in the state prosecute your appeal. For small corporations without a counsel's office, that means the cost of representation must be considered alongside the uncertainty of prevailing, and the magnitude of any savings coming from prevailing, in arriving at a decision whether to appeal your current property tax assessment.

New Jersey is in bad fiscal shape. And local governments in the state, long on current and legacy promises to highly compensated public employees, now find themselves between the rock of a new governor intent on lowering their state aid and the hard place of corporate and private citizens looking to reduce their property tax bills, many of which are based on inflated property values.

Comes the bill due.

Required Reading for Lawyers (and Everyone Else)

2010-03-13T16:26:00.000-08:00

The group Keep America Safe recently ran an ad pressuring the Obama Administration to reveal the names of seven Justice Department lawyers (appointed under this Administration) who in the past volunteered to represent Guantanamo detainees. In this weekend's Wall Street Journal, in the Weekend Journal section, are two essays on the subject.

One essay is written by Stephen Jones, the lawyer who represented, upon judicial request,Timothy McVeigh. Mr. Jones' essay is in line with the published opinions of many other lawyers regarding the propriety of the Keep America Safe ad. But his essay also includes harrowing details of Mr. Jones' life during and after his representation of McVeigh.

The other essay is written by Andrew C. McCarthy, who as an A.U.S.A. in the Southern District of New York prosecuted Omar Abdel-Rahman, known as the Blind Sheikh, and his co-conspirators, for the so-called Bridges and Tunnels terrorism plot. Whatever its prescriptive merit, McCarthy's essay is certainly courageous, as he stakes out a position strikingly at odds with the near-universal opinion (shared by lawyers on both sides of what may loosely be called the national security debate) that the Keep America Safe ad was out-of-bounds. McCarthy does a service at least to this extent: he points out a number of relevant legal distinctions between the circumstances of the detainees and the so-called "al Qaeda Seven" on the one hand, and prior defendants and their attorneys on the other hand, that lawyers like Mr. Jones, for example, have used to substantiate the out-of-bounds nature of the Keep America Safe ad. McCarthy writes more extensively on his views here.

The best and most balanced thing I have read on the subject was written by former Attorney General Michael B. Mukasey. That essay calls foul both the demonization of the likes of John Yoo and Jay Bybee, and of the so-called "al Qaeda Seven." And for the same reason.

Collateralized Debt Obligations Tutorial

2010-03-09T13:32:00.000-08:00

An Easily Understandable Explanation of Derivative Markets

2010-03-05T14:10:00.000-08:00

Perhaps one of the clearest explanations I have seen.

Heidi is the proprietor of a bar in Detroit. She realizes that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronize her bar. To solve this problem, she comes up with a new marketing plan that allows her customers to drink now, but pay later. She keeps track of the drinks consumed in a ledger (thereby granting the customers loans).

Word gets around about Heidi's "drink now, pay later" marketing strategy and, as a result, increasing numbers of customers flood into Heidi's bar. Soon she has the largest sales volume for any bar in Detroit.

By providing her customers freedom from immediate payment demands, Heidi gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages. Consequently, Heidi's gross sales volume increases massively.

A young and dynamic Vice President at the local bank recognizes that these customer debts constitute valuable future assets, and increases Heidi's borrowing limit. He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral.

At the bank's corporate headquarters, expert traders transform these customer loans into DRINKBONDS, ALKIBONDS and PUKEBONDS. These securities are then bundled and traded on international security markets. Naive investors don't really understand that the securities being sold to them as AAA secured bonds are really the debts of unemployed alcoholics.

Nevertheless, the bond prices continuously climb, and the securities soon become the hottest-selling items for some of the nation's leading brokerage houses.

One day, even though the bond prices are still climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Heidi's bar. He so informs Heidi.
Heidi then demands payment from her alcoholic patrons, but being unemployed alcoholics they cannot pay back their drinking debts. Since Heidi cannot fulfill her loan obligations, she is forced into bankruptcy. The bar closes and the eleven employees lose their jobs.

Overnight, DRINKBONDS, ALKIBONDS and PUKEBONDS drop in price by 90%. The collapsed bond asset value destroys the banks liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community.

The suppliers of Heidi's bar had granted her generous payment extensions and had invested their firms' pension funds in the various BOND securities. They find they are now faced with not only having to write off her bad debt but also with losing over 90% of the presumed value of the bonds. Her wine supplier claims bankruptcy, closing the doors on a family business that had endured for three generations, and her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers.

Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multi-billion dollar, no-strings attached cash infusion from their cronies in Government. The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers who have never been in Heidi's bar.

Viva the Privileges or Immunities Clause of the Fourteenth Amendment?

2010-03-04T17:05:00.001-08:00

Randy E. Barnett, professor of constitutional law at Georgetown, and author of "Restoring the Lost Constitution: The Presumption of Liberty", has written an opinion piece in Wednesday's Wall Street Journal that is essential reading for anyone interested, either by inclination or by compulsion, in constitutional law.

The professor deals with the issues covered in the piece more competently than I am able, but here is a preview. The upcoming decision in McDonald v. Chicago is likely to explicitly find the Second Amendment to the U.S. Constitution applicable to the states. And that means Heller will be applicable to the states. Professor Barnett wants, should that happen, that it happen via the Fourteenth Amendment's Privileges or Immunities Clause, not the Due Process Clause, which, the professor seems to believe, does not have a substantive aspect. We last saw the Privileges orImmunities Clause of the Fourteenth Amendment just before the Slaughter-House cases, which did to it what On Deadly Ground (you should thank me for not linking to it) did to Steven Segal's movie career: it continued to exist but without effect. The Privileges or Immunities Clause reads:

"No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States."

Professor Barnett finds the clause's historical marginalization unwarranted, given the plain import of its language. And for reasons of jurisprudential hygiene wants it to be the vehicle by which the Second Amendment is made applicable to the states. However, some of the questions and comments made by the Justices at oral argument on Tuesday suggest to the professor that the Court may pull the well-used lever of the Due Process Clause instead. We'll soon know.

An Afternoon in the Law

2010-03-03T17:49:00.000-08:00

Today I attended the 2010 John Marshall Harlan '20 Lecture in Constitutional Adjudication at the Woodrow Wilson School for Public and International Affairs on Princeton University's inspiring campus. The speaker was the Chief Justice of the Supreme Court of New Jersey, the Honorable Stuart Rabner. Chief Justice Rabner, like Justice Harlan before him, graduated from Princeton.

Ten minutes before the program was to begin, I involuntarily networked with a man who crossed several seats to get the business going. He was good at the networking wheeze, and before long I had volunteered nearly everything I knew about myself except my social security number. I am proud of the fact that I am uncomfortable networking. Like Bacon's Nature, I do not reveal my secrets, but rather only respond to a line of questioning. Alas, my guy was up to the task, and extracted secrets. Presently and mercifully we were brought to order.

The Chief Justice was introduced to the capacity crowd in Dodds Auditorium by a professor from the Woodrow Wilson school, who recited, apparently without omission, the Chief Justice's embarrassingly long list of absurdly impressive academic achievements. The audience learned too that the Chief Justice's father survived a Soviet work camp. And that the Chief Justice was a Princeton University tour guide while making his way through the institution, trailing clouds of glory. The Chief Justice is a remarkably amiable and intelligent man, and spoke extemporaneously for close to a half hour about New Jersey's constitutional history. He spoke too of the structure of the state's court system, which was overhauled in 1947 and which was used as the model for both the Alaskan and Hawaiian court systems.

The Chief Justice spoke at some length and specificity about a few of the programs the New Jersey courts have initiated. For example, the courts have a program whereby lawyers in the state volunteer to mediate between mortgagees and mortgagors, in an effort to avoid foreclosure proceedings. The courts have also instituted a program (now operating in four counties; soon to be five) where returning veterans who end up in criminal court, in appropriate cases, are diverted onto a counseling track and are assigned a military mentor. This program was inspired by the notion that returning veterans sometimes have trouble assimilating back into society, and that, in those cases, society should make an extra effort to aid that assimilation.

The Chief Justice ended his remarks by stressing how important he considers it that the state's courts extend to all parties procedural due process. Pointing out that because there is always at least one party unhappy with a court's decision, it is imperative that the judicial process be viewed as fair and impartial.

After the Chief Justice's main remarks, he joined the Provost of Princeton University, Christopher L. Eisberger, in those giant leather chairs such people always repair to when the question and answer session begins. The Provost, a graduate of Princeton and the University of Chicago's Law School, and an author of a book on the appointment process of Supreme Court Justices, asked the Chief Justice several of his own questions before eventually asking for questions from the audience. The mundane questions asked by the Provost yielded more interesting answers, mainly because the Provost understood that asking interesting questions to a sitting Chief Justice, who after all must remain circumspect with an eye toward future cases, means you get anodyne answers back. The Princeton students who asked questions of this sort, and who must have been unaccustomed to not getting interesting answers back, stood fast at the microphone after the Chief Justice stopped his devitalizing answers, retreating to their seats only after the Chief Justice blinked at them several times.

Here are some interesting differences between New Jersey constitutional rights and federal constitutional rights, which the Chief Justice cited in the course of his answers. Remember of course that the federal rights set a floor which state constitutional text and interpretation are free to exceed in the direction of greater individual rights:

1) Folks in New Jersey have a reasonable expectation of privacy in the trash they put out on the curb. Under the federal Constitution, that's not so.

2) With respect to a search of a house, for example, a consent must be knowing and voluntary under the federal Constitution. In New Jersey, homeowners/dwellers have the additional protection that the police must inform them they have a right to refuse such a search

3) In New Jersey, a passenger in a car that is stopped and searched, and who is found during that search to possess a gun, for example, has standing to challenge the grounds for the search. Under the federal Constitution, the passenger would not normally have sufficient possessory interest (i.e. does not own the car) to have standing to challenge such a search.

One question elicited the Chief Justice's advice to the students in the audience who are headed to law school. The Chief Justice did not mention that the legal job market is poor, much less suggest an alternate career path on that account. He was talking to Princeton students, after all, who, it was clear from the unspoken assumptions implicit in both the question and answer, were headed to top law schools. The Chief Justice advised the future law students to use their summers to try out firms both big and small, and not to go to law school with too certain an idea of what you want to do. This last bit of advice, in retrospect, and for reasons not contemplated by the Chief Justice, is comically relevant to me.

The questions from the audience exhausted, the Provost reserved for himself the last question of the afternoon. And, apparently unable to help himself, asked the Chief Justice a manifestly interesting question: Does the Chief Justice have a view on trying terrorist suspects in the civilian court system. The Chief Justice declined to offer a view on prospective cases, saying only that such trials have yielded results in the past. Then the Provost offered his own view on the question, which, whether or not correct, was entirely unsurprising.

It was a good afternoon in the law.

Should Everyone Be “Special”?

2010-03-01T11:50:00.000-08:00

One of my favorite films in recent years is Disney Pixar’s The Incredibles. The movie tells the story of a family of “Supers” (heroes), who have gone into hiding to escape public scrutiny for tort claims arising out of saving people who “did not want to be saved.” (An interesting thought itself.)

My particular interest in the film centers on the antagonist of the story. A self-declared/self-made “Super” named Syndrome. Syndrome was born without super powers, yet he was driven to become a Super anyway. As a child, his obsession with the Supers led him to attempt to help the protagonist, Mr. Incredible, catch a villain. The results were disastrous. The young Syndrome appeared on the scene as “Incredi-boy,” complete with his own outfit and technology that made up for his lack of innate super powers. Because of his interference, the villain they were after got away, and Mr. Incredible sent the young would-be helper packing. Years later, this child grew to be a bitter and determined man who was driven to perfect his technological aids with one purpose. His aspiration was to destroy all true Supers and sell his products to the masses, “so that when everyone is special, no one is.”

This scene, to me, is a key moment in the film. Syndrome is proclaiming his indictment of outcome-based measures of performance. He fails to recognize his own unique talent and giftedness with technology, and instead focuses only on what he is not – innately “Super.” His desire to strip the world of all who have such gifting and replace it with his form of power is problematic for an obvious reason. People who do have such a unique set of talents should not be punished. A theme throughout the film is the depression the Supers experience as a result of suppressing who they truly are. Less obvious, though, is the somewhat ironic problem brought about by Syndrome's plan. His desire to equalize the population (everyone will be Super, therefore no one will be) actually works to diminish his own gifting. He is, in effect, saying that there is only one way to be special. Being Super, whether by nature or machine, is his only metric for success.

The fact is that we are all uniquely gifted in some way. His own talents are evident when one considers the vast island kingdom he has managed to establish through his ingenuity. Instead of seeing himself as uniquely talented, he only sees what he is not. Comparing ourselves to others and wondering why we aren’t this or that doesn’t help us become our best, it only discourages us that we are not like another. I suppose my thought-kernel for the afternoon is to focus less on what I am not and more on what I am.

Balancing on the Edge of the Merits

2010-02-28T17:56:00.000-08:00

I have posted a draft of my newest article - Striking an Efficient Balance: Making Sense of Antitrust Standing in Class Action Certification Motions - on SSRN.

My thesis is that a district court judge considering a motion for class certification in an antitrust class must preserve the bargaining relationship of both the putative plaintiff class and the defendant(s) through an analysis of both the Article III and antitrust standing doctrines. In the article, I demonstrate the adverse impact an imprudently certified class will have on the consuming public as a whole. I propose that by considering the antitrust standing (and thus antitrust injury) of a putative plaintiff class at the certification stage of the litigation, efficient conduct – and thereby consumer welfare – will be achieved.

The trouble is that ascertaining antitrust standing can be quite complicated, almost always invoking issues typically reserved for the merits of a case. This is problematic, because a district court judge is bound by the Supreme Court's admonishment to avoid "inquiry into the merits of a suit in order to determine whether it may be maintained as a class action." Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 177 (1974).

I welcome any comments on the piece.

Hardball in the Preparation Market

2010-02-23T17:21:00.000-08:00

It's a cage match. Behemoth Barbri and wiry newcomer Themis are mano a mano in the market for Pennsylvania bar review courses. Earlier this week, I saw an e-mail from a Themis rep calling out Barbri's rep for talking trash. I do love competition.

The price for the Themis course is $1395. Would you like New Jersey with that? Themis will throw in New Jersey prep for $100. You may want to add a state essay review for $795 for a total cost of $2280. Compare Barbri's price at $2850. It took some clicking around to even find the price on BarBri's site.

I confess I'm not over my own bar exam prep experience. I resented Barbri's monopoly. Even more, I was horrified by my own perfectly inelastic demand for its product.

Liberal Tendencies: Nature or Nurture?

2010-02-18T15:40:00.000-08:00

My friend Buce at Underbelly had this to say about Sorting in the Academy.

Big Soup

2010-02-17T17:55:00.000-08:00

Another child of the capitalist system has grown up to darken the horizon. It's Big Soup.

The Campbell Soup Company is serious about causing you to buy soup. And 'causing' seems to be the right word. Ilan Brat, in a piece titled The Emotional Quotient of Soup Shopping, published in the Marketplace section of today's Wall Street Journal, tells the story of the Campbell Soup Company's two-year-long project to cause you to buy more soup.

It turns out that there are squads of folks dedicated to finding out how you feel about soup. And it turns out that they can't simply rely on the method that suggests itself: asking you how you feel about soup. How come? Campbell CEO Doug Conant notes, ruefully one suspects, that when folks are asked why they eat soup or why they don't, they "say they don't think of it." That seems to be good news. It's unclear what exactly a world would look like in which all of us had sound and articulable reasons for why we do or don't eat soup, but it seems like it would be worse than this one.

There are other challenges for the soup investigators. For example, they can't get reliable information from folks about which soup labels are memorable, which are effective, and which aren't. Not that they haven't tried. But when they conducted interviews for the purpose, the interviews "didn't fully capture their [the interviewees] unconscious responses." That also seems to be good news for those of us not in the Campbell Soup Company's executive suites. If there is one thing we can yet have a reasonable expectation of privacy about, it would be impressions we don't know we have, but do.

What's a soup company to do? Apparently, use neuromarketing techniques to ferret out consumers' hidden impressions. Neuromarketing techniques have their limitations (more good news). For example, researchers can measure emotional responses in subjects, but not what the underlying emotions are. Also, the generally small sample sizes convenient for neuromarketing testing means oulier data can be mistaken for the norm. Be that as it may, here's how Campbell has used neuromarketing techniques:

"Researchers interviewed about 40 people at their homes and later in grocery stores. The team [of researchers] also clipped small video cameras to the testers [the folks corralled for the interviews and the study] at eye level and had them later watch tape of themselves shopping for soup. Special vests captured skin-moisture levels, heart rate, depth and pace of breathing, and posture [while the testers faced the grocery shelves filled with soup cans]. Sensors tracked eye movements and pupil width."

The upshot of this research? The Campbell folks think they can "boost sales by triggering more emotional responses in stores and prompting more people to focus on more soups."

And they came up with this: aside from the three iconic labels, rendered that way by Andy Warhol (chicken noodle; tomato; and cream of mushroom), new labels will feature steam rising from the "larger, more vibrant pictures of soup", which now will be contained in "modern, white bowls." Also, the spoon that heretofore held up the soup in the foreground of the labels, having been condemned as "unemotional", will go away.

I suppose this is all all right, or in any case, the way things are. But I confess a hope that at least some of the testers faced up to the shelves while hooked up to the electronics and got amorous thoughts about past lovers. That way, and mindful of the inability of the technology to detect particular emotions, researchers may have attributed really strong emotional responses, erroneously, to a bisque label or some such.

With Friends Like These...

2010-02-07T14:08:00.000-08:00

This weekend's Wall Street Journal features a story on the state of assisted suicide in Switzerland. Specifically, the story discusses a particular player in the assisted suicide tourism market in that country, Dignitas, and dilates on the possiblity that its founder, Ludwig A. Minelli, may, by his relative extremism, cause a backlash among the generally tolerant Swiss against following the logic of free choice over ending one's life all the way to where it natually goes.

It seems that many causes and movements come to grief for the exertions of their most radical advocates. William F. Buckley, Jr., who wrote a sympathetic historical novel on the life of Joe McCarthy, was of the opinion that McCarthy, by seeing a communist nearly every place but the mirror, undermined the legitimate effort of discovering and turning out the actual communists history has shown were in place throughout the government in the 1950's.

And then there is Global Warming. The East Anglia emails (featuring Penn State professor Michael Mann; Go State!) and the unfounded prediction for the geologically imminent melting of the Himilayan ice sheets, has gone a long way toward establishing the American public's contemptuous serenity in the face of unrelenting doom talk. There have been protestations that the core science that establishes the fact of anthropogenic Global Warming (sometime recently reflagged as Climate Change; presumably as a hedge in case the practicioners of the science get the overall direction wrong) is an uncontroversial thing. We are told that the alarmist predictions and the ethically questionable behavior have been in the service of bringing us round to the realities of our peril. The end, that is, justified those means. But an unsurprising thing happened on the way to the success of that program: the architects of it failed to fool all of the people all of the time. And lost trust and legitimacy is not regained by chastising the folks from whom it is needed by telling us there would be no need to lie to us if we weren't so stupid and foolishly unconcerned.

The sort of folks who devote themselves entirely to a cause are not well suited to reminding themselves that incremental advances are a better outcome than risking the utter rejection of their cause that often comes with appearing unhinged. This is unsurprising. If, to take the example of Global Warming, a person really believes the earth will soon suffer cataclysmic damage if radical changes are not immediately adopted, it surely would seem foolish to that person that he should observe ethical guidelines not drafted with an existential threat in mind.

But surely that person would object to another adopting her own existential cause and so turning her pre-justified methods loose on him (think Torquemada, et. al. or Al Qaeda, with existential here taking on its most profound meaning). So the defense of one's methods comes down to an assertion of the correctness of one's cause. And with respect to that, history bows its weary head.

Sorting in the Academy

2010-01-19T09:11:00.000-08:00

A recently released study of academics asserts that certain characteristics of professors may explain the higher proportion of liberal academics relative to the population at large. The study concludes that 43 percent of the political gap between academics and a random population sample can be attributed to four factors more common among academics: 1)high levels of educational attainment; 2) disparity between levels of educational attainment and income; 3) self-identification as Jewish, non-religious, or a member of a faith that is not theologically conservative Protestant; and 4) high tolerance for controversial ideas.

The authors of the study, Neil Gross and Ethan Fosse, note that their findings confirm the theories of French sociologist, Pierre Bourdieu. Like Bordieu, Gross and Fosse see intellectuals as defined by "possession of high levels of cultural capital and moderate levels of economic capital." Bordieu asserts that this structure shapes intellectuals' political views. ".... Deprived of economic success relative to those in the world of commerce, intellectuals are less likely to be invested in preserving the socioeconomic order, may turn toward redistributionist policies in hopes of reducing perceived status inconsistency, and may embrace unconventional social or political views in order to distinguish themselves culturally from the business classes."

The four factors account for only some of the difference. The authors theorize that young adults are sorted into the professoriate based on their political views. "[T]he professoriate, along with a number of other knowledge work fields, has been 'politically typed' as appropriate and welcoming of people with broadly liberal sensibilities, and as inappropriate for conservatives." The reputation of the academy for 'political type' "leads many more liberal than conservative students to aspire for the advanced educational credentials that make entry into knowledge work fields possible, and to put in the work necessary to translate those aspirations into reality."

Although students may not be aware of its effect on their career choices, political typing likely affects them: "Because these identities involve cognitive schemas and habitual patterns of thinking that filter experience ... most young adults who are committed liberals would never end up entertaining the idea that they might become police or correctional officers, just as it would never cross the minds of most who are committed conservatives that they might become professors, precisely because of the political reputations of these fields."

In Remembrance

2010-01-18T08:23:00.000-08:00

Should the United States go to Pot? Si no, Por Que

2010-01-18T07:34:00.000-08:00

Dr. David Nathan, a Princeton based psychiatrist who treats patients suffering from substance abuse, has come out on the opinion page of the Wall Street Journal for the decriminalization of marijuana.

Dr. Nathan is admirably candid about the potential baleful effects of the drug, and about the fact that those effects would be visited on some folks under a decriminalized regime. But he believes the costs of the status quo are greater than the benefits derived, and that the benefits of the change would be greater than the costs realized.

He may be right. One interesting piece of speculation in the article concerns the 'gateway drug' argument that usually accompanies discussions of whether or not to legalize (note the change from decriminalize to legalize; there is a difference, discussed below) marijuana. The gateway drug argument holds that marijuana use, not so dangerous in itself, leads to the use (which here is synonymous with abuse) of truly dangerous substances. Dr. Nathan says however that the gateway properties of marijuana may be attributable to nothing more than the fact that users who go to a dealer for marijuana may be upsold to other substances by the dealer. If he is right about that, then, as he states, legalization, insofar as it obviates the trip to the illicit dealer, removes the gateway effect.

All right. But what about those like Bill Bennett, who say things like this: Drug use is wrong because it enslaves the mind and imprisons the soul. And that on that account the state should not be in the business of serving the stuff up, or of making money by taxing the stuff if the market is private. The usual debating point to raise for folks on the other side from Bennett is to point to alcohol and say, "What about that?". Then Bennett's side says we can't let the perfect be the enemy of the good. And anyway, if you don't like the effects of alcohol on society it is odd to take the position that it should take on a partner, even if we consider marijuana the lesser evil.

It is not clear which way the nation will go, but it is instructive to note that the choices we make will have some serious externalities, principally for Mexico.

Consider part of what is likely to happen if the United States legalizes marijuana: Mexico's ultra-violent drug cartels (the level of violence is a reflection of the level of money involved and of the reinforcing thrill uninstructed packs of young men are liable to take in perverse violence) will be devitalized to this extent: they currently get about half of their revenue from home-grown marijuana. Should that revenue disappear with the advent of a legal market, the gangs will be less able to intimidate, less able to name their price for cocaine shipments from Colombia, and more susceptible to ruin at the hands of law enforcement. By the way, the tragic rise to inordinate national prominence of the Mexican drug gang follows the U.S. sea-route interdiction efforts of cocaine originating from South America, which increased the cost of getting cocaine to the United States via that route and made the land route through Mexico economic.

Now consider what happens if the United States decriminalizes marijuana. That is to say, what if we decide that end users cannot be prosecuted but that the sale of the drug is still illegal. It might seem both large souled and practical to go this route. It may actually be those things. For us. But it is a nightmare scenario for Mexico. Demand will rise among Americans immune from prosecution, and the black market will get that much blacker, and Mexico will bleed itself white.

Thus does the future of marijuana's status in the United States serve as a reminder that this Leviathan can seldom commit itself to anything without also committing other nations to something else.

L'Amour Est un Oiseau Rebelle

2010-01-17T17:36:00.000-08:00

The Metropolitan Opera's live HD telecast of Bizet's Carmen to movie theatres set a record with 240,000 viewers. (Carmen blew away the record set by Puccini's Madama Butterfly last March with 197,000 viewers.) I saw and heard it in the sold out State Theatre right here in State College.

Ah, Habanera

The bird you thought you had caught
beat its wings and flew away ...
love stays away, you wait and wait;
when least expected, there it is!
All around you, swift, swift,
it comes, goes, then it returns ...
you think you hold it fast, it flees
you think you're free, it holds you fast.
Love! Love! Love! Love!
Love is a gypsy child,
it has never, ever, known law;
if you love me not, then I love you;
if I love you, you'd best beware!

I cannot understand how her dress stayed on.

Finding Comfort in Casebooks

2010-01-12T04:30:00.000-08:00

There is something familiar and comfortable about a law school casebook. For starters, I know how to read them and get what I need from them. After spending three years in law school, the casebook-learning method becomes routine. Second, they are a contained universe. The casebook poses the question and usually presents the answer, or at least the key to discovering the answer. Third, similar to being a contained universe, the casebook is finite. I know that once I have read and digested all of the information in the book, I am prepared to handle any question covered by said book. Until another case comes along and overrules the law, of course. But even subsequent laws don't seem as daunting once the framework for learning the particular subject material is established. The point is that I know that after X-number of pages, and the requisite diligence, I will have gained understanding. Finally, given a good author, the casebook can actually be diverting to read. Whether it is a sassy bankruptcy scholar or a witty property professor, casebook-learning can be a source of entertainment. For me, the process of learning and digesting the law via a casebook feels natural and safe.

Life as a lawyer outside of the law school environment, whether practice or "real life," is not nearly so comfortable. There are decisions to make and there is not always a safety-net of scholarship upon which to rely. While others may have encountered similar anxieties and issues, I find a lack of scholarly consensus with respect to a situation to be a bit unnerving. There are problems without solutions, and as a sometimes overly-analytical mind, the "paralysis of analysis" can set in and be debilitating. Personally, I like to know that there are others - far wiser than I - who have worked through a problem and arrived at the "right" solution. I find that I often lack the confidence to determine my conclusions are fair, let alone right.

Perhaps part of my own transition from law student to lawyer involves trusting my instincts. In both the law and in my personal life, maybe I do have the skills I need to either: a) reach a reasonable conclusion, or b) know when and where to seek input on a particular matter. Maybe . . . For now, I find the ability to retreat into a casebook provides a measure of solace. For this, I am grateful.

And We're Back!

2010-01-11T05:55:00.000-08:00

Anyone who watches SNL may appreciate the reference to Jimmy Fallon's Z105 "Morning Madhouse" skit. The skit has little, if anything, to do with the law, but it does make me laugh. As we begin the Spring 2010 term, which feels less "springy" and more "wintry," a bit of light-hearted humor would do us all well.

The Spring term is the final lap for our 3Ls, and the beginning of the bar preparation season. I wouldn't say the Fall semester is necessarily easier than the Spring, but for me, the pressure mounted each Spring. To help keep school in perspective, and my mood elevated during the remainder of winter, I found things that made me laugh to be the best medicine. Perspective, after all, is a key to avoiding burn-out and insanity in law school!

So, good luck to everyone this term, especially the 3Ls!

The Year of Living Dangerously

2010-01-08T17:19:00.000-08:00

The unholy crucible of Washington compromise has worked this oddity into tax law: there is no estate tax in 2010. And there promises to be a large one in 2011. Stephen Moore, writing in the Wall Street Journal about 2010 tax issues more generally, spends some time on the estate tax.

Moore of course would prefer to remove the oddity mentioned above by avoiding a resumption of the estate tax in 2011. Not so Sen. Max Baucus, who, apparently and tragically undiminshed from his health care labors, aspires to "raise the estate tax back to between 35% and 55% this year, and to make that change retroactive to Jan. 1." The better to pay for that other thing, I suppose.

But can that be done? Here's Moore: "Can Congress impose a new estate tax, say in April, on someone who was already dead and buried in February? Let's hope not." Moore has been around long enough (which requires only a month or so) to know hope is all we can do.

But let's hope Baucus fails in his ambition, and, for entertainment purposes, that Moore does, too. In that case, we can behold the pageant of moral hazard that will reign among heirs apparent this year.

Early on the pressure will likely manifest itself in elliptical ways. For example, encouraging the old tycoon to take up rock climbing. Should he prove surprisingly competent at that, late summer might see more direct efforts. For example, "Surprise!" yell the descendants as they spring from behind the matriarch's bedroom curtains (when she first wakes and on a day not her birthday).

And the closing window that will be New Year's Eve could well loose the inner Utilitarian of anyone standing vigil by the bedside of an old and infirm moneybags. And there may be many such folks standing vigil. Hospitals, more likely than Times Square, may set attendance records that night for visitors.

Without the intention of causing the outcome, the muti-motived authors of this mess are encouraging, in this limited context, the sort of inter-generational suspicions regnant in Orwell's 1984.

Best Jobs

2010-01-07T06:27:00.000-08:00

The Wall Street Journal has published a list of the 200 best jobs for 2010 based on environment, income, employment outlook, and physical demands and stress. The list reflects a study by Careercast.com, an employment site.

Selected data:

1. Actuary
22. Court reporter
62. Musical instrument repairer
63. Federal judge
80. Attorney
179. Roofer
200. Roustabout

Saab RIP

2010-01-06T17:38:00.000-08:00

It's over. Ja.

The acting CEO of GM says there's no hope a bidder will appear with the kind of krona that can get the pistons pumping again at Saab.

UCC Article 2 Sale of Goods

2010-01-05T17:02:00.000-08:00

I am reassured and horrified that the Article 2 scope disorder I've observed among my Contracts students is not just my problem. Thom Lambert at University of Missouri Law encountered a severe strain while grading his Contracts final exams and wrote about it on Truth on the Market.

UCC Article 2 governs contracts for the sale of goods. Apart from some interesting cases involving North Sea oil platforms, electricity, and software which push the envelope of 'goods,' it really couldn't be simpler. Yet, students every year write in the the final exam answer that Article 2 does or does not apply to a particular transaction because one or both of the parties is or is not a merchant.

Yes, some sections of Article 2 regulate the rights of certain professional sellers or buyers who participate in a sale of goods. But the scope of Article 2 is not merchant dependent. UCC Article 2 governs contracts for the sale of goods and it does not matter for purposes of its scope whether the parties are Exxon or rank amateurs picking up a broken leaf blower at a neighborhood garage sale.

Professor Lambert laments that every year his Contracts students screw this up on the exam, and the next year he increases the number of times he tells the class that UCC Article 2 governs all contracts for the sale of goods without regard to whether one of the parties is a merchant. Ad nauseum. I do the same. In every class session in which Article 2 is pertinent I say it: Goods -- not real estate, not services. Goods. Merchant schmerchant, I say. Goods. Do not take your eye off the goods. Where they are, Article 2 (or 2A if the deal is a lease) will be. Merchants come and go. Goods remain.

Let's review. UCC Article 2 applies to all contracts for the sale of goods. Any questions?

Professor Lambert speculates that this mistake may root in students' fixation with UCC 2-207 -- the "battle of the forms" which in part applies only "between merchants." 2-207 is the first foray into statutory interpretation for most students. Perhaps the battle of the forms triggers in some students a form of PTSD. When a simple scope question appears on the exam, students traumatized by 2-207 lose their grip and can see only merchant Viet Cong snaking through the rice. It's only a contract for the sale of goods, but in the heat and the darkness it looks like the enemy. Ah, the smell of merchants in the morning.

My friend and colleague Keith Elkin works with law students preparing for the bar exam. He told me that students make this mistake on practice bar exams even after watching the bar prep video heads say it over and over: UCC Article 2 applies to contracts for the sale of goods.

Next time I teach Contracts, I may give peace a chance and omit coverage of 2-207. If Lambert is right, the price of a really good immersion in a really badly drawn statute is too high.

American Needle Next Week

2010-01-05T16:32:00.001-08:00

Professor Stephen Ross hosted a moot argument of the American Needle v. NFL case last month at Penn State Law. The Supreme Court will hear the argument for real Wednesday, January 13. If you missed the moot, you can view it online.

32% More

2010-01-04T18:21:00.000-08:00

American people and their businesses filed 32% more bankruptcy cases in 2009 than in 2008. Last year was the seventh worse on record with about 1.43 million cases filed.

The spike in filings was sharpest in Arizona where the number of cases filed in 2009 rose 77% over last year. Wyoming cases rose 60%, Nevada 59% and California 58%. Pennsylvania is near the bottom of the list with a 14% increase. MSNBC.com sports a cool map of the US showing percentage increases by state.

Cold and Gray, Exceedingly Cold and Gray

2010-01-03T16:09:00.000-08:00

The sound of the wind howling in the woods outside made me think of the coldest my imagination has ever been: Jack London, To Build a Fire.

"When it is seventy-five below zero, a man must not fail in his first attempt to build a fire --that is, if his feet are wet. If his feet are dry and he fails, he can run along the trail for half a mile and restore his circulation. But the circulation of wet and freezing feet cannot be restored by running when it is seventy-five below. No matter how fast he runs, the wet feet will freeze the harder."

Target Puts a Bulls Eye on Costco and Sam's

2010-01-03T15:28:00.001-08:00

Target Corporation has launched The Great Save. It's packing up the holiday doodads and stocking the shelves with super-sized packages of toilet paper, bottled water, ketchup and other useful items. The Great Save will give a part of Target stores the look of a warehouse club.

Smart move? On December 31, Target stock closed down .7%. The Great Save runs through February 21. I'll be watching. NYSE: TGT.

In the Bleak Midwinter

2009-12-21T04:54:00.001-08:00

Snow had fallen snow on snow, snow on snow.

Call for Papers

2009-12-15T12:41:00.000-08:00

On Friday, March 26, 2010, the Penn State Law Review will hold a symposium addressing the Supreme Court’s recent decision in Ashcroft v. Iqbal. The symposium is entitled Reflections on Iqbal—Discerning Its Rule, Grappling With Its Implications and will feature panels addressing the following topics:

Iqbal’s implications for the role of the courts and judges in providing American society with both the opportunity for redress of harms and a common law-based approach to the development of law.
The majority’s reference to purposeful discrimination and what it signals about contemporary understandings of race in America.
Iqbal’s implications for constitutional tort litigation, including the decision’s potential impact on supervisory liability, qualified immunity, and the behavior of agency officials operating under adverse conditions.

Presenters currently include: Hon. Anthony Scirica (Chief Judge, Third Circuit), Hon. D. Brooks Smith (Third Circuit), Mark Brown (Capital), Ray Campbell (Penn State), Gary Gildin (Penn State), Ramzi Kassem (CUNY), Kit Kinports (Penn State), Jim Pfander (Northwestern), Jeff Rachlinski (Cornell), Victor Romero (Penn State), Jean Sternlight (UNLV), Shoba Wadhia (Penn State), and Nancy Welsh (Penn State). Presented papers will be published in a Symposium Issue of the Penn State Law Review. Brief abstracts of the papers are posted on Penn Statim.

The deadline for submissions in response to this Call is Friday, April 16, 2010. All submissions must be sent to iqbalsymposium@law.psu.edu. All submissions must be in English and comply with Bluebook formatting rules. If possible, please limit the submissions to five thousand words or less.

For more information, visit the Penn State Law Review web site: Penn Statim.

It Smells Like Stress

2009-12-09T07:12:00.000-08:00

Perhaps I am imagining it, but upon entering the Law School this morning, there was a distinct smell that I can only attribute to one thing: stress. The smell was nothing too obvious, but coupled with the stillness in the building, it brought to mind my own final exam periods, which are – thankfully - over. Today is the first day of final exams for the fall semester, and the first exam for our 1Ls is torts. I can think of few exams more daunting than first-year torts. Even the bar exam didn’t compare, at least for me.

As the students march forward through these examinations, I encourage them to remember to take care of themselves. Good sleep, proper nutrition, and sticking to a schedule will all aid in the actual exam-taking itself. These next ten days will be over soon, and the festivities of the holidays will be fast upon all of us. For now, I wish all exam-takers peace in their studies, energy for the work ahead of them, and vision for their futures. There is a point to all of this madness, and diligence during these next few days will pay dividends down the road.

Good luck, everyone!

Foolishness in Akron

2009-11-02T08:04:00.000-08:00

The University of Akron has reserved the right to require applicants for certain jobs to submit a DNA sample. It hasn't demanded DNA from anybody yet. But the policy has rankled some faculty. My colleague David Kaye, who follows legal doctine and fornesic genetics on DoubleHelixLaw, has commented on the new policy.

Thoughts on Academic Freedom and the Role of the University

2009-10-30T11:30:00.000-07:00

“Never discuss religion or politics.” How many times has this admonishment been tossed around, yet how often do we heed it? Perhaps in the business context we are more careful to avoid such “touchy” subjects, but what about social settings? What about the academy? The ideals of academic freedom serve to foster and protect all opinions about potentially divisive issues, yet does this protection rooted in the penumbra of the First Amendment really achieve the results of open and honest dialogue?[1] Does it even matter?

In a recent address at Columbia University, University of Chicago President, Robert Zimmer discussed the purpose of academic freedom. He said the following:

“[I]t is universities’ openness to ideas, to analytic debate, to rigor, and to questioning, and the provision of an umbrella, and in fact a safe haven, for clashing thought and perspectives, that best illuminate societal, scientific, and humanistic issues. . . The greatest contributions universities can make to society over the long run are the ideas and discoveries of faculty and students that emanate from the resulting intellectual ferment [] . . . If this is the purpose of universities, the purpose of academic freedom is precisely to preserve this openness of inquiry and freedom of thought. In other words, academic freedom is designed to protect and preserve for the long run the unique capacity of universities to contribute to society.” (emphasis added)

President Zimmer’s thoughts are noble. My question is not about their veracity, for I sincerely believe he is absolutely correct. My question is whether the university environment is truly living up to the model as a “safe haven for clashing thought and perspectives”? I hesitate to say, but my feeling is that they do not.

I do not purport to speak for everyone, but only to relate my own experiences and perspective. In any context where I am under the authority of another, I am reticent to offer an ideological opinion which sharply diverges from my authority-figure. This is not always the case, but more often than not, it is. The reason is simple; ideology is the foundation upon which we construct our worldviews, and a professor’s worldviews –naturally – animate his conclusions about his subject matter. More to the point, if my opinions are perceived as flawed in their reasoning, which could easily be the case when my opinions are stemming from an ideology that deviates from the professor’s, what will the conclusion about my scholastic aptitude be? Whether science, law, business, etc., we are all subject to bias. Even in our modern enlightened era, there is cause for caution.

Maybe this caution is healthy. Maybe cautious and guarded opinions serve to encourage quiet reflection before speaking. This is a worthy end, is it not? Unfortunately, I do not think the bias within the academy is an even split down the ideological middle. If it were, then the opportunity for reflection would be given fairly consistently to students of all worldviews. However, in many areas of the academy, there is a perceived “politically correct” worldview which garners dominant support. This trend may foster open dialogue amongst those who find themselves in the majority, but is the minority voice likewise fostered? Is there anything that can be done to encourage a true safe haven?

Perhaps a benefit of such a reality is that individuals who seek to develop new ideas will find mentors with whom they share ideological views. Within this context, there can be a mutual sharpening of minds and arrival at ideas or innovations which will contribute to society. This begs the question, though, of what role the university should play. Is the university about benefitting the student-consumer, in which case the student comes to the university with his ideas and seeks guidance as to how to achieve his goals? Or, does the university primarily serve society, in which case the student should come to the university as tabula rasa for the purpose of forming ideas which will provide the best outcome to society? Of course, the answer could be a blend of these two ideas.

President Zimmer noted the German model of the university is the modern research institution we know today. This model comprises three principles: 1) the goal of education is to teach students how to think (not simply master a craft); 2) integration of research and teaching is central to teaching students how to think; and 3) the university must be independent from the state. These principles suggest, to me, that the primary purpose of a university is to serve the student as an individual. This educated student will be in the best position to benefit society as a critically-thinking-citizen. Society ultimately derives the benefit of the education experience, yet the party immediately served is the student, not society. If that is the case, my mentor-model makes sense. It does not result in a truly free and open forum for clashing ideas, but it does give the student as a consumer the product sought.

If the university is primarily serving the student-consumer as an individual, what happens to academic freedom? Does it lose some of its importance? I think the answer is a quiet “yes.” The principles of academic freedom are still of paramount importance in many contexts, but perhaps the principles merely provide the safe-guard wherein a member of the university community has recourse should he endeavor to challenge the status quo. This protective mechanism is, I believe, a far cry from an umbrella sheltering the exchange of differing perspectives.

-----------

[1] See Griswold v. Conn., 381 U.S. 479, 482-83 (1965) (“[T]he state may not, consistently with the spirit of the First Amendment, contract the spectrum of available knowledge. The right of right of freedom of speech and press includes not only the right to utter or to print, but the right to distribute, the right to receive, the right to read . . . and freedom of inquiry, freedom of thought, and freedom to teach . . . indeed the freedom of the entire university community. Without those peripheral rights the specific rights would be less secure.”).

Law Students Ready for Work

2009-10-28T05:05:00.000-07:00

York College of Pennsylvania conducted a national survey of human resources directors and business leaders who make hiring decisions. The study showed that the most important factor that people who hire considered in whether to make a job offer is the candidate's demeanor in five areas: 1) personal interaction including courtesy and respect; 2) communication skills; 3) work ethic; 4)professional appearance; 5) self-confidence. Responders were asked to rank on a scale of 1 (very rare) to 5 (very common) the appearance of these traits in recent college graduates. For all of the five traits the mean rank was below 4.

Recent college graduates appeared to survey responders to be concerned about opportunities for advancement. This trait garnered a mean of 4. Unfortunately for job seekers, those hiring rank this trait as among the least important in the hiring decision.

53% of responders believed that the level of professionalism among recent college grads looking for entry level work was stable over the last five years. 33% percent believed that professionalism had decreased. Those that saw a decline in professionalism identified the causes as a false sense of entitlement to the job, changes in culture and values, and erosion of work ethic. 61% of responders reported that a sense of entitlement to a job had increased among recent grads over the last five years. Responders frequently noted that recent grads had problems accepting personal responsibility for on the job decisions and behavior, difficulty acting independently, and appeared to have no clear sense of direction or purpose in office environments.

I wonder whether law students possess the essential professional traits most valued in the market for legal employment. How can a law school give its students the competitive edge?

Way up in a Balloon

2009-10-27T07:55:00.000-07:00

To say that someone has gone up in a balloon, except when that person actually has gone up in a balloon, is to say that someone has gotten intellectually (defined here as the act of thinking, not the quality thereof) or emotionally carried away. So it was with Richard Heene, who was so up in a balloon about maintaining unworthy fame, or with the money that attends it, that he contrived the now-famous hoax that, perversely, references in the name given it by History his impressed son, and not the man. Heene the Younger, whatever he owes his father, certainly has cause to be sore about the use to which he was put, and about the fact that his name answers a Google search, and so always will, of "Balloon Boy". Such are the wages of a father's strange grasping, here to be paid by the son.

It is with some pride that I admit I missed Richard Heene's performance on the reality show Wife Swap, and also that I don't know on what station, or at what time, to find Wife Swap. People have told me he was a standout oddball on the show, which surely must be peopled with folks more odd than the average person in society. And that observation brings this brief essay to its point. It seems that "reality TV" has become a sort of Orwellian label. What the shows that answer that description really show are people acting as they would when they know people are watching, which tends to exaggerate in both directions what people do when they assume no one is watching.

In Heene's case, when he knew people were watching, he, according to the Wife Swap reviews, was an oddball but pedestrian control freak. When no one was watching, he exerted control over his family to follow along with his super oddball scheme, which counted among its foreseeable consequences co-opted helicopters, the expenditure of thousands of dollars, and the wasted good will of his fellow citizens. So it seems the reality show cameras exaggerate Mr. Heene in a flattering direction. Objects in your TV may appear less nuts than they actually are.

Justice Sotomayor on the Traditions in the High Court

2009-10-26T06:18:00.000-07:00

I happened to catch C-Span's special on the Supreme Court, and was struck by the newest member of the Court's comments regarding tradition:

"[T]raditons anchor us in a process that's greater than ourselves; they remind us that the role that we are playing is not a personal role, not a role that should have a personal agenda, but one that has an institutional importance and that institutional importance is bigger than us."

There are so many aspects of life that this resonates with. Whether religious practice, national governance, school tradition, family ritual, or even corporate culture, traditions do anchor us and do remind us that we are but a part of something much larger than ourselves. This is not a revelation, but I did appreciate being reminded of it and I appreciated hearing Justice Sotomayor express it.

Just a Drunken Stoner?

2009-10-21T05:25:00.000-07:00

A man charged with murder for beating his girlfriend's two year old daughter to death told his social network on MySpace that he was misunderstood and that society was to blame. While he was at it, he stated: "It's just a C felony. I can beat this."

After his conviction and sentence to life without parole, he appealed on grounds that the evidence of his character lifted from his MySpace page should have been excluded. The Indiana Supreme Court held that because he testified at trial that his actions were only reckless not intentional, he opened the door for evidence of his character.

The opinion is here. I don't think they'll have MySpace where this guy is going.

Federalism Strikes Again

2009-10-13T17:08:00.000-07:00

For those looking for healthcare solutions, the benefits of Justice Louis Brandeis's "laboratory" federalism may be of assistance. The states provide microcosms of the larger macrocosm in which to test out political and, dare one say, social ideas.

As Massachusetts has been a laboratory for universal healthcare, Minnesota looks to become a laboratory for market-based reforms. Gov. Tim Pawlenty has suggested, among other things, that Minnesotans be able to purchase health care across state lines. It will be interesting to see what happens to health care costs in MN if the Governor has his way.

We now know from Tim O’Brien, senior vice president at Blue Cross Blue Shield’s headquarters in Boston that "[Mass.] health care reform . . . costs have been much higher than what were anticipated when health care reform went into effect in 2007." The Boston Globe's 9/16/09 headline reads "Health costs to rise again." The report continued: "[P]rompting many employers to reduce benefits and shift additional costs to workers."

Campaign Finance Status Quo May Not Hold

2009-09-09T06:59:00.000-07:00

Marc Ambinder has written an excellent article in The Atlantic about the Supreme Court's rehearing of oral arguments in Citizens United v. FEC and the current landscape of campaign finance law. The article leaves its reader with a basic knowledge of an area of the law that does its best to deny that apprehension.

The relevant history of campaign finance law starts with the Supreme Court's 1976 Buckley v. Valeo decision, which found contribution limits of a certain amount placed on individuals constitutional but expenditure limitations of any magnitude on candidates or campaigns unconstitutional. Those versed in constitutional law know that placing a restriction on so fundamental a right as making a political contribution has to be justified by a compelling state interest; and one permissibly satisfied (I learned this again, incidentally, from the great and beloved Chemerinsky, who I watched via Bar Bri video this summer, and who therein appeared always in present need of shuffling off to the nearest bathroom). That interest in the Valeo case was asserted to be protecting the political process from the corrupting influence of too much money coming from a concentrated source. And too there was the related matter of our developed organizing and leveling ideology, where the pauper cannot be seen to be effectively disenfranchised by the disproportionate influence of the millionaire, or billionaire. So the static decree was handed down to a dynamic world.

One result has been the viability, recruitment, and election of billionaire politicians. Another result, which lends credibility to Freud's hydraulic model, has been 'soft money'. Soft money is the money that individuals, unions and corporations give to political organizations and entities, which is then used for issue advocacy. Such issue advocacy has been transparently used to influence elections, thus frustrating the intent of Valeo. Hence the McCain-Feingold legislation, which, among other things, prevents the use of such funds within 120 days of an election to directly influence that election. The FEC interpreted corporate contribution law pre-existing and consonant with McCain Feingold to forbid the showing on television of Citizens United's (unflattering) movie about Hillary Clinton during last year's Democratic primary season. Citizens United brought suit, and that is the matter currently before the Supreme Court.

I yield to the Ambinder article as the place to get the more complete story on this history. But Ambinder asks a question which is prompted by his article, and he leaves it purposefully and wisely unanswered. It is an important question: Is money inherently corrupting? Ambinder notes that if so, we should not want the Supreme Court to loosen any of the extant restrictions on political contributions. If no, then we should.

And maybe that's right. But if I were to bet on what McCain the man, for example, objected to about money in politics, it would be the unequal influence its unequal ownership affords to some individuals and entities relative to others. Less charitably, McCain might lament the unequal desire to spend money on political activity. I say less charitably because disparate desires in that regard is a reflection of priorities and an aspect of free association. Whatever the case, the unequal influence objection does not depend on the nature of money, but on the reality of its distribution. And it is that egalitarian impulse which animates every American heart to a greater or lesser degree. It is an impulse which may not find expression in a Supreme Court decision (depending on whether or not they have the empathy turned up that day), but may well in a Congressional response, or preemption.

Mac N Cheese Seeks Chocolate Egg

2009-09-07T17:29:00.000-07:00

Reading the financial news today, I experienced an unexpected Pavlovian response. Cadbury, maker of the exquisite Cadbury egg, rejected Kraft Foods' $16.7 billion bid. Not sweet enough, said Cadbury management. News of the snub sent Cadbury stock up by almost half to 783 pence per share, easily topping Kraft's bid of 745 pence per share.

Market watchers think the deal will happen and provide a carbo blast to the dragging mergers and acquisitions market. I'm feeling better already.

Vive La Difference

2009-08-20T15:17:00.001-07:00

Is She a He? Athlete Forced to Take Gender Test - International News News of the World Middle East News Europe News - FOXNews.com

Posted using ShareThis

Here is an interesting story from the world of sport, where apparently one is free to suppose men and women differ in certain respects without being sued.

They say the complex gender test will take a few weeks to come back. This means they are doing something more sophisticated than looking to eyeball a full set of tackle, and also that they have to.

The story makes relatively clear that this woman, and the wider world that knows her, could believe in good faith that she is a woman. That is why the complex test is required. Here is a question (and I am seriously asking): If she appears, in terms of sexual organs (and I'm guessing this is the case), to be a woman, but is in some other respect a man, can she be a man completely? And if not, what would be her scientific designation? And if forced to compete as a man, would she be disadvantaged, at the very highest levels of competition, to the extent some quantum of her is female?

On S'engage; Et Puis, On Voit

2009-08-05T19:12:00.000-07:00

That was a favorite saying of Napoleon’s. Later, Lenin adopted it as his own. Rendered in English it reads, “You commit yourself; and then, you see. It is a romantic notion, fitting for men of action. And it is revealing of each man’s monomania that it never gave them pause that they were committing everyone else.

Now the United States is on the verge of committing itself to nationalized health care, the results of which, should we go through with it . . . we will see. The debate on the business is just getting started, though tragicomically, the enabling legislation is well-advanced. The bumper sticker opposition to the idea writ large is that health care will be rationed. No one even casually acquainted with economics, and so with the notion that economics is the study of alternative uses of scarce resources, would find that news. Steven Singer could not abide the rationing chorus, and so wrote this pointing out that rationing is currently and of course afoot. Whatever his Logan’s Run enthusiasms (I have long thought that Singer’s best eventual exit will be to feed himself to hungry but otherwise healthy and sound young people), Singer is a serious intellectual force. He does a service to the extent he buries the ‘no because health care will be rationed’ opposition to government controlled heath care. The issue, of course, is who, or what, will do the rationing going forward.

Singer almost apologizes for the imperfections of his solution (grey souls in grey suits counting life years and handing out money to the potentially longer lived, all else being equal), but justifies it as the best we can do. He cites Churchill’s defense of democracy as ‘the worst possible form of government except for all the others’ as an analogous rallying cry for his proposal. Singer thinks Americans will accept such centralized rationing provided they can opt for supplementary private insurance and that the cost of care rationed the current way (e.g. by what you can afford) is brought home to us all. This ability to buy supplementary insurance is a big deal. An even bigger deal is the ability to simply pay through the nose for something if it comes to that. As Thomas Sowell has pointed out, the integrity of a government controlled system may depend on making some services and goods unavailable, regardless of an individual’s ability to pay. And don’t think such restrictions can’t be imposed. Again, as Sowell has pointed out, the FDA, although for other reasons, currently prevents us, even those of us with a very different risk profile owing to advanced disease, from buying drugs deemed safe enough for Europeans. As for Americans understanding the true cost of their health care, it seems the higher unemployment rate, coupled with our nation’s informal system of employer provided health care, has brought that cost home to many Americans who until recently were blissfully unaware.

There are two principal concerns I have with government run health care, exclusive of cost (the CBO covered that). First, Singer mentions the high costs of prescription drugs in this country as a source of rationing. He points to the reasonable costs of these drugs in other countries with nationalized systems, which will only pay a certain price for the drugs. The idea is that a nationalized system will bargain for lower-priced drugs, producing savings. But it seems clear that the cost of the development of the drugs will not go down by the act of a nationalized system demanding sale at a certain price. Rather, it seems currently that the American market is paying the loin’s share of the tab, which renders tolerable the risk that the R&D investment into new drugs will be profitable. If the United States institutes universal price controls on drugs (in addition to what goes on in the current government-run health care programs) we may well see R&D by major pharmaceutical companies go down. And we are likely to see more incremental progress via copy-cat drugs that simply tweak side effects, and less true innovation. Note that we see this even now because any industry will seek to minimize its risk and maximize its profit (see, e.g., the practice in both the publishing and motion picture industries to stay with winners, be it Doctor Phil’s fortieth book or Spiderman 20). Government-imposed (read lower) profit margins would surely make the pharmaceutical industry more risk adverse and less innovative.

Second, I am not confident that official rationing, once started, can be acceptably cabined. Singer goes into some detail in his essay about counting life years as the key to his rationing regime. That’s the practice of judging that this teenager should get the instant procedure or drug and that this senior citizen should not. The rationale is that the teenager will continue to live for many decades, whereas the senior…well, the end is nigh. But in practice, it seems unlikely that the teenager would be much featured in the analysis conducted by the grey suits. In practice it seems that what would be before the grey suit would be the senior and his need. And the grey suit would say no; not no as between the senior and a similarly situated teenager, but just plain no. That is to say, because young people are not often in need of expensive medical care, and in any case because identical needs by opposing class members will seldom be coincident in time, the rationing conducted would be in the form of a denial of a single need, not as between a need and a greater need. Or, put another way, the greater need referenced would be that hoary need that has been the benevolent altar baptized by so much human misery down the years. And it is insatiable.

Regarding the way forward, I find myself in agreement with Charles Krauthammer. He advocates radical tort reform and a stark move away from the employer-provided health insurance paradigm. But however you come down on the health care issue, it seems folks of good faith (i.e. not those ideologues who view government run health care as a tool for realigning the American people into dependency on the government, and so are for it regardless of content; nor again those who seem to be using the extant debate as an excuse to riot) can agree at least to this: that the legislators actually read and understand whatever final thing they end up voting on. They will be, after all, one way or the other, committing all of us. They should be charged with a better explanation than “we’ll see” when asked what they have done.

Marco? Polo?

2009-07-13T18:19:00.000-07:00

The whites-only swim is over at the Valley Club in Huntington Valley, PA. After breaking its contract with a summer camp of predominantly black-skinned campers, the Club has changed its mind and invites all swimmers back into the water.

The social history of swimming pools tells a stark and true story of race in America. For those readers born too late to have experienced segregated and desegregated swimming in the 1960's, you can sit on the edge of the pool by reading Jeff Wiltse, Contested Waters: A Social History of Swimming Pools in America, or just the review on Legal History Blog.

Something about swimming together nearly naked in the crystal water of a pool reveals and perhaps proves our common humanity. Everyone into the deep end.

Stay No More

2009-06-10T12:29:00.000-07:00

It's not news now but just to close the loop, the Supreme Court lifted the stay on the Chrysler-Fiat sale Tuesday. In a two page opinion, the Court per curiam held that the parties requesting the stay did not carry the burden of showing: 1) reasonable probability that four Justices will consider the issue sufficiently meritorious to grant certiorari or to note probable jurisdiction; 2) a fair prospect that the majority of the Court will conclude that the decision below was erroneous; and 3) a likelihood that irreparable harm will result from denial of the stay." My inner contracts professor notes that the petitioners can be compensated for their losses, if any, with damages-- hardly a strong case for irreparable harm.

The sentence that lingers in this perfunctory opinion is the last: "Our assessment of the stay factors here is based on the record and proceedings in this case alone."

And not in response to political pressure, or based on concern about how the outcome of this case might influence the bankruptcy proceeding now pending in In re GM.

The spin on SCOTUS blog is that the Court wrote this opinion with particular care. "By the time the full Court’s order emerged shortly after 7 p.m. Tuesday, it immediately was apparent that the Court had taken its time primarily to craft a legally precise order of four paragraphs. It very likely was composed largely in Justice Ginsburg’s chambers. She is noted for the highly refined, technical care with which she composed legal papers." (what a lovely thing to say about a person).

The Chrysler-Fiat deal closed today. Fiat Chief Executive Sergio Marchionne become CEO of Chrysler. Former Chrysler CEO, Bob Nardelli, packed up his desk and returned to Cerberus Capital Management, the former majority equity holder of Chrysler. Marchionne wrote to Chrysler employees: "There is no doubt in my mind that we will get the job done."

That may depend on how Americans (who are not obese or taller than 5'2") like the Fiat 500. You be the judge.

In re Chrysler Stayed

2009-06-08T16:41:00.001-07:00

In a one sentence opinion, Justice Ginsberg stayed the order approving the sale of Chrysler assets brokered by the U.S. Treasury Department. The 2d Circuit affirmed the bankruptcy court order approving the sale Friday. It gave objecting creditors until 4:00 PM Monday to obtain a stay of the order from the Supreme Court. Justice Ginsburg, who is responsible for emergency matters from the 2d Circuit, entered the stay just before the last tick of the clock.

The objecting parties, Indiana State Pension Trusts holding Chrysler secured debt, have advanced two arguments for reversal of the bankruptcy court order approving the sale: 1) the sale to the Fiat SpA group is an improper and unfair sub rosa reorganization plan and the bankruptcy court exceeded its authority under 11 U.S.C. section 363 to order the sale; 2) the U.S. Treasury had no constitutional authority to use TARP funds allocated for the bailout of financial institutions to finance Chrysler-Fiat. On Sunday, a consumer group filed a brief in support of the pension trust investors. The consumers' group wants to stop the sale because its terms relieve Chrysler-Fiat of successor liability for old Chrysler consumers' product liability claims.

The U.S. government filed its brief with Justice Ginsburg today, arguing that the pension trust parties have no standing to complain about the sale. Chrysler is worth next to nothing without the Fiat deal and that the proposed sale yields a better return than the only other option, liquidation. As for the TARP money, the Solicitor General argues that the pension trust investors don't have standing to object to the government’s $8 billion injection of TARP money into the new Chrysler-Fiat. Whether Chrysler-Fiat is a "financial institution" eligible to receive TARP funds is not a question worthy of Supreme Court review. ("The relevant EESA [Emergency Economic Stabilization Act of 2008] provision was enacted only eight months ago and has not yet been construed by any federal court . . . .")

This could be one of those OK Corral moments in constitutional law. The pension trusts represented by Thomas Lauria of White & Case, are the last creditors standing alone against a barrage of pressure on senior lenders to get with the Chrysler-Fiat deal, or else. The Supreme Court may be the only law in town tough enough to stand up to President Obama, Treasury and auto industry czar Steven Rattner.

The gunfight at the OK Corral is said to have lasted about 30 seconds. The trial afterward took weeks. Whether the Earp brothers and Doc Holliday's actions were in self defense or murderous is still a good game for law students more than a century later. In the end, Judge Spicer ruled that "the tragic results accomplished in manner and form as they were, with all surrounding influences bearing upon resgestae of the affair, I cannot resist the conclusion that the defendants were fully justified in committing these homicides-that it is a necessary act, done in the discharge of an official duty."

Cosmic Contract Language

2009-06-05T18:26:00.000-07:00

(Originally posted on October 29, 2009)
In Thursday's Wall Street Journal is an article about the trend of drafting contracts with cosmic language like that which was presented to a Bulgarian folk-singing group at a tryout for the TV show America's Got Talent. A clause in the contract warned that their actions that day could be "edited, in all media, throughout the universe, in perpetuity."

This sort of language, relevant mainly in the context of the arts (but see the full article for an example, complete with an allusion to the Big Bang, of its use re: pickles), is apparently motivated by a desire to account for the unknown, and perhaps is reflective too of a very high confidence in the national space program. The Journal article notes that the members of the folk-singing group "briefly contemplated whether they should give away the rights of hurtling their images and voices across the galaxies forever." Then they signed the contract.

Of course professional opinions vary as to the desirability of using such cosmic (the use of 'global' doesn't seem to do justice) language in contracts. Attorney and law school lecturer Ken Adams thinks the use of such language is "silly", and suggests its use could be a way of drumming up business for lawyers. How so? "It [cosmic language] adds an aura of magic- you're dabbling in the occult and you of course need a lawyer to guide you through the mysteries."

But associate professor of law Eric Goldman has a different view. He thinks the cosmic language "could be 'a stroke of brilliant foresight.'" Goldman says in the future, folks looking at contracts drafted without cosmic language might say, "What were they thinking? Why didn't they get the Mars rights?" That would be embarrassing.

Whatever the case, this article comes a few years too late for me. I could have turned it into an entirely novel law review note: Cosmic Language in Contracts and its Ramifications, Toward a Theory of Inter-Galactic Unconscionability.

Post GM America

2009-06-03T16:34:00.001-07:00

At a hearing before the Senate Commerce Committee today, Fritz Henderson, GM's CEO, said that GM has no choice but to dump nearly 1600 dealers (and about 100,000 jobs) over the next eighteen months.

Committee Chair John Rockefeller responded : "Let me be very clear: I don't believe that companies should be allowed to take taxpayer funds for a bailout and then leave local dealers and their customers to fend for themselves with no real notice and no real help. That is just plain wrong."

Senator Rockefeller missed the memo. Dumping losing contracts without real notice and without real help is exactly what bankruptcy will permit GM to do.

Rockefeller's frustration touches a nerve. If the government can't expect to see a return on its investment, what exactly is the public purpose of the bailout?

In an op ed for Financial Times, Richard Reich wrote: "The only practical purpose I can imagine for the bail-out is to slow the decline of GM to create enough time for its workers, suppliers, dealers and communities to adjust to its eventual demise. Yet if this is the goal, surely there are better ways to allocate $60bn than to buy GM? The funds would be better spent helping the Midwest diversify away from cars. Cash could be used to retrain car workers, giving them extended unemployment insurance as they retrain."

Reich says that industrial adjustment is just too hard to discuss, much less accomplish politically. One group wants to save jobs and communities that depend on US automakers' survival, without regard to the public cost. An opposing group wants to keep government out of industrial collapse, let the chips fall where they may, and let market vultures clean up the mess. The bailout of GM and Chrysler temporarily placates both groups. The first group gets hope that their jobs and communities have a chance of surviving. The second group gets to imagine that the bailout is a restructuring made necessary because of a mysterious short term liquidity problem, and that with $50 billion in governmental lubrication, that new car smell will be back.

The divide between the groups seems to be more political than real. People whose jobs and mortgages depend on the US auto industry don't like wasting tax revenue. And ardent free marketeers who oppose the bailout of a "company" like GM accept the role of government in easing the pain for actual people who fall on hard times.

GM and Chrysler are short timers. The bailout and the restructurings are life support that at best will give the grieving middle class time to prepare for the end. We are left to wonder: what will post-GM America be like?

Fries With that Chevy?

2009-06-02T17:01:00.000-07:00

Yesterday, President Obama described the US government as a "reluctant shareholder" in GM. Indeed.

How lean and mean will new GM have to be to make taxpayers' $50 billion investment pay off? GM's market capitalization will have to surpass that of McDonald's (MCD)—rising to nearly $69 billion just for taxpayers to break even. (Yesterday, McDonalds's market capitalization was $66.6 billion.) And that's likely to take awhile. As of May 29, GM's market capitalization was in the neighborhood of $500 million.

Under the proposed reorganization plan, of the $50 billion total investment, the US's equity stake will be $41.2 billion or about 60% of the New GM pie; another $8.8 billion will be debt. For a 60% stake to be worth $41.2 billion, the market capitalization of the reorganized company will have to rise to $68.7 billion.

Here's the visionary plan on which the return on this super-sized investment depends. New GM is going to make cars people want to buy at a profit.

Apologia Pro Vita Mia (in search of)

2009-05-30T18:11:00.000-07:00

Warning: this thing is autobiographical; read it, if at all, with that understanding. And also with the understanding that my story is not very interesting or noble. It just happens to be the only one I am competent to write about. I have personal knowledge of former classmates who came from less, worked harder, and met with greater misfortune on the road to their JDs. I find their stories repay inspection in better currency than my own.

On May 9th I graduated from Dickinson. I now have a JD degree. I am the first in my family to earn a professional degree, and I am aware of only two cousins with four year degrees. If all goes well, in November I will be notified that I have passed the New Jersey and Pennsylvania bar exams. That notification will mark the end of a long and less than fully happy journey.

In August of 2002, and several years into my working life, it occurred to me (there is no more accurate way to say it) that I should perhaps go to college. And so I did. I had a full time job, so I attended the local community college in the evenings, including over the summer semesters. Two years later I transferred to a four year institution. I earned my BA from that school the month before entering law school full time.

I entered law school full time because I understood it to be a consuming thing, and I didn’t want to perform in a middling way in both law school and at my job. Better to dedicate myself to one thing. That choice was financially ramified, as it meant that I would take on loans and forego a salary for three years. Alas, I dedicated myself to law school and still performed well-nigh middlingly.

The three family dogs died during law school. Two we put to sleep after my first year’s spring exams and before I wrote for the law review competition. I don’t have much to say about their deaths, except that folks who put their dogs to sleep in the way I did should not see Marley and Me, however attracted to Jennifer Aniston they may be. The third was put down this past fall, and left the family home a cathedral of melancholy until the puggle Sammy was acquired (actually rescued from a breeder who somehow supposed a dog looking more like a beagle, and less like a pug, to be a liability). Now my parents dress the poor thing up and take her around as though she were the grandchild I have as yet failed to provide.

An aunt died this spring, and I am embarrassed to say I did not go to the viewing or funeral; she inconveniently died during the busiest week of my semester. She was my mother’s biggest fan (outside her sons), and a very fine woman. It is not a stern enough rebuke to say I should have known better. I did. I should have done better. The law is indeed a jealous mistress, but jealously should not be respected above love.

Now I am in the unfamiliar position of pleading my professional worth, a manifest thing if you ask me, to employers. I am also studying for the New Jersey and Pennsylvania bars. And that’s all good. At least it's what I signed up for. But it's a restless time.

I am not one of those folks who, if now hit by a bus, could lie on the roadside and say I have no regrets as I shuffle off the mortal coil. I regret many of the decisions I’ve made (not the least but nearly the latest of which is not attending my aunt's viewing and funeral), and I simply haven't done enough of consequence. The thing that most gets me up in the morning, that gets me through the next outline and the next cover letter, is the idea that soon some thing will happen, some opportunity will present itself, that but for the path I followed (but-for causation!) would have remained undiscovered; unavailable. Thus will all that came before be redeemed. And thus will I find the avenue and inspiration to contribute to my fellows on a scale and to a depth my happiness and sense of worth seem to depend upon. That thought keeps me looking ahead; to the day I can be a guy who says he has no regrets. Meantime I am careful around buses.

And folks who consider such looking ahead an unholy or chimerical striving, an unrequitable sacrifice of the here and now, should consider whether they have already arrived, unreflective, to the thing that redeemed their prior acts and omissions, and which leavens all subsequent failures with consolation. That glorifies the here and now.

Se Trata De Una Tendencia

2009-05-28T16:49:00.000-07:00

President Obama is on a roll. On the same day he nominated Sonia Sotomayor to fill the vacancy on the Supreme Court, he announced his intention to appoint Miguel Diaz, a Roman Catholic theologian and associate professor at St. John's University and the College of St. Benedict in Minnesota, to serve as the next US ambassador to the Vatican. Diaz will be the first Hispanic appointed to the post since the US and the Holy See established full diplomatic ties in 1984. Diaz, who was an advisor to Obama's presidential campaign, was born in Havana. He is the son of a waiter and a data entry operator and the first person in his family to attend college.

The outgoing ambassador to the Vatican is Mary Ann Glendon, the Harvard law professor who declined an invitation to receive Notre Dame's top honor, the Laetere Medal, at graduation ceremonies earlier this month in protest of Notre Dame's decision to bestow an honorary degree on Obama notwithstanding his political position supporting abortion rights.

Prop 8 Fate

2009-05-26T17:25:00.000-07:00

Read the California Supreme Court's opinion in Proposition 8 case.

The court upheld a California Constitutional amendment banning same sex marriage. The majority wrote that it was not the court's job to address whether the ban is wise public policy, but to decide whether it is constitutionally valid, while setting aside personal beliefs and values. (at 3).

Searching for an Honest Man

2009-05-22T13:25:00.001-07:00

Leon Kass had plenty to say about the state of the humanities as the 2009 Jefferson Lecturer.

I particularly like this:

"Everyone has heard the story of Diogenes the Cynic who went around the sunlit streets of Athens, lantern in hand, looking for an honest man. This same Diogenes, when he heard Plato being praised for defining man as “an animal, biped and featherless,” threw a plucked chicken into the Academy, saying, “Here is Platonic man!” These tales display Diogenes’ cynicism as both ethical and philosophical: he is remembered for mocking the possibility of finding human virtue and for mocking the possibility of knowing human nature. In these respects, the legendary Diogenes would feel right at home today in many an American university, where a professed interest in human nature and human excellence—or, more generally, in truth and goodness—invites reactions ranging from mild ridicule for one’s naiveté to outright denunciation for one’s attraction to such discredited and dangerous notions.

Tracing the stories about Diogenes the Cynic to their source, in Diogenes Laertius’ Lives of Eminent Philosophers, one discovers that the apocryphal story is somewhat embroidered if not incorrect. Yes, Diogenes lit a lantern in broad daylight, but he did not say he was looking for an honest man. What he said was, “I am looking for [or ‘seeking’] human being”—anthrôpon zeto—either a human being or the human being, either an exemplar or the idea of humanity, or both. To be sure, purporting to seek the answer by means of candlepower affirms Diogenes’ badge as cynic. But the picture also suggests a man who refuses to be taken in by complacent popular beliefs that we already know human goodness from our daily experience or by confident professorial claims that we can capture the mystery of our humanity in definitions. But mocking or not, and perhaps speaking better than he knew, Diogenes gave elegantly simple expression to the humanist quest for self-knowledge: I seek the human being—my human being, your human being, our humanity. In fact, the embellished version of Diogenes’ question comes to the same thing: to seek an honest man is, at once, to seek a human being worthy of the name, an honest-to-goodness exemplar of the idea of humanity, a truthful and truth-speaking embodiment of the animal having the power of articulate speech."

Rule of Law RIP

2009-05-22T11:07:00.000-07:00

Andrew Grossman, Heritage Foundation Senior Legal Analyst testified before the House Judiciary Committee yesterday at a hearing on Ramifications of Auto Industry Initiatives. Grossman made three points. 1. The Bush and Obama administrations have harmed the US auto industry by intervention meant to save it; 2. The Obama administration has abused its power to sidestep the rule of law, particularly bankruptcy law; and 3. These acts will prolong our current recession unless Congress reverses them.

Grossman's third point follows from the first two. If you mess with the stability of contract and property rights, nothing good can come of that.

Grossman said: "Lenders know how to deal with bankruptcy--it's a well understood risk of doing business. But the tough measures employed by the Obama Administration to cram down debt on behalf of the automakers were unprecedented and will naturally make lenders reluctant to do business with these companies, for fear they could suffer the same fate. . . . Impaired access to debt and capital will stymie future restructuring, investment, and growth, reducing the likelihood that either company will fully rebound and, beyond that, prosper."

And on and on in the downward spiral toward oblivion.

Chrysler Rejects 789 Dealers

2009-05-15T05:56:00.000-07:00

As part of its bankruptcy case, Chrysler rejected one quarter of its dealership agreements under 11 U.S.C. sec. 365. Check to see if your hometown dealership is on the cut list. 2392 American Chrysler, Jeep and Dodge dealers will survive the sale to Fiat.

Here's what the axed dealerships heard in Chrysler's press release: “The unprecedented decline in the industry has had a significant impact on our sales and forced us to reduce production levels to better match the needs of the market. With the downsizing of operations after the sale and reduction of plants and production, similar reductions must be made to the size of the dealer body. We appreciate the support of our dealers and regret this painful action. We wish market conditions made it possible to keep everyone.”

In other words, "It's not you, it's me."

Song for Penn State Law Class of 2009

2009-05-08T05:00:00.000-07:00

When it first opened, critics panned the musical Wicked (music and lyrics by Steven Schwartz and book by Winnie Holtzman). The musical is based on a novel by Gregory Maguire. The story starts before Dorothy arrived in the Land of Oz and explains how two girls became Elphaba, the Wicked Witch of the West, and Glinda the Good. Theatre critics called the plot "muddled" and the sound in New York's Gershwin Theater "smearing." No matter. Audiences loved it.

This song is the witches' farewell to each other after a long and sometimes difficult journey together. To the Dickinson School of Law Class of 2009 from me in thanksgiving for the blessing of each other:

For Good

I've heard it said
That people come into our lives for a reason
Bringing something we must learn
And we are led
To those who help us most to grow
If we let them
And we help them in return

Well, I don't know if I believe that's true
But I know I'm who I am today
Because I knew you:

Like a comet pulled from orbit
As it passes a sun
Like a stream that meets a boulder
Halfway through the wood
Who can say if I've been changed for the better?
But because I knew you
I have been changed for good

It well may be
That we will never meet again
In this lifetime
So let me say before we part
So much of me
Is made of what I learned from you
You'll be with me
Like a handprint on my heart
And now whatever way our stories end
I know you have re-written mine
By being my friend:

Like a ship blown from its mooring
By a wind off the sea
Like a seed dropped by a skybird
In a distant wood,
Who can say if I've been changed for the better?
But because I knew you:
Because I knew you:
I have been changed for good

And just to clear the air
I ask forgiveness
For the things I've done you blame me for
But then, I guess we know
There's blame to share
And none of it seems to matter anymore.

Like a comet pulled from orbit as it
Passes a sun, like
A stream that meets a boulder, half-way
Through the wood

Who can say if I've been changed for the better?
I do believe I have been changed for the better.

Because I knew you:
I have been changed for good.

A Tribute To The Enduring American Spirit

2009-05-02T16:32:00.001-07:00

Today, Mine That Bird, a small horse with a big heart that cost $9,500 and was a 50-1 shot won the 135th running of the Kentucky Derby! He was trained by a former unknown in New Mexico who drove the hours 21 hours to Kentucky pulling his horse behind his pick-up all the way. When asked, trainer Bennie Woolley Jr. said, "They'll know who I am now."

Mine That Bird ran against million dollar horses and won with 6 and 3/4 lengths to spare, one of the largest margins of victory ever. I love this story and I love that stories like this happen in America every day, not just with horses but with people like you and me. Be encouraged and run like the wind!

In re Chrysler, LLC

2009-05-01T14:57:00.000-07:00

Chrysler filed for relief under chaper 11 of the Bankruptcy Code on Thursday in the Bankruptcy Court of the Southern District of New York. Judge Arthur Gonzales is presiding. The filing became necessary after hedge fund creditors holding approximately 30 percent of Chrysler's total debt refused to sign on to the Treasury Department brokered workout by the April 30 deadline. Look at the the petition or go to the SDNY Bankruptcy Court and review the petition and first day motions. (You'll need a Pacer account for the second link). For readers who speak the language, Bankruptcy Litigation Blog has the word on the legal risks and rewards of a section 363 sale and links to affidavits filed with first day motions by Chrysler insiders and disgruntled creditors' experts.

Yes Alison, Jones Day represents Chrysler. The chapter 11 petition signed by Jones Day NY partner and bankruptcy mega celeb Corinne Ball explains that Chyrsler shut down its manufacturing facilities and will remain idle until the bankruptcy case concludes with a court-approved deal with Fiat and Chrysler creditors as outlined by Treasury. She warned that failure to move quickly through bankruptcy would mean liquidation for Chrysler and “the end of an iconic, 83-year-old American car company,” not to mention the loss of jobs for 38,500 people.

The first hearing in the case was this morning. Reuters reports that the courtroom was packed and very hot. Judge Gonzales halted the proceeding briefly when a Dewey & LeBoeuf associate standing with bankruptcy lawyer Martin Bienenstock (for Chrysler Financial) collapsed. Once the paramedics hauled her out, Judge Gonzales decided six motions in an hour.

A New York Story

2009-04-29T19:02:00.000-07:00

In the New York Post of April 29th is the story, written by Laura Italiano, of the start of the defense’s presentation in the criminal fraud trial of Anthony Marshall, son of the late philanthropist and socialite Brooke Astor. Francis Morrissey is a co-defendant and was Mr. Marshall’s lawyer for the transaction under review. What follows is an adaptation of the Post story; quotations used were taken directly from the story.

Prosecutors claim that in 2004 Mr. Marshall and Mr. Morrissey manually transported Mrs. Astor, then 101 years of age and beset with Alzheimer’s disease, from the arms of her in-house nurse and down the hallway into the drawing room of her Park Avenue apartment (incidentally, it seems if you have a drawing room in your family, you are more likely to have experience with will contests than families without drawing rooms). Once there, she was, according to the Post story, confronted by a batch of… dark suited and gravely officious lawyers. And then she signed an apparently prepared codicil leaving 60 million worth of cash and bonds to Mr. Marshall. Mrs. Astor died a few years ago, at the great age of 104.

Fred Hafetz is Mr. Marshall’s defense attorney. Mr. Hafetz is a renowned criminal defense attorney, specializing in white collar crime. He successfully defended former Miss America Bess Meyerson, who was accused of bribing a judge in the competition that awarded her that title (perhaps the reigning Miss. California should have thought of that; e.g. Here's $50, ask me about world peace). I had occasion once to talk to Mr. Hafetz by telephone. He is grateful to my mother for a kindness done his family, and so agreed to counsel me on a career in the law. He is a nice man, and has a solid gold bar for a legal resume. Mr. Hafetz put up a slide during his opening remarks noting that Mrs. Astor, known to history as a philanthropist, gave nothing to charity between the years 1953 and 1993. In 1993, Mr. Marshall eloped with his current wife, Charlene. Mrs. Astor is recognized not to have been fond of Charlene, and the defense alleges she registered her disapproval by giving gobs of Mr. Marshall’s legacy to charity and by writing a series of wills, all of which kept Mr. Marshall from eventual possession of the 60 million, which before 1993 had been vouchsafed to him in each of a series of wills executed by Mrs. Astor (apparently, Mrs. Astor enjoyed executing and revising will instruments: Mr. Morrissey’s lawyer, noting her enthusiasm for the work, joked in his opening that “she probably could have taught trusts and estates at Harvard Law School”). Mr. Hafetz said in his opening statement that in 2004, nearing the end of her life, a lucid Mrs. Astor softened toward her son, if not also his wife, and signed the 2004 codicil that reinherited Mr. Marshall. Mr. Hafetz told the jury, “[s]omeone with dementia, someone with Alzheimer’s, is still a human being…[t]hey do not forfeit their human right…to make decisions.”

The prosecution seeks to prove its case by exclusively circumstantial evidence; testimony from household staff and famous friends of Mrs. Astor (among them Barbara Walters and Henry Kissinger) that the grande dame lacked the competence to meaningfully sign the codicil.

We’ll see who prevails, which is not necessarily the same thing as who is right. For what it’s worth, Andrea Peyser, writing a related opinion piece in the Post that is not a study in subtlety, thinks she knows where the merits lie: “Mrs. Astor, I fear, is rolling in her grave. Anthony Marshall should burn in hell.”

STOLI Hearing on the Hill Today

2009-04-29T09:50:00.000-07:00

David J. Stertzer, CEO of the Association for Advanced Life Underwriting, sent out the following update this morning.

"U.S. Senate Special Committee on Aging Chairman Herb Kohl (D-WI) will hold a hearing today focused on the life settlement market and stranger originated life insurance ("STOLI"). The hearing will be at 2:00 pm EDT and can be accessed from the Committee webpage. For a complete witness list and announcement of the hearing, please click here.

AALU submitted this written testimony to the Committee focusing on our stong efforts in conjunction with the broader life insurance industry to enact state laws to prevent STOLI, while protecting legitimate uses of life insurance and life settlements.

We hope the hearing will further those efforts, because we cannot allow STOLI to detract from the critical role life insurance products play for 75 million American families.
We will be covering the hearing and will provide you with a report tomorrow."

While Cameras Are Away The Mice Will Play

2009-04-23T20:51:00.000-07:00

Given that Justices Thomas and Breyer chatted together on the far end of the bench during the oral argument I attended (colleagues have reported the same on other occasions), it is only appropriate that they brief the public on whether the Justices are open to cameras in the SCOTUS court room. I think the public would be very amused to watch their little side show. Wink, wink.

For more on this head over to the Wall Street Journal Online.

Just to be clear, this does not mean that I endorse cameras in the courtroom. In fact, I do not, and I think it would lead to the kind of grandstanding we see on the floor of Congress most days, for those of us nerdy enough to watch C-SPAN.

Stick a Fork in Chrysler

2009-04-23T15:49:00.000-07:00

The New York Times reported today that the U.S. Treasury Department is preparing a chapter 11 bankruptcy petition for the automaker Chrysler. The Times puts the filing date as early as next week.

The Treasury Department extended a $4 billion federal loan to Chrysler in January. Chrysler needs more cash but the Treasury tap is closed until it meets the governnment's terms. Chrysler has until April 30 to work out a deal with Fiat in which Fiat takes an equity position in Chrysler and Chrysler gets access to Fiat's small-car know how and distribution network.

Treasury and Chrysler are pushing Chrysler's lenders (most of whom have taken bailout money for their own balance sheets) to reduce the $6.9 billion in debt Chrysler owes them by 85%, or down to $1 billion. Recent but not up to the minute news reports note that creditors have counteroffered to take a 40% write down of debt and receive an equity position in the restructured company provided that Fiat puts up about $1 billion in new capital. Meanwhile, Chrysler is working on a deal with the UAW over the fate of union members' pensions and health benefits.

Why is Treasury so keen for a Chrysler bankruptcy? Chrysler's creditors hold security interests in the company's assets and Treasury currently stands behind them in the repayment line. Treasury wants any additional government loans to Chrysler to be first in line for repayment. In a chapter 11 case, the bankruptcy court can grant Treasury, as post-petition lender, first priority repayment rights over creditors' objection. That's a sweet deal for U.S. taxpayers.

Penn State Law Review - Symposium "Building A Civilization Of Arbitration"

2009-04-22T09:03:00.000-07:00

I am pleased to announce that the Penn State Law Review will soon publish a symposium issue entitled "Building a Civilization of Arbitration." Below is a brief excerpt from the introduction written by Professor Thomas Carbonneau.

The U.S. Supreme Court’s “work product” has generated a large and growing arbitration bar. It also has finally begun to stimulate a greater volume of academic activity on the topic of arbitration. The work of legal practitioners and academics, along with the courts’ decisional law, are “Building a Civilization of Arbitration” that codifies advances and grapples with the controversial aspects of law-in-the-making. The Penn State Dickinson School of Law takes great pride in welcoming a distinguished group of lawyers and law teachers to the pages of its Law Review. They are the leaders in the field of arbitration. Their contributions identify the settled law and evaluate it from a variety of analytical, intellectual, and institutional perspectives.

The lead article addresses the concept of designing arbitrations from the perspective of two mainstays of the U.S. Supreme Court decisional law on arbitration: Volt Info. Sciences, Inc. and Mastrobuono. The article evaluates the use of contract freedom in the context of the judicial construction of party intent. Beyond this, the symposium investigates a wide variety of cutting-edge topics, ranging from recent landmark cases to investment arbitration and including the reform of the FAA, the concept of private ordering in international commercial arbitration (ICA), empirical developments in consumer arbitration, third-party interests in arbitration, various provocative comparative law developments—the role of courts in national arbitration laws, a lucid evaluation of the Russian Federation’s statist concept of arbitration, an equally insightful comparison of Canadian and United States consumer arbitration, and an evaluation of an important recent book on ICA. All self-respecting legal publications should include book reviews, and we are proud and delighted to have this one.

Silence as Price of TARP Bailout Funds

2009-04-17T10:46:00.000-07:00

Organized labor has seized the bailout of financial services companies as a tool to silence them in the political process.

Last month, the House of Representatives passed two bills in reaction to the AIG executive compensation story: H.R. 1586 (imposing a 90 percent tax on income in the form of retention bonuses received by executives at firms that accepted more than $5 billion in bailout funds) and H.R. 1664 (requiring Treasury to curb "unreasonable or excessive" executive compensation at firms that accepted federal bailout money).

Last Tuesday, labor federation Change to Win asked Neil Barofsky, Inspector General of the Troubled Asset Relief Program (TARP), to audit Bank of America and other firms who received TARP money to determine whether Bank of America and other financial institutionsused TARP money to lobby against the two bills. Treasury officials responded with puzzlement. Money is fungible. Change to Win doesn't agree. In particular, it wants the TARP Inspector General to disclose how much TARP recipients paid in membership dues to the Financial Services Roundtable, a financial services industry group that spoke out against the House bills amid the AIG populist revenge fervor. The Roundtable wrote to lawmakers just after H.R. 1586 passed urging Congressmen to consider the likely effect of bill on the success of the TARP program.

The AFL-CIO's Executive Pay Watch Website unveiled an annual update on April 14 which includes a section on pay practices at companies that have received TARP money. The site also features a report on companies, including Bank of America, that are actively opposing the union-backed Employee Free Choice Act (H.R. 1409, S. 560), a bill that would allow workers to form unions through a majority "card check" process and not by secret ballot. The AFL-CIO has its eye on B of A and Citigroup, TARP recipients who likely oppose the bill.

How Do You Say AIG in Portugese?

2009-04-17T07:10:00.000-07:00

Reuters reports that yesterday Portugal's Council of Ministers gave a preliminary nod to legislation that would lift bank customer's privacy rights and impose a special tax rate of 60% to "especially grave, unjustified enrichment" in a customer's account.

Under the proposed legislation, upon "well-grounded suspicions" of tax fraud and a "well-justified resolution by the General Tax Directorate," the government can access a taxpayer's banking information without court order. If the tax authority finds a difference of more than than 100,000 euros ($131,813) over previously reported income that the taxpayer cannot explain, the difference is subject to a 60% tax rate. If it exceeds 100,000 euros, the government gets direct access to the taxpayer's bank account.

The Portgugese Parliament has already approved a similar bill, introduced by the ruling Socialists together with the Left Block coalition party, the Portuguese Communist Party, and the Greens. The last opposition to encroachment of customers' bank privacy rights, President Anibal Cavaca Silva of the conservative Social Democrat party, apparently has folded. Yesterday, he reportedly endorsed the Council of Minister's plan to lift bank secrecy protection.

Lawyer Loses License for Failure to Pay Student Loans

2009-04-15T07:48:00.000-07:00

The National Law Journal reported yesterday that a Texas lawyer lost his law license because he defaulted on his student loan. I'd heard of lawyers losing their licenses for failure to pay child support, but student loan debt-- that's hitting close to home. It turns out that there's a little more to this story than the NLJ reported.

Attorney Frank Santulli first ran into trouble with the Texas Bar in 2001. Five years earlier, in 1996, the Supreme Court of Texas adopted Rules for Suspension of Attorneys in Default of Guaranteed Student Loans under which the Texas Guaranteed Student Loan Corporation (TGSCL) can inform the State Bar that a lawyer is in default. The Bar then notifies the lawyer of the report and the lawyer has sixty days to obtain certification from the TGSLC that he has entered into a repayment agreement or that he is otherwise not in default. On the sixty-first day following the notice, if the lawyer cannot produce the requisite certificate, he is automatically suspended from the practice of law. (The New Jersey Bar has adopted a similar rule).

In 2001, after TGSLC informed the Bar of Santulli's default, he appealed his suspension before the Board of Law Examiners. Santulli was in a swamp of credit card and student loan debt. He had worked out a debt management plan with Consumer Credit Counseling Services (CCCS). The Board entered an agreed order granting Santulli a two-year probationary license. He agreed to make payments under the CCCS plan and provide proof of payments to the Board.

Santulli defaulted on the payments due under the plan and in December 2002, the Board held a hearing on revocation of his probationary license. Santulli explained that he had experienced financial setbacks and indeed had not made the agreed payments on his student loan since December 2001. The Board was concerned with the professional implications of his financial problems, in particular that Santulli could find himself "in so much debt and under so much pressure that there are opportunities and temptation either to short-shrift . . . clients, or . . .convert money [from clients] to take care of those debts."

The Board granted Santulli a six-month extension of his probationary license subject to conditions including one that required him to "make suitable arrangements for payment or discharge of all his past due debts." Moreover, the order stated that Santulli's failure to comply with this payment condition would conclusively indicate a lack of trustworthiness and support the inference that Santulli posed an unreasonable risk of harm to his clients. Santulli did not object to the order.

A year later, in December 2003, Mr. Santulli appeared again before the Board and admitted that he had not made any payments on his debt. He had made arrangements with a bankruptcy lawyer to swap family-law work for bankruptcy represenation. But, the bankruptcy lawyer didn't deliver. Santulli hired another bankruptcy lawyer in October, but still no bankruptcy petition. Santulli asked the Board for another month to file for bankruptcy.

The Board rejected Santulli's request for an extension and found him in violation of the condition of his probationary license -- that he make arrangements to pay or discharge his debts. Pursuant to the 2002 agreement, Santulli's failure indicated the lack of good moral character required for the privilege of practicing law. In particular, it found that his failure to make arrangements to pay or discharge his debt presented a clear likelihood that he would harm a client, obstruct justice or violate the lawyer disciplinary rules.

Santulli sought judicial review of the revocation of his license. The trial court affirmed the Board. Santulli appealed arguing that the trial court's order did not rest on substantial evidence, that the condition of his probationary license requiring him to pay or discharge his loans was arbitrary and capricious, and that the Board erred in concluding that his behavior justified a conclusion that he was unfit for the practice of law.

The Texas Court of Appeals (3d Dist.) noted that Santulli did not object to or appeal the Board's 2002 order that imposed the payment condition. The condition was not ambiguous or otherwise inappropriate, and Santulli fully understood it. Although Santulli had filed for bankrutpcy relief in 2004, after entry of the Board's 2003 order, his bankruptcy case and ultimate discharge was not before the Board in 2003. The court held that based on the record before the Board, its decision to revoke Santulli's law license was not erroneous. "[T]he evidence shows that two and one-half years after being given a probationary license conditioned in part on paying or discharging his debts to satisfy the Board's concerns, Santulli had not made any progress . . . other than to develop a more concrete intention to file for bankruptcy within a month."

As for the connection between Santulli's failure to pay his debts and his moral character, the court found that the Board's order was supported by reliable evidence "such that a reasonable man could find that there were substantial doubts about [Santulli's] 'honesty, fairness and respect for the rights of others and for the laws of the state and nation.'" (citing Koningsberg v. State Bar of Cal., 353 U.S. 252 (1957).

In re: Bob

2009-04-09T20:10:00.000-07:00

In my counterterrorism seminar, we have come, perhaps inevitably, to the subject of torture. Torture is a thing, like pornography, that is hard to define at the margins but easily identified in its galloping variety. And torture, almost uniquely, is a thing beyond the law. Professor John Yoo gained unhappy fame not for offering the opinion that torture is legal, but by placing a great deal of conduct outside the rubric of torture by attempting to define torture narrowly in the law.

To be sure, there are those who feel torture (even the strident stuff) should be recognized in the law as available to cope with extraordinary circumstances. The quintessential example of such a circumstance is the ticking time bomb scenario, where you (yes, you) have custody of a terrorist who has planted a bomb somewhere (only he knows where) which will detonate in one hour and kill scores of people.

Would you, for example, shoot the terrorist in the leg to extract from him the location of the bomb? Whatever your answer, the idea that you should be able to do so legally (i.e. suffer no legal jeopardy after the fact) is not an exotic one. But whether one subscribes to that idea or rejects it, the basis for doing so cannot be found in the law. It has to be found outside the law, on the far side of a moral reckoning.

I won’t go into how folks in my class came down on the ticking time bomb scenario, because to do so would literally be talking out of school. But our discussion reminded me of a few other moral dilemmas, in my view more agonizing than the ticking time bomb scenario, that I was presented with in my undergraduate years. And it is with these that the rest of this post is concerned. Both came up, unsurprisingly, in philosophy classes.

The first dilemma puts you at the control of a railroad switch. Down one track, on which a runaway train presently travels, are five people who for some reason (you have to just accept the parameters of the scenario to get to the critical moral choice) cannot get off the track and will be killed if you take no action. Along the other track, to which it is in your power to redirect the train, is a single person likewise unable to vacate. The question, of course, is whether you pull the switch and save the five people by sacrificing one, or whether you stand by. You will notice that in addition to the raw number of lives calculus, there is the moral agency dimension to this dilemma: if you pull the switch, you act affirmatively to kill a person who otherwise was not in jeopardy.

Utilitarianism has an answer to this dilemma. Save the five by killing the one. But what if the five are members of the Manson family (they have escaped) and the one is a child who will grow to be the scientist who cures cancer. Utilitarianism then switches sides, even if it had to flip the switch to kill the five. What would you do?

Here’s my favorite: You are in a cave with five friends. For some reason, the cave begins to fill up with water. There is but one exit, and presently one of your five friends gets perfectly and emphatically lodged in the threshold (I’ll call him Bob). There is no way to dislodge Bob by pushing or pulling, and the water continues to rise. It is certain that the five of you yet in the cave will drown if Bob is not dislodged. Bob, incidentally, will live if left undisturbed because his face is directed out of the cave. Luckily for you and the others, and tragically for Bob, there is lying about a stick of dynamite and a means to light it. Using the dynamite on Bob (i.e. blowing him up) will free you and your four friends from the cave. Of course Bob will perish in the exercise. It has been some years since I was in the class in which we discussed this dilemma, and so I feel free, in the interest of writing a more interesting post, to go into some of the views expressed by the students.

The first consideration for the students was to decide whether to use the dynamite. Many of us quickly determined to do so. A few said no, and prepared to hypothetically die. And a few others remained for the time uncommitted. The first and last practical difficulty the Explode Bob caucus ran into was where to place the dynamite. This was a completely unnecessary inquiry, since it had been stipulated that the dynamite would dislodge Bob. Nevertheless, we dilated on the issue. At length, and to our great amusement, we determined that the dynamite would have to be used as a particularly unmarketable suppository. Then one of the uncommitted students asked to be heard. I remember him because he had to that point in the semester not said a single word in class. Accordingly, I had invested him with wisdom. He knitted his brow. He was, he said, in general if reluctant agreement that Bob had to go. But he had some nagging doubts and meant to soothe his conscience thus: couldn’t we, he said, ask Bob if it was ok to blow him up. He spoke, it turned out, too soon in that class.

If you are disposed to do so, change around the numbers involved and the moral character or utilitarian worth of the players and note when you switch from one determination to the other. You will reach decisions intuitively, easily. Then try to identify a consistent principle guiding your decisions. That is only easy if you are prepared to be categorical. And categorical approaches tend, at the limit, to produce absurd results.

Junk not joke email

2009-03-28T11:02:00.000-07:00

I knew it even before I opened the email - the telltale signs were all over the subject line .... "Between us".... Now I've won the Irish sweepstakes more times than I can count, been invited to share in the plundered oil wealth of a nation (which one? the emails never say), secret accounts of deceased dictators can be mine, steal the inheritance of those bearing my name, yes, I've seen it all. I especially appreciated the offers that cynically pose as dying religious folk begging to donate huge sums for charity - sure, there's a sucker born every minute, these say - steal from a dying woman, go ahead, you deserve it. They all go into the delete box with a chuckle.

But this one goes too far:
"Between us.... I am an investigative consultant with Holocaust Victims Assets Litigation (Swiss Banks). Between July 1997- July 2008, the Swiss Banker's Association published a list of dormant accounts originally opened by non-Swiss citizens. These accounts had been dormant since the end of World War II (May 9,1945). The continuing efforts of the Claims Resolution Tribunal (CRT) have since resulted in the discovery of various accounts. The published lists contain all types of dormant accounts, including interest-bearing savings accounts,securities accounts,safe deposit boxes,custody accounts, and non-interest-bearing transaction accounts.Numbered accounts are also included. Interest is paid on accounts that were interest bearing when established.The Claims Resolution Tribunal (CRT)handles processing of all claims on accounts due non-Swiss citizens. A dormant account of Aronson Rudolf, with a credit balance of 25,000,000 US dollar plus accumulated interest was discovered by me. The beneficiary left no WILL and no possible records for trace of heirs.As a top executive officer, I have all secret details and necessary contacts for claim of the funds without any hitch. Please verify using this website: http://www.crt-ii.org/links.phtm All that is required from you is to indicate your interest to receive the funds into your norminated Bank account. Please Reach Me Through This email: paulwarren@tsamail.co.za Thanks Paul Warren"

Not funny. Indecent, in fact.

The Crisis of Credit Visualized

2009-03-18T19:13:00.000-07:00

A refreshingly lucid explanation of the credit crisis.

The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

Finally

2009-03-10T13:04:00.000-07:00

Premium, Natural, and Organic Supermarket shoppers, rejoice! Whole Foods has settled with the FTC. According to the FTC press release, "The consent order will restore competition in 17 geographic markets that were impacted by the acquisition. In addition to requiring the transfer or divestiture of all rights to 32 stores, Whole Foods also is required to divest related Wild Oats intellectual property, including unrestricted rights to the “Wild Oats” brand, which retains significant name recognition and loyalty among consumers." FTC Chairman Jon Leibowitz says, "As a result of this settlement, American consumers will see more choices and lower prices for organic foods." Sounds good to me, but is it true?

The settlement requires Whole Foods to divest itself of thirty-two stores, in seventeen geographic markets (In 2007, when the merger agreement was entered into, Whole Foods acquired seventy-four Wild Oats stores). Nineteen of these stores are already closed. Selling closed stores will not likely prove to be easy, and unlike the competition created by a Wild Oats-esque competitor, Whole Foods need not sell the designated stores to a single buyer. This means, the stores could potentially be sold to smaller-scale operations, which may not have the ability to effectively compete with the efficiencies of an operation the size of Whole Foods. A similar problem is seen with the IP rights. Whole Foods must sell its interest in the Wild Oats name, but if the buyer is not at least as big as Wild Oats, the value of the name could diminish greatly.

The settlement also means the Supreme Court won't have the chance to review the D.C. Circuit's opinion, issued last summer, which some have criticized as "a step backward" as it "runs counter to the strong trend in recent Supreme Court jurisprudence for economic rigor and clear standards to guide businesses and the agencies." Will this consent order truly "restore competition"? Only time will tell. All I can say for sure is that settlements are always a compromise.

Siftables

2009-03-10T03:36:00.000-07:00

Very cool, short video from the Feb 2009 TED conference.

UPDATE: Holy smokes, this video looks even cooler. Think Minority Report (in a good way) and holodeck.

Betting Or Bonding?

2009-02-25T08:54:00.000-08:00

Today I ran across a Legal Zoom article that posed the question: Is Your March Madness Office Pool Legal? Wow, what a bummer! I honestly never thought about that. It's also true that I haven't had occasion to because I've never participated in a March Madness Pool for fun, let alone for money.

It doesn't surprise me that people do it though. According to the article, "2008 March Madness office pools were worth more than $2.5 billion with 27% of American employees participating." Pools are also cited as a way to foster a sense of community around the water cooler. Truth be told, the majority of office pools are illegal gambling activity because betting on sports is only legal in Nevada.

What I find most interesting is that Legal Zoom goes on to advise gamblers on how to avoid detection: keep your pool small, bracket on paper rather than online, encourage game watching after-hours rather than on the internet at work, etc. WHAT?! A website devoted to helping people accomplish things legally is advising them on how to behave illegally? Something about that just did not sit right with me.

I realize that this situation is unfortunate for those who enjoy the camaraderie of March Madness Pools. However, shouldn't lawyers respond by lobbying for an exception to the law rather than by advising clients to break the law?

Apologia pro Grammatica (I think this is right)

2009-02-24T19:25:00.000-08:00

I have been on Facebook for most of the last two years. I was initially dragooned into it by a friend who was concerned about my lack of a social life and who confided that concern to Facebook. Facebook in turn- and spookily- sent me an introductory email to sign up. And so I did.

From that time until over Christmas break, I was that androgynous white head that shows up in people’s friend portfolios, and my own portfolio of friends was limited to folks who sought me out. As part of a New Year’s resolution to surrender to the zeitgeist, and in so doing avoid being presumed dead, I became an active member of Facebook in January of this year.

Now that I am an active member of Facebook, I not only know too much about a whole bunch of people, but have discovered besides, in the messages sent between users, some persistent grammar problems. The most common one is the use of ‘your’ when what is meant is ‘you’re.’ Then there is the tendency, understandable at least from a logical standpoint, to use ‘it’s’ when what is meant is ‘its’. And, alas, there is the conscious and widespread non-use of punctuation and capital letters, and the ingenious abbreviation of one syllable words (e.g. thnx instead of thanks). It is unattractive to go on about these things too long or too stridently, because nearly everyone makes mistakes in English grammar and because pedantry is boorish; although the dedicated pedant may actually round the bend, as it were, and become endearing.

Consider the case of French grammarian Dominique Bonhours, best told by Bill Bryson in The Mother Tongue (read Bill Bryson, by the way). Bonhours, just before shuffling off the mortal coil, and exemplifying what is meant by dying in the saddle, is reported to have said, “I am going to- or I am about to- die, either expression is used.” And too there is the asserted and sometimes actual utility of excluding certain grammatical formalities from a functional writing. A few people I know steadfastly refuse to use capital letters or consistent punctuation in electronic messages. They assert the utility principle (and then make fun of my lack of a social life, going so far as to suggest a connection between that fact and my inclination to write things like this post).

But if the time saved by the writer is then wasted by the reader in divining the message sent, there is no net time saved. There is but a shifting of the burden, and an announced disrespect for the reader. And the use of a construction that means something very different from what is intended seems an unmitigated error. Finally, someone has to object to ‘thnx’, or else it will become the new ‘thanks’, the new proper thing to be transgressed against (perhaps with ‘tx’), and so on until we climb back into the trees.

Hot Cup of Joe in Hand

2009-02-20T08:25:00.000-08:00

As the mercury stays low outside, and job seekers try to secure post-graduation employment, recent research suggests a person's first impression may be more influenced by random physical comforts, like holding a hot cup of coffee, than once believed. The study, conducted at Yale, concludes there may be a link between environmental stimuli and behavior and feelings. Specifically, feelings of trust and empathy are linked to physical feelings of warmth.

The scientists recruited college students to participate in what they thought was a personality study. As the students were brought into the lab, they were asked to hold a cup of coffee (either hot or cold). They were then asked to evaluate presumed personality traits based on a neutral description of a fictitious person (industrious, cautious, and determined). The students who held the hot cup perceived the person as "more generous, sociable and good-natured" than those who held the cold cup. A second test group of students was given either a heating pad or cooling pack to hold for "product-testing." At the end of the "test," the students could choose a gift either for themselves or for a friend. The students who held the cold pack were more likely to choose the gift for themselves.

So what is the moral of the story for those seeking to make a positive first-impression? The study stopped short of concluding individuals should hand out warm drinks before an interview, but rather made the observation that perhaps our environment influences our feelings more than we could have imagined. True, but maybe holding onto that hot cup of coffee before a big interview isn't such a bad idea.

The AP story can be found here.

A Good Thought for the Day

2009-02-18T09:36:00.000-08:00

"Never let the sense of failure corrupt your new action."
~ Oswald Chambers.

Lincoln the Lawyer

2009-02-12T18:10:00.000-08:00

Today marks 200 years since Abraham Lincoln's birth.

Two days before Lincoln's 198th birthday, President Obama opened his presidential campaign on the steps of the Old Capitol in Springfield where Lincoln gave his "house divided" address. In his speech, Obama invoked Lincoln's spirit: "Through his will and his words, he moved a nation and helped free a people.”

In his speech on the Old Capitol steps in June 1858, Lincoln said about the political struggle over slavery:

"Our cause, then, must be intrusted to, and conducted by, its own undoubted friends -- those whose hands are free, whose hearts are in the work -- who do care for the result. Two years ago the Republicans of the nation mustered over thirteen hundred thousand strong. We did this under the single impulse of resistance to a common danger, with every external circumstance against us. Of strange, discordant, and even hostile elements, we gathered from the four winds, and formed and fought the battle through, under the constant hot fire of a disciplined, proud and pampered enemy. Did we brave all then, to falter now? --now, when that same enemy is wavering, dissevered and belligerent? The result is not doubtful. We shall not fail -- if we stand firm, we shall not fail. Wise counsels may accelerate, or mistakes delay it, but, sooner or later, the victory is sure to come."

Historian David Ward is curator of One Life: The Mask of Lincoln at the National Portrait Gallery. When asked for a VOA.com story how Lincoln might have felt about the presidential election, Ward said: "I think the fact that a person of color is now president would hearten Lincoln immensely."

Willing To Live Worse

2009-02-09T12:02:00.000-08:00

If this generation were willing to be the first generation to not live more prosperous than our parents, willing to quit putting bandaids on the problem and instead spend the next 40-60 years (2-3 generations) digging out of the national debt and financial folly, we could be the second greatest generation.

Will we sacrifice our present-day prosperity for the long-term solvency and prosperity of our nation for our children and our children's children? We must reject fear, embrace sacrifice, and have vision outside of ourselves.

We can survive this crisis without a stimulus that will save ourselves and doom those to come. What we are doing is like standing on the Titanic, pushing our kids back on the ship, and jumping into lifeboats to save ourselves.

Self-Control Rather Than State-Control

2009-02-08T14:59:00.000-08:00

This week I heard cries from the left and the right that there should be a law passed to regulate how many eggs may be implanted during IVF treatment. While I question the judgment of a single mother with six children persisting in IVF treatment, leading to eight more children, she has a right to do so.

Do we want to live in a country that tells couples how many children they may have, or try to have, at one time? Do we want government regulation that is motivated by an outlier case? I don't think so.

Liberty is a precious thing. It allows for personal choice with a few exceptions (e.g., murder is not a personal choice we accommodate, nor is assault or battery). Liberty means that people will sometimes make choices that society in general thinks are not good choices, and my sense is that society in general thinks that Nadya Suleman made a bad choice when she continued IVF treatment. But, the beauty of America is that she was FREE to do so.

Ms. Suleman may be ill, as some have suggested, and the clinic that administered her treatment should take a hard look at their screening process to see if perhaps their desire for a sale did not trump their concern for her best interest and that of her children. As the Hippocratic oath instructs, "never do harm to anyone." The clinic could have turned her away, and perhaps should have turned her away, but I do not think that the government should mandate or regulate how many eggs may be implanted in wombs.

I recognize that preserving liberty means that we must engage in self-control, rather than state-control, and so let us rise to that challenge. As Lord Acton said, "Liberty is the prevention of control by others. This requires self-control and, therefore, religious and spiritual influences; education, knowledge, well-being."

As for Ms. Suleman, I hope that the local community and particularly the local religious community rallies to help her as she takes personal responsibility for her actions.

On Courage

2009-02-06T07:52:00.000-08:00

Former British Prime Minister Tony Blair made a powerful speech at the National Prayer Breakfast yesterday morning. He made this observation about leadership, courage and faith:

"Courage in leadership is not simply about having the nerve to take difficult decisions or even in doing the right thing since oftentimes God alone knows what the right thing is.

It is to be in our natural state – which is one of nagging doubt, imperfect knowledge, and uncertain prediction – and to be prepared nonetheless to put on the mantle of responsibility and to stand up in full view of the world, to step out when others step back, to assume the loneliness of the final decision-maker, not sure of success but unsure of it.

And it is in that “not knowing” that the courage lies."

Dean Kenneth W. Starr Visits Penn State

2009-02-04T11:14:00.000-08:00

Excitement was in the air at the Lewis Katz Building as Dean Kenneth W. Starr's visit approached on Tuesday, February 3, 2009. In December of 2008, Dean Starr filed a complaint in California to address the legal question whether Proposition 8 is a revision or amendment to the California State Constitution. Members of the LGBT community called upon ralliers from Altoona to Harrisburg to peacefully protest his involvement in Proposition 8. The great tradition of free speech in America was on full display at the law school through Dean Starr's speech and the protesters' rally.

Dean Starr was hosted by the Federalist Society, a national legal student organization that is committed to the principles that: (1) the state exists to preserve freedom, (2) the separation of powers is central to our Constitution, and (3) it is emphatically the province and duty of the judiciary to say what the law is, not what it should be. More importantly, the Society is committed to attracting intellectually stimulating speakers to campus. Being provoked to think critically about a diversity of viewpoints is important for the next generation of emerging lawyers. The event was co-sponsored by the Young America's Foundation, Speaker's Trust, and the Dean's Office.

Since the law school's University Park location opened its doors in the fall of 2006, the Federalist Society has hosted debates and speeches addressing topics ranging from: immigration and the environment, to the International Criminal Court, gay marriage, and homeland security.

Dean Starr added to that fine tradition when he specifically addressed "The Supreme Court in American Life" to an audience of around 200. He believes that Americans currently either do not understand or misunderstand the role that the Supreme Court plays in our daily lives. He believes that to say that the Court is merely a political court is a misconception.

Dean Starr offered as an example a recent case where university funding was threatened if military recruiters were not allowed on campus due to the exclusion of openly gay and lesbian people in the military. In a unanimous decision on a topic that can be politically charged, the Supreme Court held 9-0 that the military has the right to recruit on campus.

Following his address, Dean Starr answered questions on topics ranging from Guantanamo Bay to the Second Amendment right at issue in D.C. v. Heller. Questions were submitted by those in the Katz Building Auditorium, in addition to students attending the event via simulcast from the Advantica Building in Carlisle.

Reflecting on the event, as one student said, "This was a Grand Slam for the law school." It was the first public event held in the Katz Building Auditorium, and I hope that Dean Starr's speech represents the first of many events that law students at Penn State will attend for generations to come.

In Praise of Technology

2009-02-02T13:55:00.000-08:00

PSU Law is setting the standard for distance learning. With our dual-campus system, students at either location are able to enjoy the curriculum offered at the other campus via AV technology. The technology is some of the most sophisticated around, and it along with our excellent IT personnel do a phenomenal job of facilitating meaningful interaction with our professors and colleagues who reside 100 miles away. As a tech-savvy campus, we also have the additional opportunity of engaging with third parties at locations distinct from both campuses.

This morning, our Class Actions Seminar, taught by the Honorable D. Brooks Smith, Judge on the Third Circuit Court of Appeals, was able to enjoy a a very distinguished guest speaker. The Honorable Anthony Scirica, Chief Judge of the Third Circuit Court of Appeals and Chairman of the Executive Committee of the Judicial Conference of the United States, joined our seminar from his 20th floor conference room in Philadelphia. He spoke to us for about an hour on the judicial process involved in drafting the Federal Rules. It was an amazing experience, and one made possible by the innovations of the Pennsylvania State University, Dickinson School of Law.

Liquidation Sale

2009-01-24T16:16:00.000-08:00

I stopped by our local Circuit City to have a look at the liquidation sale. The big letters on the red and yellow signs, primitive marketing but wildly effective. The parking lot was packed. The store was buzzing with folks fondling cameras and considering once again the 52 incher.

What explains the mob at Circuit City? It surely isn't the 10% discount. I ran into a couple of law students who were comparison shopping a tv. A quick phone call to a friend with an internet connection and they concluded that the liquidators jacked up the price of the tv before the discount. Ten percent off is insulting anyway.

It isn't the sale. Circuit City failed and we who were there flipping through the XBox 360 games less 10% were still alive, still warm, and still optimistic enough to consider, even for a moment, a big screen. It wasn't the ten percent. The draw is the basic delight at the misfortune of others. Schadenfrude.

What Hath Law School Wrought?

2009-01-23T19:14:00.000-08:00

I am taking Professional Responsibility this semester. This week in class we talked about the gulf that obtains between lawyers and non-lawyers in society. More than that, there is alleged to be a gulf of similar span separating lawyers as they are now from who they were when they first walked into law school. Specifically, law school is believed in much of the relevant literature to render those subject to it less reactionary and more conservative, in the non-political sense of that word.

It is not surprising that law school should change a person. As students we spend three years reading cases that lay out the opposing sides' arguments. We read dissents from majority opinions. We read cases where an appellate court reverses a trial court or where a state supreme court reverses the appellate court. Of course we read cases of the Supreme Court of the United States, which does what it will, and about which it is said that it is not final because it is right, but right because it is final. And too we read of cases with similar facts decided differently in different jurisdictions. In short, we become accustomed to needing to see a thing all around before coming to judgment on its nature. That is not what the mass of society is in the habit of doing.

Hardly surprising then, that when released back into society newly minted lawyers should have some trouble relating to non-lawyers. And if it were possible to introduce them to their former selves, the trouble would be no less. The joke told at the orientation for my class was that three years later we would know enough to answer most questions with, "It depends." No self- respecting reactionary, nor even a host of a cable television talk show (which might be the same thing), would be caught saying something like that.

For me personally, one of the worst things to happen in law school was my realization that the woman in the McDonald's hot-coffee-in-the-lap case had a point. I think before long every law student, present or past, will have this experience: someone, family or friend, will pull out a news story about some facially absurd law suit. Then everyone present will denounce the suit. Then they come to you. Wanting to commiserate yet constrained by self respect, you say something detached like, "That's something." But the others find this judgment unsatisfying and press you for a more strident condemnation of the thing. At length you are obligated to say something even less satisfying to them, but which warms your innards; something like, "Well, the relevant standard..." And then the outrage of the group moves from the lawsuit to your profession, and, the undertaking being in jest or not, you are distanced from those folks to some degree.

Such is the burden of a life in the law, I suppose. Speaking for myself, while I am nostalgic for the guy who could enjoy visceral outrage at the McDonald's case, I cannot wish to lose my hard-gained understanding (like how that dude in the Matrix can't go back to the cocoon). Happily, I still don't think the McDonalds woman should have recovered; though it would take me some time, and possibly some footnotes, to explain why.

Reflections on the Semi-Annual Receipt of Grades

2009-01-08T06:22:00.000-08:00

Law school grades are the immediate return on a student's investment in his classes. They are a very large part indeed of a typical student's emotional return for that investment. Each year at this time and again in the spring law professors receive emails and visits from aggrieved students, who feel they merited a better grade. Many of these complaints are based on the grade itself being unsatisfactory, as distinguished from the grade being inconsonant with the effort made. Many high functioning students will receive the first unwanted grade of their entire academic careers in law school. And whatever its merits, the zeitgeist that built self-esteem divorced from accomplishment does not well-prepare those students for the affront of a grade less than some species of A. So the professors brace themselves in their offices and entertain the complaints; in my experience, with the detachment of a doctor giving an unhappy patient the news. The grade, that is, is unchangeable as a dire prognosis, and the professor is there to help the student accept that reality. This steadfastness, it must be acknowledged, is adopted more in contemplation of the slippery slope than for its inherent justice.

The students are not always there for vanity. Employers value high grades. That will not change, nor can there be a convincing argument put forward as to why it should. If an employer selects someone at the top of her class, that employer gets a highly competent and intelligent person. Because grades are to some extent irreducibly arbitrary (and perhaps not even the best way to gauge ability) employers will overlook some comparably endowed students further down in the class. But so what? The employers will get what they need. And these others may come to them as proven professionals somewhere down the line, without employers assuming the risk associated with an unlettered hire.

There are some employers who look almost exclusively at first semester 1L grades, because they believe that is the semester where the students are all starting from the same point, and are all in direct competition with each other. Such employers either do not know or do not care about the impact of the cottage industry that has sprung up to teach entering students (with the money to pay the fee) how to game law school exams. In any case, the fiction that all students start from the same place is pointed up by those students who show up to the first day of law school carrying campaign posters for their election to some office or another (it doesn't seem to matter much which office), while the rest of the student body is dedicated to finding out where to pick up their I.D.'s and locker keys.

When I was in undergrad, I studied a concept called the fundamental attribution error. It refers, as I recall, to the tendency we all have to ascribe a failing of our own to ephemeral and external conditions and to ascribe the failings of others to their own indelible defects. For example, if I do not do well in an oral argument exercise, it was because I didn't sleep well the night before or because I did not have sufficient time to prepare. But if Nancy or Bobby does not do well in the exercise, it is because they just don't have it in them, etc.

Another aspect of the concept is to accept good fortune as an exchange for merit and to regard bad fortune as a failing of another. So, for example, if I get an A, the professor got it right because I did A work. But if the professor gives me a C, the professor (and it can even be the same one) did me an injustice.

We all have a certain amount of self-regard. And law students especially. I remember at orientation viewing a Power Point presentation about the personality traits of law students. Having just read a book by John Douglass (the FBI profiler guy), I recognized the list. I said to the guy next to me, "Those are personality traits of serial killers." Add to this inflated self regard the fact that grades are to some extent arbitrary, and invariably highly ramified for a student's career, and you could script out the scenes, sight unseen, that occur when grades come in.

Rather like someone in an opposing trench in the Great War, I respect and sympathize with the position of law professors in their lonely redoubt come grade time. But yet I am on the other side.

Twelfth Night

2009-01-04T17:20:00.000-08:00

Today is dia de los Reyos, the Feast of the Epiphany, or Twelfth Night. In the Christian tradition, we put away the Christmas decorations and get back to work. But it's not business as usual. When the Magi decided it was time to go back to work, "they returned to their country by another route." Matthew 2:12.

Something to Consider when Drafting New Year's Resolutions

2008-12-29T17:29:00.000-08:00

Andrew Osborn writes in yesterday's Wall Street Journal about Professor Igor Panarin, a Russian academic and former KGB man who we have cause to hope is not a modern-day Cassandra.

Professor Panarin is possessed of a theory that the United States ". . . will fall apart in 2010" (see map of our multi-sundered union via link to WSJ above). Why? Because, ". . . mass immigration, economic decline, and moral degradation will trigger a civil war . . ." Oh no! When does all this start? Next fall. Perhaps the professor has cable and has been exposed to Lou Dobbs and Fox News.

In truth, though, the professor has been pitching this idea since 1998. Recently he has been given the Obama treatment by Russian state media (which at least has the excuse of being state media). The popularity in Russia of the specter of American decline and the fact that the end is nigh combine to render the professor and his prediction presently conspicuous.

If 2009 passes without the rumblings of civil war, and if 2010 passes without the actual thing, then Professor Panarin will have some explaining to do. Perhaps in that event he can join together with Oral Roberts and those folks in the '70's who predicted a new ice age (some of whom, without acknowledging their past certitude, are now putting spoons to highchairs on behalf of melting ice caps) and begin charging rich folks money to predict the future movement of the stock market.

If, however, the professor is right, the United States will break up into six pieces. Alaska is a piece unto itself, and will be subsumed into Russia (this at least answers the questions about Palin's future in the Republican Party). A piece which the professor calls "Atlantic America" is to join the European Union and so make up something very much like Orwell's Oceania. Many folks in Tennessee, Kentucky, West Virginia, and South Carolina, if told that Professor Panarin has predicted that " . . . Washington, D.C. and New York [City] . . . " will join the European Union, might ask the professor when he will get around to predicting the winner of the 2008 presidential contest. They will certainly be surprised to find out their states, as constituents of "Atlantic America," are following Sodom and Gomorrah into the European vortex.

The great north of our nation will be annexed by Canada. But here, if only most conspicuously, the professor's theory seems a stranger to reality. Brave and valiant in arms are the Canadians, but a northern state could repel a Canadian invasion by dispatching a local Boy Scout troop. And too we have in those parts an apparently endless supply of shack-dwelling and prodigiously-armed hermit loons, who will not take kindly to the invasion.

In early January of 2004, I was in Spain's capital of Madrid. My trip coincided with the annual Desfile de los Reyos Magos (a parade and party featuring the three wise men, or kings; apparently the Spanish exchange Christmas gifts, rather sensibly, on the date that the three wise men are believed to have arrived at the manger). The city had come to a standstill, and the people had crowded into the streets and the tapas and the Parque del Retiro. Passing by a side street bordering the Calle de Acala, I saw a mother standing passively by while her nino heroically relieved himself into the sewer by the sidewalk. At the time, I considered the scene a vignette that Hemmingway could have turned into something special; indicia of the visceral soul of the Spanish people or some such thing. But now, inspired by Professor Panarin, I see that what I saw was a harbinger of Spanish moral collapse and that nation's impending absorption into Andorra (bitter-sweet for the Basque region).

The image is an Advanced Spaceborn Thermal Emission and Reflection Radiometer of Madrid: NASA/GSFC/METI/ERSDAC/JAROS, and U.S./Japan ASTER Science Team

Keynes Again

2008-12-29T12:06:00.000-08:00

A once-so-cool economist, his name has been a political epithet for the last last two decades. Times are different and economists are scrambling for the next big thing. Are Keynes's ideas hot or not?

Keynes' 1936 magnum opus, The General Theory of Employment, Interest and Money changed the face of macroeconomics in the early twentieth century. He advanced a way of thinking about a nation's entire economy at once. And he questioned the foundational assumptions of classical economics that economic activity would over the long run tend toward stability, full employment, and equilibrium.

William Barber says this about Keynes in in A History of Economic Thought 229 (Penguin Books 1967):
"The classicists were too preoccupied with questions of long-period economic growth to concern themselves directly with short-period instability; in any event - apart from the post-Napoleonic war years - the matter was not of major significance in their day and age. . . . Though some neo-classical writers made reference to ‘industrial fluctuations’ and to the ‘inconstancy of employment’, they were far more interested in the forces influencing output in particular markets than in those governing the output of the economy as a whole. Moreover, they were persuaded that full employment was the long run equilibrium position toward which the economy naturally gravitated and their analysis was built on this premise.

Even before his doubts about neo-classical presuppositions had crystallized, Keynes was suspicious of this attitude – ‘in the long run,’ he observed, ‘we are all dead’. As his thought took shape in the General Theory, economic analysis was reconstructed to bring short-period aggregative problems to the centre of the stage. The microeconomic questions around which the neo-classical tradition had been organized were pushed toward the wings. At the same time. Keynes was at pains to dissociate his position from the Marxist contention that capitalism was doomed. The essentials of the system, he maintained, could be preserved if reforms were made in time. An unregulated capitalism, however, was incompatible with the maintenance of full employment and economic stability."

Skipping through considerable detail, Keynes rejected the prevalent idea that an income depression (such as the Great One) was inevitably temporary and that once wages and prices fell far enough, firms would finally resume selling all they made and workers would all find jobs. Keynes said that inadequate consumer spending could cause an ecoomy to stagnate permanently. To end a depression, he said, spending had to rise. Although people could not be counted on to spend their way out of an economic depression-- a government could. And an initial increase in government spending, for example on New Deal style public works projects, would have a "multiplier effect" on total spending; an increase in total spending would cause consumption to increase and unemployment to fall and so on.

In Keynes' macroeconomic model, a decrease in spending leads to a decrease in employment, which leads to a further decrease in spending and so on. If people try to increase their saving (relative to spending) there will inevitably follow a fall in employment and production. The multiplier that made government spending such a panacea worked the same way in reverse to create what has come to be called the paradox of thrift. By attepmpting to increase the rate of saving, a society may create economic conditions under which the amount it can actually save is reduced.

Nascent neo-Keynesians should note that not saving hasn't worked out all that well. During the 1990's, the US personal savings rate fell from 8% to 2%. By 2005, it was negative. The good (or bad) news is that personal saving is on the rise. The Fed reported a positive savings rate in the last q of 2008. Economists are predicting that the rate will reach 4.5 % by the end of 2009.

The paradox of thrift rests on the premise that saved income falls through a hole in the floor and disappears. Not so. Saved income is standing by to purchase goods in the future. It shows up as investment in new factories, machines, education and other inputs for the product of future goods. In the long run (which Keynes dismissed as uninteresting) total demand and consumption doesn't fall because of increase saving relative to current goods consumption. It just changes form. In the short run, an increase in saving relative to current goods consumption causes some disruption. The current goods industry, so to speak, needs to lay off workers and adjust to reduced demand. The future goods industry usually can't move as fast. Future goods production depends on inputs like laws and scientific discoveries yet to be made, skills yet to be acquired and development of the next big idea.

Katz Building Sneak Peak

2008-12-23T09:30:00.000-08:00

For those of you at home for Christmas and unable to tour the new Katz Building, we thought we would post a few pictures. The pictures are, in order (1) the Dean, working hard to make the move happen (2) the courtroom (3) the auditorium (4 & 5) classrooms.