The Two Worlds Dilemma

In 18 months I will be an alumnus of PSU Law. I will receive invitations to return, to engage with the law school, and to "give back." I find myself wondering how the Two Worlds Dilemma will affect alumni cohesion in the future. As of right now (with the exception of students who transferred to UP from other schools) there are no alumni who attended only University Park. The 2007 and 2008 UP classes will have spent at least one year in Carlisle, causing some connection to that campus. But starting with the class of 2009, the only way the school will graduate students like that is if the students transfer back and forth between the two campuses from year to year.

This observation struck me as I attended alumni weekend in Carlisle and wondered what future alumni weekends will look like. A dual campus law school has three options: 1) host alumni weekend in the same place every year and nuts to the other location, 2) host alumni weekends in both locations every year and nuts to the alumni office budget, or 3) host alumni weekend in both locations, but alternate with one year at Carlisle and the next year at UP and so on and so forth. Either way, it's likely that students who graduated from one location will be less interested in attending alumni weekend at the other location. How many alumni weekends do you attend for schools you never physically attended?

This dilemma presents a challenge, particluarly to the current students who are future alumni of PSU Law. What will we do about the Two Worlds Dilemma? Will we be able to bring the two worlds together post-graduation? Or, will we just be happy to enjoy our world and nevermind the other world? Perhaps a barrier to cohesion is the sense of uncertainty people feel regarding the ultimate future of the dual campus law school. For those wondering if this is a temporary arrangement, it may be hard to pour energy and effort into addressing the Two Worlds Dilemma without knowing if, or for how long, the two worlds will exist under "one roof." The general mood at PSU Law may feel unsettled until that ultimate question is answered. It's my hunch that once that issue is settled the alumni will then follow suit and get busy supporting their alma mater(s).

REMICs Remix

Marie's blog post below is timely because another issue involving REMICs is currently hot in the tax world.

In February of this year, the Service issued a notice (2007-17) that described a pilot program aimed at increasing the amount of guidance provided by the Service:

"Under this pilot program, the IRS and Treasury would publish a notice for each guidance project selected for the program. The notice would identify research, background documents, drafts of proposed guidance and other work products, and ask interested parties to provide them. These written submissions from the public will help the IRS and Treasury determine whether it is appropriate to publish guidance. If so, the IRS and Treasury expect that increased public participation in the preliminary stages of certain guidance development would provide a significant benefit to taxpayers by permitting IRS and Treasury to hasten the publication of a greater number of guidance projects."

The first such notice was a request for guidance in the REMIC area (specifically, consideration of expanding the type of modifications on loans that a REMIC can make).

Some commentators have decried this program, stating that the wolves will be guarding the henhouse. While these are valid concerns, I believe the program is a good one. The Service is merely inviting proposals for drafting the regulations. It is not required to accept them. Outside groups have always influenced the development of regulations, this program appears to be just switching who gets to write the first draft.

Tranche Warfare

Jeff Kahn and I have been discussing the financial and tax consequences of mortgage debt forgiveness and restructuring as a response to the emerging crisis of default in the subprime mortgage market. This is too good not to share. The Congressional Research Service (CRC) has just issued a report to Congress that concludes that a private solution to the problem is more complicated than it would first appear.

Home mortgages are commonly pooled and sold by originators to Real Estate Mortgage Investment Conduits (REMIC's) who in turn issue securities backed by the mortgage payment obligation to investors. An REMIC can qualify as a pass through entity and escape corporate tax provided it refrains from "active management" of the financial assets it holds. Moreover, under Financial Accounting Standard (FAS) 140, when a mortgage originator transfers loans to a REMIC and agrees to service the loans, the servicer must refrain from "active management" of the loans or risk invalidating the "true sale" of the pool of loans to the REMIC for purposes of the originator's balance sheet. Both tax and accounting rules cause problems for a servicer who modifies mortgage debt.

The SEC as part of its oversight of the Financial Accounting Standards Board (FASB) stated in a letter to the House Financial Services Committee last summer that accounting principles regarding servicer passivity would not create an obstacle for loan servicers to modify home mortgages in favor of borrowers at risk for default. The SEC stated that modification of mortgage payement obligations by a loan servicer would not constitute "active management" of the loans.

The remaining problem, according to the CFC report, is not concern about corporate taxation or accounting treatment. In 1986, to accommodate the nascent securitization industry, Congress modified the tax code to permit REMIC's to divide the flow of mortgage payments among investors in tranches without triggering corporate taxation as "active management." For example, one tranche receives a priority right to payment over another, or a different intererest to principal allocation. Because most REMIC's have issued securities in tranches, when a loan servicer renegotiates mortgage obligations, one tranche may benefit while others lose. The disproportinate effect of renegotiation on tranches creates a confict of interest that loan servicers worry runs afoul of REMICs' obligations to investors. Putting out the fire caused by rising default and flat or declining home values in the consumer mortgage market may spawn another problem: "tranche warfare."

What's In Your IPod?

I just got an Ipod. I'm a little late to arrive at personal digital nirvana (the Buddist concept not the band) . But that's another story. As I browse the ever expanding universe of downloadable music, I replay scenes from my life that are always set to particular music: show tunes wafting from a huge turntable my parents could hardly afford; The Partridge Family; Boston and REO Speedwagon booming through the water during swim workouts, subwoofer face down on the concrete pool deck; Hendrix, the Dead and the Stones in places where parents weren't; Color My World where they were. And that just covers through high school. My new Ipod is a blank slate as daunting as any I've faced. The music I load isn't just entertainment. It's me-- who I've been and who I am now. It's my very personal soundtrack of rebellion, peace, regret, love, loss and triumph, with a lot of outstanding party action thrown in.

Is the identification I feel with popular music -- it's capacity to describe me -- unique to me, or to my generation, to describe us? Jefferson Cowie, a college writing teacher, gave his students an assignment: Assess the personal meaning of any song of any genre. His students' response surprised him. In an essay appearing today on insidehighered.com, Cowie wrote:

"For my students, rock and roll is not the aural fuel of rebellion but soundtrack of familial love and safety. The [student] essays were not about chillin' with the crew but hangin' with mom and dad; . . . about heading off to Cape Cod in the mini van. Rock is no longer about alienation but connection; not about escape but home; not about rebellion but reconciliation."

Cowie wonders whether Millenennials' parents have so smothered them with attention that they stake no claim to a musical identity of their own. "[I]t seems that there ought to be at least an edge of disdain for the SUV-driving, suburban-dwelling, vanilla affluence of their parents, but instead, students remain hopelessly connected to them, not just by their ubiquitous cell phones but also by their parents' record collections."

This idea, that Millennials are best defined by the absence of rebellion, is a theme of Nicholas Handler's essay: The Posteverything Generation. Handler, Yale 2009, won the recent New York Times Magazine essay contest in which the Times invited college students to respond to Rick Perlstein's assertion that colleges have lost their centrality in society and in students' lives. Handler writes:

"We are a generation that is riding on the tail-end of a century of war and revolution that toppled civilizations, overturned repressive social orders, and left us with more privilege and opportunity than any other society in history." But, with all that, "[l]ike a true post-modern generation we refuse to weave together an overarching narrative to our own political consciousness, to present a cast of inspirational or revolutionary characters on our public stage, or to define a specific philosophy. . . We are a generation for whom even revolution seems trite, and therefore as fair a target for bland imitation as anything else. We are the generation of the Che Guevera tee-shirt."

Handler makes a chilling observation about his generation: "How do we rebel against a generation that is expecting, anticipating, nostalgic for revolution?" His answer: "We don't."

Cowie's classroom experiment and Handler's thoughts are not enough to brand an entire generation of people one thing or another. But their observation about a postmodern comfort-loving boredom that hangs over law students these days rings true to me. I wonder why students seem increasingly detached and unwilling to engage in classroom discussion. Is it a generational thing? Or, is it just more fun to browse for music online than to participate in class?

Being Patient in the Studio

My last few posts have centered on the theme of understanding, which I suppose is indicative of the point I am at in my legal education. As a 2L, I am “in the studio” of law, taking the utility courses in order to lay the foundation of my legal knowledge. While I am comfortable with the notion that life is a journey spent pursuing deeper understanding, the impatient part of me wants to just get there. I envision “there” as the place where the intuition, factors, policy and history of law all meld happily together in my brain. Being “there” would mean that I could add my own contribution – creativity – to resolve complex issues by maneuvering through the law with the seeming effortlessness of my professors (or at least to know where to start).

I am working on my note for law review this semester. The wonderful thing about working on a project like this as a student is that we have access to some amazing minds in our faculty. Not only are our professors receptive, insightful and generous with their time, they model adeptness in legal scholarship. The fact that each professor I have approached is able to think along with me, give me constructive feedback, and suggest useful resources, all extemporaneous and without familiarity with the specific subject, is striking. I want to be able to do that.

What I have observed in my professors is that their creativity stems from a solid foundation of knowledge. Creativity alone is insufficient; in order to press legal scholarship forward in a meaningful way, one must have a command of the fundamental principles of law. In this way, legal scholarship is like choreographing a ballet. Choreographers may have inspired visions of expressive movement, but without technical proficiency and mastery of ballet form, the composition will be wanting. So is legal scholarship rooted in a mastery of the substance of the law. As novel as an argument is, if it departs without justification from what is known, it will fail to persuade.

I am an aspiring legal scholar, and while most of what I am now learning is principled and structured, this structure provides the framework for creative thought. Before I can begin to “choreograph” with the law as my professors do, I must spend more time mastering the fundamentals in the studio.

Is this Heaven?

No, it's the view from Skytop Mountain into Happy Valley. The photo is by Henry Gong, a State College local.

Just Passing Through?

PSU Law's administrators and faculty are working hard to build a first class faculty. This is both commendable and necessary. As mentioned previously, a law school is only as good as its faculty. In the meantime, while the Dean holds out for prominent or promising scholars to fill the faculty ranks, students are treated to a heavy dose of visitors. An unspoken consequence of this process is insecurity.

When a visitor teaches a class, the relationship between student and professor is necessarily insecure. Students wonder: Will he/she be here next year or the year after that? The visitor probably wonders: Should I invest in these students (organizations, moot courts, journals, etc.) if I may just be "passing through?" This insecurity interjected into the teacher-student relationship would be fine if that relationship was only about conveying and learning the law. But it is about much more. The classroom experience and every aspect of law school helps students understand themselves, form new identities as lawyers, and cultivate relationships on which they will build their legal careers. The relationship is not only one way. Professors benefit from their interaction with and investment in students too. With a visitor, however, the payoff from investment in the relationship is insecure.

Visitors add value to law schools as they pass through. As the ratio of visitors to permanent faculty grows, the effect of insecurity in the classroom and elsewhere grows. The sensation is like standing on shifting sand for both law students and tenure line faculty members looking to maximize their investment in the school.

I'm thinking of the words spoken to the Israelites when they were in exile. Despite insecurity, we should try to make the best of even a temporary situation: "Seek the peace and prosperity of the city to which I have carried you into exile . . . because if it prospers, you too will prosper."