ProfessorBainbridge.com

DOMA, the FMA, and the SOTU

President Bush's treatment of gay marriage is being criticized widely across the blogosphere, by blogpundits of all political stripes (e.g., Dreher, Drum, Green, Sullivan). In contrast, I think Bush did something quite clever, which most of the pundits have missed. Here's the key excerpt from the SOTU:

Activist judges, however, have begun redefining marriage by court order, without regard for the will of the people and their elected representatives. On an issue of such great consequence, the people's voice must be heard. If judges insist on forcing their arbitrary will upon the people, the only alternative left to the people would be the constitutional process. Our nation must defend the sanctity of marriage.

The move Bush makes here is to begin shifting the terms of the debate from outcome to process. Yes, he's still focusing too much on whether the law should recognize gay marriage, but at least he has begun to shift attention to the real question, which is "who decides"? The people's elected representatives or the imperial judiciary?

I don't have particularly strong views one way or the other on the issue of gay marriage as a legal institution. As long as the government isn't telling the Catholic Church (or any other church) that it has to recognize gay marriages as a religious matter, my libertarian instincts incline me to take a laissez faire attitude towards marriage as a legal institution.

Whatever happens with the legal institution of marriage, however, ought to happen as a result of democratic processes rather than by judicial fiat. The founders of our republic set up a carefully nuanced set of checks and balances, but the last couple of generations of Americans have allowed nine unelected old men and women to seize control of a vast array of deeply contentionous social and cultural issues of national import knowing that they are immune from being held accountable for their decisions. Our judges now use the law to impose elite opinion about how society should be ordered regardless of the democratic will. We have become courtroom spectators rather than participants in the democratic process. It is as the famed First Things symposium put it, The End of Democracy.

I would like to see Bush turn the debate fully to the "who decides" question. Instead of talking about the sanctity of marriage (which heterosexuals like Britney Spears are doing a pretty good job of destroying without help), Bush should focus the debate on judicial activism. How to do this? Revise the FMA so as to leave the definition of marriage to the state legislatures, while not requiring other states (or the federal government) to accept another state's definition. Then let the chips fall where they may.

The idea is to allow representative democracy to work out the answer on a state by state basis without courts using either equal protection or the Full Faith and Credit clause to impose a national regime before the national population (not just metropolitan elites) have reached consensus. A very narrowly tailored FMA would not require one jurisdiction to honor the definition of marriage used by another state. If Massachusetts decides to validate gay marriages and a gay couple got married in Massachusetts and then move to Alabama, Alabama would not have to treat them as being married. Arguably, Alabama already would not have to do so, because the FF&C clause has a public policy exception. It is sharply contested, however, whether the public policy exception would be applied to allow states to decline to recognize gay marriages lawful under the law of the state where the marriage occured. This has become a particularly debatable proposition after the decision last term in Lawrence. Hence, the suggestion to offer a very narrowly tailored FMA to allow each jurisdiction to decide for itself what will constitute a legal marriage under its laws, without having to defer to the definition used by the locus of the marriage ceremony.

If courts had left abortion to the political process, I suspect we would have ended up about where we are now, but our politics would be a lot less venomous. If the courts don't learn from that lesson and cram down gay marriage before the country is ready, I suspect our politics will get a lot more venomous.

Warblogging the SOTU

As I watched the SOTU on CNBC, I was reading along with the White house transcript. I thought Bush did the best job he's ever done on explaining the rationale for the Iraq war:

I know that some people question if America is really in a war at all. They view terrorism more as a crime, a problem to be solved mainly with law enforcement and indictments. After the World Trade Center was first attacked in 1993, some of the guilty were indicted and tried and convicted, and sent to prison. But the matter was not settled. The terrorists were still training and plotting in other nations, and drawing up more ambitious plans. After the chaos and carnage of September the 11th, it is not enough to serve our enemies with legal papers. The terrorists and their supporters declared war on the United States, and war is what they got. (Applause.)

Some in this chamber, and in our country, did not support the liberation of Iraq. Objections to war often come from principled motives. But let us be candid about the consequences of leaving Saddam Hussein in power. We're seeking all the facts. Already, the Kay Report identified dozens of weapons of mass destruction-related program activities and significant amounts of equipment that Iraq concealed from the United Nations. Had we failed to act, the dictatator's weapons of mass destruction programs would continue to this day. Had we failed to act, Security Council resolutions on Iraq would have been revealed as empty threats, weakening the United Nations and encouraging defiance by dictators around the world. Iraq's torture chambers would still be filled with victims, terrified and innocent. The killing fields of Iraq -- where hundreds of thousands of men and women and children vanished into the sands -- would still be known only to the killers. For all who love freedom and peace, the world without Saddam Hussein's regime is a better and safer place. (Applause.)

Great zinger of the French, delivered with that trademark smirk:

From the beginning, America has sought international support for our operations in Afghanistan and Iraq, and we have gained much support. There is a difference, however, between leading a coalition of many nations, and submitting to the objections of a few. America will never seek a permission slip to defend the security of our country. (Applause.)

I think Bush really believes this, which is one of the things I like best about him:

We also hear doubts that democracy is a realistic goal for the greater Middle East, where freedom is rare. Yet it is mistaken, and condescending, to assume that whole cultures and great religions are incompatible with liberty and self-government. I believe that God has planted in every human heart the desire to live in freedom. And even when that desire is crushed by tyranny for decades, it will rise again. (Applause.)

The end of the war section of the speech was a great closing line:

America is a nation with a mission, and that mission comes from our most basic beliefs. We have no desire to dominate, no ambitions of empire. Our aim is a democratic peace -- a peace founded upon the dignity and rights of every man and woman. America acts in this cause with friends and allies at our side, yet we understand our special calling: This great republic will lead the cause of freedom. (Applause.)

I've been an agnostic on the Iraq war, but I thought Bush made a strong defense of his policy tonight.
*****
Econoblogging the SOTU Replay

Biotechnology. [Ed: Clinton lite.] Pell Grants. [Ed: Yada yada yada.] No Child Left Behind. [Ed: Boring.] Dem's booing. Yelling at Congress about taxes. Minor promise to rein in his own excessive spending.

After the foreign policy part of the speech, the economic section was unimpressive. Stephen Green's exactly right: "On domestic policy, Bush is the Republican Bill Clinton. No issue is too small to get his attention, if he can throw a few million dollars at it and claim 'progress.'" Unlike Stephen, however, I just hate it when politicians pull out letters from little kids.

Unregulated corporate fat cats?

I genuinely enjoy Brian Leiter's blog, even on those occasions when I'm the target of his acerbic wit and incisive commentary. Among other things, he has a talent for hyperbole: "Trial lawyers are all that stands between unregulated and otherwise unpunished corporate malfeasance and the ordinary people who are often its victims..." Well, maybe not quite "all":

Criminal Trials for Top Corporate Executives. Many have complained about the lack of criminal prosecutions of high-profile executives following the corporate scandals of the past few years. That should end in 2004, with criminal trials already slated for Tyco's Dennis Kozlowki, HealthSouth's Richard Scrushy, Martha Stewart Living Omnimedia's Martha Stewart, Adelphia Communications Corp.'s John Rigas, Enron's Andrew Fastow, and WorldCom's Scott Sullivan.

Sarbanes-Oxley Act Enforcement. The case against Richard Scrushy, scheduled for trial in 2004, is reportedly the first criminal prosecution under the Sarbanes-Oxley Act (SOX). Expect to see much more SOX enforcement in 2004, as prosecutors and the SEC start to line up "false certification" cases. The SEC also will likely begin enforcement of other provisions of SOX as long-looming SOX deadlines arrive in 2004. These include new strict requirements for corporate audit committees and for management disclosures concerning internal controls over financial reporting.

(From SLW.) In fact, the SEC launched 679 enforcement actions last year, while there were only 224 private securities litigation cases last year. Add to that the ever-vigilant Eliot Spitzer, who has earned his very own archive category on this blog, and maybe the trial lawyers are getting a bit of help from the authorities.

In fairness to Prof. Leiter, I should note that I am just fisking one line in a post devoted to an assessment of the Iowa caucus results and, in particular, an encomium of (former trial lawyer) John Edwards. And he probably meant all sorts of corporate malfeasance, not just the Enron kind. One of the common themes of this blog, however, has been that we in fact regulate corporate malfeasance - at least of the latter sort - to a degree that may well not be cost-effective.

Corp Law Blog on the LVMH Decision

Mike O'Sullivan writes:

Last week a French court required Morgan Stanley to pay LVMH at least $38 million for producing a negative research report based on Morgan Stanley's alleged bias against LVMH.

As detailed in "Morgan Stanley Ordered to Pay LVMH in Suit Over Research" (NY Times), a French tribunal found that Morgan Stanley analyst Claire Kent illegally published a research report in order to harm LVMH and benefit Gucci Group, a Morgan Stanley client and LVMH rival. The tribunal cited a number of errors and biased statements in the report to support its finding of a faute lorde (intention to do damage) by Morgan Stanley against LVMH. The tribunal assessed $38 million in damages for the moral harm caused by the report, and may require Morgan Stanley to pay millions or billions in additional damages once it completes an assessment of the economic damages suffered by LVMH.

If this decision truly represents French law, France must be some sort of Happyland whose natives cheerfully live according to the credo "never criticize, condemn or complain." Where seldom is heard a discouraging word. And where infallible citizens never get a fact wrong, even facts about the future.

Heh. Go read the whole thing - Mike does a great job of ripping the French decision into little tiny shreds. Update: CE Petit has an

Posted at 04:46 PM in Corporate Law | Permalink | Comments (0)

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Prof. Yin opines:

Prof. Bainbridge thinks that having liberal California Senator Barbara Boxer defeated in 2004 is a #2 priority. Let me just remind the good securities prof. and potential next recess appointment to the 9th Circuit [Ed.: heh.] that Sen. Boxer's two terms in office are largely the doing of the California Republican party. . . . In 1992, when Boxer ran for the seat left vacant by Sen. Alan Cranston, who retired, the Republican primary pitted very conservative radio talk-show host Bruce Herschoensen against moderately conservative Representative (and Stanford prof) Tom Campbell. Campbell may not have been entirely to the liking of the far right -- he was staunchly pro-choice and ruthlessly conservative on fiscal matters (i.e., cut the deficit before cutting taxes) -- but I think he would have walloped Boxer in the general election.

The only problem is, he never got past the primary.

Perhaps the pain of seeing Sen. Boxer in office for the last 12 years, plus Arnold Schwarzenegger's stunning victory in the recall election, will lead to relatively moderate Republican candidate for the U.S. Senate. History has twice shown that if the choice for Californians is a very liberal Barbara Boxer on the one hand, and a very conservative candidate on the other (or even just someone perceived/demonized as very conservative), Californians will (reluctantly) choose Barbara Boxer.

All too true. It's why some of us refer to the California GOP as "the Stoopid Party." It's also why I was moderately surprised that Arnold plunged ahead with an endorsement of Bill Jones. [Ed.: Get it?] Presumably Arnold's thinking that Jones is conservative enough to satisfy the Tomikazes and moderate enough to win a general election (Jones was, I believe, the last GOPer to win a state-wide vote). We'll see.

Astonishing statistic in the LA Times ($):

The share of fund sales made through brokers or other intermediaries was 87% in 2002, compared with 77% in 1990.

What are these people thinking? When you buy mutual funds through a broker you buy higher expenses and a host of conflicts of interest. I'll say it again: no load, passively managed index funds. If you're buying anything else, you're not only wasting your money, but you're also wasting my tax dollars by making work for the SEC.

Lawrence Solum posted on Bush's recess appointment of Charles Pickering, asking whether there are constitutional objections to be made. (CE Petit raised the interesting issue of whether a recess appointed judge isn't a proper Article III judge, which would implicate the Supreme Court's decision in Northern Pipeline.) The use of the recess appointment power is so well-established, however, that I seriously doubt whether there would be any serious legal objection to the appointment. As for the political implications, however, I'm sure Prof. Solum is right that this marks a new round in the downward spiral of nomination politics. So what happens next? Prof. Solum invokes the "specter of mass use of the recess appointments power--along the lines suggested by Randy Barnett in his piece in NRO, Benching Bork." As you may recall, Barnett suggested that:

The one real power Republicans have over the Democrats in this fight is the recess-appointment power. It's the only threat that could force Senate Dems to budge. ... The main problem with a recess strategy is that it makes the GOP's best nominees temporary second-class judges. Not only would this fail to realign the judiciary, but it would deter the most promising judicial candidates from accepting. For this reason, recess appointments, as currently conceived, are not a credible threat. Well, until you add a twist.

President Bush could threaten to line judicial openings with committed conservative and libertarian recess appointees, people who are too old, too young, too smart, too conservative, or too burned by previous failed nominations to ever be considered for ordinary judicial appointments. Unlike practitioners who cannot abandon their practice for a short stint on the bench, professors who can take a few semesters off and judges with no prospects of higher judicial office would be ideal. It would be like a judicial clerkship program for conservative and libertarian law professors that can continue as long as there is a Republican president.

I like it. There's no way on God's green earth that I would expose myself to jerks like Leahy and Schumer in a confirmation fight, but I think it would be a blast to spend a year or two sabbatical on the 9th Circuit. Can you imagine the trouble I'd cause get into? Heh.

From the Economist ($):

Even many space enthusiasts now warn that only private enterprise will truly drive human expansion into space, and yet America's government keeps ignoring them. What might cause market forces to take up the mission? Tourism and entertainment are both possibilities. It may seem surprising, but there are large numbers of people who would spend hundreds of thousands of dollars on a trip into space. Two people, so far, have spent $20m, and another two are on their way. Film and television companies would also spend tens of millions if they could. One might laugh at the television concept “Stars in space”, but people would watch it. More to the point, though, is that no one's government would be paying for it. ...

The true space entrepreneurs in America, the people who are building realistic, privately funded spacecraft for tourism, and moon satellites for entertainment, have had no government hand-outs or incentives. They push on regardless. They are the pioneers most worth applauding.

Darn straight. A basic tenet of libertarian welfare economics is that government should provide only those services that will be underproduced due to market failures. The government provides national defense, for example, because security is a public good and therefore will be underproduced by the private sector. I don't think you can make the case anymore that space travel is a public good:

Public goods ... are non-excludable and [non-rivalous] in consumption. An example is a street sign. It will not wear out, even if large numbers of people are looking at it; and it would be extremely difficult, costly and highly inefficient to limit its use to only one or a few persons and try to prevent others from looking at it, too. A traffic light or clean air is a further example.

Space travel obviously satisfies neither condition: You can restrict access to your spaceship and not everyone can use it simultaneously. Granted, some market failures may afflict private sector space travel. In particular, two sources of negative externalities spring to mind: (1) the launch process is hazardous and risky not only for those being launched but also for folks who live downrange from the launch site; and (2) filling up Earth orbit with a bunch of space junk makes space travel hazardous and could interfere with satellites. The prospect of such externalities, however, justifies only regulation. It does not justify a government monopoly on space travel. Cars and planes are risky too, but we don't let government monopolize them. Why let government monopolize space travel? Why let government even be a player in space travel?

Alert reader Matthew Patterson caught me out on this one:

Alas, I must take issue with your post implying that the Supreme Court should strike down "antiquated" state laws prohibiting the direct shipment of alcohol. In fact, the Supreme Court previously struck down such laws in Rhodes v. Iowa (1898). As a result, Congress passed the Webb-Kenyon Act, which prohibited the importation of alcohol into a state in violation of such state's law. The language of the Webb-Kenyon Act eventually became, after the failure of prohibition, the model for Section 2 of the 21st Amendment to the Constitution, which prohibits the "transportation or importation into any State ... for delivery or use therein of intoxicating liquors, in violation of the laws thereof...." The plain language of the 21st Amendment clearly grants the States the latitude to pass laws restricting the importation of alcohol. The Supreme Court held as much in its original interpretation of the matter in State Board of Equalization v. Young's Market Co. (1936), in which Justice Brandeis, writing for the majority, scoffed at the notion that the States were limited in their authority to regulate the importation and distribution of alcohol. In the years since Young's Market, the Supremes have steadily chipped away at the plain meaning of the 21st Amendment, to the point where I have no doubt that they will rule in your favor on this issue some day in the not so distant future. As a lover of wine, I will certainly find ways to appreciate the Supreme Court's eventual liberation of the wine industry. As a lover of the law, however, I will view it as just another egregious example of judicial activism run amok, which is why it surprised me to hear you, an occasional critic of judicial activism, come out in favor of judicially striking down such laws. Your support for judicial intervention in this matter is particularly disconcerting when viewed in light of the enormous achievements of the wine industry over the past 20 years in changing such laws through legitimate, democratic means. Twenty years ago, according to www.freethegrapes.org, no States allowed direct-to-consumer wine shipments. As of 2003, 26 States had passed laws allowing some form of direct-to-consumer wine shipments. The political process can work, if given enough time. I would expect someone who has been critical of Roe v. Wade for upsetting the political process to be more patient and less predisposed to resorting to the judiciary for political redress. I guess it all depends on whose ox is being gored.

Ouch. I must confess that this brought me up short. Have I allowed my taste buds to trump my political philsophy? Yep.

Interesting op-ed in today's WSJ ($):

We teach a course on White Collar Crime at Stanford. Planning our exam questions just after the recent corporate scandals became dominant news, we thought up an angle on a case just beginning to make headlines. In the hypothetical question, the CEO of a big company is charged with a crime related to her trading in the stock of another, wholly unrelated company, and she publicly declares her innocence of that crime. We asked whether the government could make this person's protestation of innocence itself a federal securities fraud crime in connection with the stock of the company in which she is a CEO. ...

Our apparently simple exam question required students to apply legal doctrines -- as well as moral intuition -- to determine if the CEO could possibly be charged with fraud or any other crime, assuming that she did not make the claim of innocence under oath or in the context of an official proceeding. The question posed a few modestly subtle challenges -- issues that would garner extra points for thoughtful students. One was to think carefully about losses and victims. The most obvious potential victims were the shareholders of our CEO's company, given their interest in maintaining the value of their stock. But the sharp student would notice problems here: How did the CEO's claim of innocence threaten that value? Wouldn't the stock value suffer more if she confessed guilt and resigned? And how did the CEO financially gain from the statement -- other than in the trivially obvious sense that she avoids the financial loss she would suffer if she confessed guilt?

But there was another challenge in the question: Even if the prosecutor could somehow finesse the victim/loss issue -- perhaps on the theory that the government need only show that the false claim of innocence might in some unpredictable way, at some time, injure the shareholders -- there remained the question of moral judgment. It seems bizarre to charge a person with fraud when all she does is publicly proclaim her innocence under a system of justice which requires the state to prove guilt, and which allows defendants to maintain their innocence. After all, a proclamation of innocence, even containing a false assertion, is the natural way for a person charged to put the state to its proof.

Regular readers know I've been saying the same thing for months now.

Fox News just ran a home video of John Kerry singing along to Puff the Magic Dragon at a private party, during which he fakes puffing on a joint. Fox ran it three times in about 5 minutes and then ran a fairly long story on it. Why? Seems sort of silly. Yet, perhaps it does raise a serious question. John Kerry's website says:

In order to deal with the problem of illegal drugs in this country, efforts must be focused on keeping drugs out of the country and our communities, as well as reducing demand for illegal drugs. John Kerry supports aggressively targeting traffickers and dealers, as well as making a commitment to sufficiently fund drug prevention and treatment programs.

If Kerry thinks smoking pot is no big deal, he ought to come out for legalization. If Kerry thinks it is a big deal, as his website claims, he shouldn't be joking about it. More generally, we keep electing politicians (on both sides of the aisle) who once used - or, for all we know, still use - recreational drugs. Once they get into office they perpetuate the so-called war on drugs, with all of its racism, unfairness, and failures. Why do we put up with it? It is time to have a serious debate about legalization without all the posturing.

This morning 51 spam emails got through the filters at my work account. As I was deleting them, I once again got to thinking about a scene in one of my favorite books - Three Men in a Boat - in which the narrarator and his friend Harris are discussing what they would like to do to Thames riverbank proprietors who put up notice boards banning boats from side creeks:

The selfishness of the riparian proprietor grows with every year. If these men had their way they would close the river Thames altogether. They actually do this along the minor tributary streams and in the backwaters. They drive posts into the bed of the stream, and draw chains across from bank to bank, and nail huge notice-boards on every tree. The sight of those notice-boards rouses every evil instinct in my nature. I feel I want to tear each one down, and hammer it over the head of the man who put it up, until I have killed him, and then I would bury him, and put the board up over the grave as a tombstone.

I mentioned these feelings of mine to Harris, and he said he had them worse than that. He said he not only felt he wanted to kill the man who caused the board to be put up, but that he should like to slaughter the whole of his family and all his friends and relations, and then burn down his house. This seemed to me to be going too far, and I said so to Harris; but he answered:

"Not a bit of it. Serve `em all jolly well right, and I'd go and sing comic songs on the ruins."

I was vexed to hear Harris go on in this blood-thirsty strain. We never ought to allow our instincts of justice to degenerate into mere vindictiveness. It was a long while before I could get Harris to take a more Christian view of the subject, but I succeeded at last, and he promised me that he would spare the friends and relations at all events, and would not sing comic songs on the ruins.

You have never heard Harris sing a comic song, or you would understand the service I had rendered to mankind. It is one of Harris's fixed ideas that he can sing a comic song; the fixed idea, on the contrary, among those of Harris's friends who have heard him try, is that he can't and never will be able to, and that he ought not to be allowed to try.

I know just how Harris felt. I would like to sing comic songs on the ruins of the spammers, even though - like Harris - I should not be allowed to sing comic songs (or any other sort). Anyway, if spam is getting you down too, Three Men in a Boat's Victorian humor is a cheerful antidote to feelings of annoyance at our modern world.

Larry Ellison - the man of whom it was once said: "as long as Stanford keeps turning out good-looking 22-year-olds, he will date them" - has gone and gotten married. To a romance novelist no less. Huh. On a more substantive note, Oracle has joined the growing trend towards separating the positions of CEO and chairman of the board of directors. Curiously, however, the newly appointed chairman - Jeff Henley - is an insider (he's Oracle's longtime CFO). Most companies that have separated the two slots have gone with a nonexecutive chairman, since a chairman who is also an executive subordinate to the CEO is less likely to bite the hand that feeds him. As a result, Oracle's move seems less like good corporate governance than a way for Ellison to avoid duties he now finds onerous: "Ellison, [insiders] explain, has simply grown tired of investor relations, 10-Qs, SEC filings and the like."

So I was peacefully watching Hardball when I heard Robert Reich claim that George Bush lied during the 2000 election because Bush never told the American people that he wanted regime change in Iraq: "Paul O'Neill said very, very clearly in not only the interviews but also in the book, that right from the beginning this administration wanted to get rid of Saddam Hussein. That is very different from the Clinton administration. ... But the most important thing is, remember this is a man, George W. Bush, who was elected by saying during the campaign, no intervention, no regime change." Wrong on both counts. From the Wake Forest debate:

BUSH: The coalition against Saddam has fallen apart or it’s unraveling, let’s put it that way. The sanctions are being violated. We don’t know whether he’s developing weapons of mass destruction. He better not be or there’s going to be a consequence, should I be the president.

Q: You could get him out of there?

BUSH: I’d like to, of course. But it’s going to be important to rebuild that coalition to keep the pressure on him.

So Bush told us in 2000 that he'd like to get Saddam out of Iraq. Doesn't mean Bush made the right decision, but it does mean Bush isn't the one who's lying.

Of course, when you go back to the 2000 debates, you also discover that regime change was a bipartisan goal. In the Vice Presidential debates, Senator Joe Lieberman said:

The fact is that we will not enjoy real stability in the Middle East until Saddam Hussein is gone. ... And that's why I was proud to co-sponsor the Iraq Liberation Act, with Senator Trent Lott; why I have kept in touch with the indigenous Iraqi opposition -- broad-based -- to Saddam Hussein. Vice President Gore met with them earlier this year. We are supporting them in their efforts, and we will continue to support them until the Iraqi people rise up and do what the people of Serbia have done in the last few days -- get rid of a despot. We will welcome you back into the family of nations where you belong.

Update: In dissing Paul O'Neill, Instapundit laid out more evidence that regime change is a longstanding bipartisan policy. Poliblogger Steven Taylor has even more pre-2000 hints from Bush about Saddam's future.

Howard Dean reportedly told Rolling Stone that President Bush (43) has daddy issues: "He's interested in some complicated psychological situation that he has with his father." Sheesh. I wasn't going to blog about this, but since Dean opened the door, here are some quotes from a January 5 WSJ ($) profile:

1. [Dean's] childhood was dominated by his father, the back-slapping, gravel-voiced and elegantly dressed Howard Brush Dean II, widely known as "Big Howard" despite standing only 5 feet 8 inches.
2. Mr. Dean followed his father's path, first to Yale, then to a summer job that his dad helped him get at DeCoppet & Doremus, a brokerage firm that specialized in trades of fewer than 100 shares. Mr. Dean says he agonized over whether to make investing a career. Says Peter Brooks, a Yale student adviser at the time, Mr. Dean headed for Wall Street "because it was the family thing to do."
3. Within a year, it became clear to Mr. Dean that he wouldn't find Wall Street fulfilling [and] he wanted to go back to school to take biology and chemistry courses he had skipped at Yale so he could apply to medical school. First he had to break the news to his father, then a partner at Reynolds Securities. The 25-year-old Mr. Dean swore his mother to secrecy and invited his father to a quiet restaurant on the Upper East Side. "I remember making sure he had had three martinis," he says.
4. The elder Dean started Dean Witter's first political action committee, which contributed even-handedly to Republicans and Democrats despite his own fierce conservatism.
5. As the son became a rising Democratic star in Vermont, the father would good-naturedly tease him in front of friends. "He'd say, 'My son, the Communist,' or 'Don't worry; he's out of the will,' " Mr. Dean recalls. But the two men also would discuss political tactics.

In light of which, one wonders whether Governor Dean isn't projecting his own daddy issues onto President Bush.

Tung Yin on Boxer

Prof. Yin opines:

Prof. Bainbridge thinks that having liberal California Senator Barbara Boxer defeated in 2004 is a #2 priority. Let me just remind the good securities prof. and potential next recess appointment to the 9th Circuit [Ed.: heh.] that Sen. Boxer's two terms in office are largely the doing of the California Republican party. . . . In 1992, when Boxer ran for the seat left vacant by Sen. Alan Cranston, who retired, the Republican primary pitted very conservative radio talk-show host Bruce Herschoensen against moderately conservative Representative (and Stanford prof) Tom Campbell. Campbell may not have been entirely to the liking of the far right -- he was staunchly pro-choice and ruthlessly conservative on fiscal matters (i.e., cut the deficit before cutting taxes) -- but I think he would have walloped Boxer in the general election.

The only problem is, he never got past the primary.

Perhaps the pain of seeing Sen. Boxer in office for the last 12 years, plus Arnold Schwarzenegger's stunning victory in the recall election, will lead to relatively moderate Republican candidate for the U.S. Senate. History has twice shown that if the choice for Californians is a very liberal Barbara Boxer on the one hand, and a very conservative candidate on the other (or even just someone perceived/demonized as very conservative), Californians will (reluctantly) choose Barbara Boxer.

All too true. It's why some of us refer to the California GOP as "the Stoopid Party." It's also why I was moderately surprised that Arnold plunged ahead with an endorsement of Bill Jones. [Ed.: Get it?] Presumably Arnold's thinking that Jones is conservative enough to satisfy the Tomikazes and moderate enough to win a general election (Jones was, I believe, the last GOPer to win a state-wide vote). We'll see.

Appalling Investment Statistics

Astonishing statistic in the LA Times ($):

The share of fund sales made through brokers or other intermediaries was 87% in 2002, compared with 77% in 1990.

What are these people thinking? When you buy mutual funds through a broker you buy higher expenses and a host of conflicts of interest. I'll say it again: no load, passively managed index funds. If you're buying anything else, you're not only wasting your money, but you're also wasting my tax dollars by making work for the SEC.

Pickering: I'll Volunteer

Lawrence Solum posted on Bush's recess appointment of Charles Pickering, asking whether there are constitutional objections to be made. (CE Petit raised the interesting issue of whether a recess appointed judge isn't a proper Article III judge, which would implicate the Supreme Court's decision in Northern Pipeline.) The use of the recess appointment power is so well-established, however, that I seriously doubt whether there would be any serious legal objection to the appointment. As for the political implications, however, I'm sure Prof. Solum is right that this marks a new round in the downward spiral of nomination politics. So what happens next? Prof. Solum invokes the "specter of mass use of the recess appointments power--along the lines suggested by Randy Barnett in his piece in NRO, Benching Bork." As you may recall, Barnett suggested that:

The one real power Republicans have over the Democrats in this fight is the recess-appointment power. It's the only threat that could force Senate Dems to budge. ... The main problem with a recess strategy is that it makes the GOP's best nominees temporary second-class judges. Not only would this fail to realign the judiciary, but it would deter the most promising judicial candidates from accepting. For this reason, recess appointments, as currently conceived, are not a credible threat. Well, until you add a twist.

President Bush could threaten to line judicial openings with committed conservative and libertarian recess appointees, people who are too old, too young, too smart, too conservative, or too burned by previous failed nominations to ever be considered for ordinary judicial appointments. Unlike practitioners who cannot abandon their practice for a short stint on the bench, professors who can take a few semesters off and judges with no prospects of higher judicial office would be ideal. It would be like a judicial clerkship program for conservative and libertarian law professors that can continue as long as there is a Republican president.

I like it. There's no way on God's green earth that I would expose myself to jerks like Leahy and Schumer in a confirmation fight, but I think it would be a blast to spend a year or two sabbatical on the 9th Circuit. Can you imagine the trouble I'd cause get into? Heh.

Leave Space to the Private Sector

From the Economist ($):

Even many space enthusiasts now warn that only private enterprise will truly drive human expansion into space, and yet America's government keeps ignoring them. What might cause market forces to take up the mission? Tourism and entertainment are both possibilities. It may seem surprising, but there are large numbers of people who would spend hundreds of thousands of dollars on a trip into space. Two people, so far, have spent $20m, and another two are on their way. Film and television companies would also spend tens of millions if they could. One might laugh at the television concept “Stars in space”, but people would watch it. More to the point, though, is that no one's government would be paying for it. ...

The true space entrepreneurs in America, the people who are building realistic, privately funded spacecraft for tourism, and moon satellites for entertainment, have had no government hand-outs or incentives. They push on regardless. They are the pioneers most worth applauding.

Darn straight. A basic tenet of libertarian welfare economics is that government should provide only those services that will be underproduced due to market failures. The government provides national defense, for example, because security is a public good and therefore will be underproduced by the private sector. I don't think you can make the case anymore that space travel is a public good:

Public goods ... are non-excludable and [non-rivalous] in consumption. An example is a street sign. It will not wear out, even if large numbers of people are looking at it; and it would be extremely difficult, costly and highly inefficient to limit its use to only one or a few persons and try to prevent others from looking at it, too. A traffic light or clean air is a further example.

Space travel obviously satisfies neither condition: You can restrict access to your spaceship and not everyone can use it simultaneously. Granted, some market failures may afflict private sector space travel. In particular, two sources of negative externalities spring to mind: (1) the launch process is hazardous and risky not only for those being launched but also for folks who live downrange from the launch site; and (2) filling up Earth orbit with a bunch of space junk makes space travel hazardous and could interfere with satellites. The prospect of such externalities, however, justifies only regulation. It does not justify a government monopoly on space travel. Cars and planes are risky too, but we don't let government monopolize them. Why let government monopolize space travel? Why let government even be a player in space travel?

Interstate wine shipments

Alert reader Matthew Patterson caught me out on this one:

Alas, I must take issue with your post implying that the Supreme Court should strike down "antiquated" state laws prohibiting the direct shipment of alcohol. In fact, the Supreme Court previously struck down such laws in Rhodes v. Iowa (1898). As a result, Congress passed the Webb-Kenyon Act, which prohibited the importation of alcohol into a state in violation of such state's law. The language of the Webb-Kenyon Act eventually became, after the failure of prohibition, the model for Section 2 of the 21st Amendment to the Constitution, which prohibits the "transportation or importation into any State ... for delivery or use therein of intoxicating liquors, in violation of the laws thereof...." The plain language of the 21st Amendment clearly grants the States the latitude to pass laws restricting the importation of alcohol. The Supreme Court held as much in its original interpretation of the matter in State Board of Equalization v. Young's Market Co. (1936), in which Justice Brandeis, writing for the majority, scoffed at the notion that the States were limited in their authority to regulate the importation and distribution of alcohol. In the years since Young's Market, the Supremes have steadily chipped away at the plain meaning of the 21st Amendment, to the point where I have no doubt that they will rule in your favor on this issue some day in the not so distant future. As a lover of wine, I will certainly find ways to appreciate the Supreme Court's eventual liberation of the wine industry. As a lover of the law, however, I will view it as just another egregious example of judicial activism run amok, which is why it surprised me to hear you, an occasional critic of judicial activism, come out in favor of judicially striking down such laws. Your support for judicial intervention in this matter is particularly disconcerting when viewed in light of the enormous achievements of the wine industry over the past 20 years in changing such laws through legitimate, democratic means. Twenty years ago, according to www.freethegrapes.org, no States allowed direct-to-consumer wine shipments. As of 2003, 26 States had passed laws allowing some form of direct-to-consumer wine shipments. The political process can work, if given enough time. I would expect someone who has been critical of Roe v. Wade for upsetting the political process to be more patient and less predisposed to resorting to the judiciary for political redress. I guess it all depends on whose ox is being gored.

Ouch. I must confess that this brought me up short. Have I allowed my taste buds to trump my political philsophy? Yep.

As Martha Goes to Trial

Interesting op-ed in today's WSJ ($):

We teach a course on White Collar Crime at Stanford. Planning our exam questions just after the recent corporate scandals became dominant news, we thought up an angle on a case just beginning to make headlines. In the hypothetical question, the CEO of a big company is charged with a crime related to her trading in the stock of another, wholly unrelated company, and she publicly declares her innocence of that crime. We asked whether the government could make this person's protestation of innocence itself a federal securities fraud crime in connection with the stock of the company in which she is a CEO. ...

Our apparently simple exam question required students to apply legal doctrines -- as well as moral intuition -- to determine if the CEO could possibly be charged with fraud or any other crime, assuming that she did not make the claim of innocence under oath or in the context of an official proceeding. The question posed a few modestly subtle challenges -- issues that would garner extra points for thoughtful students. One was to think carefully about losses and victims. The most obvious potential victims were the shareholders of our CEO's company, given their interest in maintaining the value of their stock. But the sharp student would notice problems here: How did the CEO's claim of innocence threaten that value? Wouldn't the stock value suffer more if she confessed guilt and resigned? And how did the CEO financially gain from the statement -- other than in the trivially obvious sense that she avoids the financial loss she would suffer if she confessed guilt?

But there was another challenge in the question: Even if the prosecutor could somehow finesse the victim/loss issue -- perhaps on the theory that the government need only show that the false claim of innocence might in some unpredictable way, at some time, injure the shareholders -- there remained the question of moral judgment. It seems bizarre to charge a person with fraud when all she does is publicly proclaim her innocence under a system of justice which requires the state to prove guilt, and which allows defendants to maintain their innocence. After all, a proclamation of innocence, even containing a false assertion, is the natural way for a person charged to put the state to its proof.

Regular readers know I've been saying the same thing for months now.

Kerry's Pot Joke and Kerry's Policy on Drugs

Fox News just ran a home video of John Kerry singing along to Puff the Magic Dragon at a private party, during which he fakes puffing on a joint. Fox ran it three times in about 5 minutes and then ran a fairly long story on it. Why? Seems sort of silly. Yet, perhaps it does raise a serious question. John Kerry's website says:

In order to deal with the problem of illegal drugs in this country, efforts must be focused on keeping drugs out of the country and our communities, as well as reducing demand for illegal drugs. John Kerry supports aggressively targeting traffickers and dealers, as well as making a commitment to sufficiently fund drug prevention and treatment programs.

If Kerry thinks smoking pot is no big deal, he ought to come out for legalization. If Kerry thinks it is a big deal, as his website claims, he shouldn't be joking about it. More generally, we keep electing politicians (on both sides of the aisle) who once used - or, for all we know, still use - recreational drugs. Once they get into office they perpetuate the so-called war on drugs, with all of its racism, unfairness, and failures. Why do we put up with it? It is time to have a serious debate about legalization without all the posturing.

Spammers: What I'd Like to Do

This morning 51 spam emails got through the filters at my work account. As I was deleting them, I once again got to thinking about a scene in one of my favorite books - Three Men in a Boat - in which the narrarator and his friend Harris are discussing what they would like to do to Thames riverbank proprietors who put up notice boards banning boats from side creeks:

The selfishness of the riparian proprietor grows with every year. If these men had their way they would close the river Thames altogether. They actually do this along the minor tributary streams and in the backwaters. They drive posts into the bed of the stream, and draw chains across from bank to bank, and nail huge notice-boards on every tree. The sight of those notice-boards rouses every evil instinct in my nature. I feel I want to tear each one down, and hammer it over the head of the man who put it up, until I have killed him, and then I would bury him, and put the board up over the grave as a tombstone.

I mentioned these feelings of mine to Harris, and he said he had them worse than that. He said he not only felt he wanted to kill the man who caused the board to be put up, but that he should like to slaughter the whole of his family and all his friends and relations, and then burn down his house. This seemed to me to be going too far, and I said so to Harris; but he answered:

"Not a bit of it. Serve `em all jolly well right, and I'd go and sing comic songs on the ruins."

I was vexed to hear Harris go on in this blood-thirsty strain. We never ought to allow our instincts of justice to degenerate into mere vindictiveness. It was a long while before I could get Harris to take a more Christian view of the subject, but I succeeded at last, and he promised me that he would spare the friends and relations at all events, and would not sing comic songs on the ruins.

You have never heard Harris sing a comic song, or you would understand the service I had rendered to mankind. It is one of Harris's fixed ideas that he can sing a comic song; the fixed idea, on the contrary, among those of Harris's friends who have heard him try, is that he can't and never will be able to, and that he ought not to be allowed to try.

I know just how Harris felt. I would like to sing comic songs on the ruins of the spammers, even though - like Harris - I should not be allowed to sing comic songs (or any other sort). Anyway, if spam is getting you down too, Three Men in a Boat's Victorian humor is a cheerful antidote to feelings of annoyance at our modern world.

Oracle Developments

Larry Ellison - the man of whom it was once said: "as long as Stanford keeps turning out good-looking 22-year-olds, he will date them" - has gone and gotten married. To a romance novelist no less. Huh. On a more substantive note, Oracle has joined the growing trend towards separating the positions of CEO and chairman of the board of directors. Curiously, however, the newly appointed chairman - Jeff Henley - is an insider (he's Oracle's longtime CFO). Most companies that have separated the two slots have gone with a nonexecutive chairman, since a chairman who is also an executive subordinate to the CEO is less likely to bite the hand that feeds him. As a result, Oracle's move seems less like good corporate governance than a way for Ellison to avoid duties he now finds onerous: "Ellison, [insiders] explain, has simply grown tired of investor relations, 10-Qs, SEC filings and the like."

Robert Reich's Hardball Whopper

So I was peacefully watching Hardball when I heard Robert Reich claim that George Bush lied during the 2000 election because Bush never told the American people that he wanted regime change in Iraq: "Paul O'Neill said very, very clearly in not only the interviews but also in the book, that right from the beginning this administration wanted to get rid of Saddam Hussein. That is very different from the Clinton administration. ... But the most important thing is, remember this is a man, George W. Bush, who was elected by saying during the campaign, no intervention, no regime change." Wrong on both counts. From the Wake Forest debate:

BUSH: The coalition against Saddam has fallen apart or it’s unraveling, let’s put it that way. The sanctions are being violated. We don’t know whether he’s developing weapons of mass destruction. He better not be or there’s going to be a consequence, should I be the president.

Q: You could get him out of there?

BUSH: I’d like to, of course. But it’s going to be important to rebuild that coalition to keep the pressure on him.

So Bush told us in 2000 that he'd like to get Saddam out of Iraq. Doesn't mean Bush made the right decision, but it does mean Bush isn't the one who's lying.

Of course, when you go back to the 2000 debates, you also discover that regime change was a bipartisan goal. In the Vice Presidential debates, Senator Joe Lieberman said:

The fact is that we will not enjoy real stability in the Middle East until Saddam Hussein is gone. ... And that's why I was proud to co-sponsor the Iraq Liberation Act, with Senator Trent Lott; why I have kept in touch with the indigenous Iraqi opposition -- broad-based -- to Saddam Hussein. Vice President Gore met with them earlier this year. We are supporting them in their efforts, and we will continue to support them until the Iraqi people rise up and do what the people of Serbia have done in the last few days -- get rid of a despot. We will welcome you back into the family of nations where you belong.

Update: In dissing Paul O'Neill, Instapundit laid out more evidence that regime change is a longstanding bipartisan policy. Poliblogger Steven Taylor has even more pre-2000 hints from Bush about Saddam's future.

Dean and Daddy Issues

Howard Dean reportedly told Rolling Stone that President Bush (43) has daddy issues: "He's interested in some complicated psychological situation that he has with his father." Sheesh. I wasn't going to blog about this, but since Dean opened the door, here are some quotes from a January 5 WSJ ($) profile:

1. [Dean's] childhood was dominated by his father, the back-slapping, gravel-voiced and elegantly dressed Howard Brush Dean II, widely known as "Big Howard" despite standing only 5 feet 8 inches.
2. Mr. Dean followed his father's path, first to Yale, then to a summer job that his dad helped him get at DeCoppet & Doremus, a brokerage firm that specialized in trades of fewer than 100 shares. Mr. Dean says he agonized over whether to make investing a career. Says Peter Brooks, a Yale student adviser at the time, Mr. Dean headed for Wall Street "because it was the family thing to do."
3. Within a year, it became clear to Mr. Dean that he wouldn't find Wall Street fulfilling [and] he wanted to go back to school to take biology and chemistry courses he had skipped at Yale so he could apply to medical school. First he had to break the news to his father, then a partner at Reynolds Securities. The 25-year-old Mr. Dean swore his mother to secrecy and invited his father to a quiet restaurant on the Upper East Side. "I remember making sure he had had three martinis," he says.
4. The elder Dean started Dean Witter's first political action committee, which contributed even-handedly to Republicans and Democrats despite his own fierce conservatism.
5. As the son became a rising Democratic star in Vermont, the father would good-naturedly tease him in front of friends. "He'd say, 'My son, the Communist,' or 'Don't worry; he's out of the will,' " Mr. Dean recalls. But the two men also would discuss political tactics.

In light of which, one wonders whether Governor Dean isn't projecting his own daddy issues onto President Bush.