ProfessorBainbridge.com

Abolishing LLC Veil Piercing

My paper on veil piercing in LLCs is now available for downloading at SSRN. Here's the abstract:

Courts are now routinely applying the corporate law doctrine of veil piercing to limited liability companies. This extension of a seriously flawed doctrine into a new arena is not required by statute and is insupportable as a matter of policy. The standards by which veil piercing is effected are vague, leaving judges great discretion. The result has been uncertainty and lack of predictability, increasing transaction costs for small businesses. At the same time, however, there is no evidence that veil piercing has been rigorously applied to effect socially beneficial policy outcomes. Judges typically seem to be concerned more with the facts and equities of the specific case at bar than with the implications of personal shareholder liability for society at large.

A standard academic move treats veil piercing as a safety valve allowing courts to address cases in which the externalities associated with limited liability seem excessive. In doing so, veil piercing is called upon to achieve such lofty goals as leading LLC members to optimally internalize risk, while not deterring capital formation and economic growth, while promoting populist notions of economic democracy. The task is untenable. Veil piercing is rare, unprincipled, and arbitrary. Abolishing veil piercing would refocus judicial analysis on the appropriate question - did the defendant - LLC member do anything for which he or she should be held directly liable?

Using Chesterton to Reply to Solum on the Martial Virtues

In response to my post on the martial virtues, Larry Solum quotes a description of the trial of Socrates, from which he then poses the following excellent questions:

Are the martial virtues true human excellences? How do the martial virtues relate to the virtues of justice and beneficience? These are deep questions, but surely there are no easy answers.

I certainly agree that there are no easy answers, but in the spirit of continuing the discussion (always an enjoyable task when Larry is in the mix), let me quote an apropos passage from G.K. Chesterton's essay on Rudyard Kipling (which a reader was kind enough to pass along):

Now, Mr. Kipling is certainly wrong in his worship of militarism, but his opponents are, generally speaking, quite as wrong as he. The evil of militarism is not that it shows certain men to be fierce and haughty and excessively warlike. The evil of militarism is that it shows most men to be tame and timid and excessively peaceable. The professional soldier gains more and more power as the general courage of a community declines. Thus the Pretorian guard became more and more important in Rome as Rome became more and more luxurious and feeble. The military man gains the civil power in proportion as the civilian loses the military virtues. And as it was in ancient Rome so it is in contemporary Europe. There never was a time when nations were more militarist. There never was a time when men were less brave. All ages and all epics have sung of arms and the man; but we have effected simultaneously the deterioration of the man and the fantastic perfection of the arms. Militarism demonstrated the decadence of Rome, and it demonstrates the decadence of Prussia.

I take it that Chesterton's point is that the evils of militarism tend to arise when the martial vitues cease to be civic virtues. Alternatively, I suppose, the disconnect between martial and civic virtues may put a society in the position of, say, late Roman Gaul, powerless to resist the engulfing tide. Either way, while not claiming there are easy answers, I would claim that the growing disconnect between the martial and civic virtues is cause for grave concern. I would further claim that the legitimacy of such concern can be found in the mores of the American Founding. Clayton Cramer has unearthed a very interesting report sent by President George Washington to Congress on the necessity of a militia:

An energetic national militia is to be regarded as the capital security of a free republic, and not a standing army, forming a distinct class in the community.

It is the introduction and diffusion of vice, and corruption of manners, into the mass of the people, that renders a standing army necessary. It is when public spirit is despised, and avarice, indolence, and effeminacy of manners predominate, and prevent the establishment of institutions which would elevate the minds of the youth in the paths of virtue and honor, that a standing army is formed and riveted for ever.

Is this not an appeal to ensuring a perpetual linkage between the martial and civic virutes, grounded on much the same concerns as motivated Chesterton? Is not the final sentence of Washington's report a call to action for our own times, of which I fear he has given a precise account?

Bartlett on SOX

Bruce Bartlett's scat hing critique of Sarbanes-Oxley is available at NRO. Among other good points, he quotes someone familiar to readers of this blog:

Stephen Bainbridge, professor of corporate law at UCLA, thinks Sarbanes-Oxley was completely unnecessary. He says all economic booms inevitably breed their financial scandals. The scandals at Enron et al. would likely have occurred even if Sarbanes-Oxley had already been in effect. The scandals simply gave statists a new excuse to regulate business. ?Corporate scandals are always good news for big-government types,? Bainbridge notes.

Al Hunt on the Eucharist Controversy

In today's WSJ ($), Al Hunt complains that plans by some US bishops to withhold the Eucharist from Catholic politicians who publicly dissent from Church teaching are causing hurt feelings:

Forty-eight House Democrats, including several pro-life lawmakers, recently wrote Cardinal McCarrick to express their dismay at these calls to sanction Catholic politicians for particular policy views, warning of a backlash against the church. Rep. Rosa DeLauro, who ... initiated this move, she says, because of the "deep personal hurt" this controversy has caused among many Catholic lawmakers.

Aw, poor baby. You know, however, I am unaware of any Biblical passage or Church teaching promising that following Christ would be easy or pain-free. To the contrary, how about:

"Do not think that I have come to bring peace upon the earth. I have come to bring not peace but the sword. For I have come to set a man 'against his father, a daughter against her mother, and a daughter-in-law against her mother-in-law; and one's enemies will be those of his household.'"

"Whoever loves father or mother more than me is not worthy of me, and whoever loves son or daughter more than me is not worthy of me; and whoever does not take up his cross and follow after me is not worthy of me." (Matt. 10:33- 38.)

Besides which, what is the "deep personal hurt" of a few pro-abortion legislators compared to the slaughter of millions of innoncent unborn children every year?

Spitzer v. Grasso

My latest TCS Daily Column

In light of the filing of New York Attorney General Eliot Spitzer's long-awaited suit against former New York Stock Exchange CEO Richard Grasso, two thoughts come to mind:

(1) The government has no business setting executive compensation. Granted, Spitzer has authority to bring compensation suits against New York not-for-profits like the NYSE. Even so, it is bad policy for the government -- more precisely, an elected official with aspirations to higher office -- to be deciding how much money a corporate executive should be paid.

How much you get paid depends in large part on the thickness of the market for your services. In a thick market, wages tend to be low because there are many potential employees -- all more or less fungible -- competing for jobs. In a thin market, however, wages tend to be high because many employers are competing to hire a small number of eligible workers. The market for burger flippers is very thick. The market for law professors is relatively thick, to my considerable regret. The market for CEOs of Fortune 500 companies (which is what the NYSE essentially is) is thin. I'd guess the number of people who have what it takes to run a Fortune 500 company isn't much larger than the number of people who can run an NBA fast break. So even though much executive pay seems excessive, it's just supply and demand. Eliot Spitzer is unlikely to do a better job than competitive markets.

(2) Yet, Grasso and the NYSE are a special case. According to the WSJ ($), Spitzer alleges that Grasso abused his position as Wall Street's top regulator:

"The 54-page filing paints Mr. Grasso as an iron-fisted ruler, intimidating Wall Street titans that he regulated and manipulating the pay process to enrich himself. It portrays the board and its compensation committee as dysfunctional and its governance structure as conflict-ridden before it was overhauled in the aftermath of Mr. Grasso's ouster last September to strip its chief executive of regulatory authority. ...

"The complaint accuses Mr. Grasso, as the NYSE's chief regulator, of leaving some board members with the impression that if they opposed his pay packages, it would be at their peril. One unnamed board member from Wall Street told investigators that Mr. Grasso 'confronted' him after he expressed concern about his proposed 2000 pay to a staffer, the suit says. The member voted in favor of that year's package and later recalled thinking, 'Thank God I escaped that one. This man was also our regulator [so] you have to be careful,' the suit says.

"It also alleges that Mr. Grasso took actions that benefited firms run by executives determining his compensation, at one point calling the National Association of Securities Dealers on behalf of Mr. Langone [a NYSE board member] as the regulatory organization was investigating his boutique investment bank, Invemed. The NASD eventually sued the bank for improperly sharing profits with favored clients but not Mr. Langone. A NASD spokeswoman said Mr. Grasso's call took place "after the complaint was finalized."

Although Grasso was nominally subject to evaluation by the NYSE board, that board was comprised in large part of ceremonial "public" directors who did not take the job as seriously as they should have and representatives of Wall Street firms who had various conflicts of interest.

The solution, however, is not to make Eliot Spitzer the czar of executive compensation. After all, the problem at the NYSE is a creature of government regulation. The NYSE is a government-created hybrid. On the one hand, it is a private corporation that creates a securities market for the benefit of the specialist brokers who own it; on the other hand, the NYSE is a quasi-public regulator with the primary responsibility for ensuring that its various stakeholders comply with SEC and exchange rules.

This duality has long insulated the NYSE from outside accountability. Its quasi-government status insulates it from discipline by markets and investors. The NYSE is part of a trading market oligopoly with very high barriers to entry, moreover, most of which are attributable to SEC rules. (The SEC, for example, long let the NYSE get away with listing standards making it almost impossible for a firm to de-list.)

Part of the solution is privatization. The NASD and NASDAQ went their separate ways after repeated problems with the SEC over inadequate supervision of its member broker-dealers. It is time for the NYSE to follow their lead.

Privatization, however, is not a complete solution. As the NYSE is organized today, there is an obvious conflict of interest given that the Exchange is owned by the very people who it needs to investigate when there are concerns about trading ahead or front running. In some respects, that conflict of interest would be lessened if the Exchange were owned by public shareholders rather than the specialists. Yet, public ownership might just introduce a different set of conflicts. What if maximizing shareholder returns required the Exchange to overlook misconduct by specialists or others with floor trading privileges, for example?

The answer, it seems to me, is to follow the NASDAQ model. The NYSE's roles as a regulator and a market should be separated. The regulatory functions could be assumed by the SEC, a new SRO, or maybe even the NASD (or some combination thereof). The market then could be spun off through an IPO.

Privatization and reallocation of the exchange's regulatory function have been resisted by virtually all the relevant players. Yet, it is the only solution that addresses both the current governance problems and the longstanding conflicts that are inherent in the Exchange's dual roles.

Ribstein on Spitzer v Grasso

Larry Ribstein has a typically cogent analysis of the mess at the NYSE, which concludes with a typically idealistic "solutio n":

The solution? Not, as Professor Bainbridge suggests, a simple NASDAQ-style restructuring, with a split of the trading and regulatory arms. The answer is, to put it bluntly, deregulation of the securities industry.

Which will happen about the same time pigs fly. My proposed solution is a second-best one, which is founded on the notion that politics is the art of the possible. A NASDAQ-style restructuring seems (just barely) plausible under current conditions. Deregulating the SROs and the industry is a non-starter. To the contrary, one of the various securities law newsletters (I forget which one, but I think it was BNA's) found it newsworthy that Senator Sarbanes merely implied that there would be no new securities legislation during this Congress. (In retrospect, this post reads in a more testy tone than intended, for which I apologize to Larry.)

Spitzer v. Grasso

In light of the filing of New York Attorney General Eliot Spitzer's long-awaited suit against former New York Stock Exchange CEO Richard Grasso, two thoughts come to mind:

(1) The government has no business setting executive compensation. Granted, Spitzer has authority to bring compensation suits against New York not-for-profits like the NYSE. Even so, it is bad policy for the government -- more precisely, an elected official with aspirations to higher office -- to be deciding how much money a corporate executive should be paid.

How much you get paid depends in large part on the thickness of the market for your services. In a thick market, wages tend to be low because there are many potential employees -- all more or less fungible -- competing for jobs. In a thin market, however, wages tend to be high because many employers are competing to hire a small number of eligible workers. The market for burger flippers is very thick. The market for law professors is relatively thick, to my considerable regret. The market for CEOs of Fortune 500 companies (which is what the NYSE essentially is) is thin. I'd guess the number of people who have what it takes to run a Fortune 500 company isn't much larger than the number of people who can run an NBA fast break. So even though much executive pay seems excessive, it's just supply and demand. Eliot Spitzer is unlikely to do a better job than competitive markets.

(2) Yet, Grasso and the NYSE are a special case. According to the WSJ ($), Spitzer alleges that Grasso abused his position as Wall Street's top regulator:

"The 54-page filing paints Mr. Grasso as an iron-fisted ruler, intimidating Wall Street titans that he regulated and manipulating the pay process to enrich himself. It portrays the board and its compensation committee as dysfunctional and its governance structure as conflict-ridden before it was overhauled in the aftermath of Mr. Grasso's ouster last September to strip its chief executive of regulatory authority. ...

"The complaint accuses Mr. Grasso, as the NYSE's chief regulator, of leaving some board members with the impression that if they opposed his pay packages, it would be at their peril. One unnamed board member from Wall Street told investigators that Mr. Grasso 'confronted' him after he expressed concern about his proposed 2000 pay to a staffer, the suit says. The member voted in favor of that year's package and later recalled thinking, 'Thank God I escaped that one. This man was also our regulator [so] you have to be careful,' the suit says.

"It also alleges that Mr. Grasso took actions that benefited firms run by executives determining his compensation, at one point calling the National Association of Securities Dealers on behalf of Mr. Langone [a NYSE board member] as the regulatory organization was investigating his boutique investment bank, Invemed. The NASD eventually sued the bank for improperly sharing profits with favored clients but not Mr. Langone. A NASD spokeswoman said Mr. Grasso's call took place "after the complaint was finalized."

Although Grasso was nominally subject to evaluation by the NYSE board, that board was comprised in large part of ceremonial "public" directors who did not take the job as seriously as they should have and representatives of Wall Street firms who had various conflicts of interest.

The solution, however, is not to make Eliot Spitzer the czar of executive compensation. After all, the problem at the NYSE is a creature of government regulation. The NYSE is a government-created hybrid. On the one hand, it is a private corporation that creates a securities market for the benefit of the specialist brokers who own it; on the other hand, the NYSE is a quasi-public regulator with the primary responsibility for ensuring that its various stakeholders comply with SEC and exchange rules.

This duality has long insulated the NYSE from outside accountability. Its quasi-government status insulates it from discipline by markets and investors. The NYSE is part of a trading market oligopoly with very high barriers to entry, moreover, most of which are attributable to SEC rules. (The SEC, for example, long let the NYSE get away with listing standards making it almost impossible for a firm to de-list.)

Part of the solution is privatization. The NASD and NASDAQ went their separate ways after repeated problems with the SEC over inadequate supervision of its member broker-dealers. It is time for the NYSE to follow their lead.

Privatization, however, is not a complete solution. As the NYSE is organized today, there is an obvious conflict of interest given that the Exchange is owned by the very people who it needs to investigate when there are concerns about trading ahead or front running. In some respects, that conflict of interest would be lessened if the Exchange were owned by public shareholders rather than the specialists. Yet, public ownership might just introduce a different set of conflicts. What if maximizing shareholder returns required the Exchange to overlook misconduct by specialists or others with floor trading privileges, for example?

The answer, it seems to me, is to follow the NASDAQ model. The NYSE's roles as a regulator and a market should be separated. The regulatory functions could be assumed by the SEC, a new SRO, or maybe even the NASD (or some combination thereof). The market then could be spun off through an IPO.

Privatization and reallocation of the exchange's regulatory function have been resisted by virtually all the relevant players. Yet, it is the only solution that addresses both the current governance problems and the longstanding conflicts that are inherent in the Exchange's dual roles.

Spitzer v. Grasso and the Future of the NYSE

In light of the filing of NY AG Eliot Spitzer's long-awaited suit against former NYSE CEO Richard Grasso, it is time to revisit two dominant themes of this blog: (1) The government has no business setting executive compensation. Granted, Spitzer has authority to bring such suits. Even so, it is bad policy for the government - more precisely, an elected official with aspirations to higher office - to be deciding how much money a corporate executive should be paid. How much you get paid depends in large part on the thickness of the market for your services. In a thick market, wages tend to be low because there are many potential employees – all more or less fungible – competing for jobs. In a thin market, however, wages tend to be high because many employers are competing to hire a small number of eligible workers. The market for burger flippers is very thick. The market for law professors is relatively thick, to my considerable regret. The market for CEOs of Fortune 500 companies (which is what the NYSE essentially is) is thin. I’d guess the number of people who have what it takes to run a Fortune 500 company isn’t much larger than the number of people who can run a NBA fast break. So even though much executive pay seems excessive, its just supply and demand.

(2) Yet, Grasso and the NYSE are a special case. According to the WSJ ($), Spitzer alleges that Grasso abused his position as Wall Street's top regulator:

The 54-page filing paints Mr. Grasso as an iron-fisted ruler, intimidating Wall Street titans that he regulated and manipulating the pay process to enrich himself. It portrays the board and its compensation committee as dysfunctional and its governance structure as conflict-ridden before it was overhauled in the aftermath of Mr. Grasso's ouster last September to strip its chief executive of regulatory authority. ...

The complaint accuses Mr. Grasso, as the NYSE's chief regulator, of leaving some board members with the impression that if they opposed his pay packages, it would be at their peril. One unnamed board member from Wall Street told investigators that Mr. Grasso "confronted" him after he expressed concern about his proposed 2000 pay to a staffer, the suit says. The member voted in favor of that year's package and later recalled thinking, "Thank God I escaped that one. This man was also our regulator [so] you have to be careful," the suit says.

It also alleges that Mr. Grasso took actions that benefited firms run by executives determining his compensation, at one point calling the National Association of Securities Dealers on behalf of Mr. Langone [a NYSE board member] as the regulatory organization was investigating his boutique investment bank, Invemed. The NASD eventually sued the bank for improperly sharing profits with favored clients but not Mr. Langone. A NASD spokeswoman said Mr. Grasso's call took place "after the complaint was finalized."

Although Grasso was nominally subject to evaluation by the NYSE board, that board was comprised in large part of ceremonial “public” directors who did not take the job as seriously as they should have and representatives of Wall Street firms who had various conflicts of interest.

The solution, however, is not to make Eliot Spitzer the czar of executive compensation. After all, the problem at the NYSE is a creature of government regulation. The NYSE is a government-created hybrid. On the one hand, it is a private corporation that creates a securities market for the benefit of the specialist brokers who own it; on the other hand, the NYSE is a quasi-public regulator with the primary responsibility for ensuring that its various stakeholders comply with SEC and exchange rules.

This duality has long insulated the NYSE from outside accountability. Its quasi-government status insulates it from discipline by markets and investors. The NYSE is part of a trading market oligopoly with very high barriers to entry, moreover, most of which are attributable to SEC rules. (The SEC, for example, long let the NYSE get away with listing standards making it almost impossible for a firm to de-list.)

Part of the solution is privatization. The NASD and NASDAQ went their separate ways after repeated problems with the SEC over inadequate supervision of its member broker-dealers. It is time for the NYSE to follow their lead.

Privatization, however, is not a complete solution. As the NYSE is organized today, there is an obvious conflict of interest given that the Exchange is owned by the very people who it needs to investigate when there are concerns about trading ahead or front running. In some respects, that conflict of interest would be lessened if the Exchange were owned by public shareholders rather than the specialists. Yet, public ownership might just introduce a different set of conflicts. What if maximizing shareholder returns required the Exchange to overlook misconduct by specialists or others with floor trading privileges, for example?

The answer, it seems to me, is to follow the NASDAQ model. The NYSE’s roles as a regulator and a market should be separated. The regulatory functions could be assumed by the SEC, a new SRO, or maybe even the NASD (or some combination thereof). The market then could be spun off through an IPO.

Privatization and reallocation of the exchange's regulatory function have been resisted by virtually all the relevant players. Yet, it is the only solution that addresses both the current governance problems and the longstanding conflicts that are inherent in the Exchange’s dual roles.

My "Director Primacy" Makes Top 10 List

My article, Director Primacy: The Means and Ends of Corporate Governance, 97 Northwestern University Law Review 547 (2003), available in draft here, has been named one of the 10 best corporate and securities law review articles published in 2003.

Catholic Voting

In her post Voting Catholic, Amy Lamboley raises a very important issue:

The New York Times has an article stating that "The Roman Catholic bishop of Colorado Springs has issued a pastoral letter saying that American Catholics should not receive communion if they vote for politicians who defy church teaching by supporting abortion rights, same-sex marriage, euthanasia or stem-cell research." This does not strike me as a good idea.

First off, it is not the case that in all elections voters will be offered a choice between a pro-life and a pro-choice candidate. In more liberal areas of the country, often both candidates are pro-choice, and disagree only to the extent to which abortion should be regulated and/or subsidized by the state. Must Catholic voters abstain entirely from the election?

Second off, these are not the only areas about which the church has politically relevant teaching. Capital punishment, just war theory, and various social justice issues are all areas in which Catholic teaching can reasonably be applied to American politics, and in a way that does not so squarely line up with the Republican party line, but which a Catholic may wish to consider in choosing a candidate to support. So, for instance, in an election in which both candidates are pro-choice, but one is for the war in Iraq and one against, a voter could well feel that it was vitally important to vote for the antiwar politician. ...

I certainly don't believe that Catholics should check their Catholicism at the door of the polling-place. In fact, I don't understand how one could fail to consult fundamental religious beliefs in deciding for whom one votes. It just strikes me that, given the seriousness of the sanction involved, and given the fact that there is no party in U.S. politics that takes the "Catholic line", many decisions on which politician to support will involve weighing a number of different factors, and making unfortunate tradeoffs, it seems terribly misguided to reduce the decision to a few-issue test.

I think Amy is basically right, although I would want to tweak the analysis a bit.

First, let's remember that Bishop Sheridan did not say that Catholics who vote for, say, pro-abortion candidates will be denied the Eucharist. Nothing in his pastoral letter suggests that priests will be grilling their parishoners on their voting habits before administering the sacraments. Instead, I read the Bishop's letter as calling upon Catholics who do so to voluntarily refrain from participating in the sacraments (or, better yet, to be reconciled with the Church through renunciation and penance).

Second, while I applaud Bishop Sheridan for his strong message that the Church's Gospel of Life has pride of place in any faith-based analysis of public policy, I think he has failed to give adequate attention to the legitimate complexities Amy raises. The most authoritative recent Church treatment of these issues is to be found in the Doctrinal Note on Some Questions Regarding The Participation of Catholics in Political Life, which acknowledges that Catholics should not be single issue voters:

The Christian faith is an integral unity, and thus it is incoherent to isolate some particular element to the detriment of the whole of Catholic doctrine. A political commitment to a single isolated aspect of the Church’s social doctrine does not exhaust one’s responsibility towards the common good.

On the other hand, the Note does support Bishop Sheridan's view that the Church's Gospel of Life takes highest priority:

When political activity comes up against moral principles that do not admit of exception, compromise or derogation, the Catholic commitment becomes more evident and laden with responsibility. In the face of fundamental and inalienable ethical demands, Christians must recognize that what is at stake is the essence of the moral law, which concerns the integral good of the human person. This is the case with laws concerning abortion and euthanasia (not to be confused with the decision to forgo extraordinary treatments, which is morally legitimate). Such laws must defend the basic right to life from conception to natural death. In the same way, it is necessary to recall the duty to respect and protect the rights of the human embryo.

Even so, however, the Church acknowledges that even as to abortion compromises may be necessary in the political arena:

As John Paul II has taught in his Encyclical Letter Evangelium vitae regarding the situation in which it is not possible to overturn or completely repeal a law allowing abortion which is already in force or coming up for a vote, an elected official, whose absolute personal opposition to procured abortion was well known, could licitly support proposals aimed at limiting the harm done by such a law and at lessening its negative consequences at the level of general opinion and public morality.

What then should Catholics do? There has been an active debate of this topic over at Mirror of Justice. Michael Scaperlanda's recent post notes:

Oregon Archbishop Vlazny's statement on the reception of communion by pro-choice candidates and those who vote for them. Archbishop Vlazny says that pro-choice candidates and those who vote for them because of their pro-choice views should refrain from receiving the Eucharist. In contrast, the Archbishop says that those who vote for a pro-choice candidate despite the candidate's pro-choice position should not refrain. He says:

"Should Catholics who choose to vote for pro-choice politicians refrain from reception of the Holy Communion? If they vote for them precisely because they are pro-choice, I believe they too should refrain from the reception of Holy Communion because they are not in communion with the Church on a serious matter. But if they are voting for that particular politician because, in their judgment, other candidates fail significantly in some matters of great importance, for example, war and peace, human rights and economic justice, then there is no evident stance of opposition to Church teaching and reception of Holy Communion seems both appropriate and beneficial."

He goes on to say that those who vote for a pro-choice candidate should make their disagreement with the politicians stand on abortion abundantly clear.

I suspect Amy would find Archbishop Vlazny's position far more congenial than that of Bishop Sheridan. Personally, I come out where Archbishop Vlazny does. Out here in LA, I rarely get the chance to vote for a pro-life candidate. Instead, I am usually choosing between two pro-choice candidates. In such situations, Vlazny's analysis that voting for one of them could still be licit strikes me as analogous to John Paul's view of permissible compromises. Since my choice between two such candidates is made on grounds other than their position on abortion, I am comfortable that I am not acting in opposition to or derogation from Church teaching on these vital issues.

Two Approaches to Conservative Commentary

Hugh Hewitt's latest post is unabashed Bush cheerleading:

Newsweek has the latest poll that shows (1) a drop in President Bush's approval ratings, and (2) a dead-heat in the Bush-Kerry poll. Proving what? That Americans wish progress was quicker in Iraq, but that even in the face of the worst 45 days of news since 9/11, the president is still understood as a war leader and Kerry is an implausible replacement. There's a stature gap when it comes to dealing with the enemy which John Kerry will never fill, which is why I remain very optimistic about the fall vote. The American people know that a vote for Kerry will be a vote to cut-and-run, and they also know that there is no way to withdraw from a war we didn't start and we cannot end, as the execution of Nick Berg reminded demonstrated again this week. ...

November's choice cannot now be understood as other than a referendum on how America is going to conduct itself over the next two decades. The Bush path is clear, and means aggressive confrontation of the enemy up to and including invasion if necessary, versus the Kerry approach of talk to the Security Council and get some subpoenas issued. The Bush approach is hard and costly, both in lives lost among the military and huge appropriations. The Kerry approach is suicidal.

I have a lot of respect and admiration for Hugh, but all of this strikes me as far too glib. Contrast Hugh's unsquelched optimism about Bush with Jonathan Last's take in today's LA Times. Last is no lefty; he's an editor at the neocon Weekly Standard, but he sees Bush in a clear and harsh light:

The Republican theory of victory in November is that John Kerry will by then have become an unacceptable choice for voters because of his well-documented penchant for flip-flopping on issues. It's a smart theory with only one problem: George W. Bush would not be immune to the same charge.

Last then cites a bunch of examples, of which a number go directly to Hugh's claim that the "Bush path is clear":

In the immediate aftermath of Sept. 11, Bush spoke as if the war on terrorism would be waged against all terrorist organizations, saying, "Anybody who houses a terrorist, encourages terrorism, will be held accountable." On another occasion he said, "We are planning a broad and sustained campaign to secure our country and eradicate the evil of terrorism." And later the president proclaimed, "If any government sponsors the outlaws and killers of innocents, they have become outlaws and murderers themselves."

By November 2001, however, Bush had modified his position: "Where terrorist groups exist of global reach, the United States and our friends and allies will seek it out, and we will destroy it." The important clause "of global reach" was added to justify ignoring regional terrorism in Ireland, Spain, Chechnya, the Philippines and Israel.

In March 2003, the president was asked if he would call for a vote on the proposed U.N. Security Council resolution backing the use of force in Iraq, which faced near-certain defeat. "No matter what the whip count is," Bush said, "we're calling for the vote. We want to see people stand up and say what their opinion is about Saddam Hussein and the utility of the United Nations Security Council. And so, you bet. It's time for people to show their cards, to let the world know where they stand when it comes to Saddam." The vote was never taken.

The list goes on. After saying the U.N. would have only a perfunctory role in rebuilding Iraq, Bush went back to the world body seeking aid in September and more recently looked to U.N. special envoy Lakhdar Brahimi to help form an interim government in Iraq. After announcing he would file an amicus brief opposing affirmative action at the University of Michigan, Bush instructed his solicitor general to file a last-minute brief that essentially punted on the issue.

Personally, I have no doubt that I'll vote for Bush in November. But don't count on me for a ton of rah-rah cheerleading. The Iraq mess daily raises serious new questions about the competence of the Bush administration. As Fouad Ajami argues: "We have been doing Iraq by improvisation, we are now "dumping stock," just as our fortunes in that hard land may be taking a turn for the better." Ajami further raises the competence question by observing "the confusion--and panic--of our policies in the aftermath of a cruel April."

Conservatives do their cause no good by ignoring those questions; instead, we are going to have to make the case that Bush deserves reelection despite those legitimate questions. We also need to hold Bush 43's feet to the fire, so that the Bush 2.1 administration runs the war more competently than this one has.

Ramesh v. Andrew on the Communion Issue

Ramesh Ponnuru, my favorite Cornerite, responds to Andrew Sullivan's Time piece on the communion controversy:

We're given, in the linked piece, two arguments for why the bishops should offer communion to Catholic politicians who support legal abortion. First: "How many of us Catholics are completely worthy every Sunday of receiving what we believe to be the body and blood of Jesus? The church understands this and has long left it up to the individual to wrestle with his or her conscience as to whether going to Communion is appropriate. To turn the tables and make the giving of Communion contingent on a public, political litmus test would politicize a sacred ritual that is and always should be beyond politics."

Actually, none of us are worthy to receive the Lord, and we even say so beforehand. If legislators voted on abortion by secret ballot and did not disclose their positions to the public, it would indeed be appropriate to handle the issue in the confessional rather than in public. But the sin under discussion--that of unjustly denying the unborn legal protections that everyone else has--is committed in public. A public denial of communion is thus necessary to prevent people from reaching the false conclusion that persisting in this sin is compatible with staying in communion with the church.

Second, the denial of communion would make the church seem to be allied with the Republican party. The article ignores the existence of two to three dozen pro-life House Democrats, which is not an insignificant faction of the entire caucus even if it gets little public attention. But leave that aside. The argument boils down to this: The bishops are supposed to let members of their flock endanger their souls without doing much to help them, because of a political calculation about the effects of this pastoral care. You don't have to be familiar with canon law to see that the bishops just can't follow this advice.

Yep. In the next two posts I explore the tax/constitutional issues raised by this debate and offer my own take on what Catholic voters ought to do. There's also a very active discussion of this issue over at Mirror of Justice.

Hard versus Soft America

Michael Barone in today's LA Times (R):

It has long been my observation that American 18-year-olds are more incompetent than 18-year-olds in other advanced countries, but that American 30-year-olds are the most competent 30-year-olds in the world.

...Why should this be so? I think it's because from ages 6 to 18 Americans live mostly in Soft America, while from ages 18 to 30 they live mostly in Hard America.

Let me define my terms. Hard America is made up of all those parts of American life where you have competition and accountability. Soft America is made up of those parts where you don't. Hard America includes, among other things, the high-tech private sector. Soft America includes, among other things, high school, at least for the large majority of kids who aren't applying to selective colleges.

You know what? I think he's right:

Two East County high school teachers were placed on paid leave yesterday after students in their classes saw images and heard American Nick Berg being beheaded in Iraq.

We're at war, folks ... a war that probably will be dragging on when those students are my age. They need to know what we're up against. We do them no favors by hiding them away from hard truths.

Two Approaches to Conservative Commentary

Hugh Hewitt's latest post is unabashed Bush cheerleading:

Newsweek has the latest poll that shows (1) a drop in President Bush's approval ratings, and (2) a dead-heat in the Bush-Kerry poll. Proving what? That Americans wish progress was quicker in Iraq, but that even in the face of the worst 45 days of news since 9/11, the president is still understood as a war leader and Kerry is an implausible replacement. There's a stature gap when it comes to dealing with the enemy which John Kerry will never fill, which is why I remain very optimistic about the fall vote. The American people know that a vote for Kerry will be a vote to cut-and-run, and they also know that there is no way to withdraw from a war we didn't start and we cannot end, as the execution of Nick Berg reminded demonstrated again this week. ...

November's choice cannot now be understood as other than a referendum on how America is going to conduct itself over the next two decades. The Bush path is clear, and means aggressive confrontation of the enemy up to and including invasion if necessary, versus the Kerry approach of talk to the Security Council and get some subpoenas issued. The Bush approach is hard and costly, both in lives lost among the military and huge appropriations. The Kerry approach is suicidal.

I have a lot of respect and admiration for Hugh, but all of this strikes me as far too glib. Contrast Hugh's unsquelched optimism about Bush with Jonathan Last's take in today's LA Times. Last is no lefty; he's an editor at the neocon Weekly Standard, but he sees Bush in a clear and harsh light:

The Republican theory of victory in November is that John Kerry will by then have become an unacceptable choice for voters because of his well-documented penchant for flip-flopping on issues. It's a smart theory with only one problem: George W. Bush would not be immune to the same charge.

Last then cites a bunch of examples, of which a number go directly to Hugh's claim that the "Bush path is clear":

In the immediate aftermath of Sept. 11, Bush spoke as if the war on terrorism would be waged against all terrorist organizations, saying, "Anybody who houses a terrorist, encourages terrorism, will be held accountable." On another occasion he said, "We are planning a broad and sustained campaign to secure our country and eradicate the evil of terrorism." And later the president proclaimed, "If any government sponsors the outlaws and killers of innocents, they have become outlaws and murderers themselves."

By November 2001, however, Bush had modified his position: "Where terrorist groups exist of global reach, the United States and our friends and allies will seek it out, and we will destroy it." The important clause "of global reach" was added to justify ignoring regional terrorism in Ireland, Spain, Chechnya, the Philippines and Israel.

In March 2003, the president was asked if he would call for a vote on the proposed U.N. Security Council resolution backing the use of force in Iraq, which faced near-certain defeat. "No matter what the whip count is," Bush said, "we're calling for the vote. We want to see people stand up and say what their opinion is about Saddam Hussein and the utility of the United Nations Security Council. And so, you bet. It's time for people to show their cards, to let the world know where they stand when it comes to Saddam." The vote was never taken.

The list goes on. After saying the U.N. would have only a perfunctory role in rebuilding Iraq, Bush went back to the world body seeking aid in September and more recently looked to U.N. special envoy Lakhdar Brahimi to help form an interim government in Iraq. After announcing he would file an amicus brief opposing affirmative action at the University of Michigan, Bush instructed his solicitor general to file a last-minute brief that essentially punted on the issue.

Personally, I have no doubt that I'll vote for Bush in November. But don't count on me for a ton of rah-rah cheerleading. The Iraq mess daily raises serious new questions about the competence of the Bush administration. As Fouad Ajami argues: "We have been doing Iraq by improvisation, we are now "dumping stock," just as our fortunes in that hard land may be taking a turn for the better." Ajami further raises the competence question by observing "the confusion--and panic--of our policies in the aftermath of a cruel April."

Conservatives do their cause no good by ignoring those questions; instead, we are going to have to make the case that Bush deserves reelection despite those legitimate questions. We also need to hold Bush 43's feet to the fire, so that the Bush 2.1 administration runs the war more competently than this one has.

Krispy Sued

Sean Hackbarth on the investor suits against Krispy Kreme:

This suit stems from a company statement last week telling investors that earnings would be "10% lower than previously announced guidance." Krispy Kreme is being sued because they may have misjudged their expansion plans and not realized how much the low-carb craze would effect them. It sounds to me that this is a case of business error. There's a big difference between lying and being wrong ....

It's an old, old story I'm afraid. The top empirical work on private securities litigation is being done by a law prof named Michael Perino, who has documented the existence of a "race to the courthouse," by which he means "class actions filed soon after significant stock price declines, apparently with very little pre-filing investigation" by the plaintiff lawyer. Unfortunately, he's found that the PSLRA hasn't solved the problem.