David Zarig writes:
With the honest services decisions and the PCAOB decision, (let alone the "foreign cubed" securities case) we can see, contra this good column by Floyd Norris, when courts really get involved with a regulatory scheme. Late, in many ways. When you think about the judicial record in relation to the financial crisis - quietude on both the state and federal level during both the merger period and the bailout period - and you think about how long PCAOB has been doing its thing, and how many people have been prosecuted for the government's crazy definition of honest services fraud, you can see just how much of a backstop, rather than proactive participant in the regulatory system, the courts are. As Lyle Dennison observed in the case concerning the extraterritorial application of our securities laws, "the Court finally took on the issue, after years of declining to review it in a series of cases." Delayed, rather than immediate participation, defines judicial participation, I think.
It's not clear whether this is meant as a mere observation or a criticism. If the latter, I find it puzzling. The very nature of their social role precludes judges from being proactive regulators. They can make law, of course, but they can't do so without an actual case or controversy to use as a vehicle for doing so. Finding a case that has the right facts and the right procedural posture to make new law can take quite a while. This is especially true for the SCOTUS, of course, since it can take years for cases to find their way through the lower court system.
When it comes to complex issues like the financial crisis, moreover, why would we want judges being "proactive participant[s] in the regulatory system"? Consider the Supreme Court. Nine old farts with hardly a day of business experience between them. Each has a staff of just four (I think) wet behind the ears law clerks who probably took all con law courses. I dare say there's nobody in the Supreme Court building who could tell you the difference between a CSO and a CBO. They simply don't have the expertise available that Congress and the regulatory bodies possess.
And, of course, the judiciary is the least accountable branch. If you're going to be in a position to plunge the entire world economy into a depression, you ought to be democratically accountable.
