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UND STEP 3 Ecclesiology Week 3: The Church as Community-Assignment

As previously explained, I've enrolled in the University of Notre Dame's Satellite Theological Education Program (STEP) to pursue their Certificate in Doctrine. I am currently taking my third of the required courses: Ecclesiology. This week's topic is The Church as Community.

Our assignment this week is to discuss (in 250 words or less) the following:

The community of the Church can be described as one of communion. Read the discussion of “communion” found in CCC 946-953. What distinguishes the “communion of saints” that “is the Church” (CCC 946) from other human forms of community? Why is this important?

CCC refers, of course, to the Catechism of the Catholic Church. The relevant passage states:

946 After confessing "the holy catholic Church," the Apostles' Creed adds "the communion of saints." In a certain sense this article is a further explanation of the preceding: "What is the Church if not the assembly of all the saints?" The communion of saints is the Church.

947 "Since all the faithful form one body, the good of each is communicated to the others.... We must therefore believe that there exists a communion of goods in the Church. But the most important member is Christ, since he is the head.... Therefore, the riches of Christ are communicated to all the members, through the sacraments.""As this Church is governed by one and the same Spirit, all the goods she has received necessarily become a common fund."

948 The term "communion of saints" therefore has two closely linked meanings: communion in holy things (sancta)" and "among holy persons (sancti).

"Sancta sancti's! ("God's holy gifts for God's holy people") is proclaimed by the celebrant in most Eastern liturgies during the elevation of the holy Gifts before the distribution of communion. the faithful (sancta) are fed by Christ's holy body and blood (sancta) to grow in the communion of the Holy Spirit (koinonia) and to communicate it to the world.

949 In the primitive community of Jerusalem, the disciples "devoted themselves to the apostles' teaching and fellowship, to the breaking of the bread and the prayers."

Communion in the faith. the faith of the faithful is the faith of the Church, received from the apostles. Faith is a treasure of life which is enriched by being shared.

950 Communion of the sacraments. "The fruit of all the sacraments belongs to all the faithful. All the sacraments are sacred links uniting the faithful with one another and binding them to Jesus Christ, and above all Baptism, the gate by which we enter into the Church. the communion of saints must be understood as the communion of the sacraments.... the name 'communion' can be applied to all of them, for they unite us to God.... But this name is better suited to the Eucharist than to any other, because it is primarily the Eucharist that brings this communion about."

951 Communion of charisms. Within the communion of the Church, the Holy Spirit "distributes special graces among the faithful of every rank" for the building up of the Church. Now, "to each is given the manifestation of the Spirit for the common good.”

952 "They had everything in common." "Everything the true Christian has is to be regarded as a good possessed in common with everyone else. All Christians should be ready and eager to come to the help of the needy . . . and of their neighbors in want." A Christian is a steward of the Lord's goods.

953 Communion in charity. In the sanctorum communio, "None of us lives to himself, and none of us dies to himself." "If one member suffers, all suffer together; if one member is honored, all rejoice together. Now you are the body of Christ and individually members of it." "Charity does not insist on its own way." In this solidarity with all men, living or dead, which is founded on the communion of saints, the least of our acts done in charity redounds to the profit of all. Every sin harms this communion.

In his book Models of the Church, Avery Cardinal Dulles identifies several ways of thinking about the Church, two of which seem pertinent to the discussion question. On the one hand, we can understand the Church as an "institution." This model “defines the Church primarily in terms of its visible structures, especially the rights and powers of its officers.” Whatever the merits--and they are debatable--of this model for understanding the Church, it does not provide a basis for distinguishing the Church from any other human community. 

In contrast, Dulles says we can understand the Church as a "mystical communion." here we have a model that distinguishes the Church from secular communities. Again, it is not a perfect model, but its "emphasis on the dynamic community generated by the Holy Spirit along a vertical line (relationship with God) and horizontally (relationship with brother and sisters)" provides its greatest strength.

Dulles' insights suggest that the  Church as a communion of saints differs from secular communities in its universality. Outside of space and time, the Father, Son, and Holy Spirit commune with one another in eternal love. All who have professed Christ as savior since the Church was founded at Pentecost are drawn into that communal relationship and thus become part of a fellowship that includes not just its present day members but rather everyone who has ever believed.

This understanding of the unique nature of the Christian community is implied in Hebrews 12:1, where the author reminds us that "we are surrounded by so great a cloud of witnesses." When read in context of the preceding Chapter, which recounts the faith of the ancient saints (I am not going to get into the vexed question of the status of those saints who lived before Christ), the passage clearly suggests that we are part of community that includes both our contemporaries and the saints of the past. Indeed, it is precisely for this reason that we believe the intercession of the saints has value.

Instructively, however, the author of Hebrews goes on to remind is to keep "our eyes fixed on Jesus, the leader and perfecter of faith." No matter how valuable the intercession of our fellow believers, the saints, or even Mary may be, God remains the head and focus of our community. Hence, the Catechism reminds us that "the most important member is Christ, since he is the head."

 

UND STEP 3 Ecclesiology Week 3: The Church as Community--Initial Reflections

As previously explained, I've enrolled in the University of Notre Dame's Satellite Theological Education Program (STEP) to pursue their Certificate in Doctrine. I am currently taking my third of the required courses: Ecclesiology. This week's topic is The Church as Community.

Our instructor posed an interesting reflection question to start the week:

Believers belong to many communities apart from the community of the Church: families, neighborhoods, cities, political parties, and so forth. How should Christians understand their belonging to the Church in relation to these other communities?

We can see these communities as what Edmund Burke called the "little platoon" and what Tocqueville described as mediating institutions, which stand between the autonomous individual and the Leviathan state. Ideally, as George Weigel has written, such communities help build "a citizenry regulating itself from within according to a shared public 'language of good and evil.'" In this regard, the Church is the paramount community for both theological and civic reasons. 

Virtue is an adaptive response to the instinctive human recognition of (and need for) a transcendent moral order codified in a body of natural law.  People are most likely to act virtuously when they believe in an external power, higher and more permanent than the state, who is aware of their shortcomings and will punish them in the next life even if they escape retribution in this life.

Civic virtue also can be created by secular communities, however. As James Q. Wilson observes, “something in us makes it all but impossible to justify our acts as mere self-interest whenever those acts are seen by others as violating a moral principle.”  Rather, “[w]e want our actions to be seen by others—and by ourselves—as arising out of appropriate motives.”  Voluntary communities strengthen this instinct in two ways. First, they provide a network of reputational and other social sanctions that shape incentives. Virtuous communities will use those sanctions to encourage virtue among their members. Second, because people care more about how they are perceived by those close to them, communal life provides a cloud of witnesses about whom we care and whose good opinion we value. We hesitate to disappoint those people and thus strive to comport ourselves in accordance with communal norms.

The Christian thus appropriately can value such secular communities as ways of inculcating virtue and ethical behavior. At the end of the day, however, the Church has primary claim on our affections and devotion. It is after all, the community within which we work our our eternal destiny.

The SEC should authorize mandatory arbitration of shareholder class action lawsuits

Bloomberg reports that:

The Securities and Exchange Commission, in its long history, has never allowed companies to sell shares in initial public offerings while also letting them ban investors from seeking big financial damages through class-action lawsuits. That's because the agency has considered the right to sue a crucial shareholder protection against fraud and other securities violations.

But as President Donald Trump's pro-business agenda sweeps through Washington, the SEC is laying the groundwork for a possible policy shift, said three people familiar with the matter. The agency, according to two of the people, has privately signaled that it's open to at least considering whether companies should be able to force investors to settle disputes through arbitration, an often closed-door process that can limit the bad publicity and high legal costs triggered by litigation.

One can already hear the howls from the plaintiff's bar and their allies in certain institutional investor sectors, but this is an idea whose time has come.

The current system of securities class‐action litigation is an inefficient means to redress the harm to investors. Prominent studies have concluded that securities class‐action litigation fails to compensate adequately those harmed by fraud. The median ratio of settlement amount to total alleged investor loss has ranged between two and three percent. Securities classaction lawsuits are essentially wealth transfers among shareholders and often are circular in nature. Existing shareholders bear the burden of compensating aggrieved shareholders, some of whom also may be existing shareholders.

Although individual class members receive relatively little of the ultimate recovery that is spread across a class, the plaintiffs’ attorneys receive customarily twenty to twenty‐five percent of the total recovery. During the past ten years, plaintiffs’ lawyers, along with other middlemen, have obtained nearly $17 billion in fees from securities class actions. The diffused investors in the class lack the ability to bargain over attorney fees and courts rarely reduce the fees proposed by the plaintiffs’ attorneys.

In class‐action litigation, the interests of the plaintiffs’ attorneys and class members may not be aligned in some instances. The plaintiffs’ attorneys bear the full costs of pursuing the litigation but receive only a portion of the ultimate award. Consequently, the decisions of the plaintiffs’ attorneys may be driven by concern over litigation costs and personal gain rather than by an interest in obtaining the best result for class members. Indeed, the recent scandals involving plaintiffs’ attorneys paying large sums to repeat plaintiffs illustrate how class‐action litigation can be abused at the expense of harmed investors.

Companies and their shareholders incur enormous costs to defend against securities class‐action lawsuits. In one recent study, approximately forty‐one percent of the companies listed on the major stock exchanges had been named as defendants in at least one federal securities class action. The total monetary value of securities class‐action settlements in 2008 was $3.09 billion. The average settlement value from 2002 to 2008 was $45.6 million, which represents approximately a 175% increase from the average value of $16.6 million from 1996 to 2001.

Private securities litigation has become a real concern, particularly for new businesses that do not have the resources to handle a large lawsuit. A major lawsuit could sound the death knell for new companies that already bear a disproportionate amount of the total business tort costs in the United States. Although small companies account for nineteen percent of business revenue in the United States, they bear sixty‐nine percent ($98 billion) of the business tort costs. To cope with the cost of securities litigation, companies must raise the prices of their goods and services. Doing so, in turn, logically harms the competitiveness of U.S. businesses in a global marketplace that is dominated by low‐cost goods and services in the nations where providers do not face such threats.

Securities class actions impose a competitive disadvantage on U.S. capital markets relative to markets in other countries. Indeed, foreign companies are reluctant to list in U.S. markets due to concerns with the American litigation system. According to the Committee on Capital Markets Regulation - an independent, bipartisan body composed of twenty‐two corporate and financial leaders from business, finance, law, accounting, and academia - since the late 1990s the percentage of the world’s Initial Public Offerings (IPOs) conducted in the United States has dropped from forty‐eight percent to six percent in 2005. Of the world’s twenty‐five largest IPOs in 2005, only one of them took place in the United States. That trend continued in 2006, when a report dated November 30 observed that, in the year to date, nine of the ten largest IPOs had occurred in markets outside of the United States. Dollar figures are also staggering: Between 2000 and 2005, the percentage of dollars raised in global IPOs in the United States decreased by a factor of ten, dropping from fifty percent to five percent.

Where is the IPO activity going? The Committee report states that over the same time, London’s share of the global IPO market nearly quintupled from five percent to almost twenty‐five percent. United States exchanges attracted only about one‐third of the share of the global IPO volume in 2006 that they had in 2001 and only three of the twenty largest IPOs of 2008 were listed on U.S. stock exchanges. In 2009, the United States regained the global lead in amount of funds raised in IPOs, boasting a robust twenty‐seven percent share of global capital raised. But this number may be of little comfort when one considers that the share is mostly attributed to the $19.6 billion Visa IPO - the largest IPO in U.S. capital market history. Looking beyond this single outlier, it is apparent that capital formation has moved overseas in droves.

An unwieldy class‐action regime impacts not only the market for public offerings, but also the market for private offerings. The success of the venture capital industry relies, in large part, on how readily a start‐up or other privately held company can be taken public. Absent a desire to access the public equity markets in the United States, the amount of private equity activity in the United States also suffers. In contrast to federal litigation, securities arbitration appears to provide a more efficient and cost‐effective mechanism to resolve disputes with integrity while minimizing the burdens on our judicial system. Arbitration ensures that all relevant facts are presented to the panel without the evidentiary hurdles of federal court. In addition, the use of arbitrators knowledgeable about the securities industry may reduce the uncertainty of resolving securities claims in jury trials.

Bondi, Bradley J., Facilitating Economic Recovery and Sustainable Growth through Reform of the Securities Class-Action System: Exploring Arbitration as an Alternative to Litigation (2010). Harvard Journal of Law and Public Policy, Vol. 33, pp. 607-638, 2010. Available at SSRN: https://ssrn.com/abstract=1601305 

Google and Intel are unpatriotic corporations: What, if anything, should we do about it?

The Economist reported this week that "America needs to regain its technological edge." Unfortunately, two critical US corporations apparently are unwilling to help our country do so. In the same report, the Economist noted that:

Russia, and particularly China, are both making AI a national priority, and have far fewer qualms than the West in how they go about it. According to Jim Lewis, an expert on the impact of technology on warfare at CSIS, “when it comes to government data, the US doesn’t match what China collects on its citizens at all. They have a big sandbox to play in and a lot of toys and good people.” In China, where big data are bigger than anywhere else, privacy is not an issue, and there is no division between commercial research and military needs. By contrast, Google’s London-based DeepMind subsidiary, whose machine beat a grandmaster at the game of Go, refuses to work with the armed forces.

We all knew, of course, that Google is evil (see, e.g., #Goolag). But who knew they were so lacking in basic patriotism?

Apparently, we can add Intel to the list of companies that are throwing the US military under the bus while aiding and abetting the Chinese:

In initial disclosures about critical security flaws discovered in its processors, Intel Corp. INTC -0.20% notified a small group of customers, including Chinese technology companies, but left out the U.S. government, according to people familiar with the matter and some of the companies involved.

The decision raises concerns, security researchers said, as it potentially could have allowed information about the chip flaws, dubbed Spectre and Meltdown, to fall into the hands of the Chinese government before being publicly divulged. There is no evidence any information was misused, the researchers said.

No evidence that it was missed this time doesn't mean such information won't be misused next time.

All of this seems quite worrying. In the 2016 novel, Ghost Fleet tells a seemingly plausible story about how the Chinese military uses weaknesses in US technology to launch a preemptive strike on Hawaii.

Now let's be quite clear. I do not expect corporations as such to be patriots. After all, the corporation is just a legal fiction. It's personhood is just a convenient fiction not a statement of reality.

Instead, we have to focus on the people who make up the corporation--especially the people who run them. The problem, as I see it, is that the Davos men and women who run companies like Google and Intel increasingly regard patriotism as the moral equivalent of racism and sexism. 

As Christopher Lasch observed in The Revolt of the Elites and the Betrayal of Democracy (which remains the best place to start if you want to understand the intellectual case for Trump and, more broadly, modern American populism):

Those who covet membership in the new aristocracy of brains tend to congregate on the coasts turning their back on the heartland and cultivating ties with the international market of fast-moving money, glamour, fashion, and popular culture. It is a question whether they think of themselves as Americans at all. Patriotism, certainly, does not rank very high in their hierarchy of virtues. “Multiculturalism,” on the other hand, suits them to perfection, conjuring up the agreeable image of a global bazaar in which exotic cuisines, exotic styles of dress, exotic music, exotic tribal customs can be savored indiscriminately, with no questions asked and no commitments required. The new elites are at home only in transit, en route to a high-level conference, to the grand opening of a new franchise, to an international film festival, or to an undiscovered resort.

Harvard professor Samuel Huntington likewise railed against “gold-collar workers” with no use for the nation state, and divorced from organic societies rooted in tradition:

He warned of a cosmopolitan superclass of 20 million people, with interests diverging ever further from the anthropology of the parish. This rootless supra-culture was cornering the gains of the global economy, and capturing ideological power. “They have little need for national loyalty, view national boundaries as obstacles that thankfully are vanishing, and see national governments as residues from the past whose only useful function is to facilitate the elite’s global operations.”

I haven't figured out yet what to do about this problem. We tried Trump as a beta test for the cure, which has not worked out too well for anyone who cares about moral decency and so on.

So my ongoing project remains thinking about how a modern American populism could shake up both the political and, perhaps more important, the business elite.

UND STEP 3 Ecclesiology Week 2: Worship-Updated with Comments from Jonathan Zasloff

As previously <explained, I've enrolled in the University of Notre Dame's Satellite Theological Education Program (STEP) to pursue their Certificate in Doctrine. I am currently taking my third of the required courses: Ecclesiology. This week's topic is Worship.

Our discussion question this week is as follows:

Lumen Gentium 6 mentions “holy temple” as a scriptural image for the Church. How might the Old Testament roots of this image help us understand the place of worship in the Church’s identity? In reflecting on this question, you may find the dedication of Solomon’s Temple in 1 Kings 8 especially helpful.

For background on Lumen Gentium see this post.

Paragraph 6 states:

In the old Testament the revelation of the Kingdom is often conveyed by means of metaphors. In the same way the inner nature of the Church is now made known to us in different images taken either from tending sheep or cultivating the land, from building or even from family life and betrothals, the images receive preparatory shaping in the books of the Prophets.

The Church is a sheepfold whose one and indispensable door is Christ.(26) It is a flock of which God Himself foretold He would be the shepherd,(27) and whose sheep, although ruled by human shepherds; are nevertheless continuously led and nourished by Christ Himself, the Good Shepherd and the Prince of the shepherds,(28) who gave His life for the sheep.(29)

The Church is a piece of land to be cultivated, the tillage of God.(30) On that land the ancient olive tree grows whose holy roots were the Prophets and in which the reconciliation of Jews and Gentiles has been brought about and will be brought about.(31) That land, like a choice vineyard, has been planted by the heavenly Husbandman.(32) The true vine is Christ who gives life and the power to bear abundant fruit to the branches, that is, to us, who through the Church remain in Christ without whom we can do nothing.(33)

Often the Church has also been called the building of God.(34) The Lord Himself compared Himself to the stone which the builders rejected, but which was made into the cornerstone.(35) On this foundation the Church is built by the apostles,(36) and from it the Church receives durability and consolidation. This edifice has many names to describe it: the house of God (37) in which dwells His family; the household of God in the Spirit;(38) the dwelling place of God among men;(39) and, especially, the holy temple. This Temple, symbolized in places of worship built out of stone, is praised by the Holy Fathers and, not without reason, is compared in the liturgy to the Holy City, the New Jerusalem (5*). As living stones we here on earth are built into it.(40) John contemplates this holy city coming down from heaven at the renewal of the world as a bride made ready and adorned for her husband.(41)

The Church, further, "that Jerusalem which is above" is also called "our mother".(42) It is described as the spotless spouse of the spotless Lamb,(43) whom Christ "loved and for whom He delivered Himself up that He might sanctify her",(44) whom He unites to Himself by an unbreakable covenant, and whom He unceasingly "nourishes and cherishes",(45) and whom, once purified, He willed to be cleansed and joined to Himself, subject to Him in love and fidelity,(46) and whom, finally, He filled with heavenly gifts for all eternity, in order that we may know the love of God and of Christ for us, a love which surpasses all knowledge.(47) The Church, while on earth it journeys in a foreign land away from the Lord,(48) is like in exile. It seeks and experiences those things which are above, where Christ is seated at the right-hand of God, where the life of the Church is hidden with Christ in God until it appears in glory with its Spouse.(49)

26 Jn. 10:1-10.

27 Cf. Is. 40:11; Ex. 34:11ff.

28 Cf Jn. 10:11; 1 Pt. 5:4.

29 Cf. Jn. 10:11-15.

30 l Cor. 3:9.

31 1 Rom. 11:13-26.

32 Mt. 21:33-43; cf. Is. 5:1 ff.

33 Jn. 15:1-5.

34 1 Cor. 3:9.

35 Mt 21:42; cf. Acts 4:11; 1 Pt. 2:7; Ps. 117:22.

36 Cf. 1 Cor. 3:11.

37 1 Tim. 3:15.

38 Eph. 2:19-22.

39 Rev. 21:3.

40 1 Pt. 2:5.

41 Rev. 21:16.

42 Gal. 4:26; cf. Rev. 12:17.

43 Rev. 19:7; 21:2 and 9; 22:17

44 Eph. 5:26.

45 Eph. 5:29.

46 Cf. Eph. 5:24.

47 Cf. Eph. 3:19.

48 Cf. 2 Cor. 5:6.

49 Cf. Col. 3:1-4.

1 Kings 8 states, in relevant part:

When the priests left the holy place, the cloud filled the house of the LORD so that the priests could no longer minister because of the cloud, since the glory of the LORD had filled the house of the LORD. Then Solomon said, “The LORD intends to dwell in the dark cloud; I have indeed built you a princely house, the base for your enthronement forever.”

We see here an implication that the Temple is the literal residence of God, although God’s presence therein was intangible and invisible. This suggests a metaphor in which the Church is the House of God. 

Pope Francis has spoken about this image of the Church as Temple, explaining that:

The Church is the "House of God", the place of his presence, where we can find and meet the Lord; the Church is the Temple where the Holy Spirit dwells, who animates, guides and sustains it. If we ask ourselves: where can we meet God? Where we can enter into communion with him through Christ? Where can we find the light of the holy spirit that lights up our lives? The answer is: in the People of God, among us, who are the Church. Here we will find Jesus, the Holy Spirit and the Father.

Instead of being built of physical bricks and mortar, however, the members of the Church are the living stones that have been erected upon Jesus who's serves as the cornerstone. Again, Pope Francis spoke to that metaphor:

The Apostle Paul says to the Christians of Ephesus: "You are built upon the foundation of the apostles and prophets, with Christ Jesus himself as the cornerstone. In him the whole structure is joined together and grows into a holy temple in the Lord; in whom you also come built together spiritually into a dwelling-place for God” (Eph 2:20-22). How beautiful this is! We are the living stones of God's building, deeply united to Christ, who is the cornerstone, and is also a keystone among us. What does this mean? It means that we are the temple, we are the living Church, the living temple and when we are together the Holy Spirit, too, is present, who helps us to grow as Church. We are therefore not isolated, but we are the People of God: this is the Church!

Interestingly, however, later in 1 Kings 8 Solomon's prayer at the Temple's dedication suggests an alternative understanding of God's relationship to the Temple:

“Is God indeed to dwell on earth? If the heavens and the highest heavens cannot contain you, how much less this house which I have built!  Regard kindly the prayer and petition of your servant, LORD, my God, and listen to the cry of supplication which I, your servant, utter before you this day.May your eyes be open night and day toward this house, the place of which you said, My name shall be there; listen to the prayer your servant makes toward this place. Listen to the petition of your servant and of your people Israel which they offer toward this place. Listen, from the place of your enthronement, heaven, listen and forgive.

Here we see the Temple not as God's physical home on Earth--for it is impossible that God could be contained in a creation of Man--but as the place where the people gathered to worship God. Again, Pope Francis' remarks at the Papal audience on June 26, 2013 speak to that metaphor:

In Jerusalem, the great Temple of Solomon was the site of the encounter with God in prayer; inside the temple there was the Ark of the Covenant, a sign of the presence of God in the midst of the people ...: a reminder of the fact that God was always present in the history of his people, he had accompanied them on their journey, he had guided their steps. The temple calls to mind this history: we too, when we go to the temple [church] must remember this story, each one of us his own history, how Jesus found me, how Jesus has walked with me, how Jesus loves me and blesses me.

In addition to remembering our own history with the Lord, of course, the Temple metaphor calls to mind the history of the community of believers that stretches across space and time. The liturgy calls to mind the way in which God has guided our steps.

Update: My friend, UCLAW colleague, and rabbi to be Jonathan Zasloff sent along these very helpful comments:

If I understand you right, I think that there are really two senses of “Temple” here.

The original Holy Temples, called Beit Ha-mikdash, in Hebrew, were certainly seen in some way as God’s home on earth. Thus Exodus 25:8: “And let them make Me a sanctuary, that I might dwell among them.” As with a lot of Hebrew words, the preposition traditionally translated as “among”, b-tocham, can be read as “within them,” and as a modernist I prefer that, but traditionally it is read that way.

By the time of the Middle Ages, the commentators were clearly uncomfortable with this sort of anthropomorphism. Maimonides basically devoted the entire first volume of the Guide of the Perplexed to knocking down any attempts to think that the Bible in any way suggested anthropomorphism. The commentator Samuel ben Meir said that all this line means is that God speaks out of there. Isaac Abarbanel (one of my favorites) queried whether it makes any sense to think of the Exodus line that way in light of Isaiah 66:1 (“Heaven is My throne and Earth is My footstool”) and 1 Kings 8:27, where King Solomon after consecrating the Temple (technically the First Temple) says, “But will God indeed dwell on the earth? Behold, heaven and the heaven of heavens cannot contain You. How much less this temple which I have built!”

The 17^th century Moroccan rabbi Chaim bin Attar, whose great commentary is called the “Ohr Hachayim” (Light of Life), notes on Exodus 25:8 that the text very specifically says “that I might dwell in them,” not “that I might in it”: That is persuasive to me and suggests that a non-corporeal version has more purchase.

In other words, the standard maxim applies i.e. Two Jews, Three Opinions. Or more precisely, Israelite theology was fluid. Earlier, Israelite faith was more anthropomorphized and really henotheistic (my favorite on this is Psalm 82, where God speaks to the rest of the gods in the “divine assembly” and says He’s bigger and tougher than the rest of them. The rabbis had to pull a lot of tricks to interpret their way out of that one.). Later on, it became monotheistic and abstract. But not fully: the rabbis (around 50-500 C.E.) discussed God fleeing the Earth after the destruction of the Second Temple in 70 C.E.

But now –

Many modern Jews use “Temple” simply as a way of discussing the Jewish House of Worship. There is no comparison at all to the ancient Temples. It is precisely for that reason that I don’t like the use of “Temple” to describe what is more accurately called a “synagogue.” I like “shul,” which is Yiddish literally for “school” but has the connotation of “synagogue. In modern Hebrew a synagogue is not called Beit Ha-mikdash, but rather Beit Knesset, literally the “House of Assembly,” which is sort of a direct translation of “synagogue.”

CNBC Reports that "Billionaire Sam Zell: BlackRock's Larry Fink is 'extraordinarily hypocritical' to push social responsibility"

CNBC:

BlackRock's Larry Fink and other CEOs are "extraordinarily hypocritical" to push companies for more social responsibility, billionaire investor Sam Zell told CNBC on Tuesday. ...

"Either they're a passive fund that follows the market or they're a leader that's setting the tone," Zell said in an interview on "Squawk Box," adding BlackRock can't have it both ways.

Zell questioned whether America is ready to have BlackRock "in charge of the NYSE," saying "I didn't know Larry Fink had been made God."

The function of an index fund is to match up to the return earned by the relevant index. Any administrative costs incurred by the fund mean that the fund will underperform the index to the extent of those costs. Spending money to encourage corporate social responsibility will increase Blackrock's costs but has no guarantee of increasing its returns. So Fink's approach defeats the purpose of indexing.

Blackrock Fink's Letter to CEOs about Corporate Social Responsibility

Blackrock CEO Lawrence Fink recently sent a letter to corporate CEOs, which some are arguing is intended to--or at least will have the effect of--undermining Nobel economist Milton Friedman's famous proclamation: “The social responsibility of business is to increase its profits.”

There are any number of things about the letter that bug me. Let's start with its basic error about the nature of Friedman's argument:

Fink's model eschews the short-term focus that he said drives companies’ emphasis on quarterly results and the limitations that annual meetings place on dialog between executives and shareholders. Instead, investors and management should maintain continuous communication “about improving long-term value,” Fink wrote.

Nothing in Friedman's famous essay argues that corporate success should be measured by short-term profit. To the contrary, Friedman implicitly embraces the notion that corporate success is measured by sustainable long-term profits:

To illustrate, it may well be in the long run interest of a corporation that is a major employer in a small community to devote resources to providing amenities to that community or to improving its government. That may make it easier to attract desirable employees, it may reduce the wage bill or lessen losses from pilferage and sabotage or have other worthwhile effects.

In addition, it seems clear that Fink's approach is not based on neutral principles but rather is driven by personal ideological preferences. As Alicia Plerhoples notes of the general sustainability movement, "measurements of social and environmental benefits play a critical role in determining what constitutes sustainability and the public benefit produced. These measurements often incorporate ideologically liberal values and exclude conservative values." Does it surprise anyone that Fink gave $2300 to Obama? And $30,800 to the DNC in 2012? Or that Blackrock employees disproportionately favor Democrats?

As such, Fink's pressure on corporate CEOs to effectuate his policy preferences is a classic example of how the growing power of institutional investors raises serious agency cost concerns. Like the vast majority of large institutional investors, Blackrock manages the pooled savings of small individual investors. From a governance perspective, there is little to distinguish such institutions from corporations. Among other similarities, managers who focus on "social responsibility" rather than shareholder returns are spending other people's money. As Friedman observed:

What does it mean to say that the corpo­rate executive has a "social responsibility" in his capacity as businessman? If this statement is not pure rhetoric, it must mean that he is to act in some way that is not in the interest of his employers. For example, that he is to refrain from increasing the price of the product in order to contribute to the social objective of preventing inflation, even though a price in crease would be in the best interests of the corporation. Or that he is to make expendi­tures on reducing pollution beyond the amount that is in the best interests of the cor­poration or that is required by law in order to contribute to the social objective of improving the environment. Or that, at the expense of corporate profits, he is to hire "hardcore" un­employed instead of better qualified available workmen to contribute to the social objective of reducing poverty.

In each of these cases, the corporate exec­utive would be spending someone else's money for a general social interest. Insofar as his actions in accord with his "social responsi­bility" reduce returns to stockholders, he is spending their money. Insofar as his actions raise the price to customers, he is spending the customers' money. Insofar as his actions lower the wages of some employees, he is spending their money. ...

Adolf Berle famously explained the problem with letting managers spend shareholder money in order to be socially responsible:

I submit that you can not abandon emphasis on “the view that business corporations exist for the sole purpose of making profits for their stockholders” until such time as you are prepared to offer a clear and reasonably enforceable scheme of responsibilities to someone else. Roughly speaking, there are *1368 between five and eight million stockholders in the country (the estimates vary); to which must be added a very large group of bondholders and many millions of individuals who have an interest in corporate securities through the medium of life insurance companies and savings banks. This group, expanded to include their families and dependents, must directly affect not less than half of the population of the country, to say nothing of indirect results. When the fund and income stream upon which this group rely are irresponsibly dealt with, a large portion of the group merely devolves on the community; and there is presented a staggering bill for relief, old age pensions, sickness-aid, and the like. Nothing is accomplished, either as a matter of law or of economics, merely by saying that the claim of this group ought not to be “emphasized.” Either you have a system based on individual ownership of property or you do not.

A. A. Berle, Jr., For Whom Corporate Managers Are Trustees: A Note, 45 Harv. L. Rev. 1365, 1367–68 (1932).

Even if it were not ethically and economically undesirable for managers to pursue social responsibility, it is far from clear that doing so is practicable. Again, consider Friedman's argument:

On the grounds of consequences, can the corporate executive in fact discharge his al­leged "social responsibilities?" On the other hand, suppose he could get away with spending the stockholders' or customers' or employees' money. How is he to know how to spend it? He is told that he must contribute to fighting inflation. How is he to know what ac­tion of his will contribute to that end? He is presumably an expert in running his company–in producing a product or selling it or financing it. But nothing about his selection makes him an expert on inflation. Will his holding down the price of his product reduce infla­tionary pressure? Or, by leaving more spending power in the hands of his customers, simply divert it elsewhere? Or, by forcing him to produce less because of the lower price, will it simply contribute to shortages? Even if he could an­swer these questions, how much cost is he justi­fied in imposing on his stockholders, customers and employees for this social purpose? What is his appropriate share and what is the appropri­ate share of others?

Fink's letter fails to resolve the question how corporate executives should discharge their social responsibilities, while at the same time shifting the same problem to the level of financial intermediaries. What makes Fink and his ilk experts on social needs?

Empirical Studies of Corporate Law and Governance

I'm dubious of empirical analyses (except when they confirm my preexisting priors, of course), but I nevertheless found Michael Klausner's overview very helpful and provocative:

This chapter examines the empirical literature on corporate law and governance in the United States. Four areas of the US corporate governance literature are discussed: (i) state competition to produce corporate law, (ii) independent boards, (iii) takeover defenses, and (iv) the use of corporate governance indices. The chapter concludes that these areas of research reflect varying degrees of success. The literature on state competition has been a major success. We know much more in this area as a result of empirical analysis in this area than we did on the basis of theory alone. At the other extreme is the literature on takeover defenses and the related literature that uses governance indices as measures of governance quality. Those empirical literatures are plagued by misunderstandings of how takeovers and takeover defenses work, and many results are therefore not as informative as they appear to be. In between is the literature on the impact of an independent board. Here, empiricists faced perhaps insurmountable challenges in proving causation, but nonetheless exposed informative associations.

Klausner, Michael, Empirical Studies of Corporate Law and Governance: Some Steps Forward and Some Steps Not (January 2018). Forthcoming Chapter of Oxford Handbook on Corporate Law and Governance (2018); European Corporate Governance Institute (ECGI) - Law Working Paper No. 381/2018. Available at SSRN: https://ssrn.com/abstract=3097568

UND STEP 3 Ecclesiology Week 1: What is the Church?

As previously explained, I've enrolled in the University of Notre Dame's Satellite Theological Education Program (STEP) to pursue their Certificate in Doctrine. I am currently taking my third of the required courses: Ecclesiology. This week's topic is what is the Church?

This week's discussion question is:

How does Lumen Gentium 5 set forth the relationship between the person and work of Jesus, on the one hand, and the identity of the Church, on the other? How might this affect our understanding of the Church and its mission?

First, a bit of background. Lumen Gentium is the Dogmatic Constitution on the Church. It was one of the principal documents produced by the Second Vatican Council. It was promulgated by Pope Paul VI on November 21, 1964.

The Berkley Center offers a nice summary of the document's place in Church doctrine:

Beginning with an examination of the early Church, the encyclical traces the development of the hierarchy down through the modern period, arriving at a renewed understanding of ecclesiastical structure. In addition to reaffirming the apostolic succession of bishops, the letter articulates the notion of collegiality and portrays the pope not as a ruler of subjects, but as a unifier of equals. The encyclical furthermore insists that the entirety of the people of God constitute the structural Church and lifts up the laity as full co-participants with clergy and religious. It incited considerable debate as to whether it represented a departure from previous delineations of the role of the hierarchy, particularly with respect to governing and guiding the Church on questions of faith and morals.

Here is the relevant passage:

5. The mystery of the holy Church is manifest in its very foundation. The Lord Jesus set it on its course by preaching the Good News, that is, the coming of the Kingdom of God, which, for centuries, had been promised in the Scriptures: "The time is fulfilled, and the kingdom of God is at hand"(18). In the word, in the works, and in the presence of Christ, this kingdom was clearly open to the view of men. The Word of the Lord is compared to a seed which is sown in a field;(19) those who hear the Word with faith and become part of the little flock of Christ,(20) have received the Kingdom itself. Then, by its own power the seed sprouts and grows until harvest time.(21) The Miracles of Jesus also confirm that the Kingdom has already arrived on earth: "If I cast out devils by the finger of God, then the kingdom of God has come upon you".(22) Before all things, however, the Kingdom is clearly visible in the very Person of Christ, the Son of God and the Son of Man, who came "to serve and to give His life as a ransom for many:"(23)

When Jesus, who had suffered the death of the cross for mankind, had risen, He appeared as the one constituted as Lord, Christ and eternal Priest,(24) and He poured out on His disciples the Spirit promised by the Father.(25) From this source the Church, equipped with the gifts of its Founder and faithfully guarding His precepts of charity, humility and self-sacrifice, receives the mission to proclaim and to spread among all peoples the Kingdom of Christ and of God and to be, on earth, the initial budding forth of that kingdom. While it slowly grows, the Church strains toward the completed Kingdom and, with all its strength, hopes and desires to be united in glory with its King.

I think a useful starting point for discussion would be the meaning of mystery in this context. In colloquial English, we tend to think of a mystery as a problem--usually a crime--to be solved through the application of reason. 

In contrast, as I understand it, a mystery in Catholic doctrine is a truth that cannot be discovered by mere reason and whose essence can be grasped only poorly through drawing analogies that are, at best, only partially apt. Hence, as Scott McKellar explains:

Bishop Emilio Guano, of Livorno suggested that the Pauline term, ‘mystery’ (Ephesians 5:32) would be an appropriate scriptural expression to describe the fact “that the external visibility of Church, like the holy human nature of Christ, both conceals and reveals the inner divine reality of the Church, a reality which surpasses all knowledge.” Pope Paul VI opened the Second Session (September 29, 1963), with the words, “The Church is a mystery, a mystic reality, steeped in the presence of God.” After much discussion the Fathers placed the title “The Mystery of the Church” before the first chapter of the Constitution repeatedly referred to the Church as a Mystery. For example in in LG 5 we read, “The Mystery of the holy Church is manifest in its very foundation” (cf. LG 5, 39, 44, and 63).

Bishop Kloppenburg, a Peritus of the Brazilian Bishops at Vatican II observes that the official explanation given to the bishops in 1964 read:

 “The word ‘mystery’ in this context does not indicate simply that a thing is unknowable or hidden. Rather, as many authorities recognize today, it points to a transcendent, divine reality that has to do with salvation and that is in some sensible way revealed and manifested. The term, therefore, which is found in the Bible, is very suitable as a designation for the Church.”

Bishop Kloppenburg notes that, “the expression, ‘the Church is a mystery,’ means that the Church is a divine, transcendent, and salvific reality which is visibly present among men.” The Greek word ‘mysterium’ has as its Latin equivalent ‘sacramentum.’ The definition of mystery is very close to that of the definition of sacraments as “efficacious signs of grace, instituted by Christ and entrusted to the Church, by which divine life is dispensed to us.” (CCC 1131).

This strikes me as a very useful clarification. 

With that background in mind, let us turn to LG 5. The symbols used in article 5 invoke the Parable of the Sower. The Church is the "seed fell on rich soil and produced fruit." Thus, once constituted by Jesus as the Sower, the Church grew "by its own power" and "yielded thirty, sixty, and a hundredfold.” We thus understand our identity as the fruit of Jesus' mission on Earth.

At the same time, we understand that the original sower--Jesus--left the Word as a deposit for the Church, which is now tasked with spreading that seed to all mankind. The Church now becomes the sower. This is made explicit in the Great Commission, which tasks the Church with making "disciples of all nations, baptizing them in the name of the Father, and of the Son, and of the holy Spirit, teaching them to observe all that I have commanded you." 

In addition to the obvious analogy to the seed and sower. LG 5 speaks to directly to the nature of the Church as it relates to the Kingdom of God. Richard McBrien explains:

This conciliar teaching was in sharp contrast to the widespread preconciliar assumption that the church is the Kingdom of God on earth. Thus, the parables of the Kingdom were regularly interpreted by preachers, catechists, and even some theologians as parables of the church.

The tendency to equate the church with the Kingdom of God was denounced as a form of “triumphalism” in a famous intervention at Vatican II by the late Bishop Emile Jozef De Smedt of Bruges, Belgium.

Article 5 was added to the Dogmatic Constitution on the church (Lumen gentium) precisely to counteract this residual habit of equating the church with the Kingdom of God.

Just as Jesus came to announce, personify, and bring about the Kingdom of God, so too the church exists to proclaim, witness to, and help establish the Kingdom on earth and to facilitate its fulfillment at the end of history.

But unlike Jesus, the church cannot claim to be itself the Kingdom of God. It is at most “the seed and the beginning of that Kingdom. While it slowly grows to maturity, the Church longs for the completed Kingdom and, with all its strength, hopes and desires to be united in glory with its king” (n. 5).

In other words, the Church is not the Kingdom of God. Instead, the Church again is both seed and sower. It is simultaneously "the initial budding forth of that kingdom" and the sower tasked with proclaiming that kingdom to all mankind.

"Can Delaware Be Dethroned?: Evaluating Delaware's Dominance of Corporate Law" Now Available for Purchase

Delaware is the state of incorporation for almost two-thirds of the Fortune 500 companies, as well as more than half of all companies listed on the New York Stock Exchange, NASDAQ, and other major stock exchanges. This gives Delaware a seemingly unchallengeable position as the dominant producer of US corporate law. In recent years, however, some observers have suggested that Delaware's competitive position is eroding. Other states have long tried to chip away at Delaware's position, and recent Delaware legal developments may have strengthened the case for incorporating outside Delaware. More important, however, the federal government increasingly is preempting corporate governance law. The contributors to this volume are leading academics and practitioners with decades of experience in Delaware corporate law. They bring together a variety of perspectives that collectively provide the reader with a broad understanding of how Delaware achieved its dominant position and the threats it faces.

Langevoort on the surprisingly early demise of Texas Gulf Sulphur's equal access test

Fascinating new article by Don Langevoort:

The Second Circuit’s en banc decision in SEC v. Texas Gulf Sulphur Corp.[1] (“TGS”) is approaching its 50th anniversary, and it’s still well-known for several important holdings. Perhaps the most celebrated (or condemned) accepted the SEC’s argument that corporate insiders have a duty to “abstain or disclose” from trading while in possession of material nonpublic information.  The opinion makes a bold claim that the law in play (Rule 10b-5’s antifraud prohibition) “is based in policy on the justifiable expectation of the securities marketplace that all investors trading on impersonal exchanges have relatively equal access to material information.”[2] From that comes a command of considerable breadth: “[A]nyone in possession of material inside information must either disclose it to the investing public, or, if he is disabled from disclosing it in order to protect a corporate confidence, or he chooses not to do so, must abstain from trading in or recommending the securities concerned while such inside information remains undisclosed.”[3]

There is a standard story among legal scholars about this expression of naked egalitarianism—that it was either a triumphant or seditious idea (depending on perspective) that had its moment in the sun in the 1970s, but which the Supreme Court put to death 12 years later in Chiarella v. United States.  In a forthcoming article (part of a symposium on TGS to appear in the SMU Law Review, available here), I look back, as a matter of legal archeology if nothing else, on the pathway from TGS to Chiarella and beyond, and show that the real story is much more complicated. ...

In the early post-TGS cases, the commission seemed much more interested in building out its vision than pursuing egalitarianism per se.  It was bolstered in this by a counter-narrative at the time that TGS didn’t really mean what it said,[4] which got further traction in the mid-1970s as the American Law Institute—with the support of the securities law establishment—sought to recodify the regulatory infrastructure, including insider trading.  The Federal Securities Code rejected the egalitarian approach as not an apt reflection of then-current law.  There was also political pushback, naturally enough, especially given the threat of draconian private damage liability and the recognition that loose language in TGS could be put to use in upsetting many lucrative “market information” practices on Wall Street.  Suffice it to say that by 1976, the SEC—in a well-publicized speech by Commissioner Philip Loomis, who had argued TGS in the Second Circuit—explicitly disavowed market egalitarianism as neither good law nor good policy.

There are more intriguing archeological details, but this is enough to make it curious that the Supreme Court in Chiarella resurrected egalitarianism in order to kill it again.  (The Second Circuit decision on review had also disavowed mere possession as a source of duty). My impression is that Wall Street used it as a boogeyman, and that lawyers in the Solicitor General’s Office (perhaps still under the spell of Frank Easterbrook) were content to let it be so used because they wanted to reorient insider trading law away from anything like TGS or Cady Roberts.  Thus we got the strange—and entirely inaccurate—claim from Justice Lewis Powell that “we cannot affirm petitioner’s conviction without recognizing a general duty between all participants in market transactions to forego actions based on material, nonpublic information.”[5]  His narrower fiduciary duty test, supposedly needed to counter rampant egalitarianism, was a choice, not a necessity.

In the article, Don notes (at 4 n.14):

As Steve Bainbridge points out in his criticism of TGS in this symposium the key paragraph that promotes marketplace egalitarianism contains non-sequiturs, overbroad language and one-off citations, obscuring the inventiveness of the philosophy being promoted. Stephen M. Bainbridge, Equal Access to Information: The Fraud at the Heart of Texas Gulf Sulphur (this volume). Bainbridge thus concludes that the opinion was a fraud of its own, so that it and all the case law that followed were (and are) illegitimate. Though I agree that the bold proclamation of an egalitarian ideal and resulting disclosure duty was new to TGS, I disagree about the illegitimacy, for reasons explained herein.

The article to which Don is referring is Equal Access to Information: The Fraud at the Heart of Texas Gulf Sulphur (August 7, 2017). UCLA School of Law, Law-Econ Research Paper No. 17-14. Available at SSRN: https://ssrn.com/abstract=3014977:

The Texas Gulf Sulphur decision was the seminal moment in the creation of the modern federal insider trading prohibition. In the half century since it was decided, however, courts and commentators have overlooked the glaring flaw in the court’s analysis.

In the key part of the opinion, in which the court laid out the equal access standard, the court grossly misrepresented the precedents on which it relied. The court cited two state law opinions that were wholly irrelevant to the problem at hand. It cited two law review articles, but those articles simply do not say what the court claimed they said. Finally, the court made a bald, unsupported statement of Congressional intent that is demonstrably false.

The insider trading prohibition thus rests on a foundation of sand.

Setting aside our disagreement about the legitimacy of the moves made by the TGS court, I concur with Don's observation that Powell's fiduciary duty-based regime was not necessitated by section 10(b). In my article, Regulating Insider Trading in the Post-Fiduciary Duty Era: Equal Access or Property Rights? (May 8, 2012). UCLA School of Law, Law-Econ Research Paper No. 12-08. Available at SSRN: https://ssrn.com/abstract=2054814, I argued that:

Like equal access, the fiduciary duty approach lacked any basis in the text or legislative history of the statute and rule. Like equal access, precedent weakly supported Powell’s approach. Instead, like equal access, basing insider trading liability on a fiduciary duty to disclose was essentially a matter of judicial fiat. It was the deference his colleagues paid Powell on securities law matters that turned it into law, rather than its intrinsic merits. Unlike equal access, however, Powell’s approach lacked any obvious link to the purposes of the securities laws and, moreover, created a clear conflict with the federalism-based limits on those laws.

Bainbridge and Henderson, Outsourcing the Board, now available for pre-order

My friend and brilliant co-author Todd Henderson and I are pleased to announce that our new book, Outsourcing the Board: How Board Service Providers Can Improve Corporate Governance, can now be pre-ordered.

In this groundbreaking work, Stephen Bainbridge and Todd Henderson change the conversation about corporate governance by examining the origins, roles, and performance of boards with a simple question in mind: why does the law require governance to be delivered through individual board members? While tracing the development of boards from quasi-political bodies through the current "monitoring" role, the authors find the reasons for this requirement to be wanting. Instead, they propose that corporations be permitted to hire other business associations--known as "Board Service Providers" or BSPs--to provide governance services. Just as corporations hire law firms, accounting firms, and consulting firms, so too should they be permitted to hire governance firms, a small change that will dramatically increase board accountability and enable governance to be delivered more efficiently. Outsourcing the Board should be read by academics, policy makers, and those within the corporations that will benefit from this change.

Luther and the Law

Interesting set of new papers from John Witte:

"The Legal Turn of the Reformation" 
in Luther – 95 Treasures, 95 People (Wittenberg: Stiftung Luthergedenkstätten in Sachsen-Anhalt, 2017), 451-455
Emory Legal Studies Research Paper

JOHN WITTE, Emory University School of Law

The Lutheran Reformation revolutionized both church and state, theology and law. This brief essay sketches the legal influence of the Reformation, building on Luther’s opening call for religious freedom and his more complex theory of the two kingdoms.

"Martin Luther's Influence on Legal Reforms and Civil Law"  

in Oxford Research Encyclopedia of Religion (March, 2017)

JOHN WITTE, Emory University School of Law

The Lutheran reformation transformed not only theology and the church but law and the state as well. Beginning in the 1520s, Luther joined up with various jurists and political leaders to craft ambitious legal reforms of church, state, and society on the strength of Luther’s new theology. These legal reforms were defined and defended in hundreds of monographs, pamphlets, and sermons published by Lutheran writers from the 1520s to 1550s. They were refined and routinized in hundreds of new reformation ordinances promulgated by German cities, duchies, and territories that converted to the Lutheran cause. By the time of the Peace of Augsburg (1555)--the imperial law that temporarily settled the constitutional order of Germany--the Lutheran Reformation had brought fundamental changes to theology and law, to church and state, marriage and family, education and charity.

Critics of the day, and a steady stream of theologians and historians ever since, have seen this legal phase of the Reformation as a corruption of Luther’s original message of Christian freedom from the strictures of human laws and traditions. But Luther ultimately realized that he needed the law to stabilize and enforce the new Protestant teachings. Radical theological reforms had made possible fundamental legal reforms. Fundamental legal reforms, in turn, would make palpable radical theological reforms. In the course of the 1530s onwards, the Lutheran Reformation became in its essence both a theological and a legal reform movement. It struck new balances between law and Gospel, rule and equity, order and faith, structure and spirit.

"Luther the Lawyer: the Lutheran Reformation of Law, Politics, and Society" 
in Law and Justice: A Christian Law Review 178 (2017): 6-36

JOHN WITTE, Emory University School of Law

The Lutheran Reformation transformed not only theology and the church but law and the state as well. Beginning in the 1520s, Luther joined up with various jurists and political leaders to craft ambitious legal reforms of church, state, and society on the strength of the new Protestant theology. These legal reforms were defined and defended in hundreds of monographs, pamphlets, and sermons published by Luther and his many followers from the 1520s onward. They were refined and routinized in hundreds of new reformation ordinances promulgated by German polities that converted to the Lutheran cause. By the time of the Peace of Augsburg (1555)--the imperial law that temporarily settled the constitutional order of Germany--the Lutheran Reformation had brought fundamental changes to theology and law, to church and state, marriage and family, education and charity.

Bill de Blasio's costly carbon pension fund divestment grandstanding

The NYC Mayor Bill de Blasio puts progressive theater ahead of sound public policy is by now one of the basic truisms of American politics. Latest case in point comes from a NY Times report that de Blasio is trying to strong-arm trustees of NYC employee pension funds--who are supposed to be fiduciaries of their beneficiaries, not mayoral rubber stamps--into divesting from oil stocks:

Seeking to position himself as a national leader against climate change, Mayor Bill de Blasio on Wednesday announced a two-pronged attack against the fossil-fuel industry, including a vow that city pension funds would divest about $5 billion from companies involved in the fossil fuel business. ...

Mr. de Blasio said that a majority of the trustees on two of the funds — one for teachers and another for many employees not including police officers or firefighters — were ready to support divestment.

... The total amount managed by the funds is about $189 billion.

At least NYC comptroller Scott M. Stringer is sounding some cautionary notes, but since when has de Blasio put fiscal stewardship ahead of grandstanding?

As we have discussed on these pages many times before, social divestment is almost always bad news for fund beneficiaries:

A London Business School Institute of Finance and Accounting working paper called "The Effect Of Socially Activist Investment Policies On The Financial Markets: Evidence From The South African Boycott concluded: 

"We find that the announcement of legislative/shareholder pressure of voluntary divestment from South Africa had little discernible effect either on the valuation of banks and corporations with South African operations or on the South African financial markets. There is weak evidence that institutional shareholdings increased when corporations divested. In sum, despite the public significance of the boycott and the multitude of divesting companies, financial markets seem to have perceived the boycott to be merely a 'sideshow.'"

Another paper, "The Stock Market Impact of Social Pressure: The South African Divestment Case," from the Quarterly Review of Economics and Finance in fact found:

 "Using the South African divestment case, this study tests the hypothesis that social pressure affects stock returns. Both short-run (3-, 11-, and 77-day periods) and long-run (13-month periods) tests of stock returns surrounding U.S. corporate announcements of decisions to stay or leave South Africa were performed. Tests of the impact of institutional portfolio managers to divest stocks of U.S. firms staying in South Africa were also performed. Results indicate there was a negative wealth impact of social pressure: stock prices of firms announcing plans to stay in South Africa fared better relative to stock prices of firms announcing plans to leave."

In sum, divestment may make activists feel all warm and fuzzy, but the evidence is that (1) it has no significant effect on the target of the divestment campaign but (2) likely does harm the activists' portfolios.

As the Manhattan Institute's James Copeland explained in reference to an anti-semitic effort by the Presbyterian Chiurch (USA) to embrace the BDS movement, these results are entirely consistent with financial theory:

"Unlike a boycott in a traditional goods market, the sale of a stock or bond in a financial market in sufficient volume to affect its price makes it more attractive to a buyer who doesn't care about the divester's social cause. These buyers will bid the price back up to its equilibrium level, the risk-adjusted net present value of expected free cash flows from the instrument. So whereas a goods boycott can be effective under certain conditions, a stock divestiture never can unless there is insufficient liquidity on the other side, a highly dubious condition in our financial market. The Presbyterian Church may have $7 billion in financial assets, but that's hardly a sufficient sum to control financial market pricing."

In the NYC case, it's especially appalling because NYC's pension funds are so badly underfunded:

Mayor de Blasio presented a fiscal 2018 Executive Budget that called for pension contributions totaling $9.6 billion — another all-time high . Yet city pension plans remain significantly underfunded even by lenient government accounting standards, posing a big risk to New York’s fiscal future. ...

The city’s unfunded pension liabilities (i.e., pension debt) ballooned to an officially reported total of nearly $65 billion as of fiscal 2016, up from $60 billion just three years earlier. More than half of current pension contributions are required simply to pay down the pension debt instead of for new benefits for current workers.

Is that an environment in which one ought to be putting feel good grand gestures ahead of maximizing return?

The day may well come when NYC retirees have Bill de Blasio to thank for a default on their pensions.

Not a Cassoulet

Stew

• 2 French garlic sausages
• 2 rashers applewood smoked thick cut bacon, cut into thirds
• 1 duck breast, seasoned with salt and pepper, with skin scored in a criss-cross hatch
• ½ cup diced onion
• 1 carrot, diced
• 3 cloves garlic, minced
• 1 tablespoon tomato paste (you do buy it in tubes instead of those incredibly wasteful little cans, don't you?)
• ½ cup white wine
• 1 tablespoon demi-glace dissolved in 1 cup hot low-sodium chicken stock
• 1 14.5 ounce can cannellini beans, drained and rinsed
• 1 14.5 ounce can diced tomatoes with their juice
• 1 bay leaf
• big pinch dried Herbes de Provence

Put sausage and 1 pint water in the non-stick insert of your 4 quart Fagor LUX Multi-Cooker (you have gotten one, haven't you?) and set to the browning function. After water comes to a boil, blanch the sausages for 5 minutes. Transfer sausages to a plate. Toss out water and clean insert.

Heat multi-cooker using the browning function. When the light stops flashing, add bacon. (If bacon starts to cook too fast, switch the multi-cooker to the sauté function.)  When bacon is cooked through transfer to a paper towel-lined plate, leaving fat in cooker. Put duck breast in cooker, skin side down. When is skin is golden brown, flip over and cook for 2 minutes. Remove breast from cooker, leaving fat behind. Cut sausage into 1-inch pieces. Add to cooker and  sauté until browned on all sides. Transfer sausage to a paper towel-lined plate.

Remove all but 1 tablespoon of accumulated fat from cooker. Sauté onion and carrots (season with a heavy pinch salt) until they have softened and the onions become translucent. Add garlic and tomato paste. Sauté for 30 seconds. Add wine and reduce by about a third. Add stock, beans, tomatoes, bay leaf, herbs, and sausages. Dice bacon and add half to the cooker, reserving the other half. Remove skin from duck breast and dice. Add meat to cooker (discard skin or make into cracklings.)

Seal cooker (make sure valve is set to pressure). Using pressure function and set to cook 5 minutes. Unplug cooker and do a natural release for 10 minutes. Open valve to release any remaining pressure. Skim off any fat on surface of stew. Season to taste with salt and pressure. 

Serve in large bowls topped with toasted panko garlic bread crumbs.

Bread crumbs

• 3 garlic cloves, finely minced
• ⅛ teaspoon garlic powder
• ⅓ cup olive oil
• ⅔ cup panko bread crumbs

Heat a small non-stick skillet over medium high heat. Add oil. When oil begins to shimmer add both minced garlic and garlic powder. Cook 30 seconds. Add bread crumbs and mix well. When crumbs are golden brown remove to a plate and allow to cool.