Archive | July, 2009

Pollak on Human Rights Watch:

I just noticed this piece in yesterday’s Wall Street Journal by Noah Pollak, discussing HRW’s bias against Israel.

Pollak is actually too soft on HRW. He focuses on one aspect of the problem, that HRW gives wildly disproportionate attention to what it considers Israeli violations of human rights. (In addition to the examples Pollack provides, consider that HRW’s top Mideast official recently gave a speech on human rights problems in the Middle East, in which she devoted approximately twenty-five times as much attention to Israel as to Hamas and Hezbollah combined, and more attention to Israel than to the entire Arab world).

But he neglects another aspects of the problem, that HRW’s reports on Israel are frequently either inaccurate, or based on information from eyewitnesses that can’t be verified. And even when HRW is proven wrong about Israel, it absolutely refuses to apologize or retract, although it has done so when it’s come under criticism from pro-Palestinian sources.

Is it really possible that HRW has NEVER made an error in its many reports and releases on Israel? Well, no it’s not, especially because NGO Monitor, CAMERA, and others including Professor Avi Bell have pointed out such errors. Unfortunately, given that HRW director Ken Roth dismisses such critiques as “lies and deception” and HRW Middle East Director Sarah Leah Whitson says they amount to “griping and whining,” it’s not terribly surprising that they ignore them.

Over at the Opinio Juris blog, HRW fan/apologist Kevin Jon Heller pointed to this Jerusalem Post article, reporting that HRW’s expert investigator of an incident in Gaza “conceded for the first time since the incident that [HRW] could not contradict the IDF’s exonerating findings” and that the investigator “praised the IDF’s professional investigation into the blast.”

Heller takes this as evidence that HRW is […]

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Pennsylvania Ban on Corporate Names Containing “Blasphemy, Profane Cursing or Swearing or [Words] That Profane the Lord’s Name”:

That’s in 15 Penn. Stats. § 1303. In October 2007, the Pennsylvania Department of State in October 2007 told George Kalman that he can’t get a corporate Certificate of Organization for a company called “I Choose Hell Productions, LLC.” Kalman is now suing to invalidate that restrictions on Establishment Clause and Free Speech Clause grounds. Some quick thoughts:

Free Speech Clause: The restriction doesn’t generally bar Kalman from saying what he wants, or even using “I Choose Hell” to describe his business in advertising — it affects only the formal corporate name of the business. On the other hand, it would affect Kalman’s ability to express himself the way he wants in some business transactions (those that require the use of the official name). Plus, even though the grant of corporate charters is a government-provided benefit, it may be unconstitutional for the government to restrict this benefit in a viewpoint-based way; and the restrictions seems viewpoint-based, because what constitutes blasphemy or profaning the Lord’s name likely turns on the viewpoint: “Save Your Souls From Hell Ministries” would presumably not be blasphemous, while “I Choose Hell” might be.

Establishment Clause: The restriction probably violates the Establishment Clause, on the grounds that banning blasphemy (1) requires entanglement of government and religion (in figuring out what constitutes blasphemy), (2) has the primary purpose or effect of advancing religion by restricting expression that is in some measure hostile or insulting to religion, and (3) in any event involves a denominational preference in favor of religions that recognize “the Lord.”

By the way, “[i]n his complaint, Kalman claims that he chose the name ‘I Choose Hell Productions, LLC’ for philosophical reasons central to the expression of his films, namely his belief that suicide is a lesser alternative to struggling through difficult times: ‘even if life […]

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Risk Taking:

As I’ve mentioned in some earlier posts, I’ve been doing a read of literature on the crisis, books coming out now – but at my kid’s last swim meet, I took along instead Michael Lewis’s Liar’s Poker. That book, from the 1980s, holds up better than just about anything from that period. He does a better job of explaining the incentives and disincentives of the secondary tier players inside institutions better than anything else I’ve read. There’s astonishingly little in that book that isn’t still relevant today – partly because today’s crisis is a credit crisis, and he was describing bond trading in the 80s, when it underwent a revolution that reformed corporate finance. In some sense, we are living out today the revolution of credit of the 1980s.

One section of that book that seems especially prescient to me – and is not really about finance directly – is his discussion of the how being a successful trader requires incredible fast, raw intelligence to make snap decisions about risk – but also a short attention span. This was all written before the internet, blogging, tweeting, all this stuff of instant novelty (as XKCD puts it in a slightly different sense, “constant novelty saps my initiative“). He describes Mike Millken – accurately, from everything I have read – as being the rare person who combined both instant raw trading abilities with the ability to formulate and pursue a long term strategy about an industry and a company and a market, rather than simply reacting with the next trade. These are really different skills in business, and everything else, and I wonder if the nature of incentives in the overall human capital markets are not favoring trader skills over institution builder skills … many of the finance people […]

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Bankers’ Bonuses:

Is the problem that they are too high? The Washington Post reports today on anger in Congress and elsewhere at the size of bankers’ bonuses. NY AG Andrew Cuomo’s office released a report yesterday with the unsubtle title, “No Rhyme or Reason: The ‘Heads I Win, Tails You Lose’ Bank Bonus Culture.”. According the Post’s account:

Cuomo’s investigation into pay practices at Wall Street’s largest firms found that nearly 4,800 executives and other employees were each awarded at least $1 million. Of those, more than 900 worked for Bank of America and Citigroup, which have been among the largest recipients of government bailout funds.

This latest report about Wall Street bonuses turned up the heat on lawmakers and regulators, who have been weighing how to rein in compensation practices that banking executives themselves admit contributed to the worst financial crisis in decades. The House is set to vote Friday on legislation that would give regulators authority to prohibit pay practices that they deem inappropriate and grant shareholders the right to cast non-binding votes on executive compensation.

Rep. Edolphus Townes, chair of the House Oversight and Government Reform Committee, announced hearings, and added, summing up pretty well the sense of outrage:

“A few months ago, they were facing bankruptcy. Then, after being bailed out, they’re giving huge bonuses,” Towns said. “I think the American people need some answers. With the economy being the way it is, and people suffering . . . how do you still do that?”

Are we headed to a system of government setting compensation limits for executives in banking and elsewhere? He who pays the piper, etc. If government and the taxpayer are going to be stuck holding the bill moral hazard when things go bad, then it is hard not think something like this. The […]

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Where To Prosecute Interstate Obscenity Distribution?

That’s a very important question in obscenity law, given both the realities that different juries apply vague terms differently, and the specific legal mandate to apply “contemporary community standards.” It’s well-settled that it’s constitutionally permissible to prosecute someone who sends alleged obscenity from New Jersey to Montana in either place. But it appears that the Obama Administration is exercising its prosecutorial discretion to shift more to prosecutions in the sender’s location rather than the recipient’s, at least when the mailing was part of a deliberate sting and the recipient was a government agent. Josh Gerstein (Politico) has more. […]

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Bleg: Cheap or Free Access to Master Swap Agreement & Related Documentation:

Up until fairly recently, I had full access though some consulting work to ISDA and all the swap master agreements, documentation, etc., etc., available on the ISDA site. I don’t anymore, and when I asked our library to get it for me, they (rightly) pointed out that what I seemed to have in mind would cost tens of thousands of dollars. So I am thrown back upon public resources, and I’m embarrassed to say that now that I’m on my own sources, I can’t figure out where to find this stuff. Dear readers, where would I go to find open source, free, or cheap copies of the Master Swap Agreement and all the related documentation? Ideally with some way to get to the discussions and debates over modifications, side agreements, etc. But even just to get updated copies of the contracts. Thanks. […]

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No “Person(s) Posed in an Immodest or Sensuous Manner” on Alcohol Ads:

That’s the rule in Alabama, and it’s apparently being enforced against a wine that bears this label:

Seems pretty clearly unconstitutional; though commercial advertising (which would include product labels) is less protected by the First Amendment than most other speech, it generally can’t be restricted on the grounds that it’s offensive. Nor do I see any reason why nudity would be any different. Such depictions of nudity are generally constitutionally protected (see Erznoznik v. City of Jacksonville), and would presumably be no less protected on commercial advertising.

It’s possible that some material that is constitutionally protected against obscenity prosecutions might still be so sexually explicit that it can’t be displayed where unwilling viewers — and especially children — might see it. But I doubt that the picture above would qualify as “so sexually explicit,” especially given Erznoznik‘s holding that mere nudity can’t be restricted on such grounds. And in any case I see no constitutionally sufficient justification for banning such material on offensive grounds on alcohol advertising but not on other forms of advertising.

Thanks to Graham Simms and Dr. Vino for the pointer. […]

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Derivatives on Exchanges:

One reform to financial market regulation that has been widely (though not universally) endorsed is putting credit derivatives onto organized clearing exchanges. It is, for example, an important part of the Treasury White Paper on financial regulation reform. The WSJ ran a story yesterday, “Derivatives Plan Is Expected” (Thursday, July 30, 2009, C7) on where the plan currently stands with regulators and Congress.

The derivatives proposals coming to Congress (one of these days) are mixed up among several issues (note: a useful site to keep track of government regulatory efforts is the Treasury site
One, how to regulate derivatives – what kinds and in what ways, and should certain instruments be banned or, if permitted, require different capital and leverage and margin rules. The WSJ article focuses entirely on credit default swaps (CDS). I don’t disagree with the issues raised about CDSs, but think that the problems created by derivatives are as much or more on the leveraging of securitizations – in other words, the CDOs and similar instruments ratcheting up the leverage on securitizations, rather than CDS. The answer to CDOs and similar instruments might be less regulation of the instruments than simply limits on leverage, however arbitrary and clumsy that might be – sometimes second best solutions are better than the alternatives.

With respect to CDSs, the regulatory proposal is currently, first, to create standardized contracts that are traded and cleared on centralized exchanges, thus addressing the considerable problem of undisclosed counterparty risk as well as facilitating valuation via standardized contracts and presumably creating standards for margin and leverage. If parties wanted to go with customized, non-standard, off-exchange contracts, they would be subject to capital and margin requirements on these contracts (and perhaps disclosure to regulators of counterparties, so that someone would presumably be aware […]

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“Profit” Is Not a Dirty Word:

Yale law professor Stephen Carter writes in defense of corporate profits.

High profits are excellent news. When corporate earnings reach record levels, we should be celebrating. The only way a firm can make money is to sell people what they want at a price they are willing to pay. If a firm makes lots of money, lots of people are getting what they want.

To the country, profit is a benefit. Record profit means record taxes paid. But put that aside. When profits are high, firms are able to reinvest, expand and hire. And profits accrue to the benefit of those who own stocks: overwhelmingly, pension funds and mutual funds. In other words, high corporate profits today signal better retirements tomorrow.

Another reason to celebrate profit is the incentive it creates. When profits can be made, entrepreneurs provide more of needed goods and services. . . .

When political anger over profit reduces the willingness of investors to take risks, the nation suffers. . . .

And although it is easy to be dismayed by excess, trying to regulate profit makes things worse. Capital flows to places where returns are highest. The more exercised our political leaders become when profits rise, the more investment capital will remain abroad.


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A Tax Break for Trial Lawyers?

Walter Olson notes that some folks in Congress are pushing a tax break for trial lawyers. Specifically, the proposal would enable plaintiffs’ lawyers to deduct loans to clients to cover litigation expenses as made, rather than at the conclusion of the litigation. The estimated value of the tax code revision is $1.6 billion. Yet Victor Schwartz (among other things general counsel of the American Tort Reform Association) and Christopher Appel argue the revision could have broader implications:

Those who practice plaintiffs’ lawyer work learn quickly that it is a business similar to other capital businesses. Capital is placed at risk and a judgment is made whether or not it will bring a profit. Today the costs of litigation act as a curb against marginal and frivolous litigation. This is what makes the plaintiffs’ lawyers’ tax proposal of such great practical importance. While one cannot calculate it mathematically, having the federal government bear 40% of the initial costs allows plaintiff’s attorneys to take more cases with higher risks. The result to industries targeted by plaintiffs’ lawyers will be staggering.

Schwartz and Appel also challenge the argument that this reform would simply treat plaintiffs’ attorneys’ business expenses like those of other small businesses. […]

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Federal Judge Temporarily Restrains Release of Names of Anti-Domestic-Partnership Petition Signers in Washington States:

Today’s order, in Doe v. Reed, No. 09-5456BHS (W.D. Wash. July 29, 2009), reads in relevant part:

Plaintiffs seek to enjoin Defendants from releasing copies of the Referendum 71 petition to any third party. Specifically, Plaintiffs seek to prevent Defendants from releasing the names, addresses, and other contact information of individuals who signed the petition. Plaintiffs contend that release of this petition would result in a violation of Plaintiffs , and others’ First Amendment rights….

To obtain preliminary injunctive relief, the moving party must show: (1) a likelihood of success on the merits; (2) a likelihood of irreparable harm to the moving party in the absence of preliminary relief; (3) a balance of equities tips in the favor of the moving
party; and (4) that an injunction is in the public interest.

Having considered Plaintiffs’ motion, Defendants’ failure to appear or otherwise object to Plaintiffs’ motion, and the remainder of the record herein, the Court concludes as follows:

1. For purposes of deciding Plaintiffs’ motion for a temporary restraining order only, Plaintiffs have pled a colorable First Amendment claim, and have sufficiently demonstrated a reasonable likelihood of success on the merits.

2. Plaintiffs have demonstrated a reasonable likelihood of irreparable harm if Defendants release the contact information of those individuals who signed the Referendum 71 petition.

3. The balance of equities weighs in favor of Plaintiffs. Defendants and interested third parties will not be unduly prejudiced by delaying the release of this information until after this matter has been fully briefed, should Defendants ultimately prevail on Plaintiffs’ motion for preliminary injunction.

4. A temporary restraining order is in the public interest. Plaintiffs’ complaint raises constitutional issues potentially affecting over 100,000 voters….

The order lasts until Sept. 3, 2009, which is the date set for the hearing on a longer-lasting […]

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Congratulations to Jonathan Baker!

My Washington College of Law, American University friend and colleague, Jonathan Baker, has been named chief economist to the FCC. Congratulations, Jon! Jon is primarily a specialist in competition law, and also teaches law and economics, among other things, at WCL. He is a great professor and scholar, with long experience in senior government positions, and this is a great appointment by the administration. […]

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Hate Crimes Laws, Anti-Gay Views, and Public Accountants:

Let me tell you an interesting story, from Ake v. Bureau of Professional & Occupational Affairs (Pa. Commw. Ct. May 20, 2009), and see what you think of it.

1. In 2001, Kevin Allen Ake was living at a YMCA in Illinois, apparently “so that he could assist an elderly member of his church who lived there.” Several months after moving in, he was evicted, in his view because of his “efforts to begin a bible study program at the YMCA.” As a result, he left a bunch of messages on the voice-mail of the YMCA’s executive director, who was a lesbian; he denies that the messages contained explicit threats, but says he “basically shared what the Bible talked about was — with that kind of unnatural lifestyle — about lesbians and homosexuality.”

Ake was then prosecuted and convicted for telephone harassment, which covers telephone calls made “with intent to abuse, threaten or harass.” Two newspaper accounts reported that he was found guilty of leaving threatening messages, but nothing in the Illinois indictment, or in the Pennsylvania opinions that I read, makes it clear — it seems possible that the finding was simply that he made the calls with the intent to “abuse … or harass” rather than with the intent to threaten. In any case, though, telephone harassment, even harassment that isn’t expressly threatening, is a crime; the laws banning it are generally seen as constitutionally permissible speech restrictions (with some exceptions); and the story here is in any event not about that conviction, which may well have been perfectly sound.

2. Now generally speaking, telephone harassment is a misdemeanor. But Ake was apparently motivated at least in part by the executive director’s homosexuality, which made it a felony hate crime. Ake was thus convicted […]

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“Now he belongs to the English department”:

Sean Wilentz has a marvelous review essay in the New Republic entitled Who Lincoln Was in which he critiques a series of recent books about Lincoln. I highly recommend it and cannot adequately summarize all it covers. Wilenz’s basic point is this:

The defamatory image of Lincoln as a conventional white racist, whose chief cause was self-aggrandizement, is even more absurd than the awestruck hagiographies that have become ubiquitous in this anniversary year. My point is simpler and larger. It is that Abraham Lincoln was, first and foremost, a politician.

That, for Wilentz, Lincoln must be understood, “first and foremost,” as a politician is not a bad thing. Wilentz quotes James Oakes:

“It is important to democracy that reformers like Frederick Douglass could say what needed to be said,” Oakes wisely observes, “but it is indispensible to democracy that politicians like Abraham Lincoln could do only what the law and the people allowed them to do.” And, he might have added, it was indispensible for the nation, and above all the slaves, that Lincoln performed as president as well as he did.

Near the end of his essay, Wilentz offers a reconceptualization of the parellel between Lincoln the politician and Douglass the reformer:

Douglass in his later years did indeed become more like Lincoln–not because he turned “conservative,” but because he came to recognize, as Lincoln did almost instinctively, the difference between the role of a radical reformer and the role of a politician. He arrived at a moral and historical appreciation of politics. James Oakes puts it well: “[Douglass] did not claim that the abolitionist perspective was invalid, only that it was partial and therefore inadequate. Lincoln was an elected official, a politician, not a reformer; he was responsible to a broad public that no abolitionist crusader had to


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