The Volokh Conspiracy

I was out of town most of last week and I wasn’t planning on blogging any more on the increasingly bizarre saga of Elizabeth Warren’s claim to Native American ancestry, which as of the current moment appears to be entirely unsubstantiated.  But I was surprised to see Brian Leiter’s post doubling-down in his defense of Warren–and calling me a “Stalinist” to boot (although I confess it is not clear why or how he is using that term).  So I hope you will indulge me while I respond.

First, let me say again what I expressed at the outset–I have known from highly-credible sources for a decade that in the past Warren identified herself as a Native American in order to put herself in a position to benefit from hiring preferences (I am certain that Brian knows this now too).  She was quite outspoken about it at times in the past and, as her current defenses have suggested, she believed that she was entitled to claim it.  So there would have been no reason for her to not identify as such and in fact she was apparently quite unapologetic about it at the time.  As for the current kerfuffle, at most she has said that she can’t recall whether she did so as part of the Harvard process but hasn’t addressed whether she did so earlier in her career (raise your hand if you “don’t recall” whether you ever considered yourself to be a minority).  And, of course, Harvard must’ve gotten the information from somewhere (and as has been noted, it couldn’t have been from the AALS Directory, which doesn’t fine-grain the classification to that extent).   Warren has been mum on the topic as to whether she ever checked the “Native” box at some point and has ignored Scott Brown’s requests that she release her employment applications, such as her AALS form.

For those who still claim to be uncertain about this note one final point–that the only competing explanation that she has offered is that she identified herself as minority only in order to find similar people with whom to have lunch.  There is no option C–either she did it only to find people with whom to have lunch (which she acknowledges never actually happened) or she did it at least in part to put herself in a position to benefit from hiring preferences.  Moreover, note that the arguments are not symmetrical–she and her defenders must be claiming that she had zero intent to put herself in position to gain a hiring preference by identifying as a minority.  My impression is that there are some people who really want to believe that there is some other explanation–but there isn’t.  That’s the only alternative.  So if you want to question whether she intended to put herself in a position to benefit from hiring preferences then you must be implicitly endorsing her “lunch” explanation.  If so, then please come on out and say expressly that you endorse her explanation.  Because those are the only two options on the table.  So if you disagree with what I’m saying and questioning my sources then please state that you are endorsing what she said.

Second, Brian seems to believe for some reason that the issue here is whether Warren actually benefited from a hiring preference.  Of course it is not (as my post makes eminently clear).  The issue I raised is whether Warren made assertions as part of the law school hiring process in order to put herself in a position to benefit from a hiring preference for which she had no foundation.  Whether she actually benefited from resume fraud is beside the point, just as it was beside the point whether Yahoo’s recently-sacked CEO gained that position because he claimed to have a computer science major 20 years ago.  Would it matter if he could demonstrate that he would have been hired to be CEO anyway even if he hadn’t lied about having a computer science degree?  I don’t think so–or at least it didn’t matter to Yahoo’s directors.  (In fact, we at George Mason rescinded an offer to a candidate a few years ago because we discovered that the person had misrepresented his/her resume).  Or consider another example–would it matter if a tenure candidate had plagiarized, say, three articles, if he had a sufficient number of non-plagiarized articles to be granted tenure?  I would hope not.  (Although I acknowledge that Harvard may have different standards on this issue.)

Third, regardless of why she did it,Warren herself actually had no verifiable basis for her self-identification as Native American.  At the very least her initial claim was grossly reckless and with no objective foundation–it appears that she herself has never had any foundation for the claim beyond “family lore” and her “high cheekbones.”  And, in fact, the accuracy of the statement is increasingly falling into question.  To the extent that any supporting evidence has trickled out, it has not been provided by her (nor, interestingly enough, did she ever expressly endorse anything that was produced by others).  Now it turns out that the New England Historical Genealogical Society, which had been the source for the widely-reported claim that she might be 1/32 Cherokee, has rescinded its earlier conclusion and now says “We have no proof that Elizabeth Warren’s great great great grandmother O.C. Sarah Smith either is or is not of Cherokee descent.”  The story adds, “Their announcement came in the wake of an official report from an Oklahoma county clerk that said a document purporting to prove Warren’s Cherokee roots — her great great great grandmother’s marriage license application — does not exist.”  A Cherokee genealogist has similarly stated that she can find no evidence to support Warren’s claim.  At this point her claim appears to be entirely unsupported as an objective matter and it appears that she herself had no basis for it originally.

Fourth, Brian’s post also states the obvious–that there is plenty of bad blood between Elizabeth and myself.  But, of course, the only reason that this issue is interesting and relevant today is because Warren is running for the U.S. Senate and is the most prominent law professor in America at this moment.

So, I guess I’ll conclude by asking the obvious question: if a very prominent conservative law professor (say, for example, John Yoo) had misrepresented himself throughout his professorial career in the manner that Elizabeth Warren has would Brian still consider it to be “the non-issue du jour“?  Really?

I’m not sure what a “Stalinist” is.  But I would think that ignoring a prominent person’s misdeeds just because you like her politics, and attacking the messenger instead, just might fit the bill.

Update: Sorry, I forgot to mention this report about Texas and Penn, that indicate that she was listed as white at Texas and at U Penn records that list her as minority faculty there in at least one context but her full employment records haven’t been released there.

For those who lack the interest or patience to read my forthcoming full-blown law review article in the Washington & Lee law review, I have a shorter adapted version in latest issue of the Federalist Society’s journal Engage on the economics and regulation of bank overdraft protection.  Thanks to Nick Tuszynski of the Mercatus Center for his help with this.

Aside from Brian Leiter, whose contention that being Native American provides no affirmative action edge in law school hiring fails the straight-face test, it is obvious to everyone else why Elizabeth Warren self-identified as Native American all those years–which was to get an edge in hiring.  Even less plausible, of course, is her own explanation–that she was looking for people to have lunch with (once she got to Harvard was it that she no longer was interested in having lunch with other Native Americans or that the strategy was so successful that she had just had too many lunches through the years?).  Larry Sabato states the obvious:

“This takes her biography into a bizarre dimension,” said Larry Sabato, director of the University of Virginia Center for Politics. “It has derailed the effort to define Warren in a voter-friendly way.”

Sabato also said that Warren’s claim that she didn’t list herself as a minority to gain an employment advantage is not believable.

“This is what happens when candidates don’t tell the truth,” he said. “It’s pretty obvious she was using (the minority listing) for career advancement.”

So assume the only reasonable explanation–that contrary to Leiter’s statement she did this to get a leg up in hiring and contrary to her own statement she didn’t do it to find lunch partners.

But Warren’s campaign has produced statements, most notably from the very distinguished bankruptcy scholar Jay Westbrook at Texas, that her purported Native ethnicity was not taken into account, in his opinion and recollection, in her hiring at Texas.  Although I’ve heard otherwise, Jay’s comment certainly may be true and seems plausible–as I’ve acknowledged previously, I think very little of her work but I also recognize that on the merits she is a perfectly plausible hire at the schools she has taught at.  (Paul Bedard notes some curiosities about her hiring at Harvard that he thinks provides circumstantial evidence that racial preference played a role, but I’m not persuaded on that evidence alone.  Although it is ironic that a credentials snob like Leiter doesn’t raise an eyebrow at Harvard’s lone Rutgers grad–one wonders what he would think of Rutgers grads applying to teach at Chicago, for example.  One other observation about Bedard’s column though, is that as far as I can tell the Nebraska JD on the Yale faculty is an emeritus clinical professor not a senior chaired substantive professor as Warren is).

And let me also hasten to add, while I’ve obviously had my clashes with Elizabeth through the years, that in no way extends to Jay, for whom I have great respect and esteem who has invariably treated me with kindness and respect in my interactions with him.  So I am certainly not questioning his recollection.  But Jay is also a very longstanding friend and co-author of Elizabeth’s, so his belief of her quality may not be entirely representative of whether others on those faculties share his view that she has always been a no-brainer on the merits and might have considered racial preferences at the margin.  Given the norms of the academy, of course, even if there were those who may have seen the issue differently from Jay, there is very little incentive for those with differing recollections to come forward and provide a different story.  I also note that I don’t read Jay as saying that she never said during the hiring process that she was Native American, his defense is only that it didn’t turn out to be relevant to her being hired.

But, more importantly, I think all this vouching for her is largely beside the point with respect to the larger issue here which is not whether she did receive a racial preference from self-identifying as Native American but whether she thought that she would receive a preference for doing so (at the margin from at least some people).  The issue is the one of ethics–did she try to trade on Native American ethnicity for personal advantage, not whether she actually succeeded in doing so.  Would it matter, for example, if someone fabricated relevant credentials on his resume even if it turned out not to make a difference in hiring?  Of course it would.  Would it matter if someone plagiarized three articles in a tenure file if he also had several other articles that would have been sufficient to grant tenure?  Of course it would.  Similarly, if you think that Warren dishonestly (or at least recklessly, given that apparently she relied on nothing but “family lore” for all those years without any verification at all) represented herself as Native American in order to gain an advantage in hiring, then it seems utterly beside the point whether she would have been hired anyway.  Or, at least, if I were sitting on appointments committee I would find the repeated misrepresentation of minority status to be disqualifying for a candidate (and, frankly, I add as an aside that I’m surprised that Leiter is so cavalier about what seems like a pretty clear a credible case of credentials fraud and it seems pretty doubtful that he would be so tolerant of someone whose politics he finds less congenial).

Update: On reflection I changed “pretty clear” to “credible” to reflect that the record is not entirely clear as to how she represented herself in the hiring process.  But while there’s been discussion of whether her employers held her out as a minority I’ve not seen anyone question whether she had held herself out as a Native American at times in the law school hiring process even though it appears that she had no verifiable basis for doing so and almost certainly wouldn’t have been considered Native American by almost anyone’s reasonable understanding of what that category describes for diversity purposes.

Update: Hans Bader argues that another possible reason why even if Warren had claimed minority status for purposes of racial preferences some people might be unwilling to come forward to admit it–that doing so could expose them to personal liability.  My personal opinion is that this unlikely to be much of a factor–my sense is that a far more powerful reason is that the norms of the academy, especially with respect to someone as high-profile as Warren, provide few incentives to do so and strong incentives not to do so.

In honor of the 50^th anniversary of the publication of Milton Freidman’s Capitalism and Freedom the Liberty Law website has organized a symposium of reflections on the book’s legacy.  The introduction to the symposium is here.  My essay, which takes off on the coincidence of the publication of Capitalism and Freedom and Hayek’s The Constitution of Liberty just two years apart, is here.

One thing that struck me is how relevant many of Friedman’s arguments remain because even though it seems apparent that he has won the war of ideas on many of the issues he discusses, policies in many areas (most notably occupational licensing) have gotten worse, rather than better, in the meantime.  Which unfortunately suggests that interest groups and public choice dynamics may be more proximately important than ideas (although bad ideas, of course, create the environment for interest groups and political opportunists to prosper).

This was the first time in years that I read Capitalism and Freedom all the way through cover to cover, which was very edifying.  So I want to thank Richard Reinsch at Liberty Fund for inviting me to participate in the symposium.

I’ve posted a new, short essay on SSRN, “The Senate and Hyper-Partisanship: Would the Constitution Look Different If the Framers Had Known that Senators Would Be Elected in Partisan Elections?”  The essay was written for a symposium sponsored by the Georgetown Journal of Law and Public Policy on the topic of “Hyper-Partisanship and The Law.”

Here’s the Abstract:

This article is a contribution to the symposium “Hyperpartisanship and the Law,” sponsored by the Georgetown Journal of Law and Public Policy. The article considers the implications of direct election of United States Senators via partisan elections for the Constitution. As originally designed, the Senate was elected by state legislatures and the Framers anticipated (naïvely perhaps) that the Senate would be comprised of men chosen on the basis of distinction and ability rather than partisan allegiances. That system was changed in 1913 with the enactment of the Seventeenth Amendment, which adopted direct election of Senators. This article asks whether the Constitution would look different if the Framers had anticipated that Senators eventually would be elected by direct election as opposed to indirect election.

In particular, I focus on the distinctive powers given to the Senate within the federal constitutional structure and the reasons articulated for why those powers were given to the Senate: the power to try impeachments, to confirm nominees, and to ratify treaties, as well as the role of the Senate in the system of bicameralism and federalism. Although it is impossible to know for sure what the Framers would have done had they anticipated direct election in partisan elections I argue that it is likely that they would not have given the power to try impeachments to the Senate in the form that they did, it is reasonable that they might have changed the system of nomination and confirmation, and is likely that they would have retained the Senate’s major role in treaty confirmation. Although direct election dramatically diluted the value of bicameralism, it is likely that they would have retained a bicameral structure for most matters anyway. Finally, it is extremely likely that had they anticipated that Senators would be directly elected they would have built in additional explicit constitutional safeguards for the protection of federalism.

My impetus for writing this was the farcical Clinton impeachment proceedings many years ago, in which the Senate bore no real resemblance to the sort of jury contemplated by the Framers.  While it is plausible to think of an indirectly-elected Senate (at least how the Framers conceived of it) performing that function, that trial demonstrated the unsuitability of the currently-devised Senate in doing so (although it is not clear what the Framers might have put in its place).  That prompts some additional considerations on nominations, the treaty power, and other ruminations.

John Rosenberg discusses some of the bigger-picture slippery logic of affirmative action on Minding the Campus asking why those who believe in racial preferences have rushed to vouch that she never benefited from them.

Mark Olson says that CFPB is raising additional concerns as it ramps up in practice:

Two disturbing bits of recent information give us a taste of how the CFPB plans to operate. Representatives from the CFPB have acknowledged that lawyers from the bureau’s enforcement division are accompanying CFPB compliance examiners on their routine examinations….

The second disturbing bit of information concerns the manner in which examination findings are shared with other agencies. Because of the confidential nature of bank examination reports, there is a precise protocol for how government agencies share information. This is to guard against information gathered for one purpose by one agency being used by another agency for a different purpose. For example, there are good and obvious reasons why the IRS does not share personal tax information with other agencies outside a court order. There is also a wide concern that the CFPB, which has a Congressional mandate limited to consumer compliance, might use information collected by the safety and soundness regulators (Office of the Comptroller, FDIC, and Federal Reserve) in its enforcement efforts. With such an initiative, the CFPB would be sending an early signal that it does not intend to be limited in its scope by either precedent or Congressional directive. Hopefully the safety and soundness regulators will recognize the implications of such a request and will resist.

There is good reason why the new CFPB should feel it has a mandate for aggressive supervisory action. But just as in the old west, where vigilance committees quickly became vigilantes, there will be a fine line between the CFPB managing its new powers to achieve greater compliance with consumer laws and regulations, and the potential of an army of CFPB lawyers administering frontier justice on providers of financial services.

One of the obvious questions prompted by the public recognition that Elizabeth Warren’s claimed Native American ancestry is what it takes for someone to avail themselves of the preferential treatment afforded to racial and cultural minorities in hiring–and in particular, can someone assert the identity if they are only 1/32 and have absolutely no cultural ties, such as tribal membership.  (I say “public recognition” because I first heard this a decade ago but I certainly didn’t realize that she was only 1/32 Native American with no cultural tie.)  Warren herself, when originally asked about it, simply said that it was part of her “family lore,” indicating how little care she had put into classifying herself accurately.

To put it another way, would Warren’s 1/32 blood from her great-great-great grandmother, with no other discernible cultural links count for most university preference plans?  Hans Bader, who has worked on a number of such cases, is skeptical (he also notes David’s previous post on this).

I should also hasten to add that although Harvard frequently touted her Native American ancestry (Warren says she never authorized Harvard to claim her as a minority hire although Harvard must’ve gotten the information from somewhere) that does not necessarily mean that was a determining factor in Harvard’s decision to hire her, even if it was a consideration for her stepping-stone law school positions.  By that time she was a well-established commercial law scholar, certainly to the point where it seems plausible would not need to claim Native American background in order to receive a preferential boost to be hired (although obviously I don’t share the general enthusiasm for her work).

Update: Hans has updated and corrected his post so I’ve deleted the block quote that has been superseded and for those who want to read the specifics you can click through the link.

If you are interested in learning more about public choice economics a great way to get introduced is by attending the annual Public Choice Outreach Seminar held at the George Mason Public Choice Center in Fairfax.  Information and application material is available here.  I’ll be lecturing again this year again on the topic of “Public Choice and the Law.”

Steve Jakubowski has a summary of the Supreme Court oral argument in the RadLAX case.  Not the usual band of sign-wielding protesters on the SCOTUS steps….

Max Stearns has an interesting take on the much-publicized failure to award a winner of the Pulitzer Prize in Fiction this year, arguing that it was likely the result of a flawed set of voting rules that led to none of the finalists receiving a majority, rather than statement of unworthiness of all the candidates (apparently the judges would have been fine with any of the three winning, it is just that among the finalists no one of the three stood out above the rest).  Max argues that the problem was a mismatch of the voting rules that failed to accurately capture the voters’ preferences.

James Carter and Jason Fichtner describe it here:

Any viable solution must cut spending growth. Sen. Mike Enzi of Wyoming and Rep. Connie Mack of Florida have introduced legislation in their respective chambers to do just that. Their “Penny Plan” – recently updated to reflect the latest budget developments – calls for reducing federal spending (excluding interest payments) 1 percent a year for five years, balancing the budget in the fifth year.

To maintain balance once it’s reached, Mr. Enzi and Mr. Mack would cap federal spending at 18 percent of GDP. By no small coincidence, 18 percent of GDP roughly matches the U.S. long-run average level of taxation since World War II.

They report that the plan currently has 71 House supporters and 12 Senators.

I have a short essay up at the Liberty Law blog today “Upholding the Rule of Law In Season and Out of Season.”  I argue in opposition to the conventional wisdom that it beneficial to relax the rule of law during times of economic crisis.  In part I believe the belief in the need for discretion (and to relax the rule of law) in an economic crisis rests on a faulty analogy between national security crises and economic crises.  I also argue that the benefits to discretion during economic crisis are lower and the costs, especially systemic costs and long-term costs, are higher than is commonly supposed.

Yeah, I get the idea–if people don’t have to pay their debts now it is like we are giving a big random stimulus because people can buy new stuff and don’t have to pay for old stuff.  So they have more money.  And this is a wonderfully political gambit to give a windfall to middle-class families and over-educated and over-aggrieved OWS majors.  And higher ed would be cheaper if you couldn’t borrow money to finance it.

But that would be the effect–you wouldn’t be able to borrow money to go to college any more.  As my old friend Marcus Cole ably explained to the Senate a few weeks back when this issue was proposed.  The problem, of course, is that the moral hazard and adverse selection problems here are extreme: when most people graduate from college they are massively insolvent.  They have huge debts and very few assets (a used car perhaps).  But they have a huge future potential income stream.  Bankruptcy would allow them to shed the debts, keep their meager assets, and then protect all of that future revenue stream.  In the face of those incentives it is hard to imagine that the student loan market could exist at all, really, or would do so only at such high cost and other terms (collateral, co-signers, etc.) that it would defeat the purpose, which is to allow people to borrow now to make an investment in their human capital (just like any other capital investment).

Higher ed is too expensive and there is too much student debt (I’ve actually been concerned about student loan debt for years, back when I would tell everyone who was concerned about student credit cards that they were looking in the wrong place).  But the indirect approach of allowing discharge of student loans, and thereby unraveling the student loan market, isn’t a very productive way of thinking of it.

I don’t have a strong opinion on whether the current rules for discharge of student loans in bankruptcy are too stringent or not.  But they at least try to aim at the right question of trying to distinguish legitimate hardship from opportunism.

As readers know, my concern about regulation of consumer credit and retail banking is that inefficient efforts to “protect” consumers by regulating prices and terms of credit can have severe unintended consequences by reducing access to higher-quality options (such as credit cards and debit cards) and push consumers to use less-preferred options involuntarily (such as payday lenders and check cashers).  (And let me stress that I think there is room for those alternative lenders in the consumer credit market, I just oppose regulations that basically force consumers to use those products).

Along these lines Reuters has now constructed the “Cordray Index,” which shows how the onslaught of federal regulation as well as the continued struggles of the retail banking system to work off bad debt has created a boom time for alternative lenders as consumers have been pushed into these products.  Of course, the response of regulators to increased consumer use has been predictable, albeit tragic–to try to take these options away from people (which will, of course, simply push them further down the chain of products).  The logic turns conventional economics on its head–so when we see increased demand for this product we are supposed to think that consumers are worse for using it instead of available alternatives?  I don’t get why the ordinary rules of economics don’t apply in this market–it seems to me that increased demand for a product is generally evidence of consumer satisfaction relative to other available choices.

Anyway, here’s the “Cordray Index” from Reuters (this is similar to a chart that I posted from the WSJ a few months back that makes the same point):

Perhaps.

My daughter has been insisting for months that she should be allowed to take her guinea pigs to school.  Looks like I might have to start preparing a new reason why she can’t….

Update

As usual, the brilliant VC readers come through with Plan B for fending off my daughter’s request.

I have a question prompted by Ken’s interesting post commenting on Jonathan’s post on the blindness of the academy to the validity individual mandate challenge.

My question based on the debate around the mandate, but also the question of the Cordray and NLRB Recess Appointments (which I’ve also followed).  On both issues, on the “conservative” side of the fence there was some substantial disagreement–indeed, on these very pages.  Orin argued for the constitutionality of the mandate and John Elwood argued for the validity of the Cordray and NLRB appointments.

On the other hand, are there any prominent liberal law professors who parted company from the liberal orthodoxy on either of these issues?  The closest I’ve been able to come up with are Jason Mazzone on the mandate and Jonathan Turley on Cordray, but they both seem somewhat heterodox to me generally (perhaps my perception of both is simply incorrect).   Considering that we are only about a dozen bloggers here and were able to generate some internal dissent, doesn’t it seem probable that among the hundreds of liberal law professors in the country there might be a few who departed from the group?

And assuming I’m right as a factual matter (I’ve both Googled, searched my memory, and asked around a bit and I can’t recall anyone else on either point), does this help us to distinguish between the Adler and Anderson hypotheses?  As I take it, the Adler hypothesis would be that the group-think of the professoriate caused them to not be able to even think that the challenge to the individual mandate might be unconstitutional.  The Anderson hypothesis, as I take it, would be that the professor could think and recognize that the argument might be valid, but they might refuse to say or otherwise acknowledge the validity of the argument in order to create a fence around what can be considered within the bounds of mainstream argumentation.

So it strikes me that one way to test the hypothesis would be to ask whether there are liberal law professors who might admit privately that the mandate might be unconstitutional but would not do so publicly.  If that is the case, then it tends support the Anderson hypothesis, I think, because it suggests that the real agenda may have been to demonstrate public solidarity behind the incontrovertible nature of the mandate rather than an inability to consider the argument.  Not that anyone would be able to research this systematically–but I have heard anecdotal evidence that this was not uncommon, at least for the mandate (there’s been less talk generally, public or private, I suspect, about Cordray although it is mighty big in my world).  Which, if true, I think tends to confirm the Anderson hypothesis.

at the Liberty Law blog.

There’s an op-ed by Elizabeth Warren and other former COP-TARP members in today’s WaPo criticizing the preferential tax treatment given to AIG as part of the bailouts.  I agree, of course, with their criticism of preferential tax treatment for bailed out companies.  But isn’t the favoritism under the tax law about which they are complaining the same provision that GM exploited as well–and so that the same criticism could be applied with equal validity to GM?  Or is there something different about the benefit that AIG is getting from the benefit GM received?

(BTW, I’m genuinely asking–they seem like the same things but I just don’t know if there is a nuance of tax law that I’m missing here, so forgive me if I’m missing something obvious here.)

Congratulations to Maureen Ohlhausen, who was unanimously confirmed for a seat on the Federal Trade Commission.  Maureen worked with me as Deputy Director of the Office of Policy Planning at the FTC when I was Director then took over as Director.  A great choice and I am happy for both Maureen and the Commission.

My former colleague and sometimes co-author Max Stearns has an op-ed defending the constitutionality of Obamacare in the Baltimore Sun here (co-authored with Leslie Meltzer Henry).  If you know Max’s work you’ll recognize the argument about interstate coordination here.

Update: I’ve corrected my error on Professor Henry’s first name.  My apologies.

Paul Roderick Gregory describes an imaginary interview by Chris Wallace of Steven Rattner on the auto bailouts.  Here’s the thing that Rattner never quite seems to address–even if it is believed that government direct lending was necessary to provide DIP financing (which I doubt, but will accept for the sake of argument) there is nothing in that narrow issue that implies that anything else that happened in the auto bailouts (scrambling priorities, giveaways to the UAW, and general politicization of the entire bankruptcy process) was essential or even useful.  Using the need for DIP financing as the tail to justify the entire mangy dog of how the auto bailouts actually proceeded is thus largely a smokescreen–none of the deviations from traditional bankruptcy processes did anything to further the long-term competitiveness of the companies out of bankruptcy.

I wrote more copiously about the auto bailouts here and here.

In an article several years ago I noted several of the unusual bedfellows made between certain industries and environmental groups:

The presence of these “gains to trade” politics may explain the otherwise puzzling financial support of industry for environmental interest groups. For instance, in recent years members of the waste treatment industry have pumped hundreds of thousands of dollars into the coffers of various environmental advocacy groups, including the National Audubon Society and the National Wildlife Federation. Indeed, the Sierra Club has recognized that “the commercial waste industry has an interest in improving regulations sufficiently to drive mom-and-pop operations out of business.”  Of course, the waste treatment industry also is aware of these potential gains to trade. Oil companies, including Atlantic Richfield and Chevron, contribute to environmental groups such as the National Audubon Society, who lobby to restrict opening new areas for drilling, thereby keeping new supplies off the market. As these examples illustrate, there are ample gains to trade between environmentalists and polluting industries, and they are usually exploited.

Now comes the emerging story of an alliance between leading environmental groups and the natural gas industry to advocate for the elimination of one of natural gas’s leading competitors:

Just four years ago, shale gas king Aubrey K. McClendon told shareholders of Chesapeake Energy that “finally, we made some new friends this year.”

The chief executive sketched a vision of working hand in hand with “leading environmental organizations” on issues “where our interests might be aligned.” He said, “We believe this collaboration is unique in the industry and will benefit both Chesapeake and these environmental organizations for years to come.”

New friendships grew old, then cold. Environmental groups that once took money from McClendon — or considered doing so — to make a common cause against coal power, have stepped back as they weigh the environmental perils of extracting natural gas from shale, a business in which McClendon’s Chesapeake Energy is a leader.

The Sierra Club took $26.1 million in contributions from McClendon and Chesapeake-affiliated companies between 2007 and 2010, a fact that its executive director, Michael Brune, first disclosed to Time magazine earlier this month. Last year, Brune walked away from Chesapeake and an offer of an additional $30 million in donations.

To put the $26.1 million in context, compare the funding for the Heartland Institute, about which one critic stated, “That the Heartland Institute is effectively acting as a front group for big oil and energy, raising money from companies which are threatened by climate policies, so that it can essentially do their dirty work in undermining legislation that threatens their corporate bottom line.”  Heartland received a grand total of $676,500 from Exxon between 1998-2006 and $200,000 from the Koch Foundation in 2011.  If that amount makes Heartland a “front group for big oil and energy,” what does $26 million make the Sierra Club for natural gas?

Michael Brune, Executive Director of the Sierra Club, has now come out and stated that they won’t take any more money from the natural gas industry.  But if you read the statement, he is not saying that it was wrong for the Sierra Club to “effectively act[ ] as a front group for natural gas.”  Instead, he indicates that the Sierra Club dropped out of the lucrative arrangement only because the natural gas industry has started using hydraulic fracking.  It seems that but for that development the Sierra Club would have been perfectly content to lend its prestige and clout to Chesapeake’s rent-seeking efforts.

But the Sierra Club wasn’t the only one:

Although McClendon may be the gas industry’s most generous donor to environmental causes, he is not the only one. Natural gas entrepreneur T. Boone Pickens gave $453,250 to the liberal think tank Center for American Progress (CAP) in 2008 and 2009 through his nonprofit groups, to support its National Clean Energy Project events. At the time, Pickens was pressing lawmakers to adopt a bill to subsidize construction of natural gas filling stations. The legislation would have directly helped a company Pickens co-founded called Clean Energy Fuels, which describes itself as “the leading provider of natural gas for transportation.”

Several companies with natural gas interests, including Exxon Mobil, Chevron and the Interstate Natural Gas Association of America, have donated to the D.C.-based Center for Clean Air Policy as part of its efforts to sponsor an ongoing dialogue about domestic climate policy. Exxon and Chevron have given $35,000 each for an annual membership in the dialogue, while smaller industry associations have donated less.

I discuss the political economy of environmental interest groups more in this article.

For those who aren’t familiar with the concept of “Baptists and Bootleggers” the phrase was coined by my former professor Bruce Yandle to describe the regulatory process.

Update: I’ve been told that I overstated the size of the Koch Foundation’s contributions to Heartland, which was $25k in 2011 for health care issues and Heartland had hoped to raise that to $200k for health care the next year. I apologize for my misunderstanding.

My two cents on the recently0announced robo-signing settlement: “The ‘Robo-Signing’ Settlement: Seeds of Recovery, or Chaos?”

A couple of weeks ago I participated in a Federalist Society Teleforum on CFPB with Wayne Abernathy, Jo Ann Barefoot, and Arthur Wilmarth.  If you missed the live show rest easy because now it is available for easy downloading as a podcast here.  I thought it was a very useful discussion not only with respect to the legal questions but some discussion of more practical regulatory compliance issues and the overall impact on the financial services industry from the CFPB.  Thanks to the Federalist Society for organizing it.