The Bill of Rights Institute and Fantasy SCOTUS have combined to design a new Fantasy SCOTUS program aimed at high school teachers and students. The BRI Badge is here. The Teacher sign-up is here. Looks like a lot of fun for teachers and students.
(As readers probably know, I am on the Board of Directors of the Bill of Rights Institute and Chair of its Academic Advisory Committee.)
A few weeks back I noted the great new blog and website sponsored by Liberty Fund. In addition to the blog (which features Mike Rappaport and Mike Greve) the site also has a “Liberty Forum” section with extended deliberation of a particular topic. Last week the topic was behavioral economics and its implications for liberty and featured an essay by Doug Ginsburg and Josh Wright with several discussants. Before that was an interesting exchange on “The Uselessness of Constitutional Law” by Michael Paulsen. Paulsen’s proposition is that constitutional “law” really bears little resemblance to anything we call “law” anywhere else in the curriculum and gussying it up as supposedly being actual law not only is distracting to students but even harmful to students’ legal education: “In short, Constitutional Law is really bad law and models bad habits.”
Interesting column by James Grant on the short but severe post-WWI Depression of 1920-21:
Our Great Recession ended 2½ years ago, according to the official cyclical timekeepers, but you wouldn’t know it by a glance at the news. Zero percent interest rates and $1 trillion in “stimulus” notwithstanding, the U.S. economy can hardly seem to heave itself out of bed in the morning. Now compare this with the first full year of recovery from the ugly depression of 1920-21. In 1922, under the unsung stewardship of the president best remembered for his underlings’ scandals and his own early death in office, the unemployment rate fell from 15.6 percent to 9 percent (on its way to 3.2 percent in 1923), while constant-dollar output leapt by 16 percent. After which the 1920s proverbially roared.
And how did the administration of Warren G. Harding, in conjunction with the Federal Reserve, produce these astonishing results? Why, by raising interest rates, reducing the public debt and balancing the federal budget. Let 21st-century economists rub their eyes in disbelief. Eighteen months after the depression started, it ended.
I’ve been fascinated by the contrast of Harding’s response to the 1920 depression versus Roosevelt’s seemingly-counterproductive response to the Great Depression since I read several discussions a few years back (see here, here, and here). The problem with macroeconomics, of course, is the paucity of data points and the inability to control for relevant variables. But it is nevertheless striking to me that discussion always seems to focus on what at first glance appears to be the failed Hoover-Roosevelt response to the Great Depression rather than the apparently effective Harding response to the 1920 Depression.
The only discussions I’ve seen of the 1920 Depression are those that support Harding. Has anyone written a good response to that story, because what I’ve read seems fairly compelling (at least to the extent that macroeconomics can ever tell a compelling story).
That’s the report–but that’s not what the facts seem to indicate as noted by James Taranto:
The interview aired on “Nightline” some 90 minutes after the debate ended, and the bombshell turned out to be a dud. The supposed big revelation–that “he wanted an open marriage,” as she, not he, put it–turned out in context to be trivial.
As Mrs. Gingrich told the story, the then-speaker informed her over the phone that he wanted a divorce. “I said to him, ‘Newt, we’ve been married a long time.’ And he said, ‘Yes. But you want me all to yourself. Callista doesn’t care what I do.’ ”
“What was he saying to you, do you think?” asked interviewer Brian Ross.
Mrs. Gingrich: “Oh, he was asking to have an open marriage and I refused.”
By her account, he first asked for a divorce. She protested, and he made clear that he was unwilling to give up his then-mistress. It’s unclear from Marianne Gingrich’s account whether Mr. Gingrich actually offered to remain married in exchange for tolerance of his infidelity, or if this was merely her inference.
In either case, there is an enormous difference between offering such an arrangement as a “compromise” to a spouse who does not wish to divorce, which is what Mr. Gingrich appears to have done, and flat-out asking for an open marriage. Neither reflects well on him, but the former is within the normal range of cruel and confused behavior during a breakup, whereas the latter is, at least by American standards, deviant.
Note first that Gingrich never proposed having an “open marriage”–that’s the ex’s characterization. And it doesn’t seem accurate to me either. It looks like what Gingrich told her is (1) I’m in love with Callista, (2) I would like a divorce, (3) that he was planning on remaining with Callista regardless of whether she granted him a divorce, and (4) it is ambiguous (to me) what “Callista doesn’t care what I do” it could reasonably interpreted that Callista would tolerate infidelity or it could also reasonably interpreted that he was saying that Callista didn’t care whether he got a divorce or remarried (again recall this is the ex’s characterization of a conversation a long time ago and what was actually said between those two meanings would require a lot of nuanced parsing). One could use a lot of terms to describe that set of facts (none of them flattering) but “he was asking to have an open marriage” isn’t how I would characterize it nor do I think most people would characterize it that way. Especially because, as Taranto notes, the use of that term in the United States connotes deviancy such as swinging with multiple sex partners, rather than a long-term extra-marital affair.
To which I’ll add that given the facts as they appear to be and that the inflammatory term was provided by the ex, not by Gingrich, I think he was justified to berate John King for giving credence to the story–and I would say the interpretation that he “asked for an open marriage” is so inaccurate to actually be false (although others might disagree).
It should be obvious that I am not defending Gingrich’s behavior but I’ll say that explicitly just to make sure. I also think that character issues such as this are not necessarily out of bounds for the media because they matter to some voters. I’m just saying that this is an exceedingly dubious characterization of the story, which is not nearly so deviant as reported.
I’ll be on Freedom Watch with Andrew Napolitano tonight talking about the government’s “Voluntary Guidelines” for marketing food products to children and adolescents. My segment will appear at about 35 minutes after the hour.
Comes now the newest–and certainly one of the most welcome–additions to the blogging universe: Libertylawblog. Featuring my friends Mike Greve and Mike Rappaport. Sponsored by Liberty Fund, this is the law analogue to Liberty Fund’s immensely popular economics blog econlog. I see posts by other authors there as well (including our own Ilya Somin), so I’m not certain as to what the finished product looks like.
Libertylawtalk is a serious of podcasts from the same source that you can download here.
Best wishes to Mike and Mike (perhaps it should be known as “Mikelawblog”?) and thanks to Liberty Fund for bringing this project into being.
The problem is that the Senate does most of its work by unanimous consent—meaning without objection from present Members and without a vote or quorum. Even a single Senator alone on the floor (or “as a practical matter” one from each party) can use this process to modify the standing order in a heartbeat and conduct business.
The Senate did exactly that to pass Mr. Obama’s payroll tax holiday in December, changing a standing order by unanimous consent to conduct business during an ostensibly pro forma session. Mr. Obama signed that bill. Either that was a real session and therefore his recess appointments are unconstitutional or the bill was invalidly enacted and therefore unconstitutional. Both can’t be true.
That seems correct to me–that either a pro forma session is a real session or it is a recess. It cannot simultaneously be both, can it?
Leaving aside the constitutional questions, there is a potential statutory problem with the legality of the Cordray appointment under Dodd-Frank. Section 1066 of Dodd-Frank provides that the Secretary of the Treasury is authorized to perform the functions of the CFPB under the subtitle transferring authority to the CFPB from the other agencies “until the Director of the Bureau is confirmed by the Senate in accordance with Section 1011.” It turns out that section 1011 is a defined term which provides: “The Director shall be appointed by the President, by and with the advice and consent of the Senate.”
This seems to suggest that even if the President might be able to appoint Cordray under the recess power the full grant of statutory authority wouldn’t transfer to the Bureau unless the statutory language was fulfilled as well.
(HT: Jerry Loeser)
There will be a memorial service in honor of our late GMU colleague Larry Ribstein tomorrow (Wednesday) at George Mason Law School at 4:00 p.m. Information is here.
So it turns out that simply eliminating the supply of payday lending doesn’t actually eliminate demand. Who would’ve thought it? According to this story (which simply reports what has already been known to be the case), whenever state laws eliminate bricks-and-mortar payday lending many of those consumers simply substitute to online payday lending. Indian Tribes are becoming an especially attractive base for online payday lending operations.
In general, of course, more competition is better than less, and so I fully support the right of online payday lenders to compete with traditional bricks-and-mortar operations. On the other hand, as noted in the article, online payday lending raises several novel regulatory concerns. For example, as I understand it, rather than writing a post-dated check, online payday lending often works through a borrower giving the lender direct access to his bank account to make an EFT, which can raise heightened concerns about privacy and security. Moreover, despite their lower operating costs, to date online payday lenders do not appear to offer rates noticeably lower than bricks-and-mortar businesses. This could be for several reasons: adverse selection, heightened default risk (because of lack of legal enforceability), or reduced competition because of the fact that many online borrowers lack easily-accessible offline options. In the medium to long run, however, I suspect that online payday lending is a useful pro-consumer innovation and would grow over time, even without the subsidy provided by legislators regulating out of existence their leading source of competition.
More generally, the point here is obvious: while competition and free choice is good, enacting well-intentioned but misguided regulations that eliminate consumers’ preferred options and push them to less-preferred options is not a strategy well-designed to increase their welfare. You simply cannot wish away consumer need for credit, even short-term high-cost credit. And while state regulations enacted on the misguided premise that we can wish away that need has proved a boon for Indian Tribes and online lenders I fail to see how payday loan customers are better off as a result of this substitution.
Update:
I received a few useful comments from a lawyer who expert in all types of payday lending. He offers a few corrections and elaborations to some of my observations:
1. Regarding “heightened concerns about privacy for ACH debits, the information necessary to initiate an ACH debit entry to a person’s checking account is the same information that is encoded on the bottom of his check–the routing number and account number, nothing more, and has no more “private” information than the possessor of an unsigned black check from the borrower’s account. The ACH process is also extensively used by brick-and-mortar payday lenders to collect past-due loans for reasons for speed and simplicity. The cost of doing so is also lower than the cost of presenting the physical check; bank charges for a returned ACH debit are generally a small fraction of such charges for a returned check–this despite the current practice of banks under the Check 21 Act to present nearly all checks electronically.
2. There is a huge, and rapidly-growing, Internet-based lending business, both for payday and auto title. Indian tribal sovereign immunity is only one of the models.
3. In general, the price of an Internet payday loan is, as you point out, higher than the price of a comparable brick-and-mortar loan. There are several reasons for this. First, with immaterial exceptions, every state that permits payday lending has a regulated price ceiling. As a general matter, the regulated ceiling is below the equilibrium price. The Internet is generally free of these strictures, price discovery is simple, and the equilibrium price unsurprisingly winds up as the market rate. Second, the lender’s highest costs on the Internet are not credit losses but rather the costs of borrower acquisition that involve payments to third parties…. Lead generation is itself a huge and profitable industry. Third, credit losses are indeed somewhat higher with Internet loans but insufficiently higher to explain the price differential.
This is all very helpful. I find point 3 especially interesting in that it reminds me that payday loan storefronts are themselves a type of advertising, much like the ubiquity of Starbucks stores not only enables them to sell a lot of coffee but also serves as a type of advertising for the chain more generally. At the same time, this advertising function is embedded in the overhead. Online payday lending, of course, lacks that attribute so it follows that they would have to use alternative marketing devices. I’m intrigued by the “lead” business for Internet payday loans if anyone knows more about that.
Also, it sounds like there is indeed some adverse selection with respect to Internet lenders as at least some of those who borrow have been rationed out of traditional bricks-and-mortar price controls. Adverse selection might also contribute to the higher default rate online if collection is more difficult because of legal restrictions and difficult in enforcement.
I wanted to recognize a nice story published on Christmas Day in the New York Times about my friends at the Goldwater Institute where I (and Randy) are Senior Fellows. In addition to Clint Bolick, who is featured in the article, I want to recognize the great work of Nick Dranias, with whom I’ve done most of my work with the Institute.
I add my two cents to Forbes’s recognition of Joe Malchow and Michael Ellis in their list of 30 under 30 in the world of law and public policy (HT: Scott Johnson). I first met both of them during my Dartmouth adventures and am not surprised to find them on the list. Joe Asch has more here.
GM’s CEO says that the average Volt buyer earns $170,000 per year (and many are switching from BMW). And that many of those who are buying the Volt (and getting the tax subsidy) already own a Prius–so many are just switching from one alternative fuel vehicle to another.
Now all we need is a “cash for clunkers” for old Priuses and we’ll have a trifecta of goofy auto policies.
I did a follow-up interview with Anisha Sekar of NerdWallet on the effects of the Durbin Amendment and its political future. You can read it here.
Some New Hampshire lawmakers want to protect their liberty-loving residents from inadvertently running afoul of Massachusetts law:
Some New Hampshire lawmakers are backing a bill that would put up border signs warning drivers about to enter Massachusetts.
Signs welcoming drivers to other states are common on major roads, but lawmakers said travelers on back roads might not realize they’re crossing a border and may be subject to different laws.
“You have to think about the fact that there is a huge amount of laws that change when you go from New Hampshire to Massachusetts,” said Rep. Jennifer Coffey, R-Andover. “You don’t want to get caught on the other side of the line with illegal fireworks in an uninsured vehicle without your seat belt.”
Some of these would be helpful on the Virginia-DC border too.
I have an op-ed today in Canada’s National Post co-authored with Philippe Bergevin of the C.D. Howe Institute: “Set Interac Free.” The op-ed addresses the issue of payment card regulation and innovation in Canada. The op-ed is based on a comment that Phil and I filed on a Canadian Task Force project, “The Way We Should Pay” and ongoing research that he and I are conducting.
The Bill of Rights Institute has just produced a nifty new video on The Rule of Law and why it matters. You can take a look here. I was delighted to be invited to contribute to the video and you’ll see I pop up a couple of times.
The Bill of Rights Institute, for those of you who are unfamiliar, is a nonprofit group that educates high school students about the Bill of Rights. It describes its mission as follows: ”The mission of the Bill of Rights Institute is to educate young people about the words and ideas of America’s Founders, the liberties guaranteed in our Founding documents, and how our Founding principles continue to affect and shape a free society. It is the goal of the Institute to help the next generation understand the freedom and opportunity the Constitution offers.”
I’ve been the group’s Academic Advisor since its founding and I now also serve on the Board of Directors. If you are interested in knowing more about BRI for yourself or your kids, check it out here. And remember that December 15 is Bill of Rights day!
You just get your buddy the Secretary of the Treasury to give you insider information at the same time that he is telling the public something completely different.
A few participants at the meeting declined to trade on the inside information. Most of the attendees at the meeting, however, refused comment, so in the world of investment banker ethics we can probably assume we know what that means:
Eton Park’s Mindich, Lone Pine’s Mandel, TPG-Axon’s Singh and Och-Ziff (OZM)’s Och all declined to comment through spokesmen. Reservoir’s Stern didn’t return phone calls. Altman, through a spokesman, confirmed his attendance and declined to comment further.
Brosens confirmed in an e-mail that he had attended and said he couldn’t recall details. A spokesman for Rattner acknowledged he attended and said he didn’t trade in Fannie Mae- or Freddie Mac-related instruments after the meeting. Chanos declined to comment.
A Blackstone spokesman confirmed in an e-mail that GSO’s Goodman attended the meeting. Blackstone doesn’t believe market- sensitive information was discussed, and in any event Blackstone didn’t take any positions in Fannie or Freddie between the luncheon and Sept. 6, he wrote.
I’d be shocked if this is the last of the stories we hear about Paulson feeding inside information to his buddies from which they can profit. I hope that Congress goes after this (and goes after trading on inside information by members of Congress too). This is exactly the type of crony capitalism that needs to be stopped. And even if Paulson didn’t benefit directly at that time it certainly makes you wonder how many of those who benefited from his tips have subsequently hired him as an advisor or have donated to his new academic center at University of Chicago.
J.W. Verrett crows about the inevitability of the Solyndra debacle.
From Yeager(1974) in the Southern Economic Journal, 41(1): 96-102: ”Concern has been expressed that the burden of consumer indebtedness is becoming so excessive as to constitute a threat to the stability of the economy.” To which he adds later, “One interpretation of the information developed thus far is that American consumers have reached a ‘saturation point’ in the amount of debt they wish to carry or are able to carry, relative to disposable income. This saturation point was apparently reached in the mid-sixties….” Actually the latter point is true by many measures of household indebtedness–the real growth in household debt was in the post-War period and since then we’ve seen largely a change in the composition of debt but not the overall debt burden.
The video of the Federalist Society Lawyers’ Convention Panel on CFPB, “Will Consumers and the Economy Benefit from the Consumer Financial Protection Bureau?” is now available. The participants on the panel were David Berenbaum, Chief Program Office of the National Community Reinvestment Coalition; Leonard Kennedy, General Counsel of the CFPB; Alex Pollock of AEI; and myself. Judge Tymkovich of the Tenth Circuit served as the moderator.
An interesting conference coming up at GMU Law School, hosted by the Henry G. Manne Program in Law and Economic Studies at the GMU Law & Economics Center, on December 14. Details here. Given the swirl of antitrust issues around Google and Intel, this is a particularly timely topic.
Ted Frank at the Center for Class Action Fairness has had another important victory–obtaining a 9th Circuit reversal of a cy pres award that had been made as part of a settlement with AOL:
The Ninth Circuit U.S. Court of Appeals on Monday rejected a class action settlement that called for AOL Inc. to give $110,000 to random charities, sending a message that courts should be more careful in doling out money under the cy pres doctrine.
A unanimous panel said the charities had nothing to do with the plaintiffs’ email privacy claims and that too much money was being funneled to Los Angeles groups, despite a class spread out across the country. And the court expressed skepticism about whether judges or mediators should make recommendations on how large sums of money get paid out when the money doesn’t go to the class members.
AOL was poised to donate a total of $75,000 to three different charities — Legal Aid Foundation of Los Angeles, the Boys and Girls Clubs of Santa Monica and Los Angeles, and the Federal Judicial Center Foundation — upon the suggestion of a former federal judge who mediated the agreement. Another $35,000 was to go to charities picked by class representatives, an arrangement also recommended by the mediator, Dickran Tevrizian.
“When selection of cy pres beneficiaries is not tethered to the nature of the lawsuit and the interests of the silent class members, the selection process may answer to the whims and self-interests of the parties, their counsel or the court,” Judge N. Randy Smith wrote for the unanimous three-judge panel.
Also on the panel in Fairchild v. AOL, 10-55129, were Senior Judge Betty Fletcher and U.S. District Judge James Gwin, visiting from Ohio.
My article “Economic Uncertainty, The Courts, and the Rule of Law” is now available on SSRN. It is based on my remarks at the Federalist Society’s National Student Convention last spring at UVA. Here’s the abstract:
Abstract
Should judges protect private property rights and constitutional rights as vigilantly in times of crisis as in ordinary times? Conventional wisdom holds that crises justify suspending the rule of law and allow government discretion to address the crises. I argue that this lesson of past economic crises as well as the most recent crisis is that we should uphold the rule of law with special rigor in times of economic crisis because the temptations for politicians to misuse their powers during times of crisis are especially great. During crises, judges must be particularly vigilant in protecting private property and constitutional structure.
Crisis often is invoked to rationalize both governmental discretion and waiver of the rule of law. But as the financial crisis and its aftermath reveal, it is precisely during times of crisis that it is most important to tie the hands of government with the bonds of the rule of law. First, in times of economic crisis there is a special need for government behavior to be predictable and rule-bound to encourage investment and economic recovery in a period of uncertainty. Second, adherence to the rule of law in the face of crisis is important to restrain politicians from using the crisis to pursue their own self-interest or unleashing rent seeking by special interest groups—both of which dampen economic recovery and long-term economic growth. Third, the government’s seizure of discretion creates a ratchet effect whereby the discretion and exceptions to the rule of law made during the crisis ossify and never return to pre-crisis levels. Fourth, the dynamics of short-term interventions tend to invite moral hazard that can be exploited by powerful special interest groups.
