Author Archive | Russell Korobkin

Fannie Mae and Freddie Mac: Too Big and Too Expensive.

As I noted over the weekend, Fannie Mae and Freddie Mac were taken over by the federal government. Previously, the federal government had agreed to prop them up and in effect to make good on many of their losses. So as things deteriorated, that existing guarantee and the exposure it reflected was becoming too expensive for taxpayers to bear.

Further, while governments can seldom run things better than private businesses, Fannie and Freddie were only quasi-private. Their business model proved to be an expensive one, in part because they wasted huge sums on lobbying and executive compensation that was unwarranted given the firms’ poor performance. Also, it seemed to the Treasury Department that if the firms were taken over, the rates to place their mortgage debt would drop, in essence that the interest that they had to pay out to place their paper was too high.

So Fannie Mae and Freddie Mac had become too big and too expensive to taxpayers to let the firms continue on as they were. Allowing them to continue to operate was wasting too much taxpayer’s money, since we were on the hook for their expensive and wasteful business model.

In part to reduce the expense to taxpayers of the guarantees given in July, on Sunday the federal government put Fannie and Freddie in receivership, removed their board, put in new management, and eliminated their lobbying costs. Fannie Mae and Freddie Mac had become too big and, given the pre-existing promises to make good or offset much of Fannie and Freddie’s losses, too expensive to let them become yet more expensive for taxpayers. Better to takeover and potentially take losses sooner than to let the expense of a rescue explode in the future.

As I understand it, Sarah Palin made this point in passing, [...]

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Working the Refs: Access to Obama and Palin.

One of the big stories in the last two days was the unavailability of Sarah Palin for interviews (Palin has been out campaigning and giving speeches, but has put off interviews for now).

I think Barack Obama had the best term for public complaints about the opponent’s behavior: Working the refs.

If I were Obama, I would try to work the refs too. After all, Palin is indeed dodging the press.

But observers should not get too worked up about this issue, given the Obama campaign’s long history of struggles with the press over access to Obama, intermittent refusals to hold regular press conferences with the reporters following him (favoring instead short interviews with local and national press less up on the issues), and the habit of punishing any reporters who probe too deeply, especially about his carefully crafted personal history.

A TRIP DOWN MEMORY LANE: From February through July.


“We’re not on the plane, in my view, to have private talks with presidential candidates,” Zeleny added. “We’re here to report what they are saying and give our readers a better idea of their campaigns and their candidacies.”

“There has never been a press corps in the history of our nation that got as many interviews as they wanted,” Jen Psaki, the Obama campaign’s traveling press secretary, responded in an e-mail.

. . . Whereas a candidate like Sen. John McCain of Arizona relishes lengthy on-the-record bull sessions with the media, Obama generally does not. So it’s no surprise that reporters will rush to get a quote when he does so.

Of course, journalists griping about not getting enough access is nothing new — but as Obama and Clinton fraternize a bit more with the traveling media, and the rules aren’t clear, it presents a problem.

UPI [...]

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Did Palin Actually Say That Iraq is “a Task . . . from God”?

While searching for CNN’s story on Troopergate, I came across a surprising statement of Palin’s quoted by Anderson Cooper: that the war in Iraq was “a task that is from God”:

[Palin] also talked to church members about “being saved” at the Assembly of God and suggested to them that the war in Iraq is a mission from God. Palin said, “our national leaders are sending them out on a task that is from God. That’s what we have to make sure that we are praying for, that there is a plan and that that plan is God’s plan.”

Wow! CNN caught Palin saying on tape that Iraq was a task from God. Ouch!

But then I listended to the clip. Palin actually said:

“Pray for our military. He’s [Palin’s son Trask] going to be deployed in September to Iraq. Pray for our military men and women who are striving to do also what is right for this country – that our leaders, our national leaders are sending them out on a task that is from God. That’s what we have to make sure we are praying for, that there is a plan and that that plan is God’s plan.”

I find it hard to believe that Anderson Cooper does not understand the difference between praying for something you hope is true and stating that it is true. Is praying for peace throughout the world the same as saying that there is peace throughout the world?

I’m an atheist, but I’m not so old or out of touch that I don’t know that Palin was doing what Christians often do: praying that what the country was doing was God’s will. It’s not strange for a Christian to hope that what you want to do or think is right [...]

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Biased Omissions From ABC Report on Troopergate.

I watched a 5 minute, 18 second ABC investigative report on Troopergate in a genuine desire to learn more about Sarah Palin’s concerns about the dangerous Trooper who had tasered his stepson, allegedly threatened to kill a member of Palin’s family, drank beer in a police car, etc. Palin herself reported the alleged death threat against Palin’s father made by Trooper Wooten (her former brother-in-law): “I will kill him. He’ll eat a (expletive) lead bullet, I’ll shoot him.” And Wooten himself admitted that he tasered his 10 [or 11]-year-old stepson, according to some reports justifying it as a training exercise.

Yet some on the internet have suggested that it’s not so simple. I, for one, wanted to know more. In Chicago, a big issue over the last decade has been the extent to which police hierarchy looked the other way when dealing with “dirty cops.” The press in Chicago is uniformly harsh on officials who treat such serious behavior leniently, as Alaska Director of Public Safety Moneghan appears to have done.

So I was shocked that the entire ABC report made no mention of any reason anyone would want to have a dangerous cop fired. The only reason even hinted at in the entire ABC report was that the trooper was Palin’s brother-in-law.

I think that all the reporting that’s actually in the ABC report is fine; it is effectively edited to make Palin look like she is shading the truth (at best) — and she probably is. But it is unconscionable for ABC to fail to mention ANY LEGITIMATE REASON why Palin might want the dirty cop fired or any reason to be contacting Mr. Moneghan about it (the threats to kill her family that she witnessed). The ABC report is trying to say that Palin fired the state [...]

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A Heartbeat Away:

The homepage of the town of Wasilla, Alaska (population 5469 as of the last census), has links to three news stories. The lead story, as you might expect, is that the town’s former mayor, Sarah Palin, has been named John McCain’s running mate. The second story announces the town’s new website. The third advertises the “Baby and Me Lap Sit-Program at the Library.”

Before serving as Wasila’s mayor, Sarah Palin earned a B.A. at the University of Idaho, worked as a sports reporter for an Anchorage television station, and did commercial fishing with her husband.

At age 72, John McCain has already lived longer than his father, John McCain Jr., who died at age 70.

Sarah Palin looks like an interesting woman, but let’s hope she doesn’t have to stare down Vladimir Putin any time soon. [...]

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McCain Campaign Response to Obama Speech:

Immediately after Obama concluded his acceptance speech, the McCain campaign release a statement calling the speech “misleading” and providing a list of seven allegedly misleading claims made by Obama. McCain’s people probably should have spent a bit more time on the response rather than rushing it out the door, because much of this rebuttle doesn’t make sense at all (the claims aren’t the type that are even subject to being misleading) and much of the rest is pretty unconvincing. Out of seven allegations of “misleading claims,” by my count, only one really hits its target. It is a pretty poor performance, indeed, if you can’t successfully identify more than one misleading claim in a 50 minute political speech, much of which focused on criticizing the opposing candidate.

“MISLEADING CLAIM #1: Barack Obama Can Bring Democrats and Republicans Together.”

It remains to be seen whether he can, of course, but the claim is aspirational, not factual. A claim that he had a record of bringing Democrats and Republicans together would a factual claim, but no such claim was made in the speech. The supposed evidence that the “claim” is misleading are a series of quotes from sources that say Obama takes liberal positions and has a liberal voting record.

“MISLEADING CLAIM #2: Barack Obama Will Ensure That Our Troops On The Ground Have The Equipment They Need In Battle.”

It is hard to see how this promise made by Obama during his speech could be true, false, misleading or not misleading, since it is a claim about the future. The supposed evidence is that Obama voted against a particular war funding bill.

“MISLEADING CLAIM #3: Barack Obama Has Not Supported The President.”

I’m not sure what to make of this “claim”. I think it is a typo, and what is meant [...]

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Weighing In On Obama’s Speech:

I want disagree with David Bernstein’s somewhat tepid praise and second Jim Lindgren’s more effusive praise of Barack Obama’s acceptance speech. Everyone knows Obama can give a good speech, but this was his best. Three highlights: (1) Directly challenging John McCain on national security. Obama forcefully made the case that judgment matters more than experience. (2) Juxtaposing his aggressive agenda of government programs with a call for personal responsibility — critical for appealing to centrists. (3) Identifying common ground on the polarizing issues of abortion, gay marriage, and gun control — critical to his agenda of bringing people together. Moving the event to the football stadium, identified by pundits as a risky move, proved to be a masterstroke. The visual affect was awesome. By comparison, McCain is bound to look small, unimportant, and unpopular when he gives his acceptance speech next week.

There were two weaknesses of the speech, one of commission, one of ommission: (1) Claiming that he could pay for his domestic proposals by closing tax loopholes and eliminating unnecessary government programs (without even naming the targets) was utterly unconvincing. Better to say nothing about the financing than to call attention in this way to the fact that his proposals are expensive. (2) Failing to attack the Bush administration for trampling the Constitution, trashing privacy rights, and mistreating prisoners of war. It might have made sense not to highlight Bush’s support of torture, since McCain clearly opposed this and can use that issue to distance himself from the President, but there is lot more in this area Obama could have gone after. [...]

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Fighting the Internet Poker Ban:

For those of you who enjoy playing poker online, or who just think it is outrageous for the government to tell you that you may not and attempt to enlist the entire financial community to act as the poker police, my colleague, Professor Bainbridge, describes a way you can take action today:

The Poker Players Association has an urgent action item:

Tuesday, the House Financial Services Committee will review a bill, H.R. 5767, that would block the implementation of UIGEA regulations. In order to get this bill out of Committee on onto the House Floor, we need your help. We need you to contact the committee and express your support for H.R. 5767, as well as the King amendment which will refine the bill language. PPA strongly supports H.R. 5767 and the King amendment, but this important bill and amendment won’t pass without your help!

Call or Fax the House Financial Services Committee*
Democrats’ Committee Office:* Ph: (202) 225-4247 – FAX: (202) 225-6952
Republicans’ Committee Office:* Ph: (202) 225-7502 – FAX: (202) 226-4301

Click Here To Contact Via E-mail

The UIGEA regulations will demand that banks block “unlawful internet gambling” but there is no definition of this vague term. Banks will be forced to block millions of transactions that are not in fact illegal. As a result, you may not be able to play poker or any other game of skill online. HR 5767 will prevent this regulatory nightmare. The King amendment will force the regulatory agencies to define “unlawful internet gambling” through a formal rulemaking, with due process and opportunity for input from affected parties.

Groups that oppose your right to play poker are working to defeat this important bill. Don’t count on someone else to take action for you – call today, there’s no time to waste!


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The Genetic Information Nondiscrimination Act:

Today, the House of Representatives passed the Genetic Information Nondiscrimination Act (GINA) by a vote of 414-1, joining the Senate, which passed the bill last week 95-0. In addition to prohibiting discrimination in employment on the basis of genetic conditions, GINA prohibits health insurerance companies from denying coverage or determining premiums based on a customer’s gentic information, which is defined broadly to include family history of health conditions.

The Act provides important protections, not only for customers in the individual health insurance market, but also for small employment groups with one or more individuals who have a high likelihood of suffering a genetically-linked illness. (Federal law prohibits health insurers from discriminating against any individual in the group insurance market, but the expected costs of covering the individual can be spread equally across all members of that group). The Act also will remove a disincentive for healthy individuals to take genetic tests because of fear that knowing the results will cause insurability problems.

In an op-ed piece in last Saturday’s Los Angeles Times (here), I argue, however, that the law does not go far enough, because it still allows discrimination in coverage and pricing of insurance based on any conditions the individual customer has or has had in the past. Hopefully, GINA will be the initial step toward a legal regime in which health insurance premiums are community rated within age bands, with differential pricing allowed for risky behaviors that are individually controllable (such as smoking) in order to minimize moral hazard. [...]

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It’s the Sex, Stupid:

Quite a few commentators on the Eliot Spitzer scandal are searching for some deep explanation for the frequent sex scandals involving powerful men. “Do you think men of power and success, men like Eliot Spitzer, get intoxicated with this kind of success?,” asked Nightline’s Terry Moran on Tuesday. “Are they reckless? Do they secretly want to get caught?” “Maybe it [...]

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Clinton, Obama, and Health Insurance Mandates

As a centerpiece of her now-uphill battle for the Democratic presidential nomination, Hillary Clinton continues to attack Barack Obama because his healthcare plan does not call for an individual insurance mandate — that is, a requirement that all Americans purchase a health insurance policy — whereas her proposal, like the recently-scuttled Schwarzenegger-Nunez bill in California, includes such a mandate.

Whether the government should require everyone to purchase health insurance is a difficult issue about which reasonable people may differ. (Full disclosure: I am an unpaid member of a health care policy advisory committee for the Obama campaign, but I personally favor individual mandates as part of comprehensive health care system reform). But the sound argument to be made in favor of mandates is very different from the one reiterated daily by Clinton. As a result, her criticisms of Obama on this point are wrongheaded and disingenuous. Let me explain:

Clinton alleges that, simply because it includes a mandate, her plan would lead to universal health insurance while Obama’s would not. This is not true. Obama would institute health insurance market reforms and subsidize health insurance policies for the poor, making insurance more affordable, but he wouldn’t require adults to purchase insurance, at least at first. (He is open to mandates down the road if, after the reforms and subsidies reduce costs, a large number of healthy “free riders” still do not buy coverage). Clinton wants to require all Americans to purchase health insurance, but she refuses to describe how she would enforce such a requirement. Just as many drivers get behind the wheel of a car without coverage in spite of auto insurance mandates — 25 percent of Californians, according to estimates — many Americans simply would ignore a health insurance requirement. Massachusetts mandates that individuals buy health insurance and [...]

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The right type of stimulus?

Recession fears have caused both President Bush and Congressional Democrats to call for an enormous stimulus package to give the economy a lift. The basic idea of most of our political leaders is a one-time tax cut that will put a relatively small amount of money in the hands of a lot of consumers (and, to be fair, maybe businesses too, depending on the proposal) to encourage them to go out and buy more DVD players, restaurant meals, movie tickets, and other small luxuries that no one really needs but might keep the economy limping along.

Assuming arguendo that a stimulus package is a good idea, why not use the money to invest in the country’s crumbling infrastructure? It’s no secret that our roads, bridges, and public transportation systems are falling apart, that we’re behind much of the developed world in internet-age infrastructure like broadband and wireless capability. Investing in these types of things would not only provide lots of jobs here in the U.S., it would help promote future economic growth — something that won’t happen if we give everyone $800 and tell them to go to the mall. In addition, or alternatively, we could invest some of the stimulus budget in homeland security improvements that have shamefully been ignored, such as protecting ports and chemical plants. This type of investment could help avoid future economic dislocations that would likely result from terrorist attacks by reducing the likelihood of such attacks.

I’m no macroeconomics expert, so I encourage those readers who are to explain if I am missing something important here. Do note, though, that I’m not taking a position on whether taxes are generally too high or too low, just on what is the best way to spend a one-time amount specifically designed to pump cash into the [...]

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Child Support Obligations of Sperm Donors:

Thanks to Jocelyn Bowie for pointing me to a very interesting recent opinion in the case of Ferguson v. McKiernan, — A.2d —, 2007 WL 4555436, Pa., December 27, 2007:

A man (McKiernan) agrees to provide sperm to an unmarried woman (Ferguson) who wishes to become a single parent but wants to use the sperm of someone she knows rather than an anonymous donor. The man agrees not to seek custody or visitation of the child, and the woman agrees not to seek child support. The woman [...]

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Invitation to Nov. 28 “Stem Cell Century” panel discussion:

I want to invite all VC readers in the Boston area interested in the policy issues surrounding stem cell reserach to a panel discussion of my new book tomorrow, Wednesday, Nov. 28, from 6-7:30 p.m. The event, sponsored by the Harvard Stem Cell Institute and the Harvard Law School’s Health Policy Center, will be held at “The Meeting Room,” located at 2 Arrow Street in Cambridge, MA, about a block away from Harvard Yard. I’ll be speaking about the book, and then commentary will be provided by Professors Kevin Eggan (a well-known Harvard stem cell scientist), Frances Kamm (a philosopher at the Harvard Kennedy School of Government), and Pam Samuelson (an intellectual property expert at Boalt Hall and Harvard Law School). The event is open to the public, so please let any friends or colleagues interested in stem cell research specifically or the interface between law and biotechnology in general know. [...]

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