I agree and I think recognizing where we are is as the saying goes, “up shit’s creek” but not without a paddle or two but a group of paddlers who don’t know or or don’t want to use them. The people who engineered the bailout(s) really seem to have organized us all into a kind of situation that are divided between a) those who think we’ve got them where we want them, and that include a lot of Jamie Dimond types who are convinced it was due somehow to their brilliance;and b)those who believe them, or at least believe that those in (a) believing it, i.e. “confidence” is what it’s really all about.

I think this is where the President has found himself in a sort of “Chinese handcuffs” or monkey trap where only he can let go of the bait to get him and rest of us out of the trap. Because Congress is not going to let him use the power of deficit spending to use fiscal policy out of the situation.

I’m willing to give the President credit where credit is due. But that’s not going to give him much. I can’t say I agree with those who feel Obama is corrupt. I reserve that for a good number of the members of Congress and the Senate, who clearly have been bought off. But I cannot generate much enthusiasm for his leadership, such as it has been. You don’t start out a negotiation with a group of individuals who have been bought off but paid to posture as if they care about the public interest with proposals that start with meeting them halfway. Coach Bill has it about right I think.

Masaccio’s post is, as always, excellent but I wonder if he’s considered how much there is of fear and “loss of confidence” getting out of control. There was that time in 2008 when we all “stared into the abyss” and things seemed like it was going to be 1929 or 1931 all over again. The plan that restored the faith that the banks and the currency seemed to work. I suspect there’s a sense by those who put the plan together that they don’t want to go back and tinker with it lest it all fall apart, even as the rest of the world is falling apart and revealing that the plan only slowed the speed of the descent and not its general direction.

That’s about it.

The idea of “economic liberty” is derived from a 19th century idea floated by the post Civil War Supreme Court, primarily those of the “Field Court” so named because of justice then Chief Justice Stephen Field. You can find one source in the dissents in the “Slaughterhouse cases” by Field and Bradley, where this wing took a very radical interpretation of the “privileges and immunities” clause of the 14th Amendment. These justices would have held that every citizen (which they often ignore does not include a corporation) had the right to pursue “common callings” like being a butcher, baker or candlestickmaker. “Economic liberty” was first established for real in Allgeyer v. Louisiana, an 1896 decision that held a Louisiana law that precluded people from obtaining insurance from out of state insurance companies. The Court held that “liberty of contract” was a fundamental right just like the freedom of expression so that states and the federal government had to have “compelling interests” to restrict it. The Supreme Court overruled this doctrine in 1937 in the West Coast Hotel v. Parrish case.

I’ll postpone my shock until I read the decision myself. Until then, I’m going to assume that the Supreme Court stands as indicted by dday above.

I agree that this is a bad trend and underscores to me how result oriented against basic liberty and democracy this Court is. No surprise there. But I disagree with dday’s portrayal of the case involving discuss the Family Leave and Medical Care Act. The 11th Amendment has not been construed to impose a limitation on the power of Congress to make States subject to suit by their own citizens or the citizens of any other State. This case was part of a line of decisions with old roots but reinvigorated under Rehnquist that Congressional enactments will not be construed to authorized suits against any state without its consent unless Congress has expressly ordained it. Until Congress amended the law, the Court had held States could not be sued for patent infringement for example.

In reading about this complicated mess, I’m forced to compare this with precedents, if anything like that exists. It helps me to compare this to some of the complicated reorganizations of bankrupt firms, pools of foreign government bondholders and holding companies in the 1930′s and 1940′s. If you read Thurman Arnold’s “Folklore of Capitalism” , you find some of the same abuses going on with the formation of “creditor committees” and the courts struggling with approving “fair and equitable” settlements that didn’t force widows and orphans from being left holding worthless pieces of paper. At some point, even these creditor committees had to valuing the underlying asset(s) which is back to earning capacity or, with these mortgages, whether the assets which secure them can be sold at some “fair market value” or can be paid off over time at some rate of interest.

I’ll bet this is a case of bankruptcy fraud which involves someone knowing bankruptcy was coming and deciding to make a little profit. Bankruptcy fraud is defined thusly:

A person who, having devised or intending to devise a scheme or artifice to defraud and for the purpose of executing or concealing such a scheme or artifice or attempting to do so—
(1) files a petition under title 11, including a fraudulent involuntary petition under section 303 of such title;
(2) files a document in a proceeding under title 11; or
(3) makes a false or fraudulent representation, claim, or promise concerning or in relation to a proceeding under title 11, at any time before or after the filing of the petition, or in relation to a proceeding falsely asserted to be pending under such title,
shall be fined under this title, imprisoned not more than 5 years, or both.

Is this a case of someone knowing MF Global was filing for bankruptcy within a week and deciding to embezzle some customer funds with one of these complex instruments? Sure looks like it. The question is whether the “person” who did can be pinned on the “person” who filed bankruptcy.

It used to be, say thirty or forty or more years ago, “rules” were things that were passed by agencies to define the things a regulatee could not do at least without permission. Since the relativist Sophists of the Chicago school captured the brains of the law schools and economics schools, “rules are things that allow you to do things and get away with them. This Volcker rules thingee sounds like something very “old school” these dweebs have not seen for awhile so they are thinking something must be wrong and “unintended” about it.

Terrific post, masaccio! It’s so easy to fall into the trap of accepting the uses of words like “ideology” without thinking whether they are used properly. Saying that there’s an “ideological divide” is half true but it easily slips into a variation “both sides do it.”

I’d like to see the banksters who brought about the financial meltdown sent to prison as much as anyone, but one has to be realistic about what can be accomplished within our system, especially the criminal justice system. Matt Taibi recounts an episode in his book, “Griftopia” where the Justice Department brought a prosecution against some of these characters and lost because the fraud, while monumental and provable to the experts, was so complicated the jurors couldn’t comprehend the magnitude of the crime, so the defendants were acquitted, having shown a “reasonable doubt” of their guilt. Maybe Schneiderman has some “smoking gun” memos that will enable a prosecutor to boil a case down to the level of understanding of a simpler “mail and wire fraud” kind of issue. I’m sure there are cases which have not been brought which need to be brought. But I think the number of prosecutions that might exist will not meet the thirst for justice in this area.

If we had a Congress that was not controlled by Wall Street, we should expect some legislation that would force the reorganization of the financial services industry like the Public Utility Holding Company Act did for the utility and utility financial business in 1935.

To play the devil’s advocate here, I think there is an argument based on a 1935 case, Hopkins Federal Savings and Loan Association v. Cleary, 296 US 315 (1935)that may be relevant, if not controlling, law.

http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=us&vol=296&invol=315

This case dealt with the conversion of a Wisconsin savings and loan into a federal savings and loan without 100% approval of the members. The S&L was, in effect, a legal cooperative, which made the members the owners of the S&L. The State of Wisconsin opposed this conversion on the grounds it violated Wis. S&L law which granted property rights to the members. The case went to the US Supreme Court which sustained Wisconsin’s position over the federal law allowing conversion with only 50%$ approval of the members.

Obviously, this case is factually distinguishable, but it is precedent for the idea that property rights (or liberty rights) based on state law might trump federal legislation in some cases. It has never been overruled. If Hopkins Fed. S&L v. Cleary doesn’t become central focus of this case, the challengers to Obamacare have to be complete and utter morons. I’m assuming they are and that they will lose the case for this reason. I hope they do.

I don’t like Obamacare that much; I’d have much preferred single payer or simply extending Medicare to everybody. But there is an intellectually honest challenge to Obamacare based on precedent.

“Instead of the President setting new precedent to deal with GOP obstructionism, the Senate Democrats could have just changed Senate rules back to what they were originally.”

And just what were they originally and when was that? Practically everything I know about the filibuster I learned reading Robert Caro’s bio. of LBJ, “Master of the Senate”. That was about how Senate Rule 22, I believe, governed the filibuster in 1957 and how you couldn’t even bring a motion to change the filibuster rule or that could be filibustered too. I suppose some time between 1957 and 2009, when suddenly it became the rule that you couldn’t pass legislation without a filibuster proof majority of 60 (or 66 I forget), there was some new rule that allowed some individual Senator to invoke the filibuster without having to actually do a filibuster by reading the telephone book or something but just by putting a hold on some law or nominee. With these kinds of Catch-22 rules, Jon, I’m not sure I buy your statement.

It all comes back to that age old problem Plato discussed in “The Republic”: who will fact-check the fact-checkers?

The worst Congress I’m aware of was probably the Civil War era Congress that approved the Union Pacific Railroad grants and then, lead by the Tom Delay of the day, Oakes Ames, formed the Credit Mobilier and a construction company for the members of Congress to profit from the construction and sale of the bonds they approved. The railroad cost two or three times its actual cost, pocketed by these weasels.

On the other hand, the country at least got a railroad out of the bargain. This current bunch has nothing to show for its time.

How does this process work? I thought proposed regulations are published in the Federal Register for notice and comment. Notice and comment is open to the public. The agency then considers the comments for problems and addresses the issues and publishes the regulations.

Now how do lobbyists get into this process other than to prepare and file comments like everyone else? Is there a special meet and greet these agencies have with their “constituents” the lobbyists for these private schools? If so, then there’s no wonder we have a problem.