Business Law Prof Blog

Three SEC Chairs for Obama

Three ex-Chairs of the SEC for Obama, the headlines scream.  Two were Democratic appointees -- so what-- they are frontrunners. But one Donaldson, was a Republican appointee--is Obama better for the markets than McCain.  No. Donaldson was a Republican appointee who on every major critical vote sided with the two Democratic Commissioners to outvote the two other Republican Commissioners.  He is a major sufferer of "Guilt from Being Rich".

The Government "Fix" of the Student Loan Mess

Congress has decided to "fix" the student loan mess by purchasing those student loans that it guarantees against default (technically the guarantee is only for 90% of the default).  Direct government lending now accounts for only 22 percent or so of total student loans.  The argument is that the purchase money will go to banks who can make more loans.  There are multiple problems:  1) many lenders have left the market leaving only one -- the government chartered Salle Mae corporation.  Salle Mae has close to 80 percent of the guaranteed federal loan market.  Salle Mae is a) losing money and b) very poorly managed.  If Salle Mae continues to struggle we will have another call for a federal bailout. and 2) underappreciated, greatly underappreciated, is the problem the federal government will have managing a complex loan portfolio.  Guaranteeing loans is one thing, managing loans is another.  My guess is that the government will outsource the loans and pay a management fee to a company that the government does not monitor.  [E.g., Blackstone's job of handling the sub-prime loans picked up by the government in the government brokered Bear Stearns deal.]  This is not a solution folks.    

Ohio Has Elected a Buffoon as Its State Attorney General

Marc Dann is Ohio's Attorney General and he is a buffoon.  We elected him on his populist rants and an anti-Republican vote stemming from corruption in then Governor Taft's office.  He became the darling of the national media because he was the "next Spitzer" - the controversial ex-State Attorney General in New York who took on major played in the New York financial community.  [Spitzer did a good job as Attorney General and then, as governor of New York, resigned over revelations that he hired expensive sex workers.]   But, in some ways, Dann is not Spitzer -- Spitzer is smart.  Dann's rants began to show an indiscriminate attack on anything to do with business and an appalling lack of economic sense.   Anything successful in business was bad and deserving of attack.  He ,for example, wanted to grandstand by going after out-of-state investment banks for the sub-prime mess (who securitized mortgage loans, a process he did not understand) -- the "big fish" when, as a state official, he should go after in-state mortgage brokers who misled in-state borrowers.  He ranted about federal anti-trust enforcement, again without economic training or sophistication.  A State Attorney General has to know who to got after -- he has limited resources and many potential targets.  Good judgment is key -- Spitzer had it, at least in his prosecution targets, Dann does not.  In any event, Dann is now in trouble for personal sexual indiscretion and for the sexual indiscretion of his top staff.  His office atmosphere was incredibly crass and crude.  He refuses to resign. Great.  Unfortunately, being a buffoon or a bore is not grounds for impeachment.

The Markets and Sup-prime

The markets are correcting.  Distress financial buyers of sub-prime mortgages from banks are getting distress prices and willing to work with borrowers to forgive loan terms to keep them in their houses.  The market is clearing.  The major problem is with borrowers who refused to return phone calls.  Folks, the vast majority of the American population is financially illiterate -- it got us into this crisis and is now retarding getting us out.

Income Disparity in United States: It's not a conspiracy

Most now know the data.  In the last few years income, as recorded on income tax returns, of the very very wealthy as increased as a percentage of the total amount of income reported.  In 1980 the top .01 percent reported .87 percent of the total income reported; in 2006 the top .01 percent reported 3.89 percent of the total.  The data is imperfect -- income in not wealth and income tax laws have changed dramatically over the years.  But it does get one's attention.  Those studying the difference have come to focus on returns to education -- returns to education, particularly higher education -- have increased significantly since 1950.  We are in a sophisticated world and those who are educated are scarce and valuable.  With the different, however, come other studies that show it is not necessarily where you go to school that counts -- it is that you go to a good solid school, are attentive, get decent marks, and take strong personal qualities (persistence, conscientiousness and intensity) with you to your first job.  You do not have to go to Yale or Harvard.  It makes sense, which is better than the other crazy theories on government policies (the income disparity increased with similar percentages under Reagen, Clinton, and Bush) that do not.

Obama and Investment Taxes

The Dublin Intrade market has Senator Obama as the prohibitive favorite in the Democratic primary and as the favorite for President of the United States in the general election in November.  So we ought to pay careful attention to what he would do with taxes once in office.  As far as I can make it out he would 1) raise the top income tax rate to 39.5%, 2) lift the cap on payroll taxes for higher incomes that, added to 1) would increase the top marginal tax rate to around 52%, 3) increase dividend taxes to 39.5% from 15%, 4) increase capital gains taxes to 28% from 15%, and 4) increase the top estate tax rates to 55% from 45%.  Added together it would be one of the largest tax increases (by rate or by application) in American history.  This in the teeth of an economic slowdown and in the teeth of new competition from very capable and determined international opponents (the EU, China, India).  Particularly distressing in this package is an increase in what I call the investment tax -- those who choose to invest in United States industries will pay much higher taxes on those returns.  States are desperate to attract capital -- to the point of offering absurd tax rebates to those who offer to invest in a local factory or office -- and Sen. Obama is set to penalize those same investors who invest in the United States.  We cannot have it both ways folks. Penalties on investment will drive marginal investment offshore or limit it in other way (drive it into munis).  This is a potentially crippling gaff.      

The Goose That Lays the Golden Eggs

Once the Democrats select a Presidential candidate and focus on running against the Republican candidate, we are going to hear a great deal about tax cuts and the efficacy of "supply side" or "trickle down" economics.  The argument will focus on the effect of higher tax rates on the behavior of the wealthiest one percent of the population.  Democrats will argue that a higher tax on the wealthy will raise more revenue needed to balance the budget.  Republicans will argue that a higher tax on the wealthy will reduce revenue;  the wealthy who are productive will invest less effort and money in American business and there will be fewer jobs (and total income to tax) as a result.  Some of the productive wealthy will put the money they have in tax havens abroad (or find tax favored methods to invest at home) and reduce their efforts in American business  (competitive energy will find outlets in bridge or golf).  We will hear about the age old parable of the goose that lays the golden eggs.  Will higher taxes on the goose kill it? or will the goose continue to lay the eggs?  Democrats assume higher taxes will not kill the goose; Republicans assume that it will.  There will be fights over past data on the effects of the tax cuts of Bush in 2000 and Reagan in 1986 and the Clinton tax increase in 1993, events with much noise in the data.  Politicians will spin the data and people will believe who they want to believe.  Both sides could be right -- it depends where on the trade-off curve (between rates and revenue) we are at the time of any given tax cut and which type of tax is in issue (investment, sales or income taxes) and haw the tax is levied (corporate versus individual).  Me?  I would eliminate the double tax on business earnings (with an individual tax credit for corporate taxes paid on earnings that attaches to any dividends actually paid investors) and increase the progressive tax rate on individuals in the upper brackets.  Never happen.

The Subprime Bailout Plan: Anti-Trust Violation?

I am uncomfortable with the subprime bailout plan for reasons different that those made prominent in the press.  First, it is not an assault on contract rights.  One party to a contract, the loan servicer, can always offer new terms to the other, the loan debtor, in the hopes of working out a default.  Furthermore, the workout cannot be a threat to investors in SIVs who hold the mortgage loan; the investors may get better returns with a workout than a default.  Second, the subprime rate forgiveness agreement is not a government bailout. There is no government money involved, other than perhaps the FHA part of the plan -- which is another matter altogether-- and yet to be worked out (it has to be put into legislation).  Third, it is not government fiat; participation in the plan is voluntary.  But, my problem, the plan is a concerted agreement among competitors, sanctioned by the government. Without government involvement it would be an anti-trust violation.  Individual loan servicers should work on their own rate deals and compete with other loan servicers on how well they do.  The government should not fix the rates and then protected the fixed rates from anti-trust price fixing challenges by its involvement (state action is exempt).  The plan is, flat out, an anti-trust violation.   

New Treasury Department Study on Income Inequality

The Wall Street Journal reports that income tax data from 1996 to 2005 show that nearly 58% of all filers in the poorest income groups in 1996 had moved into a higher income category by 2005.  This means, of course, that other had moved down as well.  This is a stunning show of wealth mobility in the United States.  There is other evidence that the gains are not equally distributed by race however.  The other bit of news is that the median income of all tax filers had increased a whopping 24% real dollars (adjusted for inflation) in the time period.  The lowest quintile filers had median income increases of 90% and the highest quintile filers had gains of 10%; the richest 1% actually lost 25% of their income.  Data often gets in the way of a good heart wrenching populist appeal.

Schneider on Experts

Professor Schneider has, as reported in todays New York Times, a study on how we rely on experts. He found that a very small percentage of car mechanics fixed his automobile correctly (he had loosened a battery cable and drained some coolant from his car to create symptoms).  His conclusion: that we often have trouble relying on experts.  Advocates for government controlled health care are using his paper to make arguments about the need for health care regulation.  I would suggest an addendum: We choose to rely on experts that fix the problem even if they overcharge because the cost of failure or of a second opinion and then resolving the disputed among experts may be higher than a success even if we are overcharged.  The market severely penalizes failure and may penalize price as much. But we need the use of a car and may be willing to pay for a new battery if the car is fixed, even though tightening the battery cable will do.  If a doctor fixes my pain, I may not care if I am overcharged a bit. I may prefer it to a doctor who does not fix my pain (or a system that takes an extra six months to fix my pain).

Bush on Home Loan Defaults

Today President Bush proposed some very modest rule changes to help some home owners who are facing defaults on variable rate mortgages.  The primary proposal is to allow home owners in default to apply for fixed-interest FHA insured mortgages to refinance their debt. At present those in default are disqualified from the FHA insurance.  The proposal does not help those in the sub prime market and it does not increase the ceilings on mortgages (either in total amount or in individual amount) that can be held by Fannie Mae and Freddie Mac.  President Bush is attempting to walk a line between doing nothing (and therefore being accused of showing no sympathy) and offering a bailout to those who took a risk on housing prices and guessed wrong.  Predictably he is getting blasted by both sides.  The talk shows and conservative blogs are replete with those upset with the "bailout" and many Democrats (including, most notably, Dodd and Obama) are saying it is late and too little.  As is our tradition, there is going to be much finger pointing -- at the "flippers" (an estimated 30% of some hot markets) that bought homes, the originators that convinced people to use exotic loans, the poolers and rating agencies that packaged the loans and sold securities (CDOs backed by the loans) with glossy ratings, and the investors (hedge funds) that took the riskiest securities (the equity tranche) in the pools, and, finally, with the banks had loaned the hedge funds the money on the securities.  All the speculators (whose personal appeals for aid would be met with public derision) will use, as Jim Kramer has done, the "honest" home owner who was "duped" by "predatory" lenders (and there were some) as a front for aid that will help their positions as well.  It will be hard to carve out those that deserve aid from those who do not with any remedial proposals.

Executive Signing Statements

The arguments over the ABA's study on signing statements are proceeding apace.  I suggested in an earlier filing that Bush's transparency in the use of such statements was a positive not a negative.  The ABA condemned Bush's overuse of the technique despite its long history and recent use by President Clinton.  Clinton's legal counsel, Walter Dellinger, now a Duke law professor, has an editorial in the New York Times stating that, yes, I wrote a 1993 memo stating that Clinton has the power to use signing statements, but that overuse is abuse.  He notes a few paragraphs in his 1993 memo on restraint.  He, like other Clinton folks, is attempting to walk a fine line; Clinton's use of signing statements was good, Bush's use is bad.  What is missing, of course, it a clear definition of abuse other than one that depends on who is in the White House. 

I am suspicious over anything signed by the Yale Dean now days. [He was a signer of the report.] When academics get sanctimonious it is usually trouble.  The Yale Dean pulls the self-righteousness trigger very fast as is evidenced by his post-argument press conference in the case on military recruiters in law schools.  The court noted that high school students should know better than to make the arguments the Dean favored and he made them with great self-righteousness. 

Samuel Alito: A "Pro-Business" Justice?

Reporters, both supportive and critical, looking for an angle on the nomination of Judge Alito to the Supreme Court have claimed that he is "pro-business."  The most high profile story was on page one of the Wall Street Journal (11/1/2005) -- Jess Bravin & Jeanne Cummings, "Nominee's Record Show Backing of Business Interests, Contracts."   To some this is a positive; to others this is a negative.  Both supporters and detractors are wrong. 

Support for the stories is found in selected cases decided by Alito among the 700 opinions written by the Judge during his 15 years on the federal bench.  Those opinion in which he decided in favor of a business firm against a non-business party are featured and dissected.   What the stories reveal, however, is a Judge that decides cases based on a careful, almost dull, parsing of legal rules and doctrines.  The cases cited do not reveal a pro-business bias or a pro-"little people" bias either.  They demonstrate a judge wedded to the notion that courts apply exiting rules and rarely make new ones.

In an important sense, this approach is pro-business, not because businesses are more likely to win, but because businesses thrive when legal uncertainty is controlled and minimized.  Legal certainty enhances business planning and reduces business risk, encouraging capital investment.  It is the predictability he will add to Supreme Court business opinions that is pro-business. 

Litigation Against Critics

Three separate stories caught my eye this week.  First, in Business Week a feature story on Jim Kramer noted that a blogger in Tacoma Washington was keeping track of Kramer's stock picks on his hit show Mad Money and was charting whether or not the picks made money.  The blog was popular.  CNBC lawyers shut the cite down with a "cease and desist letter.  Second, Gretchen Morgenson wrote a column in the Sunday NYT on Jay M. Meier, who, as a stock analyst, correctly projected in March of this year a falling stock price for Digital River.  The company sued Meier for technical errors in some of his reports (e.g., number of options held by executives) and forced him to stop commenting on the company.  The stock was 40 when he made his projection and is currently trading at 28.  Third, Special Prosecutor Fitzgerald indicted the Vice President's Chief of Staff, Lewis Libbby, for perjury in his investigation of a leak of the identity of a covert CIA agent.

The common thread?  If you do not like the essential message (and cannot contest it without difficulty), sue for a technical violation of something to stifle the messenger.  You could care less about the technical violation; it is just a tool to disable someone who is giving you trouble.

To err is human.  We all make mistakes.  Many years ago a prosecutor friend of mine told me that he could indict anyone, given enough time to inspect every aspect of their lives.  A tax mistake here, a false or unfilled record there, an exaggeration on a resume when young, a divorce document filed in anger ...  He himself relieved the stress of his job with some weed. 

Those in high profile jobs, especially when they criticize other high profile folks who do not like it, are busy and there jobs care complicated.  They, of course, are the most likely to skip a detail and the most likely to have an angry opponent sue them for it.  Once turned over to litigators these prosecutions have a life of their own, as those hired to prosecute or sue have an interest in results not the common sense of perspective.  Judges can operate around the edges of legal doctrine to bring reason to the process but it is hard to do once the charges are in proper form and in a public forum.   

Using litigation as a tool to attack critics has social consequences.  It would be a dull place if every high profile critic wrote in bland legalese to avoid litigation.   

Intrade: Alito is the Next Supreme Court Nominee

  At 4:00 today on the Intrade futures markets (explained) Judge Samuel Alito went from 11 cents on the dollar to over 50 cents on the dollar in a few minutes.  The bid price settled at around 35 an hour later with a substantial spread to the ask price at 43.  Strong ask price support in the 40s remains.  Alito jumped over all the other potential nominees with the price increase.  The previous high contract had been McConnell at 17 cents on the dollar; he has fallen to 6.  Luttig is trading at 16; he is the apparent fallback pick.  All other candidates are trading at insignificant prices.

The insider money may have joined the betting and Alito looks to be the front runner as the next nominee.

Libby Indicted: Does Fitzgerald Have a Conflict of Interest??

Special Counsel Patrick Fitzgerald indicted Lewis Libby for perjury and obstruction of justice in Fitzgerald's investigation into a leak of the identity of an undercover CIA agent.  Asked how he could indict no-one for the leak and yet indict Libby for perjury, Fitzgerald used a baseball analogy. Story  The pitcher hits a batter and the umpire is trying to figure out whether it was intentional, but the umpire (prosecutor) is impeded by the pitcher "throwing sand in his face."  The sand throwing is itself serious and a crime says Fitzgerald.  Yes, but the victim of the sand throwing is the umpire, who is angered a bit by the impediment and yet it is the umpire who now prosecutes the sand thrower.  The victim as prosecutor (or prosecutor as victim) in these cases has always struck me as a conflict-of- interest.  Prosecutors do not like it when they believe they have been intentionally lied to; they get angry, like all victims get angry.  And Fitzgerald did not like it when he thought his investigation had been impeded. 

I have always believed in such cases that the angered prosecutor in such cases should turn the case over to a new, independent prosecutor for the decision to pursue an indictment before a grand jury.  [Oesterle]

No Congressional Sarbanes-Oxley Relief for Small Companies

BNA reports that at a recent panel discussion Rep. Oxley acknowledged the legitimate criticism of the impact of Sarbox on small public companies.  He believes, however, that it is unlikely Congress will address the problem.  “If somebody is hoping Congress will ride to the rescue, you can put that thought aside.”  Instead, he states that it is up to the SEC and PCAOB to address the problem.  This makes sense given the expertise of these regulators, provided there is enough flexibility under Sarbox to allow regulatory fixes (I believe there is).  But it assumes that they will act.  To date, the SEC has only provided short-term relief by postponing the Section 404 compliance date for businesses with capitalizations up to $75 million from 2005 to 2006.

Speaking about Sarbox generally, Oxley stated:  “Given the checks that we've got in it, given the transparency of the process, the increased penalties and the increased oversight, there's far less chance that you're going to see" high-level corporate frauad.  Presumably, he doesn’t count Refco because, as Larry Ribstein points out here, the full breadth of Sarbox didn’t yet apply to it (and even if it had, it probably wouldn't have prevented the fraud).  [Bill Sjostrom]

Miers' Futures Falling: Withdrawal Projected

In the Intrade futures market last week there was a surprising drop in the value of Miers' nomination futures, a drop that news reports do not explain.  Her futures are trading in the high-20s, off from a high of 92. Someone who holds a future on Miers gets a$100 if and when she is confirmed.  The futures market is projecting, in essence, that she will withdraw.  By comparison, the Intrade market is also projecting, for example, a close to 50 percent likelihood that Senator Clinton will be the next Democratic nominee for President....

I am guessing that Miers' has developed a Justice Souter problem:  We discovered after Justice Souter joined the bench that he did not write well (I am being charitable here).  When David Brooks wrote the op-ed in the NYT on Miers' harmless opinion column in the Dallas Bar news publication Brooks noted that she could not write, that her thoughts came out as awkward, jargon-laden mush.  Her column was not written under pressure; it was a chatty note from the bar President.  And it was garbled.  Since a Supreme Court Justice communicates only through prose, this is, in my view, disabling.  A Supreme Court Justice who does not write well is a nightmare to the nation's attorneys and lower courts who focus on every word and phrase in a Supreme Court opinion.  A poorly written opinion admits of too much slop in its application, adding to uncertainty and a need for future clarification through more litigation. 

Many lawyers, too many, cannot write -- they use obscure, wordy mush rather than crisp prose.  She has fallen apparently in this trap.   [Oesterle]

Update:  On 24/05 her confirmation future bid price has risen to 35.  Interestingly, a future on whether she would get over 50 votes is trading at 60 cents on the dollar; a future on whether she would get over 60 votes is trading at 30.  The market seems to project that she will no beat a filibuster.

House Passes Cheeseburger Bill

The House recently passed a bill "which provides protection to the food industry from frivolous liability claims that food products are responsible for causing a person's weight gain or obesity."  Companion legislation has been introduced in the Senate.  Article here.

Blocking Acquisitions of US Companies by Foreignors

As discussed in an earlier post, the Committee on Foreign Investment in the U.S. (CFIUS) garnered a lot of attention earlier this year in connection with CNOOC’s failed bid for Unocal. Business Week reports here that there are now rumblings on the Hill about giving CFIUS more teeth:

A bill introduced by Senator James M. Inhofe (R-Okla.) would prod the panel to consider a deal's effect on American economic security and the need for energy and other critical resources. Inhofe's bill also contains a controversial proposal to give Congress a veto over foreign mergers.

Both the Bush Administration and business are against the changes. In particular, companies worry about retaliation against their overseas operations.

The Miers Question: Why Is Her Appointment So Critical?

  When one reads the cascade of opinion pieces on the appointment of Harriet Miers to the Supreme Court of the United States one should remember that most who are writing do so under a distinct conflict of interest.  The journalists, law professors, lobbyists, and political and religious leaders that write and opine about Ms. Miers, neutral of whether they are supporters or attackers, have a stake in the importance of the event.  When the event is made to be important, these folks get public air time and sell advertising or raise money or accumulate prestige.  The public gets caught up in it all because, after all, many of us like a good spectacle now and again.  Much of the writing then will quite naturally exaggerate the importance of the appointment.

The exaggeration comes with costs as it affects the debate.  Is she the best credentialed, the most adroit thinker, the most deft legal philosopher, and so on?  I would rather that the Supreme Court as an institution not require the very best thinkers in order to operate successfully.  We put too much pressure on it.  A Court that imposes such demands on its Justices is going to have a high rate of failure.  Rather the Court ought to be able to operate adequately with decent people -- conscientious, clear minded, able to use logic.  If the Court cannot function with able, decent people as opposed to unique mental giants, then the Court's function has been miscast.  Simply put, we ask too much of the Court and we depend too much on the Court. 

This is another illustration of a misplaced belief in what government can do--get the right people in government and government will be perfect and make social life in America perfect.  If government fails it is because we have the wrong people in place.  No -- it may be because government is inherently limited in what it can do for us -- if we expect too much we will inevitably be disappointed and disadvantage ourselves to boot.  It will stifle our personal self-sufficiency and initiative. 

 

Greenspan's Replacement

With the Supreme Court nominations behind Bush (assuming Miers is confirmed),  his next big nomination is the successor to Fed Chairman Alan Greenspan.  Greenspan's last day at the Fed is expected to be 1/31/06.  Click here for an AP article on the subject.

Miers: Friendly to Business? Could Be an Illusion

  Many leaders in the business community assume that Harriet Miers is pro-business.  Indeed, some political commentators even go so far as to argue that Bush sacrificed conservative values for a pro-business judge.  These views are shaky.  The proponents base their conclusion on her high-profile business clientele when she was a practicing lawyer.  This is not definitive.  I have known many business lawyers who were not pro-business, they were pro-client;  when given a public forum with no impact on their clients they were distinctly anti-business because they "knew the tricks."  Someone who is pro-business (or is at least not anti-business) must have an underlying philosophy that embraces the economic and political benefits of capitalism.  I do not see evidence of this kind of depth of understanding in her sketchy and obscure public record.  Who knows?.   

For my discussion on whether Chief Justice Roberts will be pro-business, see my post entitled: Will John Roberts Be Pro-Business?

Miers: Confirmation by Rumor Has Begun

  Yesterday I wrote of the effect on the confirmation process of appointing an unknown to the Supreme Court, "Confirmation by Rumor." Post It has begun.  We now hear from a Texas judge and, apparently ex-boyfriend, that she goes to a conservative church in Dallas, implying she has conservative views on family values. This is only the beginning folks.  "I hear she...."

Harriet Ellen Miers: Now We Will Witness "Confirmation by Rumor"

  I knew something was up last week when Ms. Miers name surfaced late last week on the lists of potential nominees.  Who is she?? Where did she come from?? I noted.  Uh-oh.  It had all the ear marks of a purposeful, leaked out rumor.

  With today's nomination of Ms. Miers, those on the right not on the inside (on the list of those consulted) will want assurances.  There is no public record.  Will she be a conservative, the counterbalance to Justice Ginsberg?  That's what the right wants, their own version of Justice Ginsberg.  [Justice Ginsberg was the ACLU lawyer who wanted to do away with Mother's day as being too gender defining.] The only way the right will know whether to support this pick by Bush is to be told by their leaders the "inside skinny."  It will be assurance by rumor and by reference to the need to "trust" the President.  Since the President's views on border control and government spending have stretched the "trust" of the right to the breaking point, the rumors will be more important.  This means that the insiders on the right (Rev. so and so or talk show host so and so) will have extraordinary influence and a high public profile.  Great. I am not looking forward to multiple interviews of these jokers, who will use there public podium to say all sorts of other hair brained political stuff. 

The left will wait.  What are the rumors on the right???  In other words, the opposition of the left will be based on the rumors fed out by the right to their public members.  Conference hearings will be choice as Kennedy says I must vote against Miers because I heard that "that Rev.  X told his congregation that Miers' views on abortion are anti-women rights." 

This will be a confirmation fight based on rumor.  President Bush has made a huge mistake here.  The only way to stop this is for Bush himself to make a public case based on a discussion of details.  He will have to enter the debate himself not just on the merits, but to establish what the merits are.

As a side-light, consider what this type of nomination says to conservative judges who have lived with their views out in the open, who have walked the walk, stood up for their beliefs, and taken the abuse.  Suckers all.

For my take on John Roberts, visit my post entitled: The Supreme Court, Judge Roberts and Business

What's That Smell?? A Presidental Campaign Burning

Majority Leader of the Senate Bill Frist (R-Tenn.) can kiss his hopes of a Presidential campaign goodbye.  The SEC is checking out a very suspicious stock sale by Frist of HCA for insider trading.  We thought Frist held the shares in a "blind trust," that is, a trust in which an independent administrator manages the stock portfolio without input (or knowledge) of the beneficiary.   Frist himself has often told reporters he did not know how much HCA stock was in his trust.  We were wrong.  The Frist trust was a "qualified blind trust",  a trust in which the beneficiary, Frist, can direct the sale of stock. 

So what did we know:  So we know Frist directed the sale of HCA stock in June, two weeks before the company announced earnings that did not meet expectations.  The announcement caused a stock sell-off that lower the price of HCA ten percent or so.  We also know that Frist's brother is the company's chairman emeritus.  The transaction smells.  At issue is whether there are any incriminating documents or witnesses.  There may not be.    

Whether First gets indicted (or reprimanded) is irrelevant.  His Presidential campaign is dead (or at least on life support).  If the SEC does nothing, he will still be under suspicion (the Chair is a fellow Republican Congressmen) and the investigation itself will  be replayed endlessly in any subsequent campaign.   This is Leno material  "Why did Martha go to jail not Frist? His cooking was better." or "He could not help with the prison drapes." etc in the blogs.  If he is indicted, of course, we all will witness another celebrity trial.  Why these high profile folks cannot figure out (or get good advice) on how to handle their investments once they take public office is a mystery to me.  The risk of mistakes are too high to play this close to the line.