Sunday, December 8, 2013
Schragger & Schwartzman argue that “debates about the ontological status of group or corporate entities are largely irrelevant.”
Richard Schragger & Micah Schwartzman have posted “Some Realism about Corporate Rights” on SSRN. Here is the abstract:
Can we meaningfully speak of a church’s right to conscience or a corporation’s right to religious liberty? One way to approach this question is by inquiring into the nature of churches and corporations, asking whether these are the kinds of entities that can or should have rights. We have recently seen this kind of reasoning in public debates over whether corporations have free speech rights, and, relatedly, in arguments about the religious free exercise rights of churches, non-profits, and for-profit corporations. Those in favor of such rights sometimes argue that corporations and churches are moral agents, capable of exercising rights separate and apart from the rights and interests of their members; whereas, those opposed tend to argue that churches, corporations or groups are mere aggregations of individuals, or else artificial persons created or recognized by the state to advance the interests of those who compose them.
In this paper, we argue that this form of argument is mistaken and that debates about the ontological status of group or corporate entities are largely irrelevant. One does not need a particular theory of a corporation, organization, or group’s metaphysical status in order to determine its legal rights. To defend this claim, we first consider and reject H.L.A. Hart's semantic critique of corporate personality theories. Instead we follow John Dewey's realist argument against corporate metaphysics. We develop that argument and apply it to current litigation over whether for-profit corporations can assert rights of religious free exercise against the requirement that they provide health insurance coverage for contraception.
Saturday, December 7, 2013
Eric Chiappinelli has posted “The Underappreciated Importance of Personal Jurisdiction in Delaware's Success” on SSRN. Here is the abstract:
The judges of the Delaware Court of Chancery are aggressively trying to stop stockholder/plaintiffs from filing corporate law cases outside of Delaware. Delaware believes that its position as the center of corporate litigation is in danger because cases are no longer filed exclusively there. If litigation continues to flow away from Delaware, it would jeopardize Delaware’s prominence in corporate law and the large revenues Delaware receives from out of state businesses that are incorporated there.
I argue that scholars and the Delaware judges underappreciate the vital importance of personal jurisdiction over corporate directors in Delaware’s quest to become and remain the center of corporate litigation. I show that Delaware’s dominance in litigation in large part stemmed from, and is now dependent upon, its unique system of personal jurisdiction.
None of Delaware’s attempts to stop cases from flowing out of Delaware will be enduringly successful without addressing the weaknesses in its current personal jurisdiction statute. I argue that Delaware should adopt a new statute that both will remedy the current flaws and will be effective in encouraging stockholder/plaintiffs to litigate in Delaware.
Sunday, December 1, 2013
- Matteo Tonello on “The Separation of Ownership from Ownership”
The increase in institutional ownership of corporate stock has led to questions about the role of financial intermediaries in the corporate governance process. This post focuses on the issues associated with the so-called “separation of ownership from ownership,” arising from the growth of three types of institutional investors, pensions, mutual funds, and hedge funds.
- Frank Reynolds: “Delaware must fix state takeover law now, law professor warns”
Originally, the anti-takeover law passed its court challenges because the judges accepted faulty data that showed investors could acquire at least 85 percent of the target corporation and satisfy the Williams Act, Subramanian said. But none of the cases used to support the anti-takeover law actually allowed hostile suitors to acquire a controlling 85 percent of a target company, he said, and plaintiffs using research from new studies would be able to convince a judge that the statute is unconstitutionally restrictive.
- Pascal-Emmanuel Gobry: “Let’s Listen to Pope Francis on Economics”
For me, the financial crisis was an eye-opening moment. I’ve long believed in free market economics and believed that the Church would do a lot of good in the world if it embraced it. And I still believe those things. But what the financial crisis has laid bare is that the most conventional version of free market economics was actually dead wrong.
- Martin Lipton: “Some Thoughts for Boards of Directors in 2014”
In many respects, the relentless drive to adopt corporate governance mandates seems to have reached a plateau: essentially all of the prescribed “best practices”—including say-on-pay, the dismantling of takeover defenses, majority voting in the election of directors and the declassification of board structures—have been codified in rules and regulations or voluntarily adopted by a majority of S&P 500 companies…. In other respects, however, the corporate governance landscape continues to evolve in meaningful ways.
Saturday, November 30, 2013
- If you are looking for some books to help you better understand our economic history, try: Timothy Shenk on “The Long Shadow of Mont Pèlerin” – reviewing Angus Burgin’s The Great Persuasion (“[U]ncovering a history where the supposed founders of the American chapter of neoliberalism at the University of Chicago reprimand Hayek’s The Road to Serfdom for overdoing its indictment of the state while Keynes reports himself “in a deeply moved agreement” with the very same text.”).
- I thought I knew what it felt like to be scatterbrained and distracted, then I started spending time on Twitter. Let’s just say my belief that meditation is an integral part of work-life balance was reinvigorated. Relatedly, try: (1) bidushi on “The corporate world’s flirtation with meditation” and (2) “Free Video – ‘3-minute breathing space’ Guided Meditation” from the Oxford Mindfulness Centre.
- For the blogroll: Jennifer Taub’s "perpetual crisis" blog (“a blog on banking, corporate governance, and financial market reform”).
- Finally, you might be interested in Michael Pettis on “When Are Markets ‘Rational’?" (“To me, much of the argument about whether or not markets are efficient misses the point. There are conditions, it seems, under which markets seem to do a great job of managing risk, keeping the cost of capital reasonable, and allocating capital to its most productive use, and there are times when clearly this does not happen. The interesting question, in that case, becomes what are the conditions under which the former seems to occur.”).
Friday, November 29, 2013
In the movie Margin Call, which “[f]ollows the key people at an investment bank, over a 24-hour period, during the early stages of the financial crisis,” one of the main characters says: “There are three ways to make a living in this business: be first, be smarter, or cheat.” Given that only a few folks will be first or smarter, it may not be surprising that a “new report finds 53% of financial services executives say that adhering to ethical standards inhibits career progression at their firm.” In a piece over at The Guardian, Chris Arnade, a former Wall Street trader describes why. What follows is an excerpt from that piece, but you should go read the whole thing here.
After a few years on Wall Street it was clear to me: you could make money by gaming anyone and everything. The more clever you were, the more ingenious your ability to exploit a flaw in a law or regulation, the more lauded and celebrated you became. Nobody seemed to be getting called out. No move was too audacious. It was like driving past the speed limit at 79 MPH, and watching others pass by at 100, or 110, and never seeing anyone pulled over. Wall Street did nod and wave politely to regulators’ attempts to slow things down. Every employee had to complete a yearly compliance training, where he was updated on things like money laundering, collusion, insider trading, and selling our customers only financial products that were suitable to them. By the early 2000s that compliance training had descended into a once-a-year farce, designed to literally just check a box….
As Wall Street grew, fueled by that unchecked culture of risk taking, traders got more and more audacious, and corruption became more and more diffused through the system. By 2006 you could open up almost any major business, look at its inside workings, and find some wrongdoing. After the crash of 2008, regulators finally did exactly that. What has resulted is a wave of scandals with odd names; LIBOR fixing, FX collusion, ISDA Fix. To outsiders they sound like complex acronyms that occupy the darkest corners of Wall Street, easily dismissed as anomalies. They are not. LIBOR, FX, ISDA Fix are at the very center of finance ….
[So,] where is the real responsibility? … [T]he people who really should be held accountable have not. They are the bosses, the managers and CEOs of the businesses. They set the standard, they shaped the culture…. The managers knew what was going on. Ask anyone who works at a bank and they will tell you that. The excuse we have long accepted is ignorance: that these leaders couldn't have known what was happening. That doesn't suffice. If they didn't know, it's an even larger sin.
Sunday, November 24, 2013
The CFA Institute, the Journal of Corporate Finance, and the Schulich School of Business are sponsoring a Conference on Financial Misconduct, April 3-4, 2014, in Toronto, Canada. Deadline for submissions is December 15, 2013. You can go here for all the information. What follows is the stated rationale, along with suggested research questions.
Financial market misconduct erodes investors trust, and in turn influences stock market liquidity and performance, and exacerbates volatility. Financial market misconduct includes but is not limited to fraud. Despite the widespread media attention on market misconduct, the causes and consequences of market misconduct are often misunderstood and under researched around the world. The evolving structure of markets gives rise to new work on topic
This international conference will provide a timely debate on financial market misconduct. The conference also encourages, but does not require, submission to the Journal of Corporate Finance. Papers submitted to the Journal of Corporate Finance would go through the normal review process.
Some research questions that contributors to the conference might address are:
- Is market misconduct more common in different countries or across different exchanges? If so, what types (earnings management, insider trading, market manipulation, dissemination of false and misleading information, other)?
- What are the causes of international differences in expected or detected misconduct?
- What are the consequences of market misconduct, and do they differ across countries or exchanges?
- Can regulation be designed to improve ethical standards and corporate governance?
- Does high frequency trading mitigate or exacerbate market misconduct?
- Does crowdfunding facilitate potential financial market misconduct, and how might such potential misconduct be mitigated through regulation?
- Do intermediaries such as lawyers, auditors, and investment bankers mitigate or exacerbate financial market misconduct?
- Is financial market misconduct exacerbated or mitigated under different types of ownership, such as government, institutional, or family ownership?
- How is market misconduct related to activist investors such as venture capital, private equity, and hedge fund investors?
- How is fraud risk and ethics priced in markets?
- How does the risk of market misconduct affect corporate valuation?
- To what extent has the failure of regulation and reporting standards exacerbated the incidence of market misconduct and the recent financial crisis?
- What encourages the adoption of ethical standards in public firms versus private firms?
- Related research questions on both publicly traded and privately held institutions are welcome.
Saturday, November 23, 2013
I was reading the introduction to the 35th anniversary edition of Atlas Shrugged the other day, and a number of quotes taken from Ayn Rand’s related journal entries struck me (bold highlights are mine):
- I must show in what concrete, specific way the world is moved by the creators. Exactly how do the second-handers live on the creators. Both in spiritual matters—and (most particularly) in concrete, physical events. (Concentrate on the concrete, physical events—but don’t forget to keep in mind at all times how the physical proceeds from the spiritual.)
- [I]t is proper for a creator to be optimistic, in the deepest, most basic sense, since the creator believes in a benevolent universe and functions on that premise. But it is an error to extend that optimism to other specific men. First, it’s not necessary, the creator’s life and the nature of the universe do not require it, his life does not depend on others. Second, man is a being with free will; therefore, each man is potentially good or evil, and it’s up to him and only to him (through his reasoning mind) to decide which he wants to be. The decision will affect only him; it is not (and cannot and should not be) the primary concern of any other human being.
- [A] creator can accomplish anything he wishes—if he functions according to the nature of man, the universe and his own proper morality, that is, if he does not place his wish primarily within others and does not attempt or desire anything that is of a collective nature, anything that concerns others primarily or requires primarily the exercise of the will of others.
To the extent one can sum up the foregoing as asserting that some type of essentially limitless creative power exists within humans, which is exercised via thought or reason, and need not – in fact should not – concern itself with the success or suffering of others, this sounds an awful lot like some of the rhetoric associated with “The Secret” or “The Law of Attraction.” For those not familiar with the law of attraction, here is an excerpt from a review of “The Secret” that might help (for a version of the law of attraction presented by a disembodied spirit, as channeled by Esther & Jerry Hicks, go here – you might also want to check out Frank Pasquale’s post on the false advertising implications of The Secret here):
Supporters will hail this New Age self-help book on the law of attraction as a groundbreaking and life-changing work, finding validation in its thesis that one's positive thoughts are powerful magnets that attract wealth, health, happiness... and did we mention wealth? Detractors will be appalled by this as well as when the book argues that fleeting negative thoughts are powerful enough to create terminal illness, poverty and even widespread disasters.
I am certainly not the first person to have considered the possible connection between Ayn Rand’s philosophy and the law of attraction. For other examples, go here (“Homage to Atlas Shrugged & Ayn Rand” page on “Powerful Intentions,” which describes itself as “a unique Law of Attraction Online Community”) or here (“50 Prosperity Classics,” citing Ayn Rand, The Secret, and Esther & Jerry Hicks). The Atlas Society itself suggests (in a post entitled, "False Beliefs and Practical Guidance"): “If practical advice from ‘law of attraction’ preachers helps you keep focused on your goals, then use it.”
Anyway, I have not spent a lot of time researching this question (readers that have made it this far are likely now thinking either, “good” or “you’ve already spent way too much time on this”), but I would be curious to hear from anyone who knows of some better sources that either associate Ayn Rand with, or distinguish her from, the law of attraction.
Friday, November 22, 2013
Peter Turchin recently posted an interesting piece on Bloomberg entitled, “Blame Rich, Overeducated Elites as Our Society Frays.” Here is an excerpt:
The “great divergence” between the fortunes of the top 1 percent and the other 99 percent is much discussed, yet its implications for long-term political disorder are underappreciated…. Increasing inequality leads not only to the growth of top fortunes; it also results in greater numbers of wealth-holders…. There are many more millionaires, multimillionaires and billionaires today compared with 30 years ago, as a proportion of the population…. Rich Americans tend to be more politically active than the rest of the population. They support candidates who share their views and values; they sometimes run for office themselves. Yet the supply of political offices has stayed flat …. In technical terms, such a situation is known as “elite overproduction.” … [Another example:] Economic Modeling Specialists Intl. recently estimated that twice as many law graduates pass the bar exam as there are job openings for them…. Past waves of political instability, such as the civil wars of the late Roman Republic, the French Wars of Religion and the American Civil War, had many interlinking causes and circumstances unique to their age. But a common thread in the eras we studied was elite overproduction. The other two important elements were stagnating and declining living standards of the general population and increasing indebtedness of the state…. Elite overproduction generally leads to more intra-elite competition that gradually undermines the spirit of cooperation, which is followed by ideological polarization and fragmentation of the political class. This happens because the more contenders there are, the more of them end up on the losing side. A large class of disgruntled elite-wannabes, often well-educated and highly capable, has been denied access to elite positions…. History shows a real indeterminacy about the routes societies follow out of [such] instability waves. Some end with social revolutions, in which the rich and powerful are overthrown…. In other cases, recurrent civil wars result in a permanent fragmentation of the state and society…. In some cases, however, societies come through relatively unscathed, by adopting a series of judicious reforms, initiated by elites who understand that we are all in this boat together. This is precisely what happened in the U.S. in the early 20th century. Several legislative initiatives, which created the framework for cooperative relations among labor, employers and the government, were introduced during the Progressive Era and cemented in the New Deal. By introducing the Great Compression, these policies benefited society as a whole.
Sunday, November 17, 2013
A quick review of the top 10 Papers for Corporate, Securities & Finance Law eJournals on SSRN for the period of September 18, 2013 to November 17, 2013 (here), led me to Utpal Bhattacharya’s paper “Insider Trading Controversies: A Literature Review.” Here is the abstract:
Using the artifice of a hypothetical trial, this paper presents the case for and against insider trading. Both sides in the trial produce as evidence the salient points made in more than 100 years of literature on insider trading. The early days of the trial focus on the issues raised in the law literature like fiduciary responsibility, the misappropriation theory and the fairness and integrity of markets, but the trial soon focuses on issues like Pareto-optimality, efficient contracting, market efficiency, and predictability raised in the financial economics literature. Open issues are brought up. A jury finally hands out its verdict.
Saturday, November 16, 2013
Congratulations to Eric Chaffee, former BLPB contributing editor & friend of the blog, for taking over the Securities Law Prof Blog reins from Barbara Black. Barbara has left some big shoes for Eric to fill, having single-handedly built the Securities Law Prof Blog into one of the staple blogs for business law folks, but if anyone is up to the task it's Eric. Make sure you add the Securities Law Prof Blog to your personal blogroll.
Friday, November 15, 2013
I have posted an updated draft of my latest paper Rehabilitating Concession Theory, which is forthcoming in the Oklahoma Law Review, on SSRN. I have made only minor changes to the the prior draft, but I thought I’d post the abstract and link to the paper here in case any blog readers haven’t seen the paper before and might be interested in the content.
In Citizens United v. FEC, a 5-4 majority of the Supreme Court ruled that, “the Government cannot restrict political speech based on the speaker's corporate identity.” The decision remains controversial, with many arguing that the Court effectively overturned over 100 years of precedent. I have previously argued that this decision turned on competing conceptions of the corporation, with the majority adopting a contractarian view while the dissent advanced a state concession view. However, the majority was silent on the issue of corporate theory, and the dissent went so far as to expressly disavow any role for corporate theory at all. At least as far as the dissent is concerned, this avoidance of corporate theory may have been motivated at least in part by the fact that concession theory has been marginalized to the point where anyone advancing it as a serious theory risks mockery at the hands of some of the most esteemed experts in corporate law. For example, one highly-regarded commentator criticized the dissent by saying: “It has been over half-a-century since corporate legal theory, of any political or economic stripe, took the concession theory seriously.” In this Essay I consider whether this marginalization of concession theory is justified. I conclude that the reports of concession theory’s demise have been greatly exaggerated, and that there remains a serious role for the theory in discussions concerning the place of corporations in society. This is important because without a vibrant concession theory we are primarily left with aggregate theory and real entity theory, two theories of the corporation that both defer to private ordering over government regulation.
Sunday, November 10, 2013
Martin Gelter & Geneviève Helleringer posted “Constituency Directors and Corporate Fiduciary Duties” on SSRN a few weeks ago, and I’m finally getting around to passing on the abstract:
In this chapter, we identify a fundamental contradiction in the law of fiduciary duty of corporate directors across jurisdictions, namely the tension between the uniformity of directors’ duties and the heterogeneity of directors themselves. Directors are often formally or informally selected by specific shareholders (such as a venture capitalist or an important shareholder) or other stakeholders of the corporation (such as creditors or employees), or they are elected to represent specific types of shareholders (e.g. minority investors). In many jurisdictions, the law thus requires or facilitates the nomination of what has been called “constituency” directors. Legal rules tend nevertheless to treat directors as a homogeneous group that is expected to pursue a uniform goal. We explore this tension and suggest that it almost seems to rise to the level of hypocrisy: Why do some jurisdictions require employee representatives that are then seemingly not allowed to strongly advocate employee interests? Looking at US, UK, German and French law, our chapter explores this tension from the perspective of economic and behavioral theory.
Saturday, November 9, 2013
As Marc O. DeGirolami notes here: "In an extensive decision, a divided panel of the U.S. Court of Appeals for the Seventh Circuit has enjoined the enforcement of the HHS contraception mandate against several for-profit corporations as well as the individual owners of those corporations.” I have not had a chance to read the entire decision (which you can find here), but I did do a quick search for “corporation” and pass on the following excerpts I found interesting.
The plaintiffs are two Catholic families and their closely held corporations—one a construction company in Illinois and the other a manufacturing firm in Indiana. The businesses are secular and for profit, but they operate in conformity with the faith commitments of the families that own and manage them…. These cases—two among many currently pending in courts around the country—raise important questions about whether business owners and their closely held corporations may assert a religious objection to the contraception mandate and whether forcing them to provide this coverage substantially burdens their religious-exercise rights. We hold that the plaintiffs—the business owners and their companies—may challenge the mandate. We further hold that compelling them to cover these services substantially burdens their religious exercise rights…. Nothing in RFRA [the Religious Freedom Restoration Act] suggests that the Dictionary Act’s definition of “person” is a “poor fit” with the statutory scheme. To use the Supreme Court’s colloquialism, including corporations in the universe of “persons” with rights under RFRA is not like “forcing a square peg into a round hole.” [Rowland, 506 US 194, 200 (1993).] A corporation is just a special form of organizational association. No one doubts that organizational associations can engage in religious practice…. It’s common ground that nonprofit religious corporations exercise religion in the sense that their activities are religiously motivated. So unless there is something disabling about mixing profit-seeking and religious practice, it follows that a faith-based, for-profit corporation can claim free-exercise protection to the extent that an aspect of its conduct is religiously motivated.
The quote I focus on above is: “A corporation is just a special form of organizational association.” I have argued previously that when courts render decisions like the Seventh Circuit did here, they seem to be giving mere lip service to the word “special” in that sentence. For more on that, you can go here.
Friday, November 8, 2013
The Economist has an interesting piece on how “[a] mutation in the way companies are financed and managed will change the distribution of the wealth they create.” You can read the entire article here. A brief excerpt follows.
The new popularity of the [Master Limited Partnership] is part of a larger shift in the way businesses structure themselves that is changing how American capitalism works…. Collectively, distorporations such as the MLPs have a valuation on American markets in excess of $1 trillion. They represent 9% of the number of listed companies and in 2012 they paid out 10% of the dividends; but they took in 28% of the equity raised…. [The] beneficiaries, though, are a select class. Quirks in various investment and tax laws block or limit investing in pass-through structures by ordinary mutual funds, including the benchmark broad index funds, and by many institutions. The result is confusion and the exclusion of a large swathe of Americans from owning the companies hungriest for the capital the markets can provide, and thus from getting the best returns on offer….
Another booming pass-through structure is that of the “business development company” (BDC). These firms raise public equity and debt much like a leveraged fund.… What they all share is an ability to do bank-like business—lending to companies which need money—without bank-like regulatory compliance costs….
Andrew Morriss, of the University of Alabama law school, sees the shift as an entrepreneurial response to a century’s worth of governmental distortions made through taxation and regulation. At the heart of those actions were the ideas set down in “The Modern Corporation and Private Property”, a landmark 1932 study by Adolf Berle and Gardiner Means. As Berle, a member of Franklin Roosevelt’s “brain trust”, would later write, the shift of “two-thirds of the industrial wealth of the country from individual ownership to ownership by the large, publicly financed corporations vitally changes the lives of property owners, the lives of workers and …almost necessarily involves a new form of economic organisation of society.” … Several minor retreats notwithstanding, the government’s role in the publicly listed company has expanded relentlessly ever since.
November 8, 2013 in Business Associations, Books, Corporate Governance, Corporations, Current Affairs, Financial Markets, LLCs, Partnership, Securities Regulation, Stefan J. Padfield, Unincorporated Entities | Permalink | Comments (0)
Sunday, November 3, 2013
Omri Y. Marian has posted “Jurisdiction to Tax Corporations” on SSRN. Here is the abstract:
Corporate tax residence is fundamental to our federal income tax system. Whether a corporation is classified as “domestic” or “foreign” for U.S. federal income tax purposes determines the extent of tax jurisdiction the United States has over the corporation and its affiliates. Unfortunately, tax scholars seem to agree that the concept of corporate tax residence is “meaningless.” Underlying this perception are the ideas that corporations cannot have “real” residence because they are imaginary entities and because taxpayers can easily manipulate corporate tax residence tests. Commentators try to deal with the perceived meaninglessness by either trying to identify a normative basis to guide corporate tax residence determination, or by minimizing the relevance of corporate tax residence to the calculation of tax liabilities. This Article argues that both of these approaches are misguided. Instead, this Article suggests a functional approach, under which corporate tax residence models are designed to support the policy purposes of corporate taxation. This Article concludes that the U.S. should reform the way it defines “domestic” corporations for tax purposes by adopting a two-pronged tax residence test: the place where the corporation’s securities are listed for public trading, or the place of the corporation’s central management and control.
Saturday, November 2, 2013
Friday, November 1, 2013
Grant M. Hayden & Matthew T. Bodie have posted “Larry from the Left: An Appreciation” on SSRN. Here is the abstract:
This essay approaches the scholarship of the late Professor Larry Ribstein from a progressive vantage point. It argues that Ribstein's revolutionary work upended the "nexus of contracts" theory in corporate law and provided a potential alternative to the regulatory state for those who believe in worker empowerment and anti-cronyism. Progressive corporate law scholars should look to Ribstein's scholarship not as a hurdle to overcome, but as a resource to be tapped for insights about constructing a more egalitarian and dynamic economy.
Sunday, October 27, 2013
Jennifer Taub has published a new book, “Other People's Houses: How Decades of Bailouts, Captive Regulators, and Toxic Bankers Made Home Mortgages a Thrilling Business.” Here is an excerpt from the Yale University Press description:
Focusing new light on the similarities between the savings and loan debacle of the 1980s and the financial crisis in 2008, Taub reveals that in both cases the same reckless banks, operating under different names, received government bailouts, while the same lax regulators overlooked fraud and abuse. Furthermore, in 2013 the situation is essentially unchanged. The author asserts that the 2008 crisis was not just similar to the S&L scandal, it was a severe relapse of the same underlying disease. And despite modest regulatory reforms, the disease remains uncured: top banks remain too big to manage, too big to regulate, and too big to fail.
UPDATE: The book will be in bookstores in May, but can be pre-ordered now.
Saturday, October 26, 2013
Bill Black takes down claims of a “victory for the government in its aggressive effort to hold banks accountable for their role in the housing crisis.” (HT: naked capitalism.) The full piece is available here, and I highly recommend you go read the whole thing. What follows is a brief excerpt:
The author of the most brilliantly comedic statement ever written about the crisis is Landon Thomas, Jr…. Everything worth reading is in the first sentence, and it should trigger belly laughs nationwide. “Bank of America, one of the nation’s largest banks, was found liable on Wednesday of having sold defective mortgages, a jury decision that will be seen as a victory for the government in its aggressive effort to hold banks accountable for their role in the housing crisis.” … Yes, we have not seen such an aggressive effort since Captain Renault told Rick in the movie Casablanca that he was “shocked” to discover that there was gambling going on (just before being handed his gambling “winnings” which were really a bribe)…. The jurors found that BoA (through its officers) committed an orgy of fraud in order to enrich those officers…. The journalist’s riff is so funny because he portrays DOJ’s refusal to prosecute frauds led by elite BoA officers as “aggressive.” Show the NYT article to friends you have who are Brits and who claim that Americans are incapable of irony…. I’m not sure whether the DOJ consciously deciding not to investigate, bring civil suits, or prosecute the most destructive frauds in history represents “aggressive” or “accountable” to the DOJ. We do know, however, the fantasy that caused DOJ to give these control frauds a free pass. Benjamin Wagner, a U.S. Attorney who is actively prosecuting mortgage fraud cases in Sacramento, Calif., points out that banks lose money when a loan turns out to be fraudulent. “It doesn’t make any sense to me that they would be deliberately defrauding themselves,” Wagner said. “They” refers to the CEO. “Themselves” refers to the bank. “They” are not “defrauding themselves.” … The game being played out in all the corporate settlements, like the JPMorgan deal, is that the controlling officers, even when they grew wealthy by looting the shareholders, use corporate funds to cut deals that protect them from being prosecuted or having to return their fraudulent proceeds. We all know who pays for this – the shareholders. Only a comic genius would have the mastery of irony necessary to call the ability of elite bankers to become wealthy through fraud with immunity “accountability.” … The self-congratulations that DOJ press flacks regularly issue to attempt to con journalists and the public into believing that DOJ is aggressively holding elite bankers accountable for their frauds make “Baghdad Bob” seem credible by comparison.
Sunday, October 20, 2013
Sarah C. Haan has posted “Opaque Transparency: Outside Spending and Disclosure by Privately-Held Business Entities in 2012 and Beyond” on SSRN. Here is a portion of the abstract:
In this Article, I analyze data on outside spending from the treasuries of for-profit business entities in the 2012 federal election – the very spending unleashed by Citizens United v. FEC. I find that the majority of reported outside spending came from privately-held, not publicly-held companies, including a significant proportion of unincorporated business entities such as LLCs, and that more than forty percent of spending by privately-held businesses was characterized by opaque transparency: Though fully disclosed under existing campaign finance disclosure laws, something about the origin of the money was obscured. This happened when political expenditures were spread among affiliated business-donors, typically donating similar amounts to the same recipient(s) on similar dates, and when for-profit business entities were used as shadow money conduits. I also argue that, due to differences between access-oriented and replacement-oriented electoral strategies, for-profit businesses engaged in outside spending in a federal election are likely to be experiencing insider expropriation. The expropriation of a business entity’s political voice by a controlling person is another potential way in which voters are misled in our current disclosure regime. In light of these spending patterns, and evidence of insider expropriation of the political voice of many privately-held business donors, I argue that privately-held business entities that engage in federal election-related spending should be compelled to reveal the individual(s) who control them.