Category: Current Events

Berlusconi-fication: Cutting Out the Middle Man

2630085549_eebd0ce895_oRecently Rick Perlstein described American elections as a “plutocrat’s right to choose.” Such concerns have also been raised by conservative media. A political economy premised on the trading of money for power, and power for money, gives rise to an oligarchic constitutional order. Political science responds with “investor theories” of politics, where the key players are not the voters, but the donors. Politicians become vessels for their agendas.

As Jeffrey Winters observes, many types of oligarchies can develop. Americans might be interested in learning more about what might be deemed a “direct” oligarchy, where one-time donors forego buying the favor of leaders, and simply run for office themselves. Some very wealthy candidates of the right and left have fit this bill, and done passably as leaders. But the independence afforded by great wealth can also lead to flamboyantly erratic behavior, particularly among men long unaccustomed to accounting for their actions to others. Consider, for instance, the billionaire Silvio Berlusconi, a long-time Italian leader:

Perhaps the most famous example of Berlusconian rule-bending—and the one with the most popular results—was his takeover of Italian TV. Television was introduced to Italy, in 1954, through a single channel, RAI, administered by the ruling Christian Democratic Party; the highlight of its programming was the Pope’s Sunday-morning Mass, which is still on the air. For decades, the government controlled television: in the seventies, political parties were allotted news coverage in exact proportion to their votes in parliament. Then, in 1976, the Italian Supreme Court ruled that private broadcasting could be allowed on a local level. Berlusconi, who had made a fortune building suburban housing developments, began buying up local stations and broadcasting the same content on all of them. In order to comply with the letter of the court’s ruling, he staggered the broadcasts by a few seconds on each network.

Technically, these were local broadcasts; effectively, as Berlusconi made clear to advertisers, he had a national market, which he glutted with American programs like “Dallas,” “Dynasty,” and “Falcon Crest”—stories of sex and money…Berlusconi…believed that appetites existed to be stoked and sated, and he imported both American entertainment and the advertising environment that supported it. “I’m in favor of everything American before even knowing what it is,” he once told the Times.

Despite a long record of self-dealing, scandal, and outrageous statements, Berlusconi spent 9 years as Prime Minister. He had great appeal as a rascally anti-hero, exulting in a mix of la dolce vita and la vida loca. Thank goodness America, a mature democracy, could never fall for such a dubious mix of wealth and celebrity.

Photo Credit: CluPix.

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When Love’s Promises Are Fulfilled By the U.S. Supreme Court

Today, in a 5-4 decision, the United States Supreme recognized the fundamental nature of love’s promises. In Obergefell et al. v. Hodges, the Court held,  “the Fourteenth Amendment requires a State to license a marriage between two people of the same sex and to recognize a marriage between two people of the same sex when their marriage was lawfully licensed and performed out-of-State.”  Referring to marriage as a “keystone” of the U.S.’s “social order,” Justice Kennedy declared same-sex marriage bans unconstitutional. Importantly, the case makes clear that forcing gay couples to go across state lines to marry only to deny them the franchise after returning home undermines fundamental principles of liberty.

It’s no surprise that Professor Martha Ertman’s powerful book: Love’s Promises: How Formal and Informal Contracts Shape All Kinds of Families on which she copiously and beautifully toiled while rearing her son debuts the summer that equality in marriage becomes a fundamental right for gay men and women. Nor should anyone be surprised if the book, along with the decision itself, becomes a central text at universities and beyond. In what David Corn calls a “love letter to marriage,” from the pen of Justice Kennedy, the Court reasoned:

“No union is more profound than marriage, for it embodies the highest ideals of love, fidelity, devotion, sacrifice, and family. In forming a marital union, two people become something greater than once they were. As some of the petitioners in these cases demonstrate, marriage embodies a love that may endure even past death. It would misunderstand these men and women to say they disrespect the idea of marriage. Their plea is that they do respect it, respect it so deeply that they seek to find its fulfillment for themselves. Their hope is not to be condemned to live in loneliness, excluded from one of civilization’s oldest institutions. They ask for equal dignity in the eyes of the law. The Constitution grants them that right.“

With that, the Supreme Court overruled the prior judgement of the Court of Appeals for the Sixth Circuit and set in gear the reversal of centuries’ worth of stigma, shame and inequality, which may not erase overnight, but overtime will ease. Professor Ertman might also suggest that by the decision, the Court resituates contracts too. That is to say, if viewed from the lens of contracts, which serves as the core, theoretical foundation of Love’s Promises, this decision recognizes a fundamental right in contract for gay men and women. Further, the case expands the “contract” franchise to include gay women and men.

Some scholars approach gay marriage primarily from the constitutional liberties encapsulated in the 14th Amendment, upholding equal protection for U.S. citizens regardless of their status, others approach the issue as a matter of privacy. For Professor Ertman, contracts offer an additional lens and much to deliberate about on matters of marriage, parenting, and familial intimacy. Professor Ertman’s writings on contract (The Business of Intimacy,  What’s Wrong With a Parenthood Market?, and Reconstructing Marriage to name a few) precede the book, and presaged its birth.

Here for example, in a passage from Chapter Eight, she explains that “[i]t takes two more trips to the lawyer’s office to hammer out terms that satisfy Karen, Victor, the attorney, and me, from lawyerly technicalities to the emotional terms we call “mush.” From what started out as an addendum to Victor’s and my coparenting agreement has blossomed into a bouquet of wills and powers of attorney, alongside the amended parenting agreement.” She tells readers, “On the way downstairs, clutching documents still warm from the copying machine, Karen squeezes my hand, as if she too feels that signing all those dotted lines brought a family into being every bit as much as vows of forever that we plan to recite…” As she explains, “if you scratch the surface of marriage—straight or gay—you’ll find contracts there, too.”

Professor Ertman urges us to remember time and again that what builds relationships and sustains them are the formal and informal contracting that take place daily in marriage; they establish the foundation for marriage and what comes after. She works diligently in the book to demonstrate love too undergirds contracts. That is to say, she wants readers to reimagine contracts—not as the products of cold, calculated bargaining or business arrangements—though one must acknowledge contracts can be that too—even in marriage.  Often marriage is the product of love, intimacy, and warm innocence.  At other times, it is the product of business arrangements.  It was that too in the U.S. chattel system: contracts that gave legal sufficiency to the buying, selling, bartering, and even destroying of slaves, including children (among them the Black biological offspring of slave owners). In light of that history yet to be fully explored and appreciated in law, it is a formidable task to resituate or reintroduce contract in the space of families and intimacy. However, Professor Ertman rises to that challenge.

Like it or not, contracts pervade marriage and suffuse premarital agreements. Sometimes contracting in this regard attempts to resituate power and status expost marriage, providing the economically weaker spouse economic stability after the breakup. Martha highlights cases from that of Catherine Simeone who received a “raw deal,” to those of celebrities, including Michael Douglas and Beyonce. Who knew that Beyonce would receive $5 million for “each of their children,” if she and Shawn Carter (otherwise known as Jay-Z) divorced? Professor Ertman might argue that despite the businesslike nature of contracts, these legal arrangements and agreements make most matters clearer for everybody. Professor Ertman explains that contracts and even verbal agreements provide information, they can provide context, and they offer choice.

In Ertman’s life, it was a contract that bestowed her wife, Karen, parenthood of their child—not something biological, legislative, or derived from courts. And she offers multiple reasons for readers to consider the salience of contracts in intimacy, including voluntariness, reciprocal promises, and equal status. She offers an additional reason: love’s promises.

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Thoughts on the British Election

The Tory victory in Thursday’s election raises several points that are worth discussing in the UK context and globally.

1.  The British constitutional system is gradually moving towards a parliamentary/direct democracy hybrid.  Referenda are now increasingly seen as necessary or desirable to resolve major issues.  There was a referendum about proportional representation in 2011, another on Scottish independence last year, and now one is promised in 2017 on EU membership.  Parliamentary sovereignty remains, but in more formal terms.

2.  More Scottish autonomy is inevitable, as Scotland now looks more like Quebec (a region with its own culture and own political party within a larger state).  I wonder what this will mean for Scottish law.  Scottish law still possess some unique characteristics, and there are many attributes of that law that influenced the Framers and resonate today.  (I’ve always thought “Not Proved” should be a possible verdict in a criminal case, for instance.)  How would a more autonomous Scottish law develop?  Would, for example, Scotland end up with a written constitution?

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Warren Buffett & Charlie Munger Annotated by Experts in Wall Street Journal

WB1996Warren Buffett’s latest letter to Berkshire Hathaway shareholders is annotated in The Wall Street Journal by 30 professors, authors, and investors.  Editors Erik Holm and Anupreeta Das assigned us each two sentences in the letter, and/or Charlie Munger’s addendum, to amplify.  Here are my two, followed by the list of contributors. Mine address the role Warren’s son Howard will play in succession and what Munger believes concerning what made Berkshire succeed.

Regarding Buffett’s reference to his son Howard (p. 36):   Buffett tries again to defend the choice of Howard to succeed him as board chairman. Many remain skeptical. But critics should appreciate the plan’s savviness. It deftly carves a niche for the son of a legend, as Howard will: (1) not be asked to perform any task his father has performed (like investing or capital allocation) and (2) be asked to perform only one task, which Warren has never performed (monitoring the CEO for adherence to Berkshire culture and dismissing any who fail). This shrewdly avoids the trap many children of legendary parents face of never being able to measure up.

Notably, besides Munger, Howard is the only individual Buffett identifies by name among Berkshire personnel in his anniversary message and, besides Buffett, Munger only names Abel and Jain. In fact, while Munger and Buffett mutually credit the other for minting the Berkshire model, they never credit any other Berkshire personnel for its success. The omission contrasts with Buffett’s letters, which rightly herald specific executives who power Berkshire and animate its culture. The difference is that these messages, while in form historical, are really about the future, and all three people identified by name are referenced in discussions of succession.

Where Munger asserts (p. 39) that “The management system and policies of Berkshire . . . were fixed early”:   Munger’s statements about how Berkshire’s “system and policies” were “fixed early” is vague. In one sense, it sounds as if they were part of a master plan at the outset back in the 1960s.  But Buffett has often stressed that Berkshire never had a strategic plan nor any business plan. And through the 1980s, most of Berkshire’s “business” consisted of investments in securities for its insurance companies, not wholly owned operating subsidiaries. So it doesn’t seem likely that, in the 1970s or even as late as the 1980s, Buffett’s goal was to create “a diffuse conglomerate.”

On the other hand, Munger subsequently clarifies (p. 40) that Buffett “stumbled into some benefits [of these policies] through practice evolution” over his career. And Buffett sculpted much of Berkshire’s culture late in the company’s life as part of a process that is still ongoing and extends well beyond these policies. Therefore these passages should not obscure the fact that the “Berkshire system” looks sharper from today’s vantage point than from Buffett’s desk “early” on. That’s important to recognize lest observers commit errors associated with hindsight bias like believing that observed outcomes were predictable, a weakness of human psychology which Munger often lectures against.

Cunningham is the author of Berkshire Beyond Buffett: The Enduring Value of Values and editor and publisher, since 1997, of The Essays of Warren Buffett: Lessons for Corporate America. For more commentary on this topic, see today’s New York Times Dealbook column, here. Read More

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Harper Lee’s Alleged Sequel to “To Kill a Mockingbird”

To_Kill_a_Mockingbird_(1962)_trailer_2I realize that this is not exactly a legal post, but the story that the publisher released today about the “discovery” of a lost sequel to “To Kill a Mockingbird” strikes me as rather fishy.

The claim, in a statement attributed to Harper Lee, goes something like this.  In the 1950s, Lee wrote a novel set in the present about Scout, Atticus Finch, and many of her other famous characters.  She then set that aside and wrote what amounted to a prequel set in the 1930s–“To Kill a Mockingbird.”  Sixty years later, the original novel was found by somebody after everyone, including Lee, though that the manuscript was lost.

I find this all rather hard to believe.  First of all, Lee is nearly 90 years old, suffered a stroke in 2007, and lives in a nursing home.  Thus, I wonder to what extent any statement can be attributed to her.  Second, it’s an interesting coincidence that this novel was “found” not long after Lee’s sister, an attorney who acted as her advisor for decades, passed away.  Third, exactly where was this manuscript found?  In somebody’s attic?  In the same place where the “The Hitler Diaries” came from?

A fortune stands to be made from a sequel to one the most beloved books of all time.  Before it is published, I think someone should make sure that this is a genuine manuscript and that Lee is competent to make a decision to publish.  For all I know, this novel is something that she’s had all along and did not want to publish, but now that she cannot speak for herself another party (an attorney, an agent, etc.) wants to take unfair advantage of her fame.

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Fed Officials Accused of Perjury in AIG Bailout Trial

In the financial trial of the century, the most important document is missing. The document is the term sheet that the government says it gave AIG’s board right before taking the company over in Sept. 2008.  The government says the AIG board thus approved the Draconian terms that benefited Goldman Sachs and other rivals. But other evidence, including  AIG’s contemporaneous securities filings, suggests the board was agreeing only to sell the government warrants not transfer 80% of the common stock to it for a song.  The missing document would prove which side is telling the truth.

That’s one of many amazing points of contention noted by Yves Smith of Naked Capitalism in her relentless digging into what government really did during the financial crisis. Most recently, she alleges and documents perjury and obstruction of justice by top federal officials in the pending case of former AIG shareholders against the US. The case alleges that the government trampled on corporate law rights and that the Fed exceeded its authority—allegations that I document in my book, The AIG Story, written with Hank Greenberg, lead plaintiff in the case.

Smith lays out her claims in an extensive blog post at Naked Capitalism, accompanied by reams of additional documents and examples. For those looking for a skinny version, here is an abridged adaptation. Most examples concern Scott Alvarez, general counsel of the Board of Governors of the Federal Reserve; there is one with with Tom Baxter, general counsel of the New York Fed, who worked with Tim Geithner. The shareholders are represented by the noted trial lawyer, David Boies. The point about the term sheet is at the end.

Example 1

Boies: Would you agree as a general proposition that the market generally considers investment-grade debt securities safer than non-investment-grade debt securities?

Alvarez: I don’t know.

 

Example 2

Boies: [Presents a copy of the Financial Crisis Inquiry Commission report stating that the Fed had lowered the standards it applied for the quality of collateral for its loans under two programs then devised to support lending and asks] Do you see that?

Alvarez: I see that. . .

Boies: . . . [W]ould you agree that the Federal Reserve had lowered its standards regarding the quality of the collateral that investment banks and other primary dealers could use while borrowing. . . ?

Alvarez: No.

Boies: You would not agree with that?

Alvarez: Right.

 

Example 3 Read More

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Milton Hebald, RIP

The great sculptor, Milton Hebald, passed away at age 97.  May he rest in peace.  The NYT has a fine obituary here.  Accompanying this post are photos of three of his numerous sculptures gracing the grounds at Morefar, the Brewster, NY estate of the late Cornelius Vander Starr, founder of what Hank Greenberg turned into the American International Group.

Boy flying kite at Morefar (pp. 33-34)

 

 

 

 

 

 

 

 

 

 

 

 

Boy Flying Kite

Statue at Morefar (pp. 33-34)

 

 

 

 

 

 

 

 

 

Handstand

2011-09-10 10.22.03

 

 

 

 

 

 

 

 

 

Tennis Anyone?

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The Crystal Ball for 2015

In thinking about national politics for the upcoming year, the Supreme Court is the wildcard.  What will we be talking about during the first half of the year?  The usual suspects probably–taxes, immigration, foreign policy, climate change, etc.  If King v. Burwell goes against the Administration, though, we will be talking about nothing but health care in the second half of the year.  We will have no choice, as Congress and most of the states will have to come up with a response to the loss of subsidies for millions of people.  If King goes the other way, though, then we won’t be talking about health care much at all.

I haven’t a clue as to what the Court will do in King.  Oral argument in March will either be very anticlimactic or thrilling–stay tuned.

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“The Interview” and Eminent Domain

Personally I hope that the NSA figures out a way to knock North Korean State TV off the air.  In the meantime, though, the United States should exercise eminent domain and buy the movie from Sony as a partial compensation for its loss.  Then the Administration should make the movie freely available with dubbing and commentary in as many languages as possible.

I’m disturbed to hear some discussion in the vein of “Oh, it looks like a terrible and offensive movie, so why should we stir up a hornet’s nest by going after the hackers?”  Major free speech issues often involve unsavory expression–who cares about whether “The Interview” is up for any Oscars?  I don’t expect a principled stance from a corporation, but I do expect one from public officials and citizens.

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The Roberts Convention

When I think about NFIB v. Sebelius, my understanding of what Chief Justice Roberts did was to say that in an election year the Justices appointed by one political party should not strike down the signature legislation of the other political party.  I have no idea what the Chief Justice thinks that the Chief Justice did two years ago, but how would what I just said apply to King if the decision is 5-4 against the Administration.

Well, 2015 is not an election year, and King would not strike down the Affordable Care Act.  But is an adverse ruling tantamount to striking it down given that Congress will not do much in response?  I don’t know.  I get different views on that from health law experts.  Some say this would be crippling, others say not so much.  One would think that the briefs will try to convince the Chief one way or the other on this–that matters as much as the technical aspects.

One other note–Paul Krugman’s column in today’s NY Times today on King is the liberal equivalent of a Rush Limbaugh tirade.  I don’t have time to go through all of the flaws.  I love reading him and think his economic views are spot on, but on this one he doesn’t know what he’s talking about.