Thursday, October 30, 2008

A Workout Plan

Just for the record, here is one plan put forward by a couple of lawyerly individuals in the New York Times.

I like the community based aspect of this one. My thoughts on this are for agencies at Hud or Treasury to work with existing local-community based non-profits, such as Habitat and others, to provide funding and/or guarantees for private buyouts and lease-backs for those still able to make a reasonable, market-adjusted, mortgage or rent payment. Lease-back might not be the technically correct term; just so I'm clear, private investors, local non-profits, and not the federal government would be the purchasers; the original homeowner could stay on the mortgage, and in the home, under the new terms, or be provided a rent-to-own provision if they want.

Sunday, October 26, 2008

Warrant, Searches, and Qualified Immunity

Here is the Scotuswiki on a Supreme Court case that promises to be interesting to say the least. Quickly, the court's oral argument has taken place and further briefing ordered on whether Saucier v Katz (2001) should be overruled. More, after digestion commentary, to be forthcoming.

This is important because the qualified immunity test maintained in Saucier essentially makes it impossible to determine what "clearly established law" is in this context. And that is important because in the absence of a common sense understanding, any arbitrary, unreasonable, boorish and/or stupid conduct of police and other government actors cannot be held to account by the common citizen simply because the bad government actors were unable to determine that their conduct violated or would violate "clearly established law."


Saturday, October 25, 2008

What the World Could Look Like

Ronald Dworkin in NYRB, among others in the special election issue.

If McCain wins, however, Kennedy's vote would probably be irrelevant and his influence negligible because Mc-Cain's first appointment would probably create an unstoppable rock-solid conservative majority for a generation or more. (Stevens is eighty-eight, Souter sixty-nine, and Ginsburg, Kennedy, and Breyer in their seventies.) We cannot predict all the important constitutional issues that might arise in that long period. But it seems likely that a solid ultra-conservative majority would finally wipe away all constitutional protection for abortion, which Scalia and Thomas have repeatedly vowed to do. Such a majority would also allow a significantly greater role for religion in public schools and public displays and occasions; effectively end any form of affirmative action in employment or education; cut back on protections for accused criminals; and again broaden the scope of capital punishment.

Most frightening of all, it would likely embrace the Bush administration's most extravagant claims of presidential power: the so-called unitary executive doctrine Garry Wills describes below, which allows the president dictatorial powers over all executive functions, including the power to wage war, spy on citizens, and detain and torture prisoners, ignoring any congressional constraint.

Obama's promise is as great as McCain's threat. His race and background would refute the charges of American racial arrogance that have helped recruit many angry terrorists. His remarkable and apparently near-unanimous appeal abroad—an appeal the insular Republicans scorn—would immediately help redeem our soiled international reputation. He has a striking, deep intelligence, and a gift for combining clarity and strong feeling in his writing and speeches; and he uses these qualities to expose and explain complexity rather than bury it under slogans. It is said that he lacks experience. On the contrary, he alone among prominent politicians has the experience that counts most in a threatening and densely interdependent world: the crucial experience of empathy. He has lived, and been poor, in both domestic and foreign worlds that few national politicians can even imagine.

Wednesday, October 22, 2008

Investing in Future: More Stimulus

What to make of the idea of more economic stimulus, now that we seem to be determined to shore up failed banks, and the bankers that failed them? The first rule: avoid a massive asset bubble. We've seen at least two recently; real estate and before that, high tech stock. The second rule: all public spending is political, whether we recognize it or not. If I'm not mistaken, that's why we've seen declining funding for R&D and basic research. Leaving this to the private sector results in capital flight to areas that yield quick returns on Wall Street and speculation. The untempered "Free Market" philosophy of the last thirty years has proven itself to be, as in the previous century, not good for the people. Similarly, leaving philanthropy and charity to the private sector is tending sheep with wolves.

The best investments we could make would seem to be R & D in new science and technology applications, manufacturing enterprises we cannot do without such as autos and planes, the obvious -- energy, medical/health just to name a few. Of course injecting more $$$ into these areas is not as rapid an economic stimulus as cash in the pocket, but it may be almost as fast as the infrastructure projects Washington is talking about.

Careful screening may yield investment in businesses that are in a position to put many people into decent jobs quickly, such as construction projects. What else?

Here is another unique idea: provide a "co-op" fund for government and community organizations to invest in and rehabilitate houses. That would immediately begin to adjust the failing housing market. It might even put some people to work right away.

Tuesday, October 21, 2008

Serious Appellate Review Can Make a Difference

If perfunctory or truncated review of Georgia's death sentences by the state Supreme Court would be likely to result in imposition of arbitrary and unconstitutional sentences, then, by similar logic truncated federal habeas review over state criminal proceedings would likely result in rising incidents of unfair and unconstitutional decisions at the state level.

At this link is the opinion by Justice Stevens in which he underscores the truncated Georgia Supreme Court mandatory review of its death penalty cases is not the kind of review represented to the US Supreme Court in Zant.

Thursday, October 16, 2008

Global Finance in Crisis

We're off on a tangent, political economy, aka the credit crisis, global recession, market meltdown. M y previous post focused on this and questioned specifically what caused the market to tank, banks to stop lending if that is indeed the situation, and well, putting us all through another Black October.

Fareed called it "hiding mountains of debt in complex instruments." As is often the case the Economist has attempted to provide an answer including info on the financial instruments and policy to blame, perhaps, such as credit default swaps, interest rate swaps, derivatives, options, futures. In a word however, the slant is not surprisingly a policy question concerning regulation. In A Short History of Modern Finance, the closing question is whether the future of the increased regulation that seems inevitable will be as benign as the past "liberalized" capital regime has been for growth.

To my mind, tactically, questions should be couched in terms of transparency and disclosure. For instance, at some point during the previous 18 months, when oil and gasoline prices started to ratchet upward for reasons which must remain unspoken, when mortage defaults first started to become noticeable, coupled with and perhaps caused by job losses, slowing growth, and slowing demand for, and then plummeting home prices, all related to core inflation and stagnant wages, who could have failed to see the risks increasing with respect to the securities tied to home mortgages. By then, of course, it was too late to do anything except sell. Hedging seemed like a good idea, but this only increased exposure if you guessed wrong about the direction of the market, and ratcheted up volatility.

And how do you sell something that is an "off balance sheet" instrument, by definition something you don't want the investing public knowing about. And there is another problem, there is no market or clearinghouse for these things, not surprisingly. So my question from the previous post still remains, how could reasonably smart people have been enticed to continue to sell these things knowing that the rapid rise in home prices could only mean one thing, an asset bubble. Bubbles are a recurring phenom, so...? Greed is the word. As AIG executives have recently shown, taking junkets with taxpayer dollars, stupidity is also rampant.

Finally, after Enron, how could regulators have failed to outlaw similar "off balance sheet" transactions? Or, was the investing public hoodwinked into believing the practice was obsolete?

My question is this. In times of good growth anything goes and nobody notices a few bad decisions, even sleazy ripoffs. When things get tough, when prices are falling, and when people are losing jobs, it is not regulation or the lack thereof that is the problem. It is just that times are tough. Free trade might take it's share of the blame. Let's not forget the corporate execs who forgot to pass along the cost savings and other goodies realized from free trade and robust growth to consumers and workers while socking away golden parachutes, bigger boats and mansions to pass the time. This seems less of a crisis in global finance than a crisis in global productivity and the division of labor, aka the global distribution of wealth. This is a failure of the notion of the Economy and the discipline of Economics itself, as we know it. This is called politics and it is criminal, paying lip service to the theme of this blog. Heads must roll.

The rich have been allowed to get away with far too much. The blame rests squarely with the failed execution and incoherent policy of the current, soon to be ex, President and the cronies who ran his administration. I predict that we will not see another such disasterous presidency, not at least until my grandchildren are grown.

Just one more thing. When banks fail you know we are in for a rough ride. So just on more question to think about. How could we have allowed matters to come to this?

Monday, October 13, 2008

Hiding Mountains of Debt in Wall Street?

Here's what I want to know more about. What about this "hiding mountains of debt in complex instruments?"

It brought down Enron and others. Is that what the "mortgage backed securities" were all about? This is Fareed, in Newsweek:
If there is a lesson to be taken from this crisis, it's a simple and old rule of economics: there is no free lunch. If you want something, you have to pay for it. Debt is not a bad thing. Used responsibly, it is at the heart of modern capitalism. But hiding mountains of debt in complex instruments is a way to disguise costs, an invitation to irresponsible behavior.
And, excuse me, but could someone please explain to me how a "derivative" in the sense used here and on Wall Street, differs from a worthless piece of paper sold to an unwitting investor with knowledge it had no intrinsic value or economic basis in equity, meaning something of tangible value such as an asset. Is a derivative something derived from a mortgage, but not a piece of the pie?

Am I right on this, or what? These were never worth more than precisely zero? How could they have been purchased? Zachary Karabell in Newsweek:
... Absurd though these all were, they paled in comparison to the financial innovations that grew out of the mortgages—derivatives built on other derivatives, packaged and repackaged until no one could identify what they contained and how much they were, in fact, worth.

Wednesday, October 08, 2008

More New Conclusions on Federal Habeas

Continuing to review the Hoffmann & King, Rethinking the Federal Role in State Criminal Justice
DRAFT, forthcoming N.Y.U.L.Rev. DRAFT, at page 9 we find the following remarkable conclusions:

Given the time to habeas filing and disposition, most defendants convicted of felony offenses in state court have no practical access to federal habeas review.22 For the latest year with available data, 60% of all defendants who were convicted of felony crimes in state court did not receive any prison sentence at all,23 and the average prison sentence for the remaining 40% was less than five years, with release in less than three.24 This means that the average habeas petition is filed after the average prisoner is released.

It should not be surprising, therefore, that in examining who filed habeas cases, the study found that nearly 30% of prisoners who challenged their state criminal judgments were serving life sentences,25 even though fewer than 1% of all state felons who are sentenced to state prison receive life terms.26 At the other extreme, only 12% of those who filed federal habeas petitions were serving sentences of five years or less27 – even though the latter group represents the majority of all those who are sent to prison.28 Federal habeas corpus review of state convictions and sentences is unavailable to those who are not serving a very long prison sentence or who have not received a death sentence. For most of the more than two million people now incarcerated for state offenses,29 the Great Writ is a pipe dream.

Monday, October 06, 2008

Economical Thinking in Federal Habeas

Here is how a new draft by King and Hoffman, to be published in the NYU Law Review next year opens. Commentary will follow once I've read more. At the link you can download the whole thing from SSRN. Thanks, Doc B!

We believe that it is time to rethink the federal role in state criminal justice. The present approach is a failure, because it relies almost entirely on post-hoc litigation in the federal courts – especially federal habeas litigation. A recently completed empirical study,1 conducted by one of the co-authors of this essay, has exposed the futility of habeas review today. In 99.99% of all state felony cases – excluding those cases in which the defendant is sentenced to death2 – the time, money, and energy spent on federal habeas litigation is wasted, generating virtually no benefits for anyone. Non-capital federal habeas has become, in essence, a lottery, funded at great expense by taxpayers, open almost exclusively to the small group of state inmates who are sentenced to the longest prison terms, and producing almost no marginal increase in the enforcement of constitutional rights.

Sunday, October 05, 2008

Not Just Election Politics

The following description of current state of affairs is accurate and not good, because the state of the nation is not good, which qualifies as the understatement of the year. It can only get better, we hope. From the editors at New Yorker Oct. 13: (read complete article at the link)

....The Republican disaster begins at home. Even before taking into account whatever fantastically expensive plan eventually emerges to help rescue the financial system from Wall Street’s long-running pyramid schemes, the economic and fiscal picture is bleak. During the Bush Administration, the national debt, now approaching ten trillion dollars, has nearly doubled. Next year’s federal budget is projected to run a half-trillion-dollar deficit, a precipitous fall from the seven-hundred-billion-dollar surplus that was projected when Bill Clinton left office. Private-sector job creation has been a sixth of what it was under President Clinton. Five million people have fallen into poverty. The number of Americans without health insurance has grown by seven million, while average premiums have nearly doubled. Meanwhile, the principal domestic achievement of the Bush Administration has been to shift the relative burden of taxation from the rich to the rest. For the top one per cent of us, the Bush tax cuts are worth, on average, about a thousand dollars a week; for the bottom fifth, about a dollar and a half. The unfairness will only increase if the painful, yet necessary, effort to rescue the credit markets ends up preventing the rescue of our health-care system, our environment, and our physical, educational, and industrial infrastructure.

At the same time, a hundred and fifty thousand American troops are in Iraq and thirty-three thousand are in Afghanistan. There is still disagreement about the wisdom of overthrowing Saddam Hussein and his horrific regime, but there is no longer the slightest doubt that the Bush Administration manipulated, bullied, and lied the American public into this war and then mismanaged its prosecution in nearly every aspect. The direct costs, besides an expenditure of more than six hundred billion dollars, have included the loss of more than four thousand Americans, the wounding of thirty thousand, the deaths of tens of thousands of Iraqis, and the displacement of four and a half million men, women, and children. Only now, after American forces have been fighting for a year longer than they did in the Second World War, is there a glimmer of hope that the conflict in Iraq has entered a stage of fragile stability.

The indirect costs, both of the war in particular and of the Administration’s unilateralist approach to foreign policy in general, have also been immense....

Friday, October 03, 2008

The VP Debate

My take on last night's VP debate:

She is a well indoctrinated republican who recited and mangled canned lines regardless of the question on the floor, not qualified to occupy the office.

He is a well qualified, experienced, connected, grounded U.S. Senator of long years.

You do the math: change? or more of the same?

Biggest Growth Industry?

The biggest growth industry amid the economic cliff hanging? Alan Dershowitz (writing in Newsweek) tells us, here.