NewMexiKen estimates that his 15,000 posts comprise about 2 million words.
I have made not nearly so many posts (this is post 3,645), although I tend to write longer ones than he does.
10 March 2009
Glimmers Of Hope In Financial Crisis
While there is still plenty of bad news to go around, a few glimmers of hope are popping up to indicate that we may be approaching the bottom economically, and starting to turn the economy around. In no particular order:
* Citibank, one of the big four American commercial banks, has turned a profit for the first two months of 2009, for the first time since the third quarter of 2007, which has helped restore confidence in the stock market.
This is good because the stock market yesterday hit its lowest point since September 12, 1996 (almost twelve and a half years ago), continuing the stock market's trend of falling at the same pace as it did during the first seventeen months of the Great Depression.
* Used car prices are starting to increase again, after bottoming out in the shadow of declining new car sales, declining new car prices, and reduced credit availability. Used cars continue to replace new car sales, however. Buyers are often making down payments and monthly payments similar in size to those used to purchase new cars, but are opting for used vehicles so that their loan terms are shorter and the total loan amount is smaller. February new car sales are the lowest that they have been since 1967 at 9.1 million vehicles sold.
* Relative normality is returning to the commercial paper market. Commercial paper is a short term loan from an operating business obtained for use in operations as working capital.
In good economic times, the difference in the interest rate on commercial paper from the most creditworthy firms and the less creditworthy firms is a fraction of a percentage point. The risk premium paid by less creditworthy firms rose to about one interest rate percentage point in the middle of 2007, when the subprime collapse started to rear its head. Then, starting around September 2008, the risk premium paid by less creditworthy firms trying to borrow short term funds spiked, eventually reaching 5.86 interest rate percentage points. Now, the risk premium paid by less creditworthy firms to obtain short term loans has dropped to one interest rate percentage point again, back to where they were when the subprime crisis started to catch the market's attentions but before the financial markets melted down last fall.
The TED spread, which measures the different in interest rates between a 90 day Treasury Bill, which is risk free in principle, and the interest rate on an identical loan from another commercial bank (in amounts beyond those which are FDIC insured), has also returned to relative normal levels. The risk premium for lending to a bank rather than the federal government now at 1.09%, about where it was before the height of the crash in the fall of 2008. "The peak was 4.63 on Oct 10th and a normal spread is around 0.5."
Thus, while big lenders are still more concerned about the risk of default in short term loans to large companies and banks than before the current downturn began, the panic stage is over for now.
* We are well into the coincident and even the lagging indicators of a recession at this point, and should look for rebounds in residential investment and personal consumption expenditures as leading indicators that a recession is ending.
* Citibank, one of the big four American commercial banks, has turned a profit for the first two months of 2009, for the first time since the third quarter of 2007, which has helped restore confidence in the stock market.
This is good because the stock market yesterday hit its lowest point since September 12, 1996 (almost twelve and a half years ago), continuing the stock market's trend of falling at the same pace as it did during the first seventeen months of the Great Depression.
* Used car prices are starting to increase again, after bottoming out in the shadow of declining new car sales, declining new car prices, and reduced credit availability. Used cars continue to replace new car sales, however. Buyers are often making down payments and monthly payments similar in size to those used to purchase new cars, but are opting for used vehicles so that their loan terms are shorter and the total loan amount is smaller. February new car sales are the lowest that they have been since 1967 at 9.1 million vehicles sold.
* Relative normality is returning to the commercial paper market. Commercial paper is a short term loan from an operating business obtained for use in operations as working capital.
In good economic times, the difference in the interest rate on commercial paper from the most creditworthy firms and the less creditworthy firms is a fraction of a percentage point. The risk premium paid by less creditworthy firms rose to about one interest rate percentage point in the middle of 2007, when the subprime collapse started to rear its head. Then, starting around September 2008, the risk premium paid by less creditworthy firms trying to borrow short term funds spiked, eventually reaching 5.86 interest rate percentage points. Now, the risk premium paid by less creditworthy firms to obtain short term loans has dropped to one interest rate percentage point again, back to where they were when the subprime crisis started to catch the market's attentions but before the financial markets melted down last fall.
The TED spread, which measures the different in interest rates between a 90 day Treasury Bill, which is risk free in principle, and the interest rate on an identical loan from another commercial bank (in amounts beyond those which are FDIC insured), has also returned to relative normal levels. The risk premium for lending to a bank rather than the federal government now at 1.09%, about where it was before the height of the crash in the fall of 2008. "The peak was 4.63 on Oct 10th and a normal spread is around 0.5."
Thus, while big lenders are still more concerned about the risk of default in short term loans to large companies and banks than before the current downturn began, the panic stage is over for now.
* We are well into the coincident and even the lagging indicators of a recession at this point, and should look for rebounds in residential investment and personal consumption expenditures as leading indicators that a recession is ending.
09 March 2009
Quote Of The Day
"States still exist. State courts are still in operation."
From here, discussing the U.S. Supreme Court decision in Vaden v. Discover Bank.
From here, discussing the U.S. Supreme Court decision in Vaden v. Discover Bank.
Zombie Alert
No, not these zombies, I mean hyper-expensive, previously killed defense procurement project zombies.
For example:
Production of the DDG-1000 was previously capped at two ships (from an originally planned seven) due to cost overruns and decreased military relevance. Existing destroyers cost about a third as much of as the DDG-1000, whose original primary justification was primarily to provide sea based fire support for Marines during amphibious invasions.
Also back from the dead, although less obnoxiously because of the implied promise that other Air Force programs would be cut to pay for them, is the F-22 fighter jet buy which was limited by Congress to 183 planes, but which is about to have 60 additional planes tacked on, in the face of rising prices, delayed deliveries and performance concerns about the F-35B.
The budget also had 15 C-17s not requested by the military added to it by Congress, and Congress has insisted on have a backup engine design for the F-35 at immense cost.
The issue isn't a partisan one. Democrats are at least as guilty as Republicans, driven by the desire to bring home pork for their districts. But, it is the single biggest source of bloat in the military budget.
For example:
[L]ast July, when the Navy's top brass decided to end production of their newest class of destroyers -- in response to 15 classified intelligence reports highlighting their vulnerability to a range of foreign missiles -- seven Democratic senators quickly joined four Republicans to demand a reversal. They threatened to cut all funding for surface combat ships in 2009.
Within a month, Gates and the Navy reversed course and endorsed production of a third DDG-1000 destroyer, at a cost of $2.7 billion.
Production of the DDG-1000 was previously capped at two ships (from an originally planned seven) due to cost overruns and decreased military relevance. Existing destroyers cost about a third as much of as the DDG-1000, whose original primary justification was primarily to provide sea based fire support for Marines during amphibious invasions.
Also back from the dead, although less obnoxiously because of the implied promise that other Air Force programs would be cut to pay for them, is the F-22 fighter jet buy which was limited by Congress to 183 planes, but which is about to have 60 additional planes tacked on, in the face of rising prices, delayed deliveries and performance concerns about the F-35B.
The budget also had 15 C-17s not requested by the military added to it by Congress, and Congress has insisted on have a backup engine design for the F-35 at immense cost.
The issue isn't a partisan one. Democrats are at least as guilty as Republicans, driven by the desire to bring home pork for their districts. But, it is the single biggest source of bloat in the military budget.
The State of Global Christianity
I made a couple of comments at Daily Kos on March 4, 2009, about the state of Christianity globally. I'm recapping them here, with some slight edits, for future reference. These impressions come from my readings in a wide variety of sources (both Christian periodicals, and various secular magazines and insights from other media) over the last half a decade or so. I said:
One of the big under reported stories of the last three decades or so is the incredible rise of African Christianity, which has a huge energy and distinctly African character (with Evangelical leaning roots) in areas where traditional beliefs and non-Islamic faiths were until recently predominant.
Denominations like Lutherans, Episcopalians and Roman Catholics that are fairly staid in the U.S. are dynamic centers of community organizing and community expression in much of Africa, almost to the point of being unrecognizable. These churches (and more denominationationally evangelical ones) are filling lots of gaps created by weak secular states and disease/war/famine ravaged civil societies.
Their image is generally positive, but the movement also has a militant tone as Christian churches and communities resist the Southward migration of Muslim communities as the Sahara and the Sahel extends South with a changing climate. To some extent, the Islamic-Christian divide in Africa parallels the Protestant-Catholic divide in Europe.
In Latin America, Evangelicals are part of an emerging small business oriented entrepreneurial middle class (and are disproportionately represented in U.S. immigrant communities). Evangelicals in Latin America vis-a-vis the dominant Roman Catholic Church also fill something of the role that the English dissenters did vis-a-vis the Anglican Church.
In China, Christianity, including Evangelical Christianity, sits within a context of a dissident community that scares the establishment to death. This is not entirely unfounded, because in South Korea, Evangelical Christians and (of all people) the YMCA were important players in anti-Japanese occupation political activity and have become part of mainstream Korean life.
In Japan, in contrast, Evangelical Christians are more of a weird novelty, viewed more similarly to how Americans view the Salvation Army, than how Americans view Evangelical Christians.
In Eastern Europe, feelings are mixed in the post-Communist atheistic world. Orthodox Christianity is the historical faith. Evangelicals are on one hand part of the post-Communist re-emergence of Christianity in Eastern Europe, and on the other are viewed as a threat to fragile Orthodox Christian institutions (or Roman Catholic in Poland) hobbled by two generations of suppression.
Evangelicals are rare and tend to be seen as ignorant rubes in most of Western Europe (a view that predated Bush), and tend to be associated with immigrant churches in the U.K. (where immigrants are disproportionately the ones still going to church).
Christians are particularly popular among the dalits (untouchables) for whom the faith provides a bridge out of the traditional Indian caste system that they have been screwed by.
One of the big under reported stories of the last three decades or so is the incredible rise of African Christianity, which has a huge energy and distinctly African character (with Evangelical leaning roots) in areas where traditional beliefs and non-Islamic faiths were until recently predominant.
Denominations like Lutherans, Episcopalians and Roman Catholics that are fairly staid in the U.S. are dynamic centers of community organizing and community expression in much of Africa, almost to the point of being unrecognizable. These churches (and more denominationationally evangelical ones) are filling lots of gaps created by weak secular states and disease/war/famine ravaged civil societies.
Their image is generally positive, but the movement also has a militant tone as Christian churches and communities resist the Southward migration of Muslim communities as the Sahara and the Sahel extends South with a changing climate. To some extent, the Islamic-Christian divide in Africa parallels the Protestant-Catholic divide in Europe.
In Latin America, Evangelicals are part of an emerging small business oriented entrepreneurial middle class (and are disproportionately represented in U.S. immigrant communities). Evangelicals in Latin America vis-a-vis the dominant Roman Catholic Church also fill something of the role that the English dissenters did vis-a-vis the Anglican Church.
In China, Christianity, including Evangelical Christianity, sits within a context of a dissident community that scares the establishment to death. This is not entirely unfounded, because in South Korea, Evangelical Christians and (of all people) the YMCA were important players in anti-Japanese occupation political activity and have become part of mainstream Korean life.
In Japan, in contrast, Evangelical Christians are more of a weird novelty, viewed more similarly to how Americans view the Salvation Army, than how Americans view Evangelical Christians.
In Eastern Europe, feelings are mixed in the post-Communist atheistic world. Orthodox Christianity is the historical faith. Evangelicals are on one hand part of the post-Communist re-emergence of Christianity in Eastern Europe, and on the other are viewed as a threat to fragile Orthodox Christian institutions (or Roman Catholic in Poland) hobbled by two generations of suppression.
Evangelicals are rare and tend to be seen as ignorant rubes in most of Western Europe (a view that predated Bush), and tend to be associated with immigrant churches in the U.K. (where immigrants are disproportionately the ones still going to church).
Christians are particularly popular among the dalits (untouchables) for whom the faith provides a bridge out of the traditional Indian caste system that they have been screwed by.
Religion Rebranding Continues
Another national religious affiliation survey has been completed, and it tells the same story as similar surveys over the last decade and a half.
The number of Catholics is holding steady, masking a decline in Catholic affiliation among white parishioners, particularly in the Northeast, made up for by increasing numbers of Latino Catholics in the Southwest. Mainline Christian denominations continue to make up a smaller share of the population as well. The number of people who identify as non-religious is up, again, but the vast majority of them believe in some higher power, although not necessarily a personal Christian God.
This part of the trend is a combination of the demographic decline of non-Hispanic whites in the overall U.S. population and of Christmas and Easter Christians viewing themselves increasingly as non-religious rather than mainline Christian or Catholic.
Meanwhile the percentage of Americans who identify as Pentecostal and Baptist is declining, while the percentage who identify simply as Christian is growing. This is largely a direct rebranding. Those who identify as "Christian" are largely evangelical leaning non-denominational Christians who are abandoning the failed brands of the Baptist church and Pentecostalism, without making a major change in beliefs.
The number of people who adhere to non-Christian religions has stabilized in the last seven years (at 10.4%).
The rebranding trend (in bipolar politics, this is called realignment) is probably not over, as non-religious identified people reach a critical mass in some areas, and as secular practice continues to surpass secular identification.
Wedding preferences are a powerful indicator of symbolic values, and suggest that the number of people who identify as non-religious may come close to doubling before the current rebranding era runs its course. Given the decline in the number of mainline Christians we have seen so far, the shoes that have yet to drop may come disproportionately from the ranks of Catholics and Evangelicals (although a disporportionate share of couples in these faiths are not getting married at all, despite their faith).
Personal moral and ethical values tend to be more stable than the identity of church denominations, just as political values tend to be more stable than the identity of political parties. So, for the most part, this significant rebranding of American religious identities is a lagging, rather than a leading indicator of changing American mores. But, the religious institutions that are denominations aren't entirely without impact.
Perhaps the most interesting question about the "rebranding" of American religious belief is how it will impact the character of the remaining predominantly white Catholic churches and mainline Christian churches in the U.S. Presumably, those who remain are the core believers in those faiths. Exit surveys during elections and surveys by groups like the Pew Center have shown that there are big ideological differences between those who attend church more often and are more engaged, and those who are not. While a fall off in attendance among less religious mainline Christians and Catholics may not change the character of routine church services very much, sense of community among those who remain, and the size of special events may change a great deal. Mainline Christians may not longer perceive themselves as an establishment majority, which may paradoxically make their own faith more rewarding as the return to a status of agents of change different from the mainstream culture.
White Roman Catholics may experience a similar phenomena in the Northeast, and in the Southwest and in states like Florida, may rethink their own identities as their parishes grow more diverse. Some white Catholics who are uncomfortable with these changes may leave to join liturgical protestant churches like the Episcopalian and Lutheran churches, in turn changing the character of those churches in a high church direction. Others white Catholics may embrace the diversity caused by an influx of Latino parishioners in a way that restores some of the cultural divide between Catholics and Protestants in the United States that had faded in favor of the Mainline-Evangelical split before the most recent wave of Latino immigration took hold.
The divide between mainline and Evangelical Christians continues to strengthen, those Protestant denominations that bridge it facing schism threats, and in some cases, like that of the Episcopal Church, bringing them to actual schism. (Denominations like the Presbyterians and Baptists experienced similar splits more than a century ago.) The result is to more firmly break the American people into enough cohesive chunks (Roman Catholic, Mainline Christian, African American Christian, Evangelical, Secular, Non-Christian), to leave everyone with a sense of being a religious minority. Again, ironically, this may continue the historical tendency of the United States to be religious than most of its peers, where a single religious denomination or set of practices is and has long been dominant.
("The report from the Program on Public Values at Trinity College surveyed 54,461 adults in English or Spanish from February through November of last year. It has a margin of error of plus or minus 0.5 percentage points." This sample is far larger than the usual political public opinion poll, which makes state and regional numbers valid, but is considerably smaller than Glenmary, a survey of people claimed by denominations conducted by a Roman Catholic affliated entity that has county level data.)
The number of Catholics is holding steady, masking a decline in Catholic affiliation among white parishioners, particularly in the Northeast, made up for by increasing numbers of Latino Catholics in the Southwest. Mainline Christian denominations continue to make up a smaller share of the population as well. The number of people who identify as non-religious is up, again, but the vast majority of them believe in some higher power, although not necessarily a personal Christian God.
This part of the trend is a combination of the demographic decline of non-Hispanic whites in the overall U.S. population and of Christmas and Easter Christians viewing themselves increasingly as non-religious rather than mainline Christian or Catholic.
Meanwhile the percentage of Americans who identify as Pentecostal and Baptist is declining, while the percentage who identify simply as Christian is growing. This is largely a direct rebranding. Those who identify as "Christian" are largely evangelical leaning non-denominational Christians who are abandoning the failed brands of the Baptist church and Pentecostalism, without making a major change in beliefs.
The number of people who adhere to non-Christian religions has stabilized in the last seven years (at 10.4%).
The rebranding trend (in bipolar politics, this is called realignment) is probably not over, as non-religious identified people reach a critical mass in some areas, and as secular practice continues to surpass secular identification.
Fifteen percent of respondents said they had no religion, an increase from 14.2 percent in 2001 and 8.2 percent in 1990, according to the American Religious Identification Survey.
Northern New England surpassed the Pacific Northwest as the least religious region, with Vermont reporting the highest share of those claiming no religion, at 34 percent. Still, the study found that the number of Americans with no religion rose in every state.
"No other religious bloc has kept such a pace in every state," the study's authors said. . . . Thirty percent of married couples did not have a religious wedding ceremony, and 27 percent of respondents said they did not want a religious funeral.
Wedding preferences are a powerful indicator of symbolic values, and suggest that the number of people who identify as non-religious may come close to doubling before the current rebranding era runs its course. Given the decline in the number of mainline Christians we have seen so far, the shoes that have yet to drop may come disproportionately from the ranks of Catholics and Evangelicals (although a disporportionate share of couples in these faiths are not getting married at all, despite their faith).
Personal moral and ethical values tend to be more stable than the identity of church denominations, just as political values tend to be more stable than the identity of political parties. So, for the most part, this significant rebranding of American religious identities is a lagging, rather than a leading indicator of changing American mores. But, the religious institutions that are denominations aren't entirely without impact.
Perhaps the most interesting question about the "rebranding" of American religious belief is how it will impact the character of the remaining predominantly white Catholic churches and mainline Christian churches in the U.S. Presumably, those who remain are the core believers in those faiths. Exit surveys during elections and surveys by groups like the Pew Center have shown that there are big ideological differences between those who attend church more often and are more engaged, and those who are not. While a fall off in attendance among less religious mainline Christians and Catholics may not change the character of routine church services very much, sense of community among those who remain, and the size of special events may change a great deal. Mainline Christians may not longer perceive themselves as an establishment majority, which may paradoxically make their own faith more rewarding as the return to a status of agents of change different from the mainstream culture.
White Roman Catholics may experience a similar phenomena in the Northeast, and in the Southwest and in states like Florida, may rethink their own identities as their parishes grow more diverse. Some white Catholics who are uncomfortable with these changes may leave to join liturgical protestant churches like the Episcopalian and Lutheran churches, in turn changing the character of those churches in a high church direction. Others white Catholics may embrace the diversity caused by an influx of Latino parishioners in a way that restores some of the cultural divide between Catholics and Protestants in the United States that had faded in favor of the Mainline-Evangelical split before the most recent wave of Latino immigration took hold.
The divide between mainline and Evangelical Christians continues to strengthen, those Protestant denominations that bridge it facing schism threats, and in some cases, like that of the Episcopal Church, bringing them to actual schism. (Denominations like the Presbyterians and Baptists experienced similar splits more than a century ago.) The result is to more firmly break the American people into enough cohesive chunks (Roman Catholic, Mainline Christian, African American Christian, Evangelical, Secular, Non-Christian), to leave everyone with a sense of being a religious minority. Again, ironically, this may continue the historical tendency of the United States to be religious than most of its peers, where a single religious denomination or set of practices is and has long been dominant.
("The report from the Program on Public Values at Trinity College surveyed 54,461 adults in English or Spanish from February through November of last year. It has a margin of error of plus or minus 0.5 percentage points." This sample is far larger than the usual political public opinion poll, which makes state and regional numbers valid, but is considerably smaller than Glenmary, a survey of people claimed by denominations conducted by a Roman Catholic affliated entity that has county level data.)
06 March 2009
Al-Marri Enemy Combatant Case Ends
The Al-Marri enemy combatant case is over, but the harm this case and the Jose Padilla case together did to the U.S. Constitution remains in U.S. law, probably indelibly for the foreseeable future. Together, these two cases, more than any others in the history of American jurisprudence, have impaired the right of average Americans to be free from incarceration without due process of law.
The judicial branch failed us when it had a chance to stop the gross abuse of Presidential power contrary to the U.S. Supreme Court's prior precedents that these cases represent. This was not for want of trying by some good judges. Padilla won his case before a federal court appellate panel in New York which was later ruled to lack jurisdiction by the U.S. Supreme Court (hence, vacating the ruling). Al-Marri won his case before a trial judge in a ruling on a motion, and then won by a 2-1 margin before federal appellate court panel that first heard his case on appeal, before losing in a 5-4 vote of the en banc United States Court of Appeal for the 4th Circuit -- all of those ruling are now vacated. The executive branch has seen partial defeats on multiple related issues (including the validity of the habeas corpus suspension in the Military Commission Act) before the U.S. Supreme Court.
The U.S. Supreme Court ruled as follows today:
From here.
Al-Marri, a U.S. citizen, was lawfully in the United States on a student visa, when he was arrested within the United States by law enforcement officers on federal criminal charges involving fraud. While incarcerated and facing criminal prosecution in a federal court, George W. Bush declared him an enemy combatant and detained him indefinitely in a military brig, on the basis of a "declaration" from a senior government official (which is heresay) which was in turn based upon other heresay and never subjected to an evidentiary hearing or test.
Al-Marri filed a petition for habeas corpus in federal district court. The matter was appealed to the 4th Circuit Court of Appeals where Al-Marri lost. Al-Marri sought review by the U.S. Supreme Court. Instead, President Obama cancelled the enemy combatant designation and transferred al-Marri back to the federal criminal justice system facing new charges.
Per SCOTUS Blog:
The U.S. Supreme Court's decision to vacate the 4th Circuit ruling prevents the 4th Circuit Al-Marri en banc decision from making further bad law (notably, the decision to vacate was made with government consent). But, the 4th Circuit ruled against U.S. citizen Jose Padilla on otherwise similar facts, after which Padilla was transferred to the criminal justice system in Florida, where he was convicted (that conviction is now on appeal), and in that case, the U.S. Supreme Court overruled a 4th Circuit decision to vacate its decision in that case which it felt had been obtained based upon misrepresentations by government lawyers in the case. By refusing to hear the Al-Marri case now, the U.S. Supreme Court had eliminated the most plausible means by which the Padilla precedent in the 4th Circuit could have been overruled.
Therefore, while it is good news that the bad precedent in the Al-Marri case has been vacated, the bad news is that the U.S. Supreme Court did not use Al-Marri's case to overturn the binding 4th Circuit Court of Appeals precedent that held that Jose Padilla's detention as an enemy combatant solely upon the say so of the President was legal.
Furthermore, the first time that the Padilla case arrived at the U.S. Supreme Court, it held that jurisdiction and venue in a habeas corpus petition is proper only in the state where the person is currently being detained. So, simply by virtue of detaining an alleged enemy combatant somewhere within the jurisdiction of the 4th Circuit Court of Appeals, a President can benefit from the 4th Circuit's binding precedent in the Padilla case, subject only to the argument that it has been implicitly overruled by subsequent U.S. Supreme Court decisions.
In short, it appears that the authority of a President to detain a person lawfully within the United States (including U.S. citizens), without trial, upon the basis of a hearsay within hearsay affidavit that the person is an enemy combatant, remains good law in the United States, at least within the limitations set forth in the 4th Circuit ruling in the Padilla case.
Jose Padilla and Al-Marri were the only known individuals detained as enemy combatants within the United States long enough for their cases to make it through the court system. Neither has received any direct remedy (even credit for time served) for the harm they suffered while detained as enemy combatants, and neither was released for any reason other than the grace of the sitting President. Padilla, however, may have received some leniency at sentencing in light of what he had already been through. Neither man, it appears are facing criminal charges in connection with matters they were charged with prior to being detained as enemy combatants. The matters described in the enemy combatant declaration were not brought up in the criminal trial of Jose Padilla.
It is not clear clear what evidence is implicated in the new Al-Marri criminal case. IIRC, the charges brought against him originally were dismissed with prejudice when he was detained as an enemy combatant. There are also statute of limitations, speedy trial, time served, fruit of the poisonous tree evidence, and other unusual issues present in the current criminal trial, although no issues of that type were sufficient to prevent the conviction at trial of Jose Padilla, on rather thin evidence.
Also, Al-Marri, unlike Padilla, does not have a long prior criminal record, so if he is convicted, the sentence pursuant to the sentencing guidelines is likely to be much shorter. However, unlike Jose Padilla, Al-Marri faces deportation after he serves his sentence if he is convicted, and due to the expiration of his student visa, if he is not convicted.
In the end, George W. Bush established that there is no timely judicial remedy for extra-judicial detention in the face of national security concerns, even for people lawfully within the U.S., and that the Congress is willing to go a long way to ratify Presidential action regarding detainees for fear of being called weak on terrorism. But, these episodes also established that there are large and powerful forces within the international and domestic legal and political communities that are extremely uncomfortable with this approach, so the policy never reached beyond these two test cases in the U.S., and the government was never willing to risk having the U.S. Supreme Court rule on the issue and potentially invalidate the policy.
(Popular fiction and some press reports, by the way, wrongly attribute these detentions by the President to the U.S.A. PATRIOT Act, enacted shortly after the 9-11 attacks, actually does address the issue of non-criminal detentions of suspected terrorists, but does so in a far more measured way that gives the President far less power.)
It also isn't at all obvious that the courts would have tolerated this enemy combatant policy if it had been used more widely, as the U.S. Supreme Court indicated in an usual written order accomanying the dismissal of the Padilla case and its refusal to vacate the 4th Circuit decision in that case.
It is not clear if this will be the last judicial word on the enemy combatant doctrine in our generation from U.S. Courts. While the habeas corpus petitions are moot, the issues could come up in the direct criminal appeal of the Jose Padilla criminal conviction (or a collateral attack on that conviction), in the Al-Marri criminal case, or in a civil rights lawsuit brought by either man to the extent that this is not barred by the Military Commissions Act which contains broad grants of immunity, on top of already broad sovereign immunity and state secrets doctrines. Further, the right of each man to bring a civil rights suit might be waived in connection with a plea bargain or negotiated resolution of a criminal appeal. Padilla's may be barred by the doctrines of res judicata or collateral estoppel in any civil suit brough by him by the 4th Circuit ruling in his habeas corpus case.
Congress could, of course, act to prohibit the President from detaining people lawfully within the U.S., absent from combat, and not accused of engaging in combat in the United States, like Padilla and Al-Marri. But, a similar statute already on the books was swept away in the face of arguments that the authorization for the use of military force (which was later enacted) permitted these detention, and that the President has the unilateral authority as a commander-in-chief, to do so.
The judicial branch failed us when it had a chance to stop the gross abuse of Presidential power contrary to the U.S. Supreme Court's prior precedents that these cases represent. This was not for want of trying by some good judges. Padilla won his case before a federal court appellate panel in New York which was later ruled to lack jurisdiction by the U.S. Supreme Court (hence, vacating the ruling). Al-Marri won his case before a trial judge in a ruling on a motion, and then won by a 2-1 margin before federal appellate court panel that first heard his case on appeal, before losing in a 5-4 vote of the en banc United States Court of Appeal for the 4th Circuit -- all of those ruling are now vacated. The executive branch has seen partial defeats on multiple related issues (including the validity of the habeas corpus suspension in the Military Commission Act) before the U.S. Supreme Court.
The U.S. Supreme Court ruled as follows today:
CERTIORARI -- SUMMARY DISPOSITION
08-368 AL-MARRI, ALI V. SPAGONE, DANIEL (08A755)
The application of the Acting Solicitor General respecting the custody and transfer of petitioner, seeking to release petitioner from military custody and transfer him to the custody of the Attorney General, presented to The Chief Justice and by him referred to the Court is granted. The judgment is vacated and the case is remanded to the United States Court of Appeals for the Fourth Circuit with instructions to dismiss the appeal as moot. See United States v. Munsingwear, Inc., 340 U.S. 36
(1950).
From here.
Al-Marri, a U.S. citizen, was lawfully in the United States on a student visa, when he was arrested within the United States by law enforcement officers on federal criminal charges involving fraud. While incarcerated and facing criminal prosecution in a federal court, George W. Bush declared him an enemy combatant and detained him indefinitely in a military brig, on the basis of a "declaration" from a senior government official (which is heresay) which was in turn based upon other heresay and never subjected to an evidentiary hearing or test.
Al-Marri filed a petition for habeas corpus in federal district court. The matter was appealed to the 4th Circuit Court of Appeals where Al-Marri lost. Al-Marri sought review by the U.S. Supreme Court. Instead, President Obama cancelled the enemy combatant designation and transferred al-Marri back to the federal criminal justice system facing new charges.
Per SCOTUS Blog:
With Friday’s order on Al-Marri, he will soon be taken into federal court for an initial appearance, to have the charges read to him. A grand jury in Illinois on Feb. 26 charged him with two counts of providing “material support and resources” to the Al Qaeda terrorist network. The maximum penalty on each charge is 15 years in prison. One day after the charges were filed, they were made public and President Obama ordered Al-Marri’s release by the military. He has been held at the U.S. Navy brig in Charleston, S.C., for more than five years without any charges, military or civilian. He was arrested at his home in Peoria, Ill., where he was attending Bradley University. The government later shifted him into military custody, saying he had come to the U.S. to take part in terrorism activities with a “sleeper cell” of Al Qaeda operatives.
The U.S. Supreme Court's decision to vacate the 4th Circuit ruling prevents the 4th Circuit Al-Marri en banc decision from making further bad law (notably, the decision to vacate was made with government consent). But, the 4th Circuit ruled against U.S. citizen Jose Padilla on otherwise similar facts, after which Padilla was transferred to the criminal justice system in Florida, where he was convicted (that conviction is now on appeal), and in that case, the U.S. Supreme Court overruled a 4th Circuit decision to vacate its decision in that case which it felt had been obtained based upon misrepresentations by government lawyers in the case. By refusing to hear the Al-Marri case now, the U.S. Supreme Court had eliminated the most plausible means by which the Padilla precedent in the 4th Circuit could have been overruled.
Therefore, while it is good news that the bad precedent in the Al-Marri case has been vacated, the bad news is that the U.S. Supreme Court did not use Al-Marri's case to overturn the binding 4th Circuit Court of Appeals precedent that held that Jose Padilla's detention as an enemy combatant solely upon the say so of the President was legal.
Furthermore, the first time that the Padilla case arrived at the U.S. Supreme Court, it held that jurisdiction and venue in a habeas corpus petition is proper only in the state where the person is currently being detained. So, simply by virtue of detaining an alleged enemy combatant somewhere within the jurisdiction of the 4th Circuit Court of Appeals, a President can benefit from the 4th Circuit's binding precedent in the Padilla case, subject only to the argument that it has been implicitly overruled by subsequent U.S. Supreme Court decisions.
In short, it appears that the authority of a President to detain a person lawfully within the United States (including U.S. citizens), without trial, upon the basis of a hearsay within hearsay affidavit that the person is an enemy combatant, remains good law in the United States, at least within the limitations set forth in the 4th Circuit ruling in the Padilla case.
Jose Padilla and Al-Marri were the only known individuals detained as enemy combatants within the United States long enough for their cases to make it through the court system. Neither has received any direct remedy (even credit for time served) for the harm they suffered while detained as enemy combatants, and neither was released for any reason other than the grace of the sitting President. Padilla, however, may have received some leniency at sentencing in light of what he had already been through. Neither man, it appears are facing criminal charges in connection with matters they were charged with prior to being detained as enemy combatants. The matters described in the enemy combatant declaration were not brought up in the criminal trial of Jose Padilla.
It is not clear clear what evidence is implicated in the new Al-Marri criminal case. IIRC, the charges brought against him originally were dismissed with prejudice when he was detained as an enemy combatant. There are also statute of limitations, speedy trial, time served, fruit of the poisonous tree evidence, and other unusual issues present in the current criminal trial, although no issues of that type were sufficient to prevent the conviction at trial of Jose Padilla, on rather thin evidence.
Also, Al-Marri, unlike Padilla, does not have a long prior criminal record, so if he is convicted, the sentence pursuant to the sentencing guidelines is likely to be much shorter. However, unlike Jose Padilla, Al-Marri faces deportation after he serves his sentence if he is convicted, and due to the expiration of his student visa, if he is not convicted.
In the end, George W. Bush established that there is no timely judicial remedy for extra-judicial detention in the face of national security concerns, even for people lawfully within the U.S., and that the Congress is willing to go a long way to ratify Presidential action regarding detainees for fear of being called weak on terrorism. But, these episodes also established that there are large and powerful forces within the international and domestic legal and political communities that are extremely uncomfortable with this approach, so the policy never reached beyond these two test cases in the U.S., and the government was never willing to risk having the U.S. Supreme Court rule on the issue and potentially invalidate the policy.
(Popular fiction and some press reports, by the way, wrongly attribute these detentions by the President to the U.S.A. PATRIOT Act, enacted shortly after the 9-11 attacks, actually does address the issue of non-criminal detentions of suspected terrorists, but does so in a far more measured way that gives the President far less power.)
It also isn't at all obvious that the courts would have tolerated this enemy combatant policy if it had been used more widely, as the U.S. Supreme Court indicated in an usual written order accomanying the dismissal of the Padilla case and its refusal to vacate the 4th Circuit decision in that case.
It is not clear if this will be the last judicial word on the enemy combatant doctrine in our generation from U.S. Courts. While the habeas corpus petitions are moot, the issues could come up in the direct criminal appeal of the Jose Padilla criminal conviction (or a collateral attack on that conviction), in the Al-Marri criminal case, or in a civil rights lawsuit brought by either man to the extent that this is not barred by the Military Commissions Act which contains broad grants of immunity, on top of already broad sovereign immunity and state secrets doctrines. Further, the right of each man to bring a civil rights suit might be waived in connection with a plea bargain or negotiated resolution of a criminal appeal. Padilla's may be barred by the doctrines of res judicata or collateral estoppel in any civil suit brough by him by the 4th Circuit ruling in his habeas corpus case.
Congress could, of course, act to prohibit the President from detaining people lawfully within the U.S., absent from combat, and not accused of engaging in combat in the United States, like Padilla and Al-Marri. But, a similar statute already on the books was swept away in the face of arguments that the authorization for the use of military force (which was later enacted) permitted these detention, and that the President has the unilateral authority as a commander-in-chief, to do so.
05 March 2009
Mark To Market Leaves Some Big Banks Insolvent
A bank is insolvent when it has a negative book value. Normally, book value is a quite accurate measure of a bank's value, but in this unusual times, there can be big disparities between the ordinary book value of bank assets (like loans) and bank liabilities (like deposits), and the value of the same assets and liabilities on a fair market value in what is known as mark-to-market accounting. These mark to market numbers are reported annually (and soon, quarterly) by publicly held banks.
Jonathan Weil at Bloomberg lays out the results for some of our nation's biggest banks:
This doesn't mean that run of the mill depositors have anything to worry about. The FDIC insures deposits up to $250,000 per bank, per category of account, and a surprisingly large share of the deposits at any given bank are uninsured.
This means that small depositors will lose nothing, even if the bank crashes, and that the FDIC will not incur long term losses, even if a bank collapses and the FDIC has to make good on small deposits, because the FDIC's claims have priority over other claims in bankruptcy. Even the banks that are most insolvent on a market to market basis aren't anywhere near to leaving the FDIC in the lurch in the long run.
But, we can expect to see the market value of insolvent banks fall dramatically in the next few days, and insolevency on a mark to market basis makes the case for nationalizing big banks much stronger. Until now, one of the main arguments for being stingy with troubled car companies, but generous with troubled banks, has been that the banks are profitable, solvent going concerns whose main problem is liquidity. This is not at all obvious now for many of the nation's largest banks.
Jonathan Weil at Bloomberg lays out the results for some of our nation's biggest banks:
Bank of America Corp. last week disclosed that its loans at the end of 2008 were worth $44.6 billion less than what its balance sheet said. Wells Fargo & Co. said its loans were worth $14.2 billion less than their book value. The spread at SunTrust Banks Inc. was $13.7 billion. . . .
Loans, for instance, typically are carried at historical cost, reduced only by management’s estimate of how much money the bank will lose on the loans it has made. Meanwhile, market values for many loans have tanked, along with the collateral backing them (if any), as more borrowers miss their payments and investors worry that the banks’ loss forecasts are too low.
Tangible common equity has become the capital benchmark of choice for investors . . . Tangible common starts with common shareholder equity. This amounts to a company’s net assets, minus preferred stock, which is left out because it acts like debt. Tangible common also excludes squishy intangible assets such as goodwill, which is a bookkeeping entry leftover from acquiring other companies, and mortgage-servicing rights, which reflect the value of future income from collecting and processing loan payments. . . .
Bank of America, for instance, had $35.8 billion of tangible common equity as of Dec. 31, before it completed its government-aided acquisition of Merrill Lynch & Co. That figure falls to negative $1.7 billion once it’s adjusted so that all financial assets and liabilities are measured at fair value, using the numbers BofA disclosed in its footnote. The fair-value version shows BofA needs lots more common equity -- badly.
Wells Fargo’s tangible common equity was $13.5 billion as of Dec. 31. On a fair-value basis, it was negative $133 million. That makes the bank’s $40.9 billion stock-market capitalization look awfully rich.
In total, eight of the 24 banks in the KBW Bank Index had negative tangible common equity on a fair-value basis, including SunTrust, KeyCorp, Fifth Third Bancorp, Huntington Bancshares Inc., Marshall & Ilsley Corp. and Regions Financial Corp.
Even with those fair-value tweaks, tangible common still might overstate a bank’s ability to absorb losses. It includes deferred-tax assets, which are pent-up losses that companies hope to use someday to cut their tax bills. The problem with those is that they’re valuable only to profitable companies that are paying income taxes. Wells Fargo’s capital would look even worse if its $13.9 billion of net deferred taxes were excluded. Same at Bank of America, which said it had $8.7 billion of the stuff. . . .
Seven banks in the KBW index said the fair values of their loans were higher than their carrying amounts: Bank of New York Mellon Corp., Northern Trust Corp., People’s United Financial Inc., Comerica Inc., BB&T Corp., Cullen/Frost Bankers Inc. and Commerce Bancshares Inc.
For all but one of those companies, Bank of New York, tangible common equity wound up being higher on a fair-value basis. The same was true at Citigroup Inc. because of lower fair-value figures for its debt.
JPMorgan Chase & Co.’s tangible common equity drops to $56.4 billion, or just 2.7 percent of tangible assets, from $71.9 billion if you plug in the bank’s fair-value figures. Mainly that’s because JPMorgan said its loans were worth $21.7 billion less than their carrying value as of Dec. 31.
This doesn't mean that run of the mill depositors have anything to worry about. The FDIC insures deposits up to $250,000 per bank, per category of account, and a surprisingly large share of the deposits at any given bank are uninsured.
This means that small depositors will lose nothing, even if the bank crashes, and that the FDIC will not incur long term losses, even if a bank collapses and the FDIC has to make good on small deposits, because the FDIC's claims have priority over other claims in bankruptcy. Even the banks that are most insolvent on a market to market basis aren't anywhere near to leaving the FDIC in the lurch in the long run.
But, we can expect to see the market value of insolvent banks fall dramatically in the next few days, and insolevency on a mark to market basis makes the case for nationalizing big banks much stronger. Until now, one of the main arguments for being stingy with troubled car companies, but generous with troubled banks, has been that the banks are profitable, solvent going concerns whose main problem is liquidity. This is not at all obvious now for many of the nation's largest banks.
Citibank v. Dead Woman
The Bankruptcy Prof Blog offers up a delightful example of the Dilbertesque incompetence of credit card call centers in the case of a women who died with a zero balance on her credit card.
One of the things that they taught us in law school was that the empirical evidence shows that even major institutions that extend credit to consumers are rarely organized to collect debts through the probate claims process, in part, because most collectible claims are paid voluntarily. They don't even seriously try to collect debts in this way. Apparently, this is still true.
For what it's worth, some of the relevant law includes the following:
1. The non-exempt assets of a decedent are subject to the valid debts of the decedent, submitted properly through the probate claims process. These claims take priority over inheritances, and certain kinds claims have priority over others. Strict time limits apply. If no probate estate is opened, the creditor must open one in the right window of time to collect a debt from the estate.
2. If the claims filing deadline expires, heirs can take their inheritance of property which was not collateral for a valid debt, free and clear of the decedent's valid debts.
3. Creditors who have taken as collateral property of a decedent, generally continue to have a right to enforce their legal rights in the collateral itself.
4. While a decedent's debts may reduce the amount of property available to inherit, if timely claims are made or liens on the decedent's property are in place, the decedent's next of kin have no legal obligation to pay the debts of a deceased relative in the absence of a guarantee of that debt in writing. This rule arguably has U.S. Constitutional stature. Indeed, it isn't even rude to not to pay a dead relative's debts.
5. In Colorado, at least, there is no legally enforceable duty for anyone to give even a know creditor notice of a decedent's death before the statute of limitations for filing claims expires.
6. Fair debt collection laws may create liability for a collection agency if it incorrectly asserts that a relative of a decedent is liable for a decedent's debt, and tries to collect a debt from the relative. Despite this fact, collection agencies frequently do claim that relatives of a decedent are liable for the decedent's debts and attempt, sometimes persistently, to collect dead people's debts from these relatives.
7. Most states prohibit the use of courts outside the probate court process to collect debts owed by dead people (other than enforcement of rights in collateral and written guarantee claims brought against guarantors of a deceased person). There is a probate exception to federal court diversity jurisdiction, so federal courts are also not an option.
As always, there are obscure exceptions to the general rules above (e.g. an insurer may be required to make good on a claim, even when the insured has died and the period for filing claims has expired).
I do not know the answer to the underlying merits question in the case of Citibank v. the Dead Woman linked above, which is whether a person who has a zero balance on their credit card can be held contractually liable for annual fees and late charges incurred after their death. Many contract claims survive death, but a credit card is a terminable at will contract whose renewal is implied from inaction. It is not obvious that this implication is proper when one of the parties no longer has the capacity to enter into contracts at the time of the renewal due to death.
One of the things that they taught us in law school was that the empirical evidence shows that even major institutions that extend credit to consumers are rarely organized to collect debts through the probate claims process, in part, because most collectible claims are paid voluntarily. They don't even seriously try to collect debts in this way. Apparently, this is still true.
For what it's worth, some of the relevant law includes the following:
1. The non-exempt assets of a decedent are subject to the valid debts of the decedent, submitted properly through the probate claims process. These claims take priority over inheritances, and certain kinds claims have priority over others. Strict time limits apply. If no probate estate is opened, the creditor must open one in the right window of time to collect a debt from the estate.
2. If the claims filing deadline expires, heirs can take their inheritance of property which was not collateral for a valid debt, free and clear of the decedent's valid debts.
3. Creditors who have taken as collateral property of a decedent, generally continue to have a right to enforce their legal rights in the collateral itself.
4. While a decedent's debts may reduce the amount of property available to inherit, if timely claims are made or liens on the decedent's property are in place, the decedent's next of kin have no legal obligation to pay the debts of a deceased relative in the absence of a guarantee of that debt in writing. This rule arguably has U.S. Constitutional stature. Indeed, it isn't even rude to not to pay a dead relative's debts.
5. In Colorado, at least, there is no legally enforceable duty for anyone to give even a know creditor notice of a decedent's death before the statute of limitations for filing claims expires.
6. Fair debt collection laws may create liability for a collection agency if it incorrectly asserts that a relative of a decedent is liable for a decedent's debt, and tries to collect a debt from the relative. Despite this fact, collection agencies frequently do claim that relatives of a decedent are liable for the decedent's debts and attempt, sometimes persistently, to collect dead people's debts from these relatives.
7. Most states prohibit the use of courts outside the probate court process to collect debts owed by dead people (other than enforcement of rights in collateral and written guarantee claims brought against guarantors of a deceased person). There is a probate exception to federal court diversity jurisdiction, so federal courts are also not an option.
As always, there are obscure exceptions to the general rules above (e.g. an insurer may be required to make good on a claim, even when the insured has died and the period for filing claims has expired).
I do not know the answer to the underlying merits question in the case of Citibank v. the Dead Woman linked above, which is whether a person who has a zero balance on their credit card can be held contractually liable for annual fees and late charges incurred after their death. Many contract claims survive death, but a credit card is a terminable at will contract whose renewal is implied from inaction. It is not obvious that this implication is proper when one of the parties no longer has the capacity to enter into contracts at the time of the renewal due to death.
Three Cheers For Owen Fiss
Owen Fiss is the author of one of my personally favorite law review articles of all time, entitled "Against Settlement," 93 Yale L.J. 1073 (1984). Fordham Law School is having an all day seminar on the article on April 3, twenty-five years later, featuring Owen Fiss and many other law faculty who have engaged with the arguments he made in that article.
I have long argued that the courts should be, and are, in the business of rights enforcement and not dispute resolution.
A useful list of classic law review articles from the Yale Law Journal appears here.
In 1984, Owen Fiss provocatively argued that the ADR movement overvalued settlement, that adjudication serves a purpose greater than dispute resolution, and that "[c]ivil litigation is an instrument for using state power to bring a recalcitrant reality closer to our chosen ideals." Against Settlement, 93 Yale L.J. 1073 (1984). What do we make of his arguments twenty-five years later? In the intervening years, the dispute resolution field has matured, public interest lawyering has changed, aggregate litigation has grown with comprehensive resolution as an expected endgame, and global perspectives on litigation have become more prominent, shedding new light on the arguments Fiss raised.
The Fordham Law Review has assembled a remarkable group – many of the nation’s leading voices in ADR, complex litigation, and public interest lawyering – for a one-day symposium to reconsider questions of settlement and adjudication in civil litigation.
I have long argued that the courts should be, and are, in the business of rights enforcement and not dispute resolution.
A useful list of classic law review articles from the Yale Law Journal appears here.
04 March 2009
Four Banks Rule Them All
Paul Krugman aptly notes that despite the immense size of the U.S. economy, our banking industry is remarkably concentrated.
Two of those banks trace their roots to New York City, the other two trace their roots to San Francisco.
I suspect that the top ten commercial banks in the U.S. would hold close to three-quarters of the assets of U.S. commercial banks.
Krugman notes that given the great concentration of banking assets, nationalizing banks on the Swedish model is less far fetched than it might appear. He doesn't mention the fact, but Citigroup's shareholders have almost been wiped out already. And, there may be no party other than the federal government big enough to acquire one of these huge institutions right now in the financial markets, other than the Federal Reserve.
This high level of concentration also helps explain some remarkable charts showing unemployment rates by county, that NewMexiKen called attention to in a post.
Unemployment rates, at the county level, and even at the state level, vary a great deal. Michigan and the better part of the territory of the 9th Circuit Court of Appeal have more than 10% unemployment rates with patches of unemployment rates of 15% or worse. The Great Plains are virtually unscathed with much of the area having unemployment rates under 4%. The Great Recession will not include a dust bowl.
A large share of the worst hit counties are either counties with manufacturing oriented economies, or counties which had housing bubbles. Interestingly, there are only a handful out of 3,000+ counties in the nation which are in both categories. Grain and coal oriented county economies were virtually untouched, and financial centers have suffered remarkably low employment impacts considering that big financial institutions are believed to be at the heart of the current crisis. For example, upstate New York has been harder hit than New York City.
Colorado has just one county (Mesa County, home to Grand Junction, Colorado which is a regional center on the Western Slope that serves the oil and gas economy) which saw housing prices rise to at least 175% of 2000 levels (Denver's housing price increase was has been roughly equal to the rate of inflation in that time period), and has not a single county where at least 25% of earnings from 1998-2000 came from manufacturing. Not surprisingly then, Colorado has been one of the states least hard hit by the financial crisis.
Heuristically, it is reasonable to believe that the collapse of the housing bubble, which took place almost entirely on the Pacific coastline, the Atlantic Coastline and Florida's Gulf Coast, created unemployment by killing the local construction industry and also led to a national shortage of credit. This national shortage of credit, in turn, reduced demand for manufactured products, which caused unemployment in places that manufacture goods.
Housing bubble collapses largely continued to a handful of states have been able to dry up credit nationally, because so much available credit was controlled by a small number of big investment and commercial banks. In a less centralized economy, we would presume that California and Florida banks would be going under left and right, while Nebraska and Colorado banks would be sitting pretty, minimizing the national impact of what are really localized real estate problems.
The other thing that the maps show which is surprising is the geography of the American manufacturing economy. Everybody knows that the "rust belt" extending from Pittsburgh to a swath of territory more or less along the Great Lakes is a hub of American manufacturing. What is less widely known is that the South now has a "new rust belt" made up mostly of rural counties of the South's Hill Country. Manufacturing is a relatively unimportant part of the vast majority of counties West of the Mississippi.
The limited unemployment impact in financial centers may flow from the fact that a fairly small number of people generate most of the wealth in these cities. Something like one in seven employees in New York City works in finance, but that sector generates a grossly disproportionate share of the city's income. And, many laid off financial workers are not unemployable, even though the most valuable application of their knowledge, skills and abilities is in finance. A lawyer who used to do billion dollar merger and acquisition deals can do divorces if he must. Stock brokers are capable of selling refrigerators too. In contrast, many construction workers and factory workers have few alternatives when work dries up in their ordinary occupation.
If you are a state legislator in Tennessee or Mississippi or Alabama, each of which has a vibrant manufacturing economy and mostly sensible, stable housing prices, it has to be infuriating that your state's economy is in the tank as a consequence of bad mortgage lending practices in California, Nevada, Arizona and Florida which are completely beyond your control, largely as a result of decisions made by banks being run in New York City and San Francisco.
The four biggest US commercial banks – JPMorgan Chase, Citigroup, Bank of America and Wells Fargo – possess 64 per cent of the assets of US commercial banks[.]
Two of those banks trace their roots to New York City, the other two trace their roots to San Francisco.
I suspect that the top ten commercial banks in the U.S. would hold close to three-quarters of the assets of U.S. commercial banks.
Krugman notes that given the great concentration of banking assets, nationalizing banks on the Swedish model is less far fetched than it might appear. He doesn't mention the fact, but Citigroup's shareholders have almost been wiped out already. And, there may be no party other than the federal government big enough to acquire one of these huge institutions right now in the financial markets, other than the Federal Reserve.
This high level of concentration also helps explain some remarkable charts showing unemployment rates by county, that NewMexiKen called attention to in a post.
Unemployment rates, at the county level, and even at the state level, vary a great deal. Michigan and the better part of the territory of the 9th Circuit Court of Appeal have more than 10% unemployment rates with patches of unemployment rates of 15% or worse. The Great Plains are virtually unscathed with much of the area having unemployment rates under 4%. The Great Recession will not include a dust bowl.
A large share of the worst hit counties are either counties with manufacturing oriented economies, or counties which had housing bubbles. Interestingly, there are only a handful out of 3,000+ counties in the nation which are in both categories. Grain and coal oriented county economies were virtually untouched, and financial centers have suffered remarkably low employment impacts considering that big financial institutions are believed to be at the heart of the current crisis. For example, upstate New York has been harder hit than New York City.
Colorado has just one county (Mesa County, home to Grand Junction, Colorado which is a regional center on the Western Slope that serves the oil and gas economy) which saw housing prices rise to at least 175% of 2000 levels (Denver's housing price increase was has been roughly equal to the rate of inflation in that time period), and has not a single county where at least 25% of earnings from 1998-2000 came from manufacturing. Not surprisingly then, Colorado has been one of the states least hard hit by the financial crisis.
Heuristically, it is reasonable to believe that the collapse of the housing bubble, which took place almost entirely on the Pacific coastline, the Atlantic Coastline and Florida's Gulf Coast, created unemployment by killing the local construction industry and also led to a national shortage of credit. This national shortage of credit, in turn, reduced demand for manufactured products, which caused unemployment in places that manufacture goods.
Housing bubble collapses largely continued to a handful of states have been able to dry up credit nationally, because so much available credit was controlled by a small number of big investment and commercial banks. In a less centralized economy, we would presume that California and Florida banks would be going under left and right, while Nebraska and Colorado banks would be sitting pretty, minimizing the national impact of what are really localized real estate problems.
The other thing that the maps show which is surprising is the geography of the American manufacturing economy. Everybody knows that the "rust belt" extending from Pittsburgh to a swath of territory more or less along the Great Lakes is a hub of American manufacturing. What is less widely known is that the South now has a "new rust belt" made up mostly of rural counties of the South's Hill Country. Manufacturing is a relatively unimportant part of the vast majority of counties West of the Mississippi.
The limited unemployment impact in financial centers may flow from the fact that a fairly small number of people generate most of the wealth in these cities. Something like one in seven employees in New York City works in finance, but that sector generates a grossly disproportionate share of the city's income. And, many laid off financial workers are not unemployable, even though the most valuable application of their knowledge, skills and abilities is in finance. A lawyer who used to do billion dollar merger and acquisition deals can do divorces if he must. Stock brokers are capable of selling refrigerators too. In contrast, many construction workers and factory workers have few alternatives when work dries up in their ordinary occupation.
If you are a state legislator in Tennessee or Mississippi or Alabama, each of which has a vibrant manufacturing economy and mostly sensible, stable housing prices, it has to be infuriating that your state's economy is in the tank as a consequence of bad mortgage lending practices in California, Nevada, Arizona and Florida which are completely beyond your control, largely as a result of decisions made by banks being run in New York City and San Francisco.
Best Quote From Yesterday
Im wondering if Franz Kafka designed the mycigna.com website
Via Steam Powered Twitter.
Self Censorship
While it may sometimes seem like it, I do not actually simply pour everything I think or have to say of general interest into this blog. There is actually considerable self censorship that goes into producing this little bit of the blogosphere.
As the sidebar notes, I am a Denver based lawyer. This means that I have substantial ethical obligations to keep information about my clients confidential (Colorado Rule of Professional Conduct 1.6), even if its is not legally privileged from subpoenas and discovery, and even if this information may be obtainable from another source. As a lawyer, I am also forbidden from improperly influencing or disrupting the courts (Colorado Rule of Professional Conduct 3.5), I am limited in the extrajudicial statements I can make about litigation (Colorado Rule of Professional Conduct 3.6), I am prohibited from defaming judicial officials (Colorado Rule of Professional Conduct 8.2), and I am subject to the lawyer's equivalent of the "officer and a gentleman" rule in military justice (Colorado Rule of Professional Conduct 8.4). I am permitted to engage in law reform activities that may impact my clients, but I am obligated to disclose that my advocacy benefits a client (although I need not disclose which client) if it does so (Colorado Rule of Professional Conduct 6.4).
In addition to my obligations of a lawyer, I avoid mentioning my children or spouse by name without a very good reason for doing so, in order to avoid creating a paper trail the could lead to identity theft and to avoid embarrassment. And, I also make it my practice not to disclose inside political information I am privy to, before it is ripe to do so or available from third party sources.
I also feel an obligation towards my readers to make posts that are not hedged in unacknowledged material ways by ethical concerns.
On the other hand, there are some matters which others self censor, such as the names of bad actors in the political and legal system, and perpetrators of business misconduct, which I make a point of including when I have a factual basis to support my statements. This utilizes the wonders of Internet search engines to leverage my contributions to creating accountability in our society, even though it means that my exposure to litigation may be higher (a risk that is particularly high for a blogger who uses his real name as I do).
All of this means that this blog is self censored quite a bit.
For example, it is my policy not to comment non-factually by name on particular sitting or nominated trial judges whom I have any reasonable probability of practicing before (although the gloves come off when a judge leaves office in disreputable circumstances, and factual background on efforts to remove these judges which are public knowledge are not off limits).
Another important category of issues that I do not post upon are disputed legal issues upon which I am now taking a position, or I am likely to in the immediate future take a position, in the course of representing a client. For example, if I were writing a brief to the Colorado Court of Appeals on the legal doctrine collateral estoppel, I wouldn't blog on a case I saw on that issue at How Appealing. These issues shift from month to month, and sometimes I will reference a non-controversial part of an issue (e.g. federal courts are courts of limited jurisdiction) in a larger post, even if I am currently litigating a controversial part of that issue (e.g. how the amount in controversy is calculated for federal jurisdiction purposes in a class action lawsuit).
So, if some issue drops off the blog for a while, and others sudden start appearing again, this may have something to do with my changing practice, or may simply be a matter of shifting interest and news coverage. Like the C.I.A., I will not confirm or deny my reasons for not blogging on particular topic in individual cases.
As the sidebar notes, I am a Denver based lawyer. This means that I have substantial ethical obligations to keep information about my clients confidential (Colorado Rule of Professional Conduct 1.6), even if its is not legally privileged from subpoenas and discovery, and even if this information may be obtainable from another source. As a lawyer, I am also forbidden from improperly influencing or disrupting the courts (Colorado Rule of Professional Conduct 3.5), I am limited in the extrajudicial statements I can make about litigation (Colorado Rule of Professional Conduct 3.6), I am prohibited from defaming judicial officials (Colorado Rule of Professional Conduct 8.2), and I am subject to the lawyer's equivalent of the "officer and a gentleman" rule in military justice (Colorado Rule of Professional Conduct 8.4). I am permitted to engage in law reform activities that may impact my clients, but I am obligated to disclose that my advocacy benefits a client (although I need not disclose which client) if it does so (Colorado Rule of Professional Conduct 6.4).
In addition to my obligations of a lawyer, I avoid mentioning my children or spouse by name without a very good reason for doing so, in order to avoid creating a paper trail the could lead to identity theft and to avoid embarrassment. And, I also make it my practice not to disclose inside political information I am privy to, before it is ripe to do so or available from third party sources.
I also feel an obligation towards my readers to make posts that are not hedged in unacknowledged material ways by ethical concerns.
On the other hand, there are some matters which others self censor, such as the names of bad actors in the political and legal system, and perpetrators of business misconduct, which I make a point of including when I have a factual basis to support my statements. This utilizes the wonders of Internet search engines to leverage my contributions to creating accountability in our society, even though it means that my exposure to litigation may be higher (a risk that is particularly high for a blogger who uses his real name as I do).
All of this means that this blog is self censored quite a bit.
For example, it is my policy not to comment non-factually by name on particular sitting or nominated trial judges whom I have any reasonable probability of practicing before (although the gloves come off when a judge leaves office in disreputable circumstances, and factual background on efforts to remove these judges which are public knowledge are not off limits).
Another important category of issues that I do not post upon are disputed legal issues upon which I am now taking a position, or I am likely to in the immediate future take a position, in the course of representing a client. For example, if I were writing a brief to the Colorado Court of Appeals on the legal doctrine collateral estoppel, I wouldn't blog on a case I saw on that issue at How Appealing. These issues shift from month to month, and sometimes I will reference a non-controversial part of an issue (e.g. federal courts are courts of limited jurisdiction) in a larger post, even if I am currently litigating a controversial part of that issue (e.g. how the amount in controversy is calculated for federal jurisdiction purposes in a class action lawsuit).
So, if some issue drops off the blog for a while, and others sudden start appearing again, this may have something to do with my changing practice, or may simply be a matter of shifting interest and news coverage. Like the C.I.A., I will not confirm or deny my reasons for not blogging on particular topic in individual cases.
Is Iraq A Powder Keg?
Thomas Ricks, a guest commentator on NPR today and author of the book "The Gamble," argued that if U.S. troops leave today that there would be genocide in Iraq. I think he's wrong.
In my view the decline in violence in Iraq is not mostly consequence of a troop surge. It is a consequence of the segregation of Iraq. In most of Iraq, members of minority ethnic groups of fled either abroad or to other regions of Iraq where they are in the majority. Where there isn't segregation at the provincial level, it has happened at the neighborhood level, with minority neighborhoods becoming fortified outposts on the model of Cold War Berlin. Violence has declined because militias have run out of targets in places where they have power. While a Warsaw Ghetto scenario is possible in parts of Baghdad, the civilian leaders in Iraq so no inclination to pick that kind of fight now that their power is secure.
There are a couple of provinces that are still in flux, but provincial elections have laid the ground work for civilian rule, which nationally looks likely to be an Iran friendly regime. The national government, moreover, looks like it is in a position to impose its will upon the disputed regions.
At this point, even a dramatic event, like the break up of Iraq into Kurdish, Shiite and Sunni mini-states wouldn't necessary disrupt regional security very much. The Kurds are de facto independent and have been since before the U.S. invaded in 2003 anyway. Non-Kurdish Iraq doesn't have enough military might to be a threat to its neighbors. Iran can secure control politically, so it has little incentive to do so with violence. Kuwait and Saudi Arabia rely upon the goodwill of the Americans too much to move in militarily in Iraq (for no obvious gain). If Syria intervenes militarily in the Sunni dominated Anbar and Ninevah provinces of Iraq, as it has in Lebanon, and as its huge Iraqi refugee population may encourage it to do, local authorities may welcome the invaders with flowers and heart felt cheers.
Removing American troops, who comprise the last remnants of occupying foreign soldiers, eliminates one of the most important remaining flash points that would motivate violent factions. Even if more foreign troops are needed to maintain stability, it isn't at all obvious that U.S. troops are good candidates for the role.
In my view the decline in violence in Iraq is not mostly consequence of a troop surge. It is a consequence of the segregation of Iraq. In most of Iraq, members of minority ethnic groups of fled either abroad or to other regions of Iraq where they are in the majority. Where there isn't segregation at the provincial level, it has happened at the neighborhood level, with minority neighborhoods becoming fortified outposts on the model of Cold War Berlin. Violence has declined because militias have run out of targets in places where they have power. While a Warsaw Ghetto scenario is possible in parts of Baghdad, the civilian leaders in Iraq so no inclination to pick that kind of fight now that their power is secure.
There are a couple of provinces that are still in flux, but provincial elections have laid the ground work for civilian rule, which nationally looks likely to be an Iran friendly regime. The national government, moreover, looks like it is in a position to impose its will upon the disputed regions.
At this point, even a dramatic event, like the break up of Iraq into Kurdish, Shiite and Sunni mini-states wouldn't necessary disrupt regional security very much. The Kurds are de facto independent and have been since before the U.S. invaded in 2003 anyway. Non-Kurdish Iraq doesn't have enough military might to be a threat to its neighbors. Iran can secure control politically, so it has little incentive to do so with violence. Kuwait and Saudi Arabia rely upon the goodwill of the Americans too much to move in militarily in Iraq (for no obvious gain). If Syria intervenes militarily in the Sunni dominated Anbar and Ninevah provinces of Iraq, as it has in Lebanon, and as its huge Iraqi refugee population may encourage it to do, local authorities may welcome the invaders with flowers and heart felt cheers.
Removing American troops, who comprise the last remnants of occupying foreign soldiers, eliminates one of the most important remaining flash points that would motivate violent factions. Even if more foreign troops are needed to maintain stability, it isn't at all obvious that U.S. troops are good candidates for the role.
03 March 2009
No Civil Rights Liability For Bounty Hunters
The U.S. Court of Appeals for the 10th Circuit has unanimously held in a 3-0 decision on a question of first impression in the 10th Circuit (which includes Colorado) that bounty hunters are not "state actors" and hence do not have liability for violations of civil rights.
I'm not terribly surprised by the result in this case arising out of Oklahoma. Existing precedents hold that repo men are not state actors, and that a civil lawsuit or non-judicial self-help remedy to enforce private rights (e.g. in a foreclosure or eviction) also does not constitute state action. Similarly, courts have held that private prison operators are not entitled to sovereign immunity.
Still, it was not a foregone conclusion. Temporary law enforcement employees, even if paid on a contract basis, typically are state actors and that would be another fair way to characterize a bounty hunter's status. Bounty hunters are generally only authorized to apprehend and transport people who were previously arrested by law enforcement and released on bond pending criminal charges to arrest a fugitive from justice, so their work is more intimately connected to other state actors like law enforcement officials, than is your typical repo man, who can repossess your car in the absence of any court involvement for the exclusive benefit of a private bank. For example, the bond the bounty hunter receives is set by a government official, while the fee of a repo man is agreed upon between the bank and the repo man.
Previous 10th Circuit case law had held that "in some cases a search by a private citizen may be transformed into a governmental search implicating the Fourth Amendment if the government coerces, dominates or directs the actions of a private person conducting the search or seizure.” United States v. Smythe, 84 F.3d 1240, 1242(10th Cir. 1996). But, a bumbling private citizen acting as a Nancy Drew without government direction or involvement is not held to the constitutional standards of police officers and other state actors. For example, the 10th Circuit noted that in a prior federal appellate court case (citations and internal quotations omitted):
The 10th Circuit found the symbiotic relationship between law enforcement and bounty hunters, the heavy state regulation of the industry, and the arrest powers afforded to bounty hunters unpersuasive.
The flip side of not being a state actor is the bounty hunters receive only the governmental immunity that the legislature chooses to provide to them. They do not benefit from pure sovereign immunity. In practice, bounty hunters actually do have considerable immunity from suit under state law, at least from the people they are empowered to bring in, but a legislative reaction to one high profile case could change that result in any given state. Bounty hunting has the potential to be a high profile partisan political issues that divides states in the same way that slavery, abortion and gun rights do. Indeed, the Fugitive Slave Law, which was one of the tension points that gave rise to the U.S. Civil War concerned the interstate authority of bounty hunters in a situation with important civil rights implications.
In the case decided, the 10th Circuit held that bounty hunters who later testify as witnesses in a criminal case arising from new facts discovered while making a bounty hunter seizure of a fugitive are not bound by the 4th Amendment's protections against warrantless searches and seizures.
In the narrow case of bounty hunters apprehending fugitives who have been previously arrested and released on bail, the parade of horribles isn't too horrible. While the bounty hunters themselves didn't have a warrant for the arrest of the person they seized, such a warrant issues as a matter of course when someone jumps bail and becomes a fugitive for justice. If the bounty hunters in this situation had been law enforcement agents, they would have been acting on the basis of a court issued arrest warrant, and would have been entitled to rely upon the "plain view" doctrine to seize and testify regarding evidence of new criminal offenses observed during the course of the arrest. The conditions that go with a release on bond pending trial may even have waived (or could be designed to waive) some of the formal elements of a fugitive's Miranda rights, by providing a pre-emptive advisement of rights.
But, the worry is that the reasoning of this case could be extended beyond its narrow scope to allow bounty hunters or other independent contractors hired by government agencies to do work that would be state action subject to the U.S. Constitution if done by employees to do what the employees could not do. For example, if the C.I.A. puts out a bounty on a suspected terrorist, and a bounty hunter seizes and interrogates that person with torture in the U.S., is everyone involved immune to suits for violations of the United States Constitution? What if it was not the C.I.A., but the routine practice of police departments across the county, to impose bounties for people suspected of crimes before any arrest had taken place and before any arrest warrant had been issued? Arresting suspects while the arresting officers are actively looking for the suspects turns out to be a surprisingly small share of police department activity anyway, and is often conducted by members of a separate department of the police force (often detectives or SWAT teams). Police departments, in principle, could return to the stereotypical Old West system of wanted posters and bounties, outsourcing that part of their work, probably on a cost effective basis, at the expense of the rights of criminal defendants.
It isn't obvious that any different reasoning would apply in these kinds of cases, if the relationship was sufficiently hands off. Nothing in the U.S. Constitution requires that the government make illegal conduct by private actors that would be illegal if undertaken by a government employee (although some state constitutions do have a generalized constitutional right to sue private parties for damages). Indeed, if a state passed a law legalizing extra-judicial "honor killings," the law would probably not be unconstitutional, even though it would probably violate U.S. human rights treaty obligations (although not necessary judicially enforceable treaty obligations). But, this kind of lawless vigilante justice, which Americans were re-introduced to by military contractors in Afghanistan and Iraq (indeed unreliable bounty hunters are at the core of much of the dispute over the detainees at Guantanamo Bay, Cuba), is not something that would be good for our Republic.
I'm not terribly surprised by the result in this case arising out of Oklahoma. Existing precedents hold that repo men are not state actors, and that a civil lawsuit or non-judicial self-help remedy to enforce private rights (e.g. in a foreclosure or eviction) also does not constitute state action. Similarly, courts have held that private prison operators are not entitled to sovereign immunity.
Still, it was not a foregone conclusion. Temporary law enforcement employees, even if paid on a contract basis, typically are state actors and that would be another fair way to characterize a bounty hunter's status. Bounty hunters are generally only authorized to apprehend and transport people who were previously arrested by law enforcement and released on bond pending criminal charges to arrest a fugitive from justice, so their work is more intimately connected to other state actors like law enforcement officials, than is your typical repo man, who can repossess your car in the absence of any court involvement for the exclusive benefit of a private bank. For example, the bond the bounty hunter receives is set by a government official, while the fee of a repo man is agreed upon between the bank and the repo man.
Previous 10th Circuit case law had held that "in some cases a search by a private citizen may be transformed into a governmental search implicating the Fourth Amendment if the government coerces, dominates or directs the actions of a private person conducting the search or seizure.” United States v. Smythe, 84 F.3d 1240, 1242(10th Cir. 1996). But, a bumbling private citizen acting as a Nancy Drew without government direction or involvement is not held to the constitutional standards of police officers and other state actors. For example, the 10th Circuit noted that in a prior federal appellate court case (citations and internal quotations omitted):
{A] bus station manager searched a box he feared contained dangerous materials after he called the police and the responding officer advised him that he could legally open the box. This did not constitute a government search. Noting that the police in no way instigated, orchestrated or encouraged the search, we held that if a government agent is involved merely as a witness, the requisite government action implicating Fourth Amendment concerns is absent.
The 10th Circuit found the symbiotic relationship between law enforcement and bounty hunters, the heavy state regulation of the industry, and the arrest powers afforded to bounty hunters unpersuasive.
The flip side of not being a state actor is the bounty hunters receive only the governmental immunity that the legislature chooses to provide to them. They do not benefit from pure sovereign immunity. In practice, bounty hunters actually do have considerable immunity from suit under state law, at least from the people they are empowered to bring in, but a legislative reaction to one high profile case could change that result in any given state. Bounty hunting has the potential to be a high profile partisan political issues that divides states in the same way that slavery, abortion and gun rights do. Indeed, the Fugitive Slave Law, which was one of the tension points that gave rise to the U.S. Civil War concerned the interstate authority of bounty hunters in a situation with important civil rights implications.
In the case decided, the 10th Circuit held that bounty hunters who later testify as witnesses in a criminal case arising from new facts discovered while making a bounty hunter seizure of a fugitive are not bound by the 4th Amendment's protections against warrantless searches and seizures.
In the narrow case of bounty hunters apprehending fugitives who have been previously arrested and released on bail, the parade of horribles isn't too horrible. While the bounty hunters themselves didn't have a warrant for the arrest of the person they seized, such a warrant issues as a matter of course when someone jumps bail and becomes a fugitive for justice. If the bounty hunters in this situation had been law enforcement agents, they would have been acting on the basis of a court issued arrest warrant, and would have been entitled to rely upon the "plain view" doctrine to seize and testify regarding evidence of new criminal offenses observed during the course of the arrest. The conditions that go with a release on bond pending trial may even have waived (or could be designed to waive) some of the formal elements of a fugitive's Miranda rights, by providing a pre-emptive advisement of rights.
But, the worry is that the reasoning of this case could be extended beyond its narrow scope to allow bounty hunters or other independent contractors hired by government agencies to do work that would be state action subject to the U.S. Constitution if done by employees to do what the employees could not do. For example, if the C.I.A. puts out a bounty on a suspected terrorist, and a bounty hunter seizes and interrogates that person with torture in the U.S., is everyone involved immune to suits for violations of the United States Constitution? What if it was not the C.I.A., but the routine practice of police departments across the county, to impose bounties for people suspected of crimes before any arrest had taken place and before any arrest warrant had been issued? Arresting suspects while the arresting officers are actively looking for the suspects turns out to be a surprisingly small share of police department activity anyway, and is often conducted by members of a separate department of the police force (often detectives or SWAT teams). Police departments, in principle, could return to the stereotypical Old West system of wanted posters and bounties, outsourcing that part of their work, probably on a cost effective basis, at the expense of the rights of criminal defendants.
It isn't obvious that any different reasoning would apply in these kinds of cases, if the relationship was sufficiently hands off. Nothing in the U.S. Constitution requires that the government make illegal conduct by private actors that would be illegal if undertaken by a government employee (although some state constitutions do have a generalized constitutional right to sue private parties for damages). Indeed, if a state passed a law legalizing extra-judicial "honor killings," the law would probably not be unconstitutional, even though it would probably violate U.S. human rights treaty obligations (although not necessary judicially enforceable treaty obligations). But, this kind of lawless vigilante justice, which Americans were re-introduced to by military contractors in Afghanistan and Iraq (indeed unreliable bounty hunters are at the core of much of the dispute over the detainees at Guantanamo Bay, Cuba), is not something that would be good for our Republic.
Worst Law Firm Layoff Ever
Not all is well in law land:
The 2300 attorney law firm has a headquarters in Los Angeles and a total of twenty-eight offices. The firm operates in three countries in addition to the United States. It is (or was at any rate) the 7th largest law firm in the world.
Pay freezes and/or layoffs are in place in other large law firms, but not to the same extent.
The nation's largest New York and Los Angeles law firms have historically had major financial companies (and parties to large scale financial and ownership transactions brokered by these financial companies) as a key component of their client mix, so it is not entirely surprising that these firms are feeling the impact of the financial crisis.
Before the layoffs, Latham & Watkins had a 3.18 to 1 ratio of attorneys' to clients. After the layoff, the associate to partner ratio drops to 2.84 to 1. Large New York City law firms typically have a partner to associate ratio ranging from 2:1 to 4:1.
Large and medium sized law firms predominantly outside financial centers frequently have 1:1 ratios of partners to associates, or even slightly more partners than there are associates. This is mostly because clients tend to prefer to have at least one experienced partner responsible for their cases. In anything but the largest litigations and transactions, the need to have a partner engaged in every single significant matter poses practical limits on how much work can be delegated to associates. While a rare lawyer manages to personally supervise eight or ten associates, this is not the norm, even in large law firms.
Incidentally, large law firms are largely a product of Anglo-American legal systems.
Of the 100 largest law firms in the world, #99 is based in Spain, #91 is based in the Netherlands, and #85 is based in France. Fidal, the largest law firm outside the Anglo-American legal world, which is based in France, has about 1200 lawyers. Loyens & Loeff, with 800 lawyers and a headquarters in the Netherlands, is the second largest law firm in the civil law world. Garrigues, based in Spain, which is the third largest law firm in the civil law world (by revenues) has 1,963 lawyers.
Of the remainding 97 firms in the top 100 by revenues, one is Canadian (#64), four are Australian, seventeen are British and the rest are American. This probably has a lot to do with the lack of a unified legal profession in many civil law countries, and the tendency of of large corporations in civil law countries to use law trained in house executives for transactional work, rather than practicing attorneys in separate firms.
Latham & Watkins . . . is cutting 190 associates and 250 staff members. Above the Law says it knows of no other law firm to have laid off so many employees, absent a dissolution. . . . The firm is offering an unheard of severance package that includes six months' salary and medical coverage. The pay will be capped at $100,000 . . . the cuts amount to 12 percent of the firm’s associate ranks and 10 percent of paralegal and administrative staffers. The firm's offices in New York and Los Angeles "will be particularly impacted," . . . The firm is also pushing back start dates for new associates until mid-December and offering $75,000 to associates who agree to delay their start date until October 2010 . . . . Law firm chairman Robert Dell said the firm's 550 partners will not be affected by the cuts. . . . The firm had an "over-capacity issue that we have to deal with," he said.
The 2300 attorney law firm has a headquarters in Los Angeles and a total of twenty-eight offices. The firm operates in three countries in addition to the United States. It is (or was at any rate) the 7th largest law firm in the world.
Pay freezes and/or layoffs are in place in other large law firms, but not to the same extent.
The nation's largest New York and Los Angeles law firms have historically had major financial companies (and parties to large scale financial and ownership transactions brokered by these financial companies) as a key component of their client mix, so it is not entirely surprising that these firms are feeling the impact of the financial crisis.
Before the layoffs, Latham & Watkins had a 3.18 to 1 ratio of attorneys' to clients. After the layoff, the associate to partner ratio drops to 2.84 to 1. Large New York City law firms typically have a partner to associate ratio ranging from 2:1 to 4:1.
Large and medium sized law firms predominantly outside financial centers frequently have 1:1 ratios of partners to associates, or even slightly more partners than there are associates. This is mostly because clients tend to prefer to have at least one experienced partner responsible for their cases. In anything but the largest litigations and transactions, the need to have a partner engaged in every single significant matter poses practical limits on how much work can be delegated to associates. While a rare lawyer manages to personally supervise eight or ten associates, this is not the norm, even in large law firms.
Incidentally, large law firms are largely a product of Anglo-American legal systems.
Of the 100 largest law firms in the world, #99 is based in Spain, #91 is based in the Netherlands, and #85 is based in France. Fidal, the largest law firm outside the Anglo-American legal world, which is based in France, has about 1200 lawyers. Loyens & Loeff, with 800 lawyers and a headquarters in the Netherlands, is the second largest law firm in the civil law world. Garrigues, based in Spain, which is the third largest law firm in the civil law world (by revenues) has 1,963 lawyers.
Of the remainding 97 firms in the top 100 by revenues, one is Canadian (#64), four are Australian, seventeen are British and the rest are American. This probably has a lot to do with the lack of a unified legal profession in many civil law countries, and the tendency of of large corporations in civil law countries to use law trained in house executives for transactional work, rather than practicing attorneys in separate firms.
The Long View On Ford Sales
Ford sales off 48% say the news stories today. But that’s not the whole story.
Last month Ford sold 99,400 vehicles.
In February 2008 Ford sold 192,799 vehicles.
In February 2007 Ford sold 211,150 vehicles.
In February 2006 Ford sold 244,021 vehicles.
So a more accurate headline might be, “Ford sales down 60% in three years.”
From NewMexiKen.
Ford is the only one of the Big Three not in dire immediate need of a federal bailout. And, one can attribute the extent of the February 2009 year on year sales to the financial crisis. But, it was probably looking at mid- to high- single digit sales declines even without the latest economic turmoil.
No amount of balance sheet tinkering can postpone product problems that lead to sales problems indefinitely. And, it doesn't take as many workers to make 99 thousand cars a month as it does to make 244 thousand cars a month, so the short term decline in labor demand is writing on the wall.
There were enough cars sold in the United States in February 2009 for Ford to have sold 244,000 cars. The trouble is, lots of those potential customers bought cars from other companies instead. While the financial crisis is the short term story, the long term story is declining Big Three market share.
UPDATE:
Major automakers' U.S. sales continued their deep slump in February, putting the industry on track for its worst sales month in more than 27 years . . . .
Ford Motor Co.'s U.S. sales fell 48 percent from a year earlier, while Toyota Motor Corp. posted a 40 percent drop . . . February sales could be worse than January's total of 656,976 light vehicles. That was the lowest monthly total since the industry sold 656,310 vehicles in December 1981, according to Autodata Corp. and Ward's AutoInfoBank. . . .
Ford, which hasn't taken any federal assistance, is preparing for sales to remain depressed. The Dearborn company said it plans to produce 425,000 vehicles in the second quarter, down 38 percent from the 685,000 it made in last year's April-June period. . . .
Industrywide, the average incentive per vehicle last month rose 8 percent from January to $2,914 per vehicle sold, Edmunds said. Incentives climbed to an average of 20 percent of the sticker price of a new car, and they topped more than $10,000 on some vehicles. . . .
Edmunds said its data show that 27 percent of people who intended to buy a new car switched to used at the dealership in February . . . .
[Ford] Sales of the F-Series truck, traditionally the best-selling vehicle in the U.S., fell 55 percent, while sales of the Focus small car also dropped, by 39 percent.
Toyota Motor Corp.'s total of 109,583 vehicles came in slightly higher but was down from 182,169 in the same month a year ago.
I haven't found data yet on other major automaker sales in February of 2009. I'd also like to know what the profit or loss per vehicle is at Ford, but don't have time to calcualte the number at the moment.
In 1985, Ford's market share was just under 20%, while GM and Chrysler combined accounted for another 60% of U.S. automobile sales (Chrysler was the smallest of the Big Three even then, IIRC). If Ford had held onto that market share, it would have sold 35,000 more vehicles last month than it actually did. The remaining 59,000 car drop in Ford sales can fairly be attributed to the financial crisis.
02 March 2009
Porn and Republicans
One of the most interesting stories of the 2008 election in Denver that I never got around to blogging was relentless pro-McCain and anti-Obama campaigning on the street sign for Shotgun Willies, a strip club at the corner of Colorado Boulevard and Virginia Avenue in Glendale, Colorado (a small Arapahoe County enclave surrounded on all sides by the City and County of Denver). It is a prominent sign. One of my previous employers who had an office nearby used it as our main landmark when giving people directions to our office for years. One or two other strip clubs also had pro-GOP signage when they had any political messages at all.
At the time, I'd chalked it up to the adultery factor. McCain has had lots of wives and admitted in his memoirs to having numerous affairs while married. Obama's romantic life was decidedly more monogamous.
Well, it turns out that the connection between the porn industry and the Republican party is more than mere coincidence. It wasn't just based upon personal factors that distinguished particular candidates in a particular election either. The proof comes from yet another red state, blue state comparison that undermines the image of Republicans as morally virtuous family values types:
Hat Tip: The Big Orange Giant.
Also, while high per capita porn consumption rates are associated with conservative turf, the same is not true when it comes to per capita condom consumption. Reliably Democratic Denver leads the nation on the measure, at at 189% of the average for the nation's 50 largest cities. As in economics, Republicans are big on talk, and Democrats prefer action.
At the time, I'd chalked it up to the adultery factor. McCain has had lots of wives and admitted in his memoirs to having numerous affairs while married. Obama's romantic life was decidedly more monogamous.
Well, it turns out that the connection between the porn industry and the Republican party is more than mere coincidence. It wasn't just based upon personal factors that distinguished particular candidates in a particular election either. The proof comes from yet another red state, blue state comparison that undermines the image of Republicans as morally virtuous family values types:
Utah, averaged 5.47 adult content subscriptions per 1000 home broadband users; Montana bought the least with 1.92 per 1000. . . . Number 10 on the list was West Virginia at 2.94 subscriptions per 1000, while number 41, Michigan, averaged 2.32. Eight of the top 10 pornography consuming states gave their electoral votes to John McCain in last year's presidential election – Florida and Hawaii were the exceptions. While six out of the lowest 10 favoured Barack Obama.
Hat Tip: The Big Orange Giant.
Also, while high per capita porn consumption rates are associated with conservative turf, the same is not true when it comes to per capita condom consumption. Reliably Democratic Denver leads the nation on the measure, at at 189% of the average for the nation's 50 largest cities. As in economics, Republicans are big on talk, and Democrats prefer action.
Kenny Be v. Paris
I recently looked at a page full of pictures of outfits from the Paris Fashion Show and came away from the experience wonder what monsters would wear any of those outfits.
Then, I looked at Westword cartoonist Kenny Be's Denver answer to the Paris fashion show. Honestly, while his ideas are absurd, they are slightly less absurd than the Paris offerings. For example, his idea of "The Denver Tuxedo" sounds exactly like what my elementary school aged son will be wearing when he finally goes to the prom a decade or so from now:
Maybe we really are a cow town at heart. Losing a newspaper didn't help that image either.
Meanwhile, for insights into what my daughter might be wearing in a similar time frame, I reviewed Teen Vogue while off getting a hair cut for one of the kids. I swiftly concluded that it will take many years of parental fortitude development before I'm ready to do that again.
Then, I looked at Westword cartoonist Kenny Be's Denver answer to the Paris fashion show. Honestly, while his ideas are absurd, they are slightly less absurd than the Paris offerings. For example, his idea of "The Denver Tuxedo" sounds exactly like what my elementary school aged son will be wearing when he finally goes to the prom a decade or so from now:
The ubiquitous North Face Bionic jacket and Adidas track pants are elevated from everyday Denver slob couture into elegant evening wear with the addition of a bow tie and cummerbund.
Maybe we really are a cow town at heart. Losing a newspaper didn't help that image either.
Meanwhile, for insights into what my daughter might be wearing in a similar time frame, I reviewed Teen Vogue while off getting a hair cut for one of the kids. I swiftly concluded that it will take many years of parental fortitude development before I'm ready to do that again.
27 February 2009
What Will It Take To Save Borders Group Inc.?
When I was in law school, Borders Books in Ann Arbor, Michigan had a reputation as one of the nation's most fabulous independent book stores in the nation, with a headquarters on State Street near the independent movie theater and close to the University of Michigan campus, and a small number of other locations nearby.
Borders was then what the Tattered Cover bookstore in Denver is now.
Meanwhile, discount retailer Kmart, founded in 1962 to fill roughly the niche that Wal-Mart has right now, as the lowest priced big box retailer in the market offering half decent goods, acquired the mall based Waldenbooks chain in 1984. Waldenbooks was a bookstore for people who don't like to read. Almost nothing they sold was written at above then 10th grade reading level. It was like the pharmacy book rack, but bigger.
In 1992, Kmart bought the very dissimilar (by geographically local) Borders Books, on the theory that Kmart could provide the capital for Borders to expand, and Borders could provided books store operating experience that Kmart lacked. Borders expanded dramatically, Borders and Waldenbooks were merged in 1994, and neither chain was a good fit with Kmart so they were spun off in 1995. Kmart did half a dozen similar deals in other areas (e.g. Office Max. Sports Authority and Payless Drugs) at roughly the same time.
Kmart's deteriorating (and still shabby) core business fell into a Chapter 11 bankruptcy in 2002, left bankruptcy in 2003, and merged with Sears in 2004. Both the Kmart and Sears brands continue to operate struggling big box retail store operations, although market watchers suspect that the real value in the companies may be in their vast real estate holdings which have slowly been converted to other uses (including store within a store Land's End outlets at Sears stores).
Anyway, Borders Group has continued on its merry way for more than 13 years, painstakingly moving Waldenbooks upmarket so that they are smaller but nice mall based mini-Borders stores with a focus on popular titles, while expanding the Borders model to most metro areas in the United States until it has become the number two brick and mortar bookseller in the United States with the entire group having 27,000 employees.
But, the 2009 financial crisis was not kind to Borders group. Its sales covered only about 80% of its expenses. Its full speed ahead expansion has never really been tested either, until now. From shopping there, online and off, I know that its prices are competitive with competitors Barnes & Noble and Amazon.com, although sometimes ever so slightly higher. Anyway, the bottom line is that it has no real room to improve the bottom line by increasing prices. It has spent early 2009 slashing management costs and unprofitable operations, like a marquee downtown Chicago store, and has so far held onto enough financing to keep it afloat.
But, investors have lost faith. The current stock price of 58 cents a share is down from a 52 week high of $10.66 a share. This collapse basically has taken place from September of 2008 until January of this year. The company's market capitalization is now about $36 million.
This is despite the fact that the balance sheet of the company doesn't look all that bad. Its inventory of books and other media to sell are mostly financed with trade credit. Its plant and equipment are almost completely financed with short term debt and capital leases. It has almost no long term debt, and it does have some cash on hand. Still, if you make a loss of 25% of the sale price on everything you sell, you've got a problem.
It looks to me like the losses are basically a case of (1) stores that are too large and have too much overhead to support their sales, and somewhat related (2) too little focus on titles that sell.
Recent experience has also shown a very poor track record for retail companies trying to emerge successfully reorganized from Chapter 11 bankruptcy. So, unless Borders can slash costs, maintain cash flow until the 2009 Christmas season, and have much better sales in 2009 than it did in 2008, it is doomed. This is a shame because Borders really is the best non-independent brick and mortar book seller in the market.
Borders was then what the Tattered Cover bookstore in Denver is now.
Meanwhile, discount retailer Kmart, founded in 1962 to fill roughly the niche that Wal-Mart has right now, as the lowest priced big box retailer in the market offering half decent goods, acquired the mall based Waldenbooks chain in 1984. Waldenbooks was a bookstore for people who don't like to read. Almost nothing they sold was written at above then 10th grade reading level. It was like the pharmacy book rack, but bigger.
In 1992, Kmart bought the very dissimilar (by geographically local) Borders Books, on the theory that Kmart could provide the capital for Borders to expand, and Borders could provided books store operating experience that Kmart lacked. Borders expanded dramatically, Borders and Waldenbooks were merged in 1994, and neither chain was a good fit with Kmart so they were spun off in 1995. Kmart did half a dozen similar deals in other areas (e.g. Office Max. Sports Authority and Payless Drugs) at roughly the same time.
Kmart's deteriorating (and still shabby) core business fell into a Chapter 11 bankruptcy in 2002, left bankruptcy in 2003, and merged with Sears in 2004. Both the Kmart and Sears brands continue to operate struggling big box retail store operations, although market watchers suspect that the real value in the companies may be in their vast real estate holdings which have slowly been converted to other uses (including store within a store Land's End outlets at Sears stores).
Anyway, Borders Group has continued on its merry way for more than 13 years, painstakingly moving Waldenbooks upmarket so that they are smaller but nice mall based mini-Borders stores with a focus on popular titles, while expanding the Borders model to most metro areas in the United States until it has become the number two brick and mortar bookseller in the United States with the entire group having 27,000 employees.
But, the 2009 financial crisis was not kind to Borders group. Its sales covered only about 80% of its expenses. Its full speed ahead expansion has never really been tested either, until now. From shopping there, online and off, I know that its prices are competitive with competitors Barnes & Noble and Amazon.com, although sometimes ever so slightly higher. Anyway, the bottom line is that it has no real room to improve the bottom line by increasing prices. It has spent early 2009 slashing management costs and unprofitable operations, like a marquee downtown Chicago store, and has so far held onto enough financing to keep it afloat.
But, investors have lost faith. The current stock price of 58 cents a share is down from a 52 week high of $10.66 a share. This collapse basically has taken place from September of 2008 until January of this year. The company's market capitalization is now about $36 million.
This is despite the fact that the balance sheet of the company doesn't look all that bad. Its inventory of books and other media to sell are mostly financed with trade credit. Its plant and equipment are almost completely financed with short term debt and capital leases. It has almost no long term debt, and it does have some cash on hand. Still, if you make a loss of 25% of the sale price on everything you sell, you've got a problem.
It looks to me like the losses are basically a case of (1) stores that are too large and have too much overhead to support their sales, and somewhat related (2) too little focus on titles that sell.
Recent experience has also shown a very poor track record for retail companies trying to emerge successfully reorganized from Chapter 11 bankruptcy. So, unless Borders can slash costs, maintain cash flow until the 2009 Christmas season, and have much better sales in 2009 than it did in 2008, it is doomed. This is a shame because Borders really is the best non-independent brick and mortar book seller in the market.
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