Harrisburg Considers Putting Itself on Self-Exclusion List

Because that's what you do when you're an inveterate gambler, you ask the guys who run the casino to ban you from the casino.

“This is taxpayer money and it’s compromised... You’re playing roulette or you’re gambling with this money and it might work out for some areas, but for a heck of a lot of others it did not.”

The quote appears in today's edition of Bond Buyer and are the words of State Sen. Lisa Boscola. She uttered them as explanation for why she plans to introduce legislation that would ban school districts and localities from using financial swaps and derivatives (fancy words that dress up a transaction that is nothing more than a bet).

Hopefully Sen. Boscola gets the law passed. Folks should never enter into a financial transaction without understanding what exactly is going on. Because when you don't have a clue what you're buying, more often than not you're being taken. And that's precisely happened to PA's school districts when they entered into these types of transactions.

Bond Buyer notes that on one deal the Bethlehem school district ended up costing $10.2 million more than what the same transaction would have cost had the school district just gone with standard fixed-rate loan.

Funny or Die takes on Citizens United

Hedging our Antitrust Laws


I got to thinking about whether a renewed commitment to the enforcement of Antitrust laws would be an appropriate remedy to problems caused by Citizens United. After all, if a corporation is so huge that its participation will warp the democratic process, it suggests that the corporation ought to be an appropriate target for an antitrust investigation.

Similarly, I always thought the use of the term "too big to fail" necessarily implicated antitrust laws. Unlike Amtrak or even AT&T, I never could understand either (1) the market failure that required government intervention; or (2) the public good that would otherwise go unfulfilled if in fact these too-big-to-fail firms failed. It was not that these firms created some product that was necessary to sustain our way of life. With neither predicate satisfied, I always thought that rather than being "too big to fail," the banks were too big to exist.

While occasionally discussed on the fringe, policy makers never gave consideration to imposing as a condition of the bailout a break up of the banks. Rather, the whole debate was framed as some sort of new-fangled ecological disaster.

OMG!!! Lehman and Bear Stearns have run aground!!! Their captains were drunk. Millions of barrels of crude CDOs have been spilled. [Images of dying otters; their fur matted with toxic CDOs.] The horror!!! OMFG!!! Goldman Sachs and its drunken sailors are going to crash too!!!

It was if the bailout addressed a new form of pollution. In my peculiar logic, I thought it made more sense to see the subprime crisis as the financial industry's Bhopal disaster. The bailout just being the cost of scrubbing clean all the CDO-smothered penguins.

But my plan is not to revisit my whole limited liability thing.

My plan is to address a thought I've been chewing on this evening - antitrust law as a method of managing systemic economic risk.

Two Interrelated Thoughts

First, I've been mulling over Keynes' "In the long run we are dead." Problem is, as long as "we" now includes corporations, this statement is no longer true.

Second, I've been mulling over the Great Laws of the Iroquois. Specifically, the duty to "consider the impact of our decisions on the next seven generations."

What if corporations had to consider this duty? What if being a "fiduciary" encompassed this concept?

Wouldn't that would be a neat solution to this whole Citizens United nonsense?

How I Learned to Stop Worrying and Love the Corporation

Keith Olbermann devoted his special comment to today's decision by the Supreme Court in Citizens United v. FEC. I agreed with Howard Fineman in that for once I felt that his normal hyperbolic schtick didn't do justice to the issue. And considering Olbermann's comment was based upon his comparison of today's decision to the Dred Scott decision that upheld the institution of slavery, Olbermann could have made a much finer point had he noted the irony of corporations achieving their ascendance by appropriating for themselves the very means created to free the slaves - the 14th Amendment.

Led by Justice Roberts and the so-called originalists, the the Supreme Court wrested control of our democracy from the people who created it and vested it in the tools we have created.

It's a plot straight out of Terminator.

More on how we were AIG before we were AIG

From Metropolis (no not this Metropolis):

The contaminated water that returns to the surface is called "flowback"-and the debate over the gas drilling centers on how to treat it. If it is not properly treated, the used water can harm fresh water ecosystems. Flowback is a cocktail of carcinogenic solvents, hydrochloric acid, lubricants, anti-corrosion agents and microbe killers.


So depressing.

But for the fact that limited liability allows corporations to offload the cost of the externalities to taxpayers, this whole fracking thing would never be profitable.

The Limited Liability Problem (We were AIG before we were AIG)

Pennsylvania has been on the front lines of a recent controversy over fracking, a new technique to extract natural gas. Not to be confused with "fraking," fracking involves pumping a bunch of water mixed with all sorts of untoward stuff into underground rock formations. The idea being that the hydraulic pressure will "frack" the rock causing it to release all sorts of trapped natural gas and thus solving the energy crisis all the while earning millions of dollars for the corporations who came up with this fraking plan.

By now you're probably wondering what the frak this has to do with the limited liability problem.

A Hypothetical ConLaw Essay Question Addressing the Subject of Equal Protection

Imagine the following hypothetical - There are two persons. They reside in the same state. Perhaps even the same city. They may even be neighbors. And if they were neighbors, person B would have a slightly larger house because person B has slightly more money.

Financial considerations aside, these two persons are by and large equal in every regard. Or at least so says the Constitution.

Each of these two persons happens to be an avid participant in the political process. Each regularly lobbies their Congress person. Each has a habit of speaking out upon the issues of the day. And each contributes generously to the causes and politicians with whom each sympathizes.

In other words, both are model citizens.

However, being the residents of the same state, both must abide by the laws passed by their state legislature. And being committed to the rule of law, both of our hypothetical persons do. They even abide by a recently-enacted law that absolves from personal liability any person who wears a veil and agrees to pay a recurring fee to maintain a registration of that veil with the state.

Having slightly less money than person B and a slightly more photogenic face, person A never takes advantage of the recently-enacted law. Being able to buy a wardrobe that accommodates the wearing a veil as well as pay the fee to register her veil with the state, person B does. As a result, person B is able to enjoy the benefits of this new law by going about her daily activities, including her numerous political engagements, without having to bear the burden of personal liability.

Until one day, person B gets slightly worked up about a certain politician. After a night of heavy drinking, she comes to believe that that politician is stealing from the state's treasury to pay for his mistress's renovations to her recently purchased home that was sold to her by some state entity for the princely sum of $1.

Being an active citizen, person B has a blog and before her buzz fades, she has published a missive enumerating each of the certain politician's faults. Moments later Google's spider scans her blog's feed and republishes it across countless other websites. Some even more famous blogger picks up the story. By the next morning it is on Huffington Post.

By the time person B rouses herself from her hangover, she is watching some newscaster introduce footage of the certain now red-faced politician vowing to restore his reputation by finding the person who published the pernicious lies and sue that person for every cent that person may be worth.

Shortly after the press conference, the politician rings up his attorney, who happens to be you, and demands advice. Facing imminent election, he explains that his political career is hopelessly ruined. During the last twelve hours, he's lost 55 points in the polls. Angrily, he states that he has proof beyond a shadow of a doubt that person B's statements are recklessly untrue.

Having written the law that granted person B an exemption from personal liability, the politician is particularly frantic about how he has no recourse against person B's reckless lies. He goes on and on about how he knows how much person B is worth in her personal capacity and how fairness demands that person B make him whole.

Knowing the publicity the case will garner and the benefit it will be to your future legal career, you agree to represent the politician. After consoling him, you persuade him to hang up the phone by promising him that you need the time to draft a memo to him summarizing your theory of his case specifically addressing how person B may be held personally liable for her actions.

Knowing that the person B has a bang up accountant, you assign your summer associate the job of writing the section on piercing B's veil.

Your memo must address other legal theories.

PA School Districts are Run by a Bunch of Inveterate Gamblers

Or so says Jack Wagner, PA's auditor general.

A little over a year ago, I came to pretty much the same conclusion.

Putting the shenanigans in the context of home mortgages (thinking the experience folks have with home mortgages would make the whole "swaption" thing a little easier to comprehend), I wrote the following:

In the words of the homeowner analogy, the homeowner (aka, the school board) is basically placing a bet with her local neighborhood bookie that a couple years down the road the market interest rate is going to be lower than whatever rate she is presently paying. In exchange for placing this bet, the bookie pays the homeowner an upfront payment and agrees to cover a certain portion of her monthly mortgage payments. However, if whenever this bet comes due interest rates don't come down, the bookie gets paid back all the money he put out plus a penalty.

Just replace "homeowner" with "school district" and you get the drift. And in this bet, there is no way for the bookie, aka the "banker," to lose money cause turned around and took the other side of the same bet from AIG. No matter how things turn out, the bookie gets his.

Drink Local Beer

Duh.

"When you drink local, you drink fresh--but you also support the local economy. I’ll break it down for you: When you drink a Joe Coffee Porter from Philadelphia Brewing Co. you’re not only showing some love for a local business, you’re supporting a business that’s outsourcing their graphic design to a local artist. That same artist probably walks an extra block to go to an independent café instead of Starbucks.