April 20, 2016
icon AALS Call for Papers: Securities Regulation and Technological Change
Posted by Erik Gerding

Call for Papers
AALS Section on Securities Regulation - 2017 AALS Annual Meeting

January 3-7, 2017, San Francisco

The AALS Section on Securities Regulation invites papers for its program on “Securities Regulation and Technological Change” at the 2017 AALS annual meeting.

TOPIC DESCRIPTION: This panel discussion will explore the intersection of securities regulation and technology.  The Executive Committee welcomes papers on a broad range of related topics, including technology in financial markets, high frequency trading, crowdfunding, transactional and financial innovation, securities offering reform, and information overload.

ELIGIBILITY: Full-time faculty members of AALS member law schools are eligible to submit papers. Pursuant to AALS rules, faculty at fee-paid law schools, foreign faculty, adjunct and visiting faculty (without a full-time position at an AALS member law school), graduate students, fellows, and non-law school faculty are not eligible to submit. Please note that all faculty members presenting at the program are responsible for paying their own annual meeting registration fee and travel expenses. 

PAPER SUBMISSION PROCEDURE: Up to four papers may be selected from this call for papers. There is no formal requirement as to the form or length of proposals. However, more complete drafts will generally be given priority over abstracts, and presenters are expected to have a draft for commentators three weeks prior to the beginning of the AALS conference.

Papers will be selected by the Section's Executive Committee in a double-blind review. Please submit only anonymous papers by redacting from the submission the author's name and any references to the identity of the author. The title of the email submission should read: "Submission - 2017 AALS Section on Securities Regulation."

Please email submissions to the Section Chair Verity Winship at:  vwinship@illinois.edu on or before August 19, 2016.

Permalink | AALS, Calls for Papers, Securities, Technology | Comments (View) | Bookmark

April 19, 2016
icon Welcome to the Blawgosphere: The Surly Subgroup
Posted by Christine Hurt

Welcome to the blawgosphere/blogosphere: The Surly Subgroup:  Tax Blogging on a Consolidated Basis!  This new blog was launched fittingly on Tax Day (yesterday).  Sorry I missed the launch, but I was running to the post office.  The array of authors promises interesting takes on a variety of tax issues:  Jennifer Bird-Pollan, Benjamin Leff, Leandra Lederman, Philip Hackney, David Herzig, Stephanie Hoffer, Diane Ring, Sam Brunson, and Shu-Yi Oei.

Happy Posting!


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icon 2015 Stetson Law Review Symposium - Inequality, Opportunity, and the Law of the Workplace
Posted by Matt Bodie

In March 2015, the Stetson Law Review hosted a symposium on "Inequality, Opportunity, and the Law of the Workplace."  The day was a terrific opportunity to think about how the concern about income inequality -- the focus of this guy's campaign -- is and can be addressed by the law, especially labor and employment law.  The symposium is dedicated to Michael Zimmer, who tragically passed away months after the symposium.  Below are links to videos of the event and to papers published from the symposium:



Permalink | Employees | Comments (View) | Bookmark

icon Dictation and Delegation in Securities Regulation
Posted by Usha Rodrigues

Glom readers, it has been a busy semester!  I am trying to get back to blogging, and will start with some happy news.  I've been obsessing about the politics of securities regulation for some time--specifically, why did we get the JOBS Act, and more generally what explains why and when Congress intervenes in securities law.  Between teaching and associate deaning I've also been writing, and I'm proud to report I now have a draft posted on SSRN and accepted at the Indiana Law Journal.  Abstract below; comments welcome.

 When Congress undertakes major financial reform, either it dictates the precise contours of the law itself or it delegates the bulk of the rulemaking to an administrative agency. This choice has critical consequences. Making the law self-executing in federal legislation is swift, not subject to administrative tinkering, and less vulnerable than rulemaking to judicial second-guessing. Agency action is, in contrast, deliberate, subject to ongoing bureaucratic fiddling and more vulnerable than statutes to judicial challenge.

This Article offers the first empirical analysis of the extent of congressional delegation in securities law from 1970 to the present day, examining nine pieces of congressional legislation. The data support what I call the dictation/delegation thesis. According to this thesis, even controlling for shifts in political-party dominance, Congress is more likely to delegate to an agency in the wake of a salient securities crisis than in a period of economic calm. In times of prosperity, when cohesive interest groups with unitary preferences can summon enough political will to pass deregulatory legislation on their behalf, the result will be laws that cabin agency discretion. In other words, when industry can play offense, Congress itself engages in the making of governing rules and does not punt to an agency—even on issues that would seem the logical province of administrative technocrats. In contrast, following a crisis, industry is forced to play defense rather than offense. Its goal is to minimize the deleterious impact of inevitable legislation by shifting regulation as much as possible to the agency level, where it has time to regroup and often delay regulation until the political pressure for reform abates.

Permalink | Legal Scholarship, Politics, Securities | Comments (View) | Bookmark

April 13, 2016
icon Congrats to SMU and my coauthor!
Posted by Matt Bodie

Just wanted to say congratulations to both the SMU Dedman School of Law and my coauthor Grant Hayden on Grant's upcoming move to SMU.  Grant is going there along with Joanna Grossman, James Coleman, and Dale Carpenter -- a terrific group of lateral hires.  Along with a few articles in the works, Grant and I are working on a book for Cambridge titled "Reconstructing the Corporation."  I'm excited for him and Joanna and congratulate SMU Dean Jennifer Collins and the SMU faculty for choosing an excellent set of new colleagues.

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April 08, 2016
icon The 2016 Texas Legal Scholars Workshop
Posted by Gordon Smith

The Southern Methodist University (SMU) Dedman School of Law and the University of Houston Law Center are sponsoring The 2016 Texas Legal Scholars Workshop. Here is the announcement:

Would you like early-stage feedback on a research idea? Or late-stage feedback on an article ready for submission? Or something in between? Your colleagues at SMU and Houston invite you to join us for the second annual Texas Legal Scholars Workshop, to be held on August 26-27, 2016, at the SMU Dedman School of Law in Dallas, Texas. The Texas Legal Scholars Workshop provides an intimate setting for early-career scholars (those with less than 10 years in a full-time faculty position) to receive feedback on an idea, work-in-progress, or a polished draft. We welcome legal scholars from all disciplines.

At the Workshop, each author will present a 5-10 minute synopsis of his or her paper, followed by 15-20 minutes of comments by a primary commenter, followed by an open discussion with other attendees.

The workshop will give participants the chance to meet other early-career scholars in Texas, share feedback on research, and enjoy a few social events. There is no registration fee. Attendees are responsible for their own hotel and travel expenses, but SMU will pay for meals, including a hosted dinner at a restaurant on Friday night.

more ...

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April 07, 2016
icon The MetLife Designation Opinion - To Designate, FSOC Must Do A Cost-Benefit Analysis
Posted by David Zaring

MetLife successfully appealed its designation as a SIFI to the district court in Washington, which took an awfully searching review of the factors used by the FSOC to make the determination.  The court, in the end, concluded that the council's designation was arbitrary and capricious, which means it was illegal.  The most interesting part of the opinion is the part requiring the FSOC to do a cost benefit analysis before designating.

FSOC has refused to do a quantified cost benefit analysis, which is a departure for the executive branch.  The White House requires agencies to conduct one before they promulgate expensive rules.  That a financial regulator, where excel spreadsheets and quantified stress tests are part of the job, would refuse to do one in making a determination about the riskiness of a financial institution is a pretty interesting rebuke to those who believe that cost benefit analyses are essential components of effective regulation.  But perhaps the FSOC has been listening to John Coates.

Here's what the court had to do to require a cost benefit analysis - most, um, interestingly it relied on the word "appropriate" while ignoring the word "deems" in Congress's guidance about how to do SIFI designations.  Most administrative lawyers would conclude that it was up to the Council to decide whether to take costs into account in designations if the statute provides that the FSOC “shall” consider a number of factors and also “in making a designation, any other risk-related factors that the Council deems appropriate.”

But the court thought differently:

FSOC, too, has made the decision to regulate—by designating MetLife. That decision intentionally refused to consider the cost of regulation, a consideration that is essential to reasoned rulemaking. Cf. [Michigan v. Environmental Protection Agency, 135 S. Ct. 2699 (2015)] at 2707 (“Consideration of cost reflects the understanding that reasonable regulation ordinarily requires paying attention to the advantages and the disadvantages of agency decisions.”) (emphasis in original). In light of Michigan and of Dodd-Frank’s command to consider all “appropriate” risk-related factors, 12 U.S.C. § 5323(a)(2)(K), FSOC’s position is at odds with the law and its designation of MetLife must be rescinded.

I'm pretty unpersuaded by that reasoning.  Cost benefit analysis may be a good idea, or it may not be, but I don't see how the courts should go around requiring it on the basis of a catch-all clause awarded discretion to the agency to add factors to an already long list of factors to be considered in SIFI designations.

Permalink | Administrative Law, Finance, Financial Crisis, Financial Institutions | Comments (View) | Bookmark

April 04, 2016
icon Peter Conti-Brown: The Next Symposium
Posted by David Zaring

I trust you all enjoyed our symposium on The Power And Independence of the Federal Reserve.  There's another one starting on the (excellent) Notice and Comment blog, so do head over there for more takes on Peter Conti-Brown's book, and on assessing the place of the Fed and how it works.

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icon Colorado Law Transactional Threepeat
Posted by Erik Gerding

Congratulations to my three Colorado Law students Stephanie Drumm, Josh Kohler, and Parker Steel who were named co-national champions (along with a UCLA team) at the annual Transactional LawMeet competition this weekend in New York.  The Colorado Law team also won the best draft award.

This competition -- a sort of moot court for transactional law -- was the brainchild of Drexel law professor (and friend of the Glom) Karl Okamoto.  It has been running for over five years and has now grown to the point where the competition has seven regional competitions that feed into the national finals.  Colorado Law students have shared the national title for the last three years.  Go Buffs!

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April 01, 2016
icon Family Film Blogging: Batman v. Superman: Dawn of Justice
Posted by Christine Hurt

So, our family did not go see any of the Easter-related movies this past weekend (Risen, The Young Messiah).  No, wait, we did.  We saw Batman v. Superman.

First, my disclaimers.  I love Marvel.  I'm not a D.C. person.  I am not very familiar with the D.C. universe.  In addition, I have not seen the Dark Knight trilogy.  I was not a big fan of Man of Steel.  "My" versions of Batman and Superman are Michael Keaton and Christopher Reeve, respectively.  So, I wasn't really excited about seeing this installment, but I was outvoted by my children and Captain America:  Civil War isn't out yet.

Second, it was not as bad as I feared.  It's no Captain America, but it was interesting.  (Rotten Tomatoes has it at 29% from critics; 71% from viewers.  I disagree with the critics.)  Ben Affleck, as much as I wanted to hate him, was pretty good as an older, resigned, wise Batman.  The problem with the movie is not Batman; it's Superman.  This man of steel is not like the Superman of yore.  He does not fight for Truth, Justice and the American Way.  He does not love America, or humans.  He loves Lois Lane.  He is depicted here (and in Man of Steel) as a stranger in a strange land basically biding his time until he wakes up back on planet Krypton.  Perhaps there was too much stuff to put in the movie so we couldn't waste time watching him save random people or have any sort of personality at all.  But the result is that he seems more like someone in hiding than a superhero.  Batman has more dialogue and more air time; we know what makes him tick.  While Superman reacts to situations around him, Batman is a proactive superhero.  Or antihero.  Or whatever.

Whether or not Superman or Batman are heroes is the main question of the movie.  What would we do if there were humans among us with powers that threatened democratic debate and civil society should those humans prove not to be benevolent dictators?  Should we fear Superman?  Is the planet better off without a Superman?  (This, of course, is a question played out in the X-Men series as well as The Avengers.  And how do we feel about vigilantes?  Assassins?  These fears are stirred up in a crucible located in what I'll call the "twin cities" of Gotham and Metropolis, which are apparently right next to each other.  In a creative scene, Bruce Wayne is present at the final fight scene between Superman and General Zod that ends Man of Steel.  The destructive battle, in the middle of Metropolis, topples a skyscraper bearing the name of Bruce Wayne's company and kills many employees.  Bruce tries to save as many on the ground as he can, but the devastation is overwhelming.  In that moment, Bruce Wayne becomes Superman's biggest critic. (Batman does not seem to contemplate what would have happened to his employees under General Zod, but his heartbreak is palpable and his misplaced rage seems logical.)  Two years later, Batman is still monitoring Superman, and Clark Kent (almost lamely) wants the Daily Planet to investigate Batman, who he sees as an out-of-control vigilante, branding his captured bad guys so they are marked in prison.

Left to their own devices, Batman and Superman may have left each other alone, but Lex Luthor sees an opening.  Lex Luthor is our young, upstart genius bad guy (and having Jesse Eisenberg, known for portraying Mark Zuckerberg, play the evil genius seems a little on the nose).  Luthor's motivations are amorphous.  Unlike the 1970s Luthor, he is not attempting to amass wealth or even power.  He could be playing the two against each other so that one will take the other one out, leaving more room for criminal minds like his, but then he creates an even worse, uncontrollable monster to fight them both.  Luthor seems to be rooting for chaos and destruction for its own sake, and doesn't seem to have a plan to save himself from that destruction.

In the end, there are a lot of interesting themes here.  Because it was Easter, I saw Superman as a Christ-figure both loved and hated, and Holly Hunter as Pontius Pilate tasked with passing judgment on him.  Batman is Saul, a hater who sets out to destroy him but who has an ephiphany along the way and becomes a convert and organizer.  Who is Luthor?  The Devil, who still blames his father.  Who is Wonder Woman?  Who knows?  She was only on screen for 10 minutes.

My boys liked the movie, but it was dark.  I thought my 8 year-old was on the line for violence and intensity, though there were much younger kids there.  There were no jokes, no witticisms, no comic relief at all.  Clark and Lois aren't flirty or cute -- they are doomed and resigned.  I prefer my action movies with a dash of fun.  This movie is obviously the "Dawn" of a new string of DC movies:  Wonder Woman, The Flash (which doesn't seem to be linked at all to the Netflix series our family has been watching), Aquaman.  I hope they have a little bit of humor.

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March 30, 2016
icon Call for Papers: Business and Human Rights Scholars Conference
Posted by Erik Gerding

Business and Human Rights Scholars Conference

University of Washington School of Law, Seattle, Washington

September 16-17, 2016

The University of Washington School of Law, the NYU Stern Center for Business and Human Rights, the Rutgers Business School, the Rutgers Center for Corporate Law and Governance, and the Business and Human Rights Journal announce the second Business and Human Rights Scholars Conference, to be held September 16-17, 2016 at the University of Washington School of Law in Seattle.  Conference participants will present and discuss scholarship at the intersection of business and human rights issues. 

Upon request, participants’ papers may be considered for publication in the Business and Human Rights Journal (BHRJ), published by Cambridge University Press. The Conference is interdisciplinary; scholars from all global regions and all disciplines are invited to apply, including law, business, business ethics, human rights, and global affairs.  

To apply, please submit an abstract of no more than 250 words to BHRConference@kinoy.rutgers.edu with the subject line Business & Human Rights Conference Proposal.  Papers must be unpublished at the time of presentation. Please include your name, affiliation, contact information, and curriculum vitae. 

The deadline for submission is May 15, 2016.  Scholars whose submissions are selected for the Conference will be notified no later than June 15, 2016. We encourage early submissions, as selections will be made on a rolling basis.

About the BHRJ

The BHRJ provides an authoritative platform for scholarly debate on all issues concerning the intersection of business and human rights in an open, critical and interdisciplinary manner. It seeks to advance the academic discussion on business and human rights as well as promote concern for human rights in business practice.

BHRJ strives for the broadest possible scope, authorship and readership. Its scope encompasses interface of any type of business enterprise with human rights, environmental rights, labour rights and the collective rights of vulnerable groups. The Editors welcome theoretical, empirical and policy/reform-oriented perspectives and encourage submissions from academics and practitioners in all global regions and all relevant disciplines.

A dialogue beyond academia is fostered as peer-reviewed articles are published alongside shorter ‘Developments in the Field’ items that include policy, legal and regulatory developments, as well as case studies and insight pieces.


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March 29, 2016
icon D. Gordon Smith Named New Dean of J. Reuben Clark Law School, Brigham Young University
Posted by Christine Hurt




Congratulations are in order for our own Gordon Smith, who was recently named the new dean of BYU Law School beginning May 1!  Anyone who has spent much time talking to Gordon knows that he is a visionary, someone who is always asking how to make this institution, this organization, this conference, even this blog, better.  I am very excited to see how he applies his boundless energy and creativity to the deanship here at BYU.  Obviously, being a law school dean these days has its challenges and opportunities, and I trust wholeheartedly Gordon's judgment and care in this regard.  I doubt any of us will get much sleep for the next five years, but I can guarantee that this institution will be all the better for it.

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March 23, 2016
icon Song of Myself: Walker on SEC ALJs
Posted by David Zaring

I've got an article on the constitutionality of the SEC's administrative proceedings (bottom line: they are clearly constitutional), and Chris Walker has a take on the issue, and the paper, over at Notice and Comment.  

Permalink | Administrative Law, Securities | Comments (View) | Bookmark

March 22, 2016
icon Book Club: Peter Conti-Brown’s Response - Is Democracy Good For The Fed?
Posted by David Zaring

My thanks to my inimitable friend and colleague David Zaring for hosting this book club and for inviting me to respond. It’s a real pleasure to be back among the Glomerati—my first venture into academic blogging was on these digital pages back in 2011, including a real-time record of my finding the primary source for the “punch bowl” metaphor that figures so prominently in my book. I still love those stories about Stanford’s Erika Wayne, equal parts document sleuth and librarian.

I wanted to write a few responses to the excellent posts from David, Matt, and Usha and in the process write a bit more about what I see as the central intellectual puzzle of Federal Reserve independence, governance, and accountability, which is this: how can such a technical field benefit from democratic processes without corrupting the entire enterprise? As I wrote, I realized I was going to end up droning on and on, so I’ll keep this a bit more limited than the quality of these responses warrant.

This framing gets at the pith of Matt’s first post. He asks, “is it okay to ‘Bork’ a Federal Reserve appointee?” This question can be broken into two—should there be a more searching assessment of Fed appointees subject to the Appointments Clause, and what is the standard at which the senatorial consent should be withheld?

On the first, I think the answer is a resounding yes, with one clarification. The more searching assessment I would hope to see would not necessarily be at the Senate level alone—we’ve had plenty of closed-door politicking on Fed appointments that have led to some extraordinary appointments and also some very regrettable decisions. On the unfortunate side, I’m thinking of Senator Shelby’s decision to block Peter Diamond from a Fed governorship because Diamond was “unqualified,” just as he received the Nobel prize in economics. I’m thinking, too, of the regrettable—and hopefully temporary—decision to “pair” Fed appointments on a partisan basis, such that Jeremy Stein (a Democrat) could only get through the Senate with Jerome Powell (a Republican), despite no partisan balancing requirement in the Federal Reserve Act. We don’t need more Senators trying to play fast and loose with Fed appointments; we need more public attention on these appointments.

An example of this that I find exactly in line with my vision of a successful public engagement on the Fed was in the summer of 2013 when the Obama Administration leaked that the president was considering Janet Yellen and Larry Summers for the Fed Chairmanship, and leaned Summers. The reaction was swift and very public: from every corner of the democracy came searching assessments of these two proto-candidates’ personalities, histories, ideologies, expertise, and more.

At the time, some lamented this attention to the Fed from outside the temple of full-time Fed watchers as corrosive and lamentable. I think they are exactly wrong. There was plenty of frivolity, gossip, and consideration of extraneous factors in the public vetting we saw in Yellen vs. Summers. But the level of public attention was also impressively substantive. My favorite example in this phenomenon was the non-ironically titled “Seventeen academic papers of Janet Yellen’s that you need to read.” (Full disclosure: I used to work indirectly for Summers at Harvard and continue to have enormous respect for him.)

To Matt’s first question, then, I would like to see more of this kind of public attention to these appointments. The authority of the Fed governors is extraordinary. It’s important that the public have a role in selecting them so that their values are as known as they can be.

To the second question—when should Senators reject a candidate?—I’ll confess something that may make my liberal friends cringe. I’m not convinced that Robert Bork himself should have been Borked. I would prefer a model of Senatorial advice and consent that looked much more like a brake on cronyism than on a sustained attack on a candidate’s (or the sponsoring Administration’s) politics. The Senators’ role, then, is to prevent presidents from rewarding their talentless but politically or financially connected friends with jobs that require policy expertise. It’s not to attempt a redo of our most essential of institutions, the quadrennial presidential election.

To take Supreme Court history (not to say the Supreme Court present) as an example, there was simply no question that Bork was qualified to sit on the court, even if his values and judicial philosophy (and beard?) were out of sync with the Democratic and perhaps American majority. But minus the beard, what about Bork was different from Antonin Scalia, who sailed through the nomination process? Not much that could be known at the time. And it’s not clear to me that the kind of judging we see in the jurist who took Bork’s place—Anthony Kennedy—is better for our democratic institutions, even as I have endorsed and celebrated some of the outcomes in cases that make Kennedy so famous.  

If I were a Senator in 1987, then, I would’ve voted for Bork and then sought to campaign hard in 1988 to say that while qualified, we needed justices of a different philosophy much more likely to be sponsored by a Democratic president than a Republican one. At the same time, I would’ve felt more comfortable voting against Abe Fortas (given the air of scandal and undue proximity to President Johnson) and felt very comfortable voting against Nixon’s nomination of Harrold Carswell (about whom—in his defenseSenator Roman Hruska said “Even if he is mediocre, there are a lot of mediocre judges and people and lawyers, and they are entitled to a little representation, aren't they?”). Qualifications, not politics.

It’s the same analysis for the Fed. There are a few Governors who I think should not have been nominated given their abundant lack of anything except a connection to the President. And as mentioned, there are others who were dinged because of their perceived politics despite sterling credentials. I would want to see more public attention on the expertise and less of the politics, recognizing with Churchillian sobriety that the democratic process will lead to all kinds of regrettable excesses. It’s just better than anything else we might design to take its place.

On Matt’s other post, his hypothesis that “Fed appointees cannot have the expertise necessary to do their job without also being wed to some of the economic and banking orthodoxies that led to the 2008 financial crisis,” I say that we should have that debate. Not just in the Senate Banking Committee hearing room, but in the blogosphere, editorial pages, academic conferences, and around the water cooler. Let’s inquire about what a potential Fed Governor believes about the world and the Fed’s place in it before we hand over a vote that can influence the development of the global economy. The stakes are just too high to leave it to backroom deals. And this is the overarching point: politics is already happening in and around the Fed. To pretend otherwise is fantasy. The question is whether those politics will be little-d democratic or whether they will be something else.  

David highlights the essential importance of looking beyond traditional methodological or institutional paths in trying to get a sense of how agencies work in practice. Like anyone, I’m likely to overemphasize my own methodological approach over others. For example, I am decidedly skeptical that indices of central bank independence coded on the basis of central bank charters tell us much of anything. I think the question of “independence”—to the extent it’s a coherent question at all—is better explored through the methods of narrative history rather than quantitative econometrics. But that’s the point: we need to have multiple approaches in case my view is filled with blind spots and otherwise limited—narrative history isn’t great for doing a 100-nation study, for example.

Finally, I’m delighted Usha brought in her excellent perspective on “fetishization” of independence, an article that has shaped my thinking over the years. I think she’s exactly correct. I’d even go a step further and say that the term itself is devoid of much or any analytical content. Part of my aim in this book is to prompt readerly skepticism anytime anyone—whether in defense of the Fed or in attack—invokes “independence” as the support for their proposition. As I argue at length, and as Usha makes clear in the corporate governance context, Fed independence on the ground is not what those who rely on it have supposed it to be. 

Again, my thanks for taking the book seriously and providing a wonderful forum for discussing it.

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March 19, 2016
icon Book Club: The Independence Fetish
Posted by Usha Rodrigues

In The Power and Independence of the Federal Reserve, Peter Conti-Brown has written an accessible book about the Fed.  Did you catch that?  I'll say it again: Peter Conti-Brown has written an accessible book about the Fed.  More than that, the WSJ calls it "riveting."  And it is--especially for those of us corporate types who have always had the feeling that we should understand the workings of the Fed a lot better than we actually do.  So, go read the whole thing.  For now, I'm going to focus on that resonant word in the title, independence.

We Americans are used to thinking about independence as an unalloyed good.  Heck, we even have an independence day.  But independence one of those concepts defined by what it is not--like good faith, it's an excluder (see Robert Summers' work).  The key question is, independence from what?  In corporate law, we're concerned about independence from conflict of interest.  In the Fetishization of Independence I contrasted the static view of director independence taken at the federal level (in statute and the exchange rules) with the more dynamic, situational definition of Delaware.  While I stressed the difference between these two notions of independence, both jurisdictions are ultimately concerned about a lack of conflict.  

Not so the Fed.  Conti-Brown begins his book by articulating what he calls the Ulysses/punchbowl view of Fed independence: that the Fed must be independent, like Ulysses, tied to the mast to resist the siren song of public demand for easy credit.  Or like "the chaperone who has ordered the punch bowl removed just when the party was really warming up."  The Fed needs to independent of political pressures so that tipsy citizens don't pressure it to introduce easy money policies that lead to high inflation. Thus, independence in Fed terms means "independence from political control"--not from a conflict of interest.  Still, we have definition by absence rather than positive attribute in both cases.

As with corporate law, the inherent irreducibility of independence leads to problems.  The basic problem is the same: how can one reliably verify the absence of something?  There are two problems with this notion of Fed independence that Conti-Brown identifies in his book that I'll highlight here.  The Ulysses/punchbowl conception of independence assumes that sirens and partygoers always act a certain way.  The problem was, the sirens weren't singing on cue in the wake of the 2008 financial crisis, and not all the partygoers were lurching towards the punchbowl of easy money.  Indeed, as Conti-Brown colorfully puts it, "After the crisis, the Fed was in the position of trying to get a bunch of wallflowers to take tequila shots."  The Fed faced political backlash for its quantitative easing policy from Rick Perry among other politicians.  And during the crisis the Fed, far from standing aloof from politics, coordinated closely with Treasury on a response. This coordination, Conti-Brown argues, is perfectly appropriate.  But it illustrates the paucity of the Ulysses/punch bowl metaphor and justification for the Fed's independence. 

The second problem is that independence from political pressure isn't an unmitigated good--it also means insulation from accountability, as Dave and Matt have already mentioned.  I've been thinking a lot about when and why Congress delegates authority (on which more later).  Conti-Brown makes a strong case that the process by which the presidents of the regional Feds are selected is unconstitutional, because of the executive's lack of power to appoint or remove them.  The incredible discretion that the Fed wielded in applying Section 13(3) of the Federal Reserve Act during the 2008 crisis is another example of the Fed's freedom to operate--it could use vague statutory language and lawyerly justifications to lend to Bear Stearns and AIG but not to Lehman Brothers.  A mere 2 years later, with Dodd-Frank, Congress  delegated still more discretion to the Fed--ultimately, to its economists and lawyers, who make "judgements about the permissible scope of banking cities and the requirements of law that are not exclusively, perhaps not even mainly, technocratic.  They reflect the values of the people making them." (By the way, Conti-Brown is very, very good at bringing to life the people of the Fed--Greenspan, Volcker and Bernanke, yes, but whistleblowing examiner Carmen Segarra as well. And who knew O. Henry worked as a bank examiner?).  But I digress.  The main point is, independence from political control and may be wise policy (but see the problem one above).  And it might be expedient to delegate tough questions to the discretion of the central bankers and their lawyers and economists.  But it's not a democratic form of government. 

Ultimately I'm left with independence in the Fed context as being as empty a concept as it is in the corporate world.  Maybe we agree that we want independent corporate directors and independent bankers because it's easy.  Certainly it lets us ignore the meatier question of what we should affirmatively expect of the individuals in these roles.   



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