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April 2010 Archives

April 6, 2010

Implicit and Explicit Christian Scholarship--Skeel

In his characteristically wise contribution to the Stuntz conference, Mike Seidman posed the question of why so many of Bill’s influential criminal procedure articles make no references to the Bible or Christianity. Why, he asks, do they look so much like articles written by non-Christian scholars?

One possibility is that Bill hides his faith in order to make the articles more palatable to secular scholars. Seidman rejects this as completely inconsistent with Bill’s character, and he also rejects a second possible explanation, that Christianity does not really have anything to add. 
 
Seidman proposes a very different explanation: Christian humility. Because Scripture does not give a single, clear answer to many legal and political issues, better not to wield it as a weapon in the debates.
 
I think this is a subtle and persuasive insight. But I also think there may be two more explanations for the absence of explicit Christian reference in work by Bill and other Protestant legal scholars in the 1980s and 1990s. First, unlike for Catholic scholars, there weren’t a large number of role models—there weren’t lots of Protestant scholars integrating their faith into scholarship in criminal law or corporate law or other areas. There were some, but there certainly weren’t lots, and I can’t think of any in Bill’s field. Fortunately this is rapidly changing.
 
The second explanation is quite different. Top notch Christian scholarship isn’t always scholarship with explicitly Christian ideas. The author’s faith may be more a question of how the scholar chooses and explores the ideas, than of the particular position he or she ultimately takes. This is something Bill has written about, as has C.S. Lewis.
 

April 9, 2010

The Dodd Bill--Skeel

The Dodd Bill—the financial reform package currently under consideration in the Senate—is a sterling illustration of the old cliché that sometimes it's worse to miss by an inch than a mile. The provisions for handling large financial institution failures have progressed a great deal from last summer’s Obama administration proposal. They borrow a lot more from the bankruptcy laws, for instance. And there’s a lot of tough talk about ending too big to fail and harsh medicine for large financial institutions that stumble. But the framework has more than enough wiggle room for bank regulators to bail out creditors as they did in 2008, and it gives them a $50 billion pot of cash to do it with.  The end result is as bad, and could even be worse, than the original, for reasons described in more detail in this op-ed from a couple of days ago.

The bill also resolves the debate over whether to establish a Consumer Financial Protection Agency to police credit cards and mortgages in a strange way. The Dodd Bill does call for a new consumer watchdog—a good thing, in my book-- but would stick it in the Federal Reserve. The Fed focuses on protecting the banking system, which often benefits from credit card and mortgage terms that may hurt consumers. If the watchdog is sufficiently independent, the arrangement might work. But the proposal seems to invite lots of cognitive dissonance within the Fed.
 
If I were a lawmaker and were forced to vote today, the resolution provisions would put me squarely in the no category. But if I were a Republican lawmaker, the last thing I would do is commit myself to opposing any financial reform package that emerges from Congress. The politics of financial reform seem very different than the healthcare debate, as I’ve argued before, given the distaste for bailouts on both sides of the political spectrum. If the Dodd Bill were amended in ways that really made good on the claims to end too big to fail and to reduce the need for bailouts, it might be worth voting for. But we definitely aren’t there yet.
 

The Stuntz Conference Video--Skeel

The earlier link to the conference should now have the video.  It's right here.

And here is an article from the Weekly Standard on the conference.

April 18, 2010

Goldman's Dark Hour--Skeel

I remember the moment when I realized that Goldman had gone from being the darling of Wall Street—the firm everyone pointed to as the best run, with the best internal risk controls—to something very different. Last summer, in response to a little piece I wrote for a New York Times Dealbook blog discussion, a commentator referred to Goldman as the embodiment of evil, or something to that effect. I couldn’t imagine what he was talking about. Within a few weeks, I began to understand, as rumors surfaced about Goldman profiting from its customers’ subprime losses and being a multibillion dollar beneficiary of the government’s AIG bailout.

After many months of rumors, the SEC has charged Goldman with violating the securities laws by misleading the investors in synthetic collateralized debt obligations (CDO’s). With a CDO, investors invest in an entity that holds bonds issued by a variety of companies.  A synthetic CDO doesn’t actually hold the bonds, but achieves the same effect by holding financial instruments (usually, credit default swaps) that are linked to the same kind of bonds.  As I understand it, based on a quick reading of the SEC complaint, the SEC alleges that Goldman didn’t tell investors that John Paulson, a hedge fund manager who helped to determine the contents of the synthetic CDO, had placed large bets that the underlying subprime bonds would decline in value.  Paulson was picking bonds that he viewed as likely to default.
 
I personally have somewhat conflicting reactions to the scandal.  First, if the allegations are true, Goldman deserves to be punished for hiding key information about the packaging of the synthetic CDOs.  Although the losers in these transactions seem to have been large institutions, that’s no excuse for withholding key information about how the investment portfolio was selected.  But second, I suspect that part of the reason for charging Goldman is a distaste both for synthetic CDOs and for the fact that Goldman benefitted from the subprime crisis. I’ve never understood the rationale for synthetic CDO’s and have doubts about their benefits. But as long as they’re legal, I don’t think banks should be punished for having profited from them.

April 26, 2010

Interview With Poet Charles Wright--Skeel

Many many years ago, while I was in law school, I took a poetry workshop with Charles Wright.  He was already a well-known poet then, and he's subsequently won the Pulitzer Prize and many other awards.  In addition to being a superb poet (the critic Helen Vendler recently described him as one of America's major poets) and a true gentlemen, he's also quite funny.  Here is a little interview culled from a conversation I had with him a few months ago: skeel-charles-wright-interview.pdf

Here's a bit of information about Wright and one of his poems. 

 

April 29, 2010

The Supreme Court Pick--Skeel

I’m lousy with predictions, especially when they involve presidents or Supreme Court justices, but here goes: I predict President Obama will hint widely that he plans to nominate Diane Wood (the main Protestant in the running), but actually nominate Elena Kagan.

Here’s the thinking: President Obama seems to shy away from surprise nominations, so I strongly suspect the choice will be one of the names we’ve been hearing—or someone who fills the airwaves soon. There’s been so much discussion of the fact there will not be any Protestants on the Court when Stevens steps down that the President risks getting hammered if he doesn’t pick a Protestant. This makes Diane Wood the obvious choice. If she were in fact nominated, the pick would be quite ironic, since her stridently pro-choice abortion views will outrage nearly all evangelical Protestants and many others as well—much more so than the non-Protestant front-runners.
 
I suspect President Obama wants to select Wood but I also suspect he’s leery of a big fight over abortion. He doesn’t need a fight over social issues at the moment.  This is why I think he’ll hint that Wood will be the pick, then shift to Kagan when it becomes clear that many politically active Protestants would rather see Kagan than have a Protestant justice.  This would give him cover on the Protestant justice issue, while assuring a solid, sufficiently liberal pick and a less ugly confirmation battle.
 
Truth be told, I think this would be a good outcome, which is always a dangerous starting point when you’re making predictions.
 
 
 

April 30, 2010

Endgame in the Financial Reforms--Skeel

With the financial reform bill now in the full Senate and all signs pointing toward its passing in the next week or two, a flurry of possible amendments are circulating privately and publicly. Which are most important? Not Senator Boxer’s new amendment, which would explicitly state that large financial institutions must be liquidated if they are subject to the proposed resolution procedures for “systemically important” financial institutions. Senator Boxer’s claim that this would prove that the bill doesn’t allow future bailouts illustrates an understandable but dangerous confusion about what a bailout is. If all of an institution’s creditors are paid in full, it’s a bailout even if the institution itself is eventually liquidated. If creditors know they’ll be paid—and they can be under the proposed bill—they’ll be too willing to lend to the institution and won’t monitor as carefully as they would if they would if they weren’t protected. They’ll act like the creditors of Bear, Stearns, AIG and Lehman Brothers did.

The one amendment that would do most to change this, in my view (and as Tom Jackson and I argued in this recent op-ed), would be to reverse the special treatment that derivatives and other financial contracts are now given under the bankruptcy laws. Parties to a derivatives contract currently can terminate their contract, sell their collateral, and keep even preferential or fraudulent payments they receive prior to a bankruptcy. These special rules, which were insisted on by Goldman Sachs and other major derivatives dealers in the 1980s, 1990s and 2000s, substantially reduce the benefits of bankruptcy for a large, troubled financial institution. Unlike many of the proposals being discussed in DC, which would slap down Wall Street without producing real benefits, this one would punish Wall Street more productively. It would make bankruptcy even more attractive as an alternative to bailouts than it already is, and make future bailouts much less likely.