Court's decision unsettles democratic principle of 'One man, One vote'

The Supreme Court’s clearly political decision on campaign finance, Citizens Union v. FEC, has not only pierced the veil of the Supreme Court’s air of impartiality and prestige as the nation’s ‘High Court’, it has also harmfully thrown into disarray a long-standing simple rule of American politics – namely, that foreigners or foreign interests should play no role in the outcome U.S. elections.  In this surprise ruling that caught the legal establishment off guard in what had been considered decided law under the McCain-Feingold Act, it was also telling that it was also along strictly partisan lines, leading many analyst to suspect – given the GOPs fundraising foibles in the last election, as well current low public polling by the GOP – that there was more than meets the eye in the decision. Nevertheless, regardless of political shenanigans, the Court’s rulings are considered the ‘Law of the Land.’  Republicans have been near unanimous in their praise, or unusually silent indicating tacit support, for this bizarre decision. 

  At the moment, foreign corporations may not spend any money in U.S. elections under a provision of federal election law. However, President Barack Obama, in rare public rebuke of the High Court, and other critics say the court’s decision to let corporations spend their money to directly influence elections opened the floodgates to foreign involvement.  In last week’s State of the Union address to Congress and the nation, Obama asserted the court had allowed special interests, “including foreign corporations, to spend without limit on our elections.”  He added,  “With its ruling today, the Supreme Court has given a green light to a new stampede of special interest money in our politics,” said President Obama in a statement. “It is a major victory for big oil, Wall Street banks, health insurance companies and the other powerful interests that marshal their power every day in Washington to drown out the voices of everyday Americans…”

Under scoring this point, Justice John Paul Stevens said in his dissenting opinion that the reasoning underlying the ruling “would appear to afford the same protection to multinational corporations controlled by foreigners as to individual American” citizens.  Stevens also accused the majority of judicial activism and attacked the use of corporate personhood in the case: “The conceit that corporations must be treated identically to natural persons in the political sphere is not only inaccurate but also inadequate to justify the Court’s disposition of this case.”Further still, and specifically in relation to Economic Foreign Policy, the more complicated question is how, under the new ruling, to treat U.S. subsidiaries of foreign companies or American corporations that are controlled by foreign investors, or the Political Action Committees (PACs) of foreign corporations and foreign investors such as sovereign wealth funds.

Before the court ruling, the issue was very clear: corporations, including some with foreign ties, could form PACs, funded with voluntary and limited contributions from their executives and employees. But they could not spend money from their general treasuries to advocate for or against candidates for federal offices.  For the purposes of determining who could play, U.S. citizens and some legal immigrants could, and everyone else could not.

“The court has suddenly made the prohibition on foreign nationals a much more complicated affair to enforce,” said Tara Malloy, associate counsel at the Campaign Legal Center, which wanted the corporate ban upheld. “Now you may have a multinational corporation, and it’s unclear who is funding what, or even what groups in what countries have what interests.”

Floyd Abrams, the Constitutional lawyer who argued the case in favor of striking down the ban on corporate campaign spending, said existing rules that apply to PACs to limit foreign influence could have the same effect on corporate spending generally.  “That said, if it’s an American company, it would presumptively be governed by American law,” Abrams added.

Fred Wertheimer, a longtime advocate of limiting money in politics, said the existing Federal Election Commission (FEC) rules are inadequate and that the FEC itself is ineffective in enforcing them.  Meanwhile, the FEC is currently reviewing the court ruling and will take no action until they complete an analysis of the impact of the decision.

In crafting their response to the decision, lawmakers have focused on the possibility that investment funds controlled by foreign governments, known as sovereign wealth funds, could end up playing a role in U.S. elections.  Rep. Chris Van Hollen (D-MD), said the bill he is drafting with Sen. Chuck Schumer ( D-NY), a ranking Senate Finance Committee player, aims to prevent foreign governments from trying to influence elections through investments by their sovereign wealth funds. “That’s the potential,” Van Hollen said. “If that potential is there, we have to do what we can to shut it down.”

But less clear, in a world where states compete for foreign investment and giant U.S. firms are happy to attract international money, is whether election law’s distinction between domestic and foreign corporate money makes sense. For example, would money tied to Japan’s Toyota Motor Corp., which builds cars and trucks in four states and has parts suppliers in many more, be inherently any worse than contributions from Ford Motor Co., the American car maker that also has operations around the world?

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In the context of the Economic Foreign Policy of nations – particularly our global trading partners and competitors, these are crucial considerations that may bear direct impact on our balance of payment with other nations.  So while the clearly political decision by the conservative wing of the Supreme Court will aid the cash-strapped, unpopular Republicans in the 2010 Mid-term and the 2012 Presidential election, it has done so at great peril to our national sovereignty.

Source:  HuffPo,  Excerpts from AP - By MARK SHERMAN, Saturday, January 30, 2010

WARNING! You are being manipulated: Government is NOT the problem.

I’m guilty.  Way back in the day when I was young and thought I knew it all, I was the biggest proponent of ‘free market capitalism’ and the ‘deregulation’ orthodoxy.  To boot, in my mind ‘Big Government’ was an evil purveyor of the ‘welfare state’ and it was anathema to innovation, job growth, free enterprise, property rights and human industriousness.  I was sold and though many tried, you could not convince me otherwise.  That is until I joined the financial industry, learned the business from the inside, out and later gained additional insight from graduate business and finance courses and professors such as Joseph Stiglitz, Jagdish Bhagwati and Charles Calomiris at Columbia.   And then more and more, I began to realize the foxes were guarding the hen house when I noted the huge  competitive advantage  Big Business  has over ordinary citizens when they leverage billions of dollars and armies of lobbyist to fight against the will of the American people and the public interest. For instance, in the way food companies have peddled money & influence to minimize FDA protections resulting in legalizing unhealthy, carcinogenic ingredients in the nation’s food supply; or the way Wall Street’s Oligarchs – with the help of their crony, Treasury Secretary Tim Geithner – snookered taxpayers out of trillions in bail-out funds; or how the financial industry lobby and credit card companies are undermining the will of American voters by watering down the proposed Consumer Financial Protection Agency, allowing banks to continue charging loan shark rates on credit cards and bank ATM fees.  With all due respect, the so-called “best and brightest minds” from the Lords of Finance to Auto Industry execs, to the Titans of Wall Street told us they knew best how to run business & industry with as little regulations as possible.  Thing is…

Business Lobby

…they ran their companies – along with the global economy – into the ground, and then stuck taxpayers with the bill for their greedy, risk-laden foibles.  What we’ve learned from this crisis (if you’ve been paying attention to Enron, Tyco, AIG, commodity price-fixing, Wall Street risk, and purveyors of faulty mortgages, etc) is that the “best & brightest” in American corporations really aren’t.  And I have more news for you: The only sector in the economy that has worked effectively throughout this financial crisis is what many pejoratively call “Big Government.”  That’s right, Government does work – they bailed-out your banks, saved millions of jobs from falling over the cliff, kept you in your foreclosed homes, provides  unemployment checks and food stamps to help put food on your table and stay afloat weekly, rescued the auto industry ensuring its future viability and gave you a great deal on that new car in the driveway – while it protects and defends the right, in far-away places, of the lunatic fringe to gratuitously condemn President Obama as a “fascist” or rally for “less  government” and “less regulation” – the very things that got us into this mess.  Yes, I trust the government when our recent experience patently reveals that “BIG BUSINESS” when left unchecked by “BIG GOVERNMENT” screw consumers, taxpayers and becomes consumed by greed and harmful, irrational risk-taking that undermines the public good.  In the aftermath, it is ‘Big Government’ — led by the president – that is expected to ride in to the rescue, clean-up the mess left by the previous administration, stabilize the economy and reset the conditions for job growth and economic prosperity. Left to ‘Big Business’ there would still be pigs at the trough. It is time we hold ‘Big Business’ accountable to be be good corporate citizens and to demand their social responsibility to uphold the public good above greed and profits.

Two final points.  ‘Big Government’ is no longer a pejorative term; it does have an important role to play in society.  And second, Ayn Rand is over-rated.   That’s why I think you’ll appreciate the piece below from today’s Washington Post.

 —-

By Steven Pearlstein, Washington Post

Dec 30, 2009 – If you step back and look at the big economic policy issues– health care, financial regulation, immigration, education reform, the budget deficit — they appear to boil down to one fundamental question: What is the best trade-off between fairness, stability and social cohesion on the one hand and disruptive and growth-inducing free market capitalism and innovation on the other?

At its most simplistic level, this debate plays itself out as the choice between big government and small government, between regulation and deregulation, between European-style socialism and Anglo-American free-market capitalism … Over the years, the center of political gravity has swung toward one camp or the other in response to economic crises brought on by overdoing things in one direction. The pendulum has now begun to swing back from Reagan Republicanism to some still-evolving form of Obama Democracy…

What good is competition if it drives corporate executives to knowingly engage in increasingly risky behavior simply to boost short-term profits and stock prices even at the expense of long-term value creation? And what good is innovation that is used to snooker consumers, mislead investors or subvert sensible regulation?

…Americans understand that free markets are the best vehicle for generating innovative products and ever more efficient ways of producing them. But recent experience also reminds that innovation and the competitive dynamic are not always what they are cracked up to be. When investors engage in herd behavior and deploy scarce capital merely to bid up the price of real estate or financial assets, that does nothing to improve economic output or efficiency … What good is competition if it drives corporate executives to knowingly engage in increasingly risky behavior simply to boost short-term profits and stock prices even at the expense of long-term value creation?  And what good is innovation that is used to snooker consumers, mislead investors and subvert sensible regulation?

The question is not simply whether innovation will be “stifled,” as the business community likes to suggest, but whether those innovations serve a larger social purpose.  Read more here… 

Washington: support the public welfare over Big Business lobby

Really interesting editorial in today’s New York Times that hits the mark with the threat that an un-check and powerful bank lobby poses to achieving much needed bank and financial industry reform to protect consumers against industry collusion, predatory and price-gauging practices, as well as disproportionate risk-taking that threatens a sustained economic recovery.  These practices have reached crisis proportions and is pervasive in Washington.  The tactics of the bank lobby also subverts the U.S. Congress’s Constitutionally-ordained obligation to protect the ‘public welfare’ against all enemies, foreign AND domestic.  The “Big Business” lobby constitutes a clear and present threat to our citizens Republic. And “Big Government” represents the only realistic check against “Big Business.”  It is time to demand that “Big Business” be good “corporate citizens” to act in the public’s interest, and to show ‘corporate patriotism’ to their country and government for coming to their rescue.  It is also time for Washington lawmakers to take heed to public needs, as well as the public mood: something must be done.

(NYT) New York - Pretty much everyone agrees on the causes for the country’s desperate financial mess: predatory lenders, weak regulations, even weaker regulators, and risky nigh unto incomprehensible financial instruments.

Congress’s willingness to address those problems will have its first real test on Wednesday when the House Financial Services Committee puts finishing touches on what could be essential reform legislation — or a major disappointment, depending on what they do.

At the top of the committee’s agenda is regulation of the largely unregulated and dangerously opaque multitrillion-dollar derivatives’ market. Next on the agenda is the creation of a new Consumer Financial Protection Agency to oversee the consumer-credit offerings of banks and other financial firms — including mortgages, credit cards, overdraft “protection” and payday loans. Both reforms are crucial, and we fear both are in danger of being irreparably weakened. Derivatives are supposed to help investors and businesses manage risk, but their unchecked and unregulated use led — directly and indirectly — to the financial crash and subsequent trillions of dollars in taxpayer interventions.

Traitors to the public will

 Congress should require that all derivatives’ dealers and users — including banks, hedge funds and corporations — conduct their trades on exchanges where they would be subject to considerable regulation and public scrutiny. Regulators could create exceptions for customized contracts that are negotiated one on one for truly complex and unique circumstances. But most derivatives contracts are highly standardized and can be, and should be, exchange-traded.

The threats to the consumer protection agency are even more blatant. To curry favor with the banks, several lawmakers are intent on amending the proposed legislation so that no state could impose its own — tougher — consumer protection laws on banks. That would be a mistake because in the past, many states have demonstrated the will and the expertise to protect consumers. But federal rules were issued in 2004 that basically barred states from enforcing their laws over national banks and their subsidiaries. That short-circuited state efforts to control, among other things, the subprime lending that sparked the financial crisis. Some lawmakers are also intent on weakening the proposed power of the new agency to examine the books of the banks and firms that it would regulate. Current bank regulators have that power, but they have not used it with a sole focus on protecting the best interests of consumers.  Read more here.

Unfortunately, the proposed legislation has too many loopholes and exemptions. For example, many corporations and hedge funds would still be able to trade standardized derivatives privately. That may protect bank profits — without transparency, there is no chance for comparison shopping — but it would put taxpayers at risk of a repeat calamity. Like the banks, some corporate investors in derivatives resist exchange trading. They argue that more regulation would raise their transaction costs to hedge any given risk. That’s debatable because greater transparency is likely to reduce costs. But even if true, somewhat higher costs would be a small price to pay for systemwide stability. Still, there is reason for hope and the Obama administration seems to be taking the lead on this.

Such growing sentiment about the odious nature of Wall Street was also echoed by administration officials on the Sunday morning talk circuit. “The bonuses are offensive,” said the President’s senior adviser David Axelrod on ABC’s “This Week,” adding that banks must do more to support lending across the country and should stop their lobbying efforts aimed at blocking the passage of new consumer financial protections and needed industry regulations currently being considered in Congress.

“They ought to think through what they are doing, and they ought to understand that a year ago a lot of these institutions were teetering on the brink, and the United States government and taxpayers came to their rescue” Axelrod said. “They have responsibilities, and they ought to meet those responsibilities” by displaying good corporate citizenship, playing fair, and by supporting American business and responsible citizens by making loans. They also have a public duty as corporate citizens to their government as well as to the American taxpayers for coming to their rescue. Read more here.