- Using regulation to stomp political adversaries endangers rule of law: Gov. Cuomo directs New York financial regulators to pressure banks, insurers to break ties with National Rifle Association (NRA) [J.D. Tuccille, Reason]
- My opinion piece on New Jersey governor’s scheme for a state bank has now escaped its WSJ paywall; WSJ readers respond [letters] And Sen. Kirsten Gillibrand [D-N.Y.] has now introduced a plan to get the federal government into retail banking via the post office [Daniel Marans, Huffington Post, quoting Gillibrand’s interesting claim that “Literally the only person who is going to be against this is somebody who wants to protect payday lender profits.”] More: Nick Zaiac on postal banking;
- “From Kelo to Starr: Not Merely an Unlawful Taking but an Illegal Exaction” [Philip Hamburger on federal government’s acquisition of a dominant equity stake in AIG]
- Court’s opinion on consumer debt contract formed in New York specifying Delaware law undermines “valid-when-made” doctrine that promotes liquidity of secondary debt market [Diego Zuluaga, Cato]
- “Some blockchains, as currently designed, are incompatible with” the European Union’s General Data Protection Regulation [Olga Kharif, Bloomberg via Tyler Cowen]
- And if you’re interested in the legal constraints holding back the extension of banking services to the cannabis industry, tune in to a Cato conference on that subject May 10.
- For best effect, read it aloud: “Do YOU appear in the form of water droplets? Are YOU found on grass and windows in the morning? If so you MAY be dew condensation.” [Andy Ryan]
- “Bezos could get out of Trump’s kitchen by telling the editors and reporters at his newspaper to shut up about the President.” [John Samples]
- Wave of ADA web-accessibility suits hit banks: “N.Y. lawyers sue 40-plus companies on behalf of blind man in a month” [Justin Stoltzfus, Legal NewsLine] More: Jonathan Berr, CBS MoneyWatch;
- “Law schools should not continue hiring faculty with little to no practical experience, little to no record of scholarship, and little to no teaching experience. ” [Allen Mendenhall, Law and Liberty]
- U.K.: “Couple claiming compensation for food poisoning exposed by holiday selfies” [Zoe Drewett, Metro]
- Federal judge: “every indication” that prominent Philadelphia personal injury firm “essentially rented out its name in exchange for referral fees” [ABA Journal]
“Politicians Want to Start a Bank. What Could Go Wrong?” is the title of my new Wall Street Journal op-ed about New Jersey Gov. Phil Murphy’s very bad idea.
The article will be paywalled for many, but you can read some of the journalistic coverage of the bank issue: Matt Friedman, Politico, Samantha Marcus/NJ Advance Media. Some articles I cite in my piece along with relevant links/research: The Economist on German Landesbanken, Aaron Fernando, The Progressive (citing German example, and noting current campaigns for city-owned banks in Los Angeles, San Francisco, Seattle, and other cities); Erica Jedynak letter, MyCentralJersey.com (“A 2011 report based on research provided by Federal Reserve Bank of Boston and other state agencies recommended the Massachusetts legislature not pursue the idea”).
Research on public-owned banks across the world suggests [that lending is politicized]. A 2002 paper from a Northwestern University economist found that areas with stronger political parties get lower interest rates from public banks. Political interference is likely the reason that public banks have been found to underperform compared to private banks in underdeveloped countries, according to a 2012 paper written by Taiwanese researchers.
On corruption rankings, Transparency.org on Germany; Five Thirty-Eight and Harvard Safra Ethics Center on U.S. states. On New Jersey’s outstandingly bad record for corruption: Olivia Nuzzi, Daily Beast and Philip Bump, Washington Post.
- High cross-border remittance costs for globally mobile workers slow ascent from poverty, and know-your-customer and money-laundering regulations have made things worse [Money and Banking]
- “The Supreme Court should find ALJs to be ‘officers of the United States’ and thus make them subject to presidential appointment and removal.” [Ilya Shapiro on Cato merits amicus filing in Lucia v. Securities and Exchange Commission]
- “Settlement of Lawyer-Driven ‘Merger Tax’ Litigation Stumbles in New York” [Greg Herbers, WLF]
- “Financial Regulation: The Apotheosis of the Administrative State?” 2017 National Lawyers Convention Federalist Society panel with Richard Epstein, Hal Scott, Peter Wallison, and Arthur Wilmarth, moderated by Judge Carlos Bea;
- With advances in Oregon and even California, deregulation of commercial insurance lines is having a moment [Ray Lehmann, Insurance Journal; Lehmann’s 2017 Insurance Regulation Report Card for R Street Institute] Perennially troubled Massachusetts, on the other hand, continues slide in same survey [Agency Checklists]
- Tech companies have been experimenting with old and lawful device of dual class stock and SEC shouldn’t be allowed to use raised eyebrow power to stop that [Bainbridge, WLF]
- SCOTUS by 9-0, Ginsburg writing, agrees with Cato amicus (and disagrees with Sen. Grassley amicus) that Dodd-Frank doesn’t cover “whistleblowers” who never told the SEC [Digital Realty Trust v. Somers: Ilya Shapiro/Harvard Law Review, Joel Nolette/Least Dangerous Blog, earlier]
- Claim: “rolling back bank regulations is a good way to trigger a financial meltdown.” How much truth in that? [George Selgin, Cato]
- Crosstown hypocrisy: a closer look at the cities who tell judges and bond investors as needed that their infrastructure will or won’t face future destruction owing to climate change [Dan Walters, CalMatters; Jay Newman, Wall Street Journal, earlier]
- Mortgage systems in Canada, Germany appear to operate with less risk and lower default rates. Would Americans accept the trade-offs? [Arnold Kling]
- Tag-along private suits following regulatory action, familiar in US courts, now crop up in Australia [Kevin LaCroix]
- Regrettable Lovenheim ruling turned liberal shareholder groups into boardroom players [Prof. Bainbridge] The law of corporate social responsibility and shareholder accountability [same]
- New research suggests “SEC rule intended to prevent conflicts of interest among staff has actually had the perverse effect of causing staff to profit from their knowledge as insiders of the SEC” [Thaya Brook Knight, Cato]
- “Federal Prohibition Left California Cannabis Farmers Without Insurance or Banks When Wildfires Struck” [Christian Britschgi]
- “Is Dodd-Frank/SOX reform dead?” [Stephen Bainbridge]
- Trial lawyers and CFPB did little to correct Wells Fargo fake-account scandal [Ted Frank WSJ letter]
- Study finds that more-cumbersome judicial foreclosure methods tend to correlate with tougher lending standards especially for poor; should constriction of home credit for poorer households be interpreted as a good? [Brian Feinstein, Chicago via CL&P]
- A different way to encourage more prudent home lending practice, scale back FDIC coverage [Scott Sumner]
From reader Matt S., on a phenomenon people have been musing about for years:
No, if you think about it, it’s fairly easy to understand that one..
They have to have the braille on walk up ATM and it’s just easier to have one set of buttons on a given ATM model that can be installed anywhere, than to manufacture two different sets of controls for any one model, one for walk up installations and one for drive through installations.
Once you have to have braille on some ATMs, basic economics says that it will be more cost efficient to have it on all ATMs.
It’s part of a lively reader discussion of accessibility rules.
- “The Rise of Financial Regulation by Settlement” [Matthew C. Turk, Columbia Law School Blue Sky Blog]
- Before buying into the idea that fractional reserve banking has some sort of fraudulent roots, consider the common law concepts of detinue, bailment, and debt [George Selgin, Cato]
- Cato files brief urging Supreme Court to clarify constitutional status of SEC’s use of in-house administrative law judges [Thaya Brook Knight on Lucia v. SEC]
- Between FATCA and the Patriot Act, American extraterritorial banking rules keep wreaking havoc on other countries [Ernesto Londoño, New York Times on Uruguay legal marijuana businesses]
- “Congress Can Rescind the CFPB’s Gift to Trial Lawyers” [Ted Frank, WSJ]
- “Absent Reform, Little Relief in Sight from Chronic “Merger Tax” Class-Action Litigation” [Anthony Rickey, WLF]
A victory worth cheering for due process and property rights: the U.S. House has unanimously approved a bill that would curb IRS seizure of bank accounts premised on the owners’ having engaged in a pattern of deposits or withdrawals below the $10,000 reporting threshold (“structuring forfeiture”). The measure would 1) codify a recent IRS practice of not keeping money if no underlying illegality were found such as tax evasion or income from unlawful sources; 2) assure account holders a quick hearing after a seizure, a process that can now drag out for long periods. [Institute for Justice press release; Michael Cohn, Accounting Today] The Treasury inspector general found that “in a whopping 91 percent of sampled cases, the laws were being used to forfeit assets from individuals and businesses found to have obtained their income legally.” [Michael Haugen, The Hill, April]
I’ve been writing on this issue for years. The bill, co-sponsored by Reps. Peter Roskam (R-IL) and Joseph Crowley (D-NY), is called the Clyde-Hirsch-Sowers RESPECT Act; I’ve written about the structuring case of Maryland farmer Randy Sowers here and here.
The Department of Justice has confirmed that it is putting an official end to Operation Choke Point, the under-the-radar initiative by Obama financial regulators to discourage banks from doing business with certain disfavored businesses such as payday lenders and gun dealers. I’ve written a piece for the Washington Examiner on it, excerpt:
The fate of Choke Point should serve as a warning that it’s dangerous to allow those in power to flag legal-but-suspect domestic businesses for shaming and commercial ostracism — especially if the process is covert, and especially if the result is to cut off the outcasts from access to the basics of economic life.
At the same time, it’s significant that the answer to Choke Point was *not* to pass some new law compelling banks to do business with payday lenders, fireworks stands, or X-rated studios.
Part of a free society is that we shouldn’t force commercial relationships on private actors. Businesses — and that includes providers of credit and payments services — should legally be free to follow their conscience.
And Eric Boehm quotes me at Reason:
“It should serve as a warning that the government doesn’t get to flag for banks—or businesses generally—which legal-but-suspect domestic customers it would like them to ostracize,” Olson told Reason on Friday. “Those in power must refrain from signaling that they’d be pleased if certain categories of otherwise legal customer get cut off from their access to economic life.”