Massachusetts Sen. Elizabeth Warren has a new scheme to impose employee co-determination and an assortment of other forcible corporate governance alterations on American business. My new Cato post argues that it would expropriate huge sums in shareholder value while undercutting incentives for economic dynamism. Alternatives to the U.S. corporate governance system, “European or otherwise, simply do not have as good a track record of supporting a dynamic economy that generates world-beating enterprises across a wide range of business sectors.” Other views: Donald Boudreaux (“deeply truly scary”), Matt Yglesias/Vox (taking favorable view of scheme, including its destruction of perhaps 25 percent of current shareholder value). More on the “stakeholder” and co-determination angles: Samuel Hammond, and Megan McArdle on the latter.
- Sens. Marco Rubio, Elizabeth Warren team up on federal bill to curb practice of yanking occupational licenses over unpaid student debt [Eric Boehm] “Pennsylvania’s Governor Calls for Abolishing 13 Occupational Licenses” [same] Licensing reform generally hasn’t been a partisan battle, but party-line vote in California legislative committee has derailed one promising bill [same] Nebraska gets out in front on the issue with a bill sponsored by libertarian state senator Laura Ebke [Platte Institute] “You Shouldn’t Need a License to Braid Hair” [Ilya Shapiro and Aaron Barnes on Cato amicus brief in Niang v. Tomblinson]
- Alone among states, California requires a “mandatory mediation and conciliation process” for agricultural employers. Arbitrary and open to constitutional challenge [Ilya Shapiro and Reilly Stephens on Cato amicus brief for California Supreme Court certiorari in Gerewan Farming Inc. v. Agricultural Labor Relations Board]
- “Lawsuits that compel sharing economy companies to treat their contractors as full-fledged employees will only forestall the inevitable transition towards a Tomorrow 3.0 economy.” [Pamela Hobart, Libertarianism.org reviewing Michael Munger’s new book “Tomorrow 3.0”] Plaintiffs in California Supreme Court ruling: “Uber Drivers Just Killed All the Parts of the Job They Supposedly Liked the Most” [Coyote]
- Or maybe the gig economy isn’t taking over after all [Ben Casselman, New York Times; Ben Gitis and Will Rinehart, American Action Forum, on new Bureau of Labor Statistics survey finding that prevalence of contingent work has declined, not risen, since 2005]
- “Original Meaning Should Decide Arbitration Act Case on Independent Contractors” [Andrew Grossman and Ilya Shapiro on Cato amicus in Supreme Court case of New Prime v. Oliviera]
- “Disability rates among working-age adults are shaped by race, place, and education” [Martha Ross and Nicole Bateman, Brookings]
- SEC in-house administrative law judges are unconstitutional, rules 10th Circuit, creating circuit split [ABA Journal, Jonathan Adler]
- “Dear Sen. Warren: If we care to share our policy views, we’ll let you know. Otherwise MYOB. Signed – 33 firms” [Elizabeth Warren letter demanding to know what financial firms think of delay in Labor Department fiduciary rule, coverage WSJ/MarketWatch]
- New York Gov. Andrew Cuomo’s grab for more regulatory power over financial institutions would erode due process protections [New York Post quoting Mark Calabria]
- “Supreme Court Probes Whether Miami Can Sue Banks Over Foreclosure Crisis” [Daniel Fisher, earlier on Bank of America v. Miami here, etc.] Arnold Kling’s prescriptions for getting the government out of the mortgage market;
- Mini-symposium on the personal benefit standard for insider trading in the recent Supreme Court case of Salman v. U.S. [Bainbridge]
- India’s devastating crackdown on cash [Cato Daily Podcast with Jim Dorn and Caleb Brown]
After initially resisting, Sen. Elizabeth Warren (D-Mass.) has agreed to return nearly $130,000 in donations she and her PAC received from the Boston-based Thornton Law Firm, known for asbestos plaintiff’s litigation. An investigation found the law firm paid $1.4 million in bonuses in patterns strongly suggesting they were being used to cover “straw donations” nominally from partners [co-published Boston Globe/Open Secrets story; New York Post]
From 2010 through 2014, Strouss and Bradley along with founding partner Michael Thornton and his wife donated nearly $1.6 million to Democratic party fundraising committees and a parade of politicians from Senate minority leader Harry Reid of Nevada to Hawaii gubernatorial candidate David Ige to Sen. Elizabeth Warren of Massachusetts. Over the same span, the lawyers received $1.4 million listed as “bonuses” in Thornton Law Firm records; more than 280 of the contributions precisely matched bonuses that were paid within 10 days.
That payback system, which involved other partners as well, helped make Thornton the 11th-ranked law firm nationally for political contributions in 2014, according to data analyzed by the Center, even though the firm is not among the 100 biggest in Massachusetts, much less the U.S.
Capitol Hill recipients of Thornton money include many figures who have played a role in blocking asbestos litigation reform, including Sens. Chuck Schumer (D-N.Y.) and Lindsey Graham (R-S.C.), and then-Sen. Joe Biden (D-Del.).
- Sens. Elizabeth Warren (D-Mass.), Dianne Feinstein (D-Calif.), and Brian Schatz (D-Haw.) call for federal investigation into AirBnB effects on housing market [Kevin Boyd, Rare] “Santa Monica convicts its first Airbnb host under tough home-sharing laws” [Los Angeles Times]
- “Florida man claims he invented iPhone in 1992, sues Apple for $10 billion” [Don Reisinger, Fortune, auto-plays]
- More on why Philadelphia soda tax is a bad idea [Baylen Linnekin, earlier here and here] Reining in FDA, legal home distilling, school lunch waste: 9 food issues for the next President [same]
- Judge Alsup: once having launched infringement claim, mass copyright filer can’t escape counterclaim so easily by dropping it [opinion in Malibu Media v. John Doe (“motion seems more like a gimmick designed to allow it an easy exit if discovery reveals its claims are meritless”) via Techdirt]
- IKEA dresser recall shows CPSC acting aggressively. Did it act wisely? [Abby Wisse Schachter, Wall Street Journal]
- Don’t use “implied contract” to escape the implications of freedom of association re: cake-baking [David Henderson]
“The U.S. Department of Justice (DOJ) has filed a series of criminal charges against short-term lending companies, accusing the unrelated firms of violating the Racketeer Influenced Corrupt Organization (RICO) Act, a federal law passed with the intention of combating organized crime.” It says lenders have falsely claimed affiliation with American Indian tribal governments so as to evade regulation. [Ben Johnson, Heartland]
The forces of consumer financial regulation led by Sen. Elizabeth Warren have made it clear that they would like to ban “payday” lending (short-term, at high interest rates or fees). Yet history teaches that such lending — like gambling, late-night alcohol, and many other disapproved activities — is in such steady demand that short of government supervision of a population more intense than anything in living memory, the real choice is whether to tolerate an aboveboard legal market or to drive it into informal and sometimes illegal channels. In the latter circumstance, consumer remedies against bad actors may be non-existent, and extra-legal status and the absence of advertising may make it hard for borrowers to compare possible sources of loans. As for enforcement methods following non-payment of debt: “Driving [businesses] underground will very often make it worse,” Olson said. “It will mean outright violence, at worst, or extralegal sanctions for those who aren’t paying their debt. You might find you like extralegal sanctions less than you like things they can currently do, like ruining your credit rating.” More: Eric Boehm.
- “The IRS warned Obama it was illegal to pay ObamaCare subsidies to insurance companies.” They went ahead anyway. [The Week, Paul Caron/TaxProf]
- Medical liability payouts back on rise after decade of decline; of top ten states per capita, all are in Northeast except New Mexico (6th) and Illinois (8th) [New Jersey Civil Justice Institute]
- “Why isn’t there more telemedicine?” [Austin Frakt, NYT via Tyler Cowen]
- Would Prince have fared better had law allowed easier access to anti-addiction drug buprenorphine? [Jeb Kinnison]
- Down memory lane: how advocacy foundations funded Elizabeth Warren’s research on medical bankruptcy [Jon Henke]
- Ways to get cheaper pharmaceuticals through competition rather than regulation [Charles Hooper and David Henderson, Regulation magazine (Cato), more from Henderson]
- To keep your sex business free from the coils of federal regulation, your best bet might in fact be Ted Cruz, implacable opponent of Operation Choke Point [Elizabeth Nolan Brown; more from Snopes on rather silly attacks on Cruz for doing job lawyers are expected to do for clients in Texas case]
- Snoopy, you’re not systematically important: judge frees MetLife from SIFI designation under Dodd-Frank [Thaya Brook Knight/Cato, John Cochrane]
- What with Sen. Elizabeth Warren trying to put a lid on some companies’ criticism of the Labor Department’s fiduciary rule, hope it’s still OK for the rest of us to talk about it [Thaya Brook Knight, Cato]
- Sen. Warren isn’t only one using letters to SEC to browbeat businesses: New York City elected Public Advocate Letitia (“Tish”) James tries to hassle gunmaker Sturm Ruger to comply with various demands of gun control advocates [Manikandan Raman, Benzinga/Yahoo; more on Ms. James and her blames]
- Next term Supreme Court will consider case on scope of insider trading law, Salman v. U.S. [Ira Stoll, more] “Returning to Common-Law Principles of Insider Trading After United States v. Newman” [Richard Epstein, Yale Law Journal on Second Circuit’s decision via Stoll]
- DoJ cracks down on big-investor activism — at least when of a sort antitrust enforcers don’t like [Matt Levine]
The campaign to attach legal consequences to supposed “climate denial” has now crossed a fateful line:
The Competitive Enterprise Institute (CEI) today denounced a subpoena from Attorney General Claude E. Walker of the U.S. Virgin Islands that attempts to unearth a decade of the organization’s materials and work on climate change policy. This is the latest effort in an intimidation campaign to criminalize speech and research on the climate debate, led by New York Attorney General Eric Schneiderman and former Vice President Al Gore….
The subpoena requests a decade’s worth of communications, emails, statements, drafts, and other documents regarding CEI’s work on climate change and energy policy, including private donor information. It demands that CEI produce these materials from 20 years ago, from 1997-2007, by April 30, 2016.
CEI General Counsel Sam Kazman said the group “will vigorously fight to quash this subpoena. It is an affront to our First Amendment rights of free speech and association.” More coverage of the subpoena at the Washington Times and Daily Caller.
A few observations:
- If the forces behind this show-us-your-papers subpoena succeed in punishing (or simply inflicting prolonged legal harassment on) groups conducting supposedly wrongful advocacy, there’s every reason to think they will come after other advocacy groups later. Like yours.
- This article in the Observer details the current push to expand the probe of climate advocacy, which first enlisted New York AG Eric Schneiderman and then California’s Kamala Harris, into a broader coalition of AGs, with Massachusetts and the Virgin Islands just having signed on. More than a dozen others, such as Maryland Attorney General Brian Frosh, seem to be signaling support but have not formally jumped in. More: Peggy Little, Federalist Society.
- CEI people, many of them longtime friends of this site, have been active critics of the Schneiderman effort, with Hans Bader, a senior attorney there, highly critical just a week ago.
- In these working groups of attorneys general, legal efforts are commonly parceled out among the states in a deliberate and strategic way, with particular tasks being assigned to AGs who have comparative advantage in some respect (such as an unusually favorable state law to work with, or superior staff expertise or media access). Why would one of the most politically sensitive tasks of all — opening up a legal attack against CEI, a long-established nonprofit well known in Washington and in libertarian and conservative ideological circles — be assigned to the AG from a tiny and remote jurisdiction? Is it that a subpoena coming from the Virgin Islands is logistically inconvenient to fight in some way, or that local counsel capable of standing up to this AG are scarce on the ground there, or that a politician in the Caribbean is less exposed to political backlash from CEI’s friends and fans than one in a major media center? Or what?
- I recommend checking out the new Free Speech and Science Project, which intends to fight back against criminalization of advocacy by, among other things, organizing legal defense and seeking to hold officials accountable for misusing the law to attack advocacy.
- This is happening at a time of multiple, vigorous, sustained legal attacks on what had been accepted freedoms of advocacy and association. As I note in a new piece at Cato, Sen. Elizabeth Warren has just demanded that the Securities and Exchange Commission investigate several large corporations that have criticized her pet plan to impose fiduciary legal duties on retirement advisors, supposedly on the ground that it is a securities law violation for them to be conveying to investors a less alarmed view of the regulations’ effect than they do in making their case to the Labor Department. This is not particularly compelling as securities law, but it’s great as a way to chill speech by publicly held businesses.
- Robert Litan in Fortune on why Elizabeth Warren went after him;
- “Economists have no idea how to measure the value created by the financial sector.” [Arnold Kling]
- W$J at end of August had an investigative report on the (opaque, high-discretion, unaccountable) system of installing “monitors” in banks and other financial institutions to settle civil or criminal charges;
- Update: in a sidebar to my City Journal piece on New York Attorney General Eric Schneiderman this summer, I covered his charges of “redlining” against small upstate banks that did not operate in inner cities; now Schneiderman has extracted $825,000 from a Buffalo bank [NY AG press release]
- No kangaroo courts at the SEC, please [Bloomberg View editorial on in-house adjudicators, earlier here, etc.]
- How the FATCA law, deplored in this space for years, makes life hard for U.S. expatriates/spouses [Colleen Graffy, WSJ]
- “Except for the ten to twelve million people who use them every year, just about everybody hates payday loans.” [New York Fed “Liberty Street Economics” via Tabarrok] Despite reports of FDIC back-off, Operation Choke Point controversy not over [Ballard Spahr via Kevin Funnell]