Tag Archives: securities regulation

What is the Law? What are Laws? Is Law a matter of Contract or Decree? Agreements or Formulae for Disagreement?

Periodically, the question comes up, “what is the law?”
None answered this question any better than W.S. Gilbert, who wrote into Iolanthe an introit or opening number for the Lord Chancellor of England to sing, “The Law is the true embodiment of everything that’s excellent, it has not kind of fault or flaw, and I, my lords, embody the law.”
As a practical matter, it does seem that Judges just come down from on high and tell you, as the Lord Chancellor did, that whether they sit on a “supreme” or a “superior” court in a “circuit” or a “district”, they ARE in fact both SUPREME and SUPERIOR and they get to tell you what the law is, whether there is a jury empaneled or not.
But in reality, Law is FORMAL and ONGOING DIALOGUE about what has happened in the past and what ought to happen under a given set of circumstances in the future.  Law is first and foremost a dialogue about norms of behavior, and exceptions to those norms.
Up to a point, this is all you need to know: whether you are negotiating a contract in Birmingham, England, Birmingham, Alabama, Binghamton, New York, Bogotá, Colombia, or Buenos Aires, Argentina—you are engaged in a dialogue that will create a relatively “small piece of private legislation”—a new law, governing a limited number of people and circumstances, which is what a contract is—so take your job as a negotiating legislator seriously.  You are creating a series of obligations which arise from agreement.
You need to take it seriously because that aspect of negotiating new law is just about creating a stage on which to enact some kind of business or personal transaction which is important enough that you want its performance to be obligatory—you want to formalize the enactment of a transaction so that, if necessary, that transaction can be FORCED by society or some third party acting on behalf of society, if you need invoke such powers.  And the invocation of such powers has a whole bunch of other ramifications as we turn from the arena of transactional law to that of litigation (from agreement to disagreement) and then to resolution.  Every society, from the simplest hunter-gatherer bands to the United Nations, has some variation of all these formalized, some would say “ritualized” steps.
Anthropologists from Lewis Henry Morgan to Sally Falk Moore, and comparativist students of classical history from Numa Denis Fustelle des Coulanges (The Ancient City) to Georges Dumézil have been studying this question for two centuries now in the modern scientific vein.  Many modern anthropologists cite Clifford Geertz and by utilizing Geertzean analysis state that law involves the historically real enactment of mythic formulas (See, e.g. Marshall Sahlins, Historical Metaphors and Mythic Realities).  But the basic conclusions that law (or the related concept of “rule” or “rulership”, involving a series of taboos and their application to everyday life) involve a kind of “ritual” or series of ritualistic formulations for the enforcement of “social norms” concerning behavior.  This definition rarely helps people in any practical way.
In my opinion, and based on my experience, a practical definition of the law is:
“Law is the Practical Instrument to Implement Politically Formulated Policies”.
Peyton has been working for me for six and a half years and it took him a very long time to realize the truth here: Law from even 13 years ago may ALREADY be a relic of policies which no longer have political support or vigor.
In 1999, nothing like the mortgage foreclosure and eviction crisis that started in 2007-2008 HAD EVER HAPPENED BEFORE IN THE UNITED STATES.  There had never been a concerted National Policy, starting at the highest levels of government, to wipe out private property ownership.
        In short, in 1999 the Bush-Obama socialist-to-communist revolution had not yet started, although some significant legal groundwork for that revolution had been laid. For example, the notion that mortgage notes were a class of securities beyond the realm of securities fraud regulation goes all the way back to the Supreme Court’s adoption of the Second Circuit’s “Judicially Crafted List of Exceptions” in 1990. Reves v Ernst and Young, 494 US 56, 110 SCt 945 (1990).
      At the present time, it is pretty  obvious that the Courts have their marching orders about the need to throw a bone to particularly active and loud people here and there while absolutely wiping out 99% of the homeownership in favor of rental—BY the government/banks/financial interests FOR the government/banks/financial interests.
        Because I believe in maintaining private property, against the banks, against confiscatory taxation, if necessary by violent revolution, I have no compunction about fighting FOR adverse possession anytime and all the time, but we have to realize we have to come up with MUCH better and newer arguments than tired rehearsals of the current deviations from the common law.  The communists in Government and Banking WANT to abolish the common law—that is THEIR POLICY.
        And that’s why, as I have told you all, I am looking to new theories such as the Writ of Amparo and Anti-trust/Price Fixing—to catch the Powers that Be Offguard and to force them to eat their own words and choke on them.
The most sophisticated judges on the modern U.S. Courts have been asserting repeatedly the need to draw on Foreign Law as a resource INSTEAD of merely rehashing the common law and the common law—so let’s make them explain why we shouldn’t have the Writ of Amparo in the USA.
        Socialist commentators have been criticizing the government for not using the Antitrust and Securities Laws to enable the government to take over more companies and businesses, so why not use these same Antitrust and Securities Laws to enable THE PEOPLE to take over more companies, properties, and businesses AGAINST the totalitarian creep of government?
           If the United States Constitution be treated as a very important, nearly sacred, contract on how to make law, for example, are Executive Orders “Law”?  What force and effect, if any, should they have?  Because such orders are nowhere specified or allowed in the Constitution.  So what aspect of the Constitutional Contract permits “legislation” by Decree?  06-02-1952 Youngstown Sheet & Tube Co v Sawyer 343 US 579 72 SCt 363 SCOTUS May-June 1952.  And what is the remedy when even Congress agrees that the President has powers beyond those authorized in the Constitution?
         If anybody wants to see me I’m back IN LA at least for this weekend and Peyton is on his way back to Texas.

State Control over the Economy, Part I: JPMorganChase & Washington Mutual

Attention today (Monday September 29, 2008) has been focused on the House of Representatives in Washington, D.C., which made a “show vote” against “socialism” and government bailout of the financial industry.  Yet everyone over the age of 6 knows that today was just partisan showmanship, and that Congress will rescue the starving billionaires and “small timers” (i.e. mere millionaires) on Wall Street as surely as they will vote themselves a pay raise sometime in the next few years and create more exemptions for fraud or acts of oppression committed by government officials.  No one in the Republican leadership or the 94 Democrats who joined them in voting down the Republican President’s bill admitted that it is GEORGE W. BUSH’S America, the nightmare of corporate welfare and immunity for financial sleight of hand artists, largely envisioned by Daddy George H.W. and implemented by and under William Jefferson Clinton, which is collapsing.  Populism will blame Wall Street, but it was Bill Clinton’s repeal of the Glass-Steagal Act in 1999 and all the concommitant removal other “brakes” places on the rampage of international bankers on cocaine which has led to the current meltdown.  Why is it that we are amazed at the puppet theatre played out in Congress today?  The members on both sides of the aisle are actually clamouring for yet MORE government intervention because we have repeatedly voted for the worst of the worst of both Republicrat and Democan Parties over the past two decades.  The Republican leadership made it pretty clear that the ONLY reason Bill 3997 failed today was because Nancy Pelosi opened her mouth and said a few semi-rational and coherent things about the effects of deregulation and greed on the collapse of the most insane paper-money manufacturing scheme (securitized mortgages) in the history of the world.  But until SECURITIZED MORTGAGES ARE EITHER ABOLISHED or fully regulated like ALL OTHER SECURITIES in this country, the exponentially increasing risks will continue to pile up. 

As of the present moment, I think that insufficient attention has been played to the government’s intervention in the collapse of Washington Mutual.  Late Thursday night, an incredible thing happened: Washington Mutual made known to the government that it was on the verge of collapse, and OVERNIGHT the government brokered a takeover of Washington Mutual whereby 100% (or something very close) to the government insured deposits, loans, credit card accounts, and other “assets” of Washington Mutual were transferred to JPMorganChase while 100% (or something very close) of the corporate liabilities (i.e. equity shares and bonds, implying UNSECURED obligations of the bank) were declared WORTHLESS. $1.8 BILLION in financial manipulation OVERNIGHT. 

Where is the “wall of separation between government and the private sector these days?”  Since when, in a non-Communist, non-Fascistic economy, can the government in effect order a merger of two major businesses without shareholder consent or litigation of any kind?  This is called a “Command and Control” or “Fiat” economy.  Nothing of this level of dictatorial efficiency was ever achieved or implemented in Nazi Germany, the U.S.S.R., or anywhere else to the best of my knowledge.  The Kings of England up through William of Orange, Adolph Hitler, Joseph Stalin, and Mao Tse-Tung all had more constituencies with whom to contend and negotiate than the financial authorities who merged these two gigantic banks—which happen to be the greatest single offenders in the whole securitized “mortgage backed equity/collateral backed obligation” debacle.  The lack of discussion or any widespread dissemination of information regarding the details or the mechanisms of the Washington Mutual/JP Morgan Chase “overnight shotgun marriage” last week was just a prelude to the “show trial” in Congress today, where amateur actors tried to pretend that Congressional approval of the bailout is all but pro forma. 

The Great Leader GWB will, within a few days, achieve the complete reimbursement of his buddies in high finance if he has to do so by (hush-hush) executive orders—I have no doubt of that.  What I wonder is whether Ron Paul or anybody else on the House Floor was thinking how completely content-free the debate really was, and how pointless the show of posed opposition to the implementation of something close to pure communism in the financial sector.  IF the Federal government can, without comment, by mere announcement merge JPMorgan Chase and Washington Mutual OVERNIGHT in one week, there is really no meaningful limit to what the Government and and will do, given a week or two, with or without rubber-stamped congressional approval. 

So in short, to those of you who were in favor of the Bill 3997 bailout, I say, “be of good cheer, Big Brother will take care of you whether the Puppet Actors in Congress approve it outloud today, tomorrow or never.”  To those of you who think that Congress struck a blow for economic integrity and allowing the free markets to take care of their own greatest leaders’ failures, I would say: look at JPMorganChase and Washington Mutual merger that took place without application to the Antitrust Division of the DOJ, the Federal Commerce Commission, or anyone else, and tell me that it makes any difference what Congress does.  Look at all the dozen or so mergers of the past couple of weeks and tell me that there is a rule of law or free market economy at work here.  Where were the shareholder votes necessary to approve these mergers?  Where were the bids and white knights and marketplace speculation?  ALL of these things have been suppressed and coopted by the government to hide the failures of the corporate-communistic policies of the past 20 years.  Had the free market or even free discussion of these issues been allowed, all the truth about who is responsible for the present state of affairs, and who authorized the exemption of securitized mortgages from securities fraud regulation (and even private civil litigation complaints or demands concerning such securities fraud).  

Free Market Capitalism is dead.  Socialism is managed by and for the primary benefit of the operators and managers of the major financial corporations.  Even the small private shareholders in financial institutions can be wiped out NOT by the Market but by the Government, in a moment, in twinkling of an eye—but without any trumpets…..