Sunday, July 27, 2014

Timothy Geithner: A Regulator Beholden to a Bank?

In her article in The New York Times, Gretchen Morgenson raises the possibility that Tim Geithner, president of the New York Federal Reserve from 2003 to early 2009 and U.S. Treasury Secretary during Obama’s first term, was a captured regulator, “a man locked into the mind-set of the very bankers he was supposed to oversee.”[1] I contend that while a shared mindset was part of the mix, he was actively doing the bidding of Wall Street, and one bank in particular, which he owed big time. That is to say, it is not just that he worked with Republicans such as Ben Bernanke, chairman of the Fed, and Henry Paulson, Bush’s Treasury Secretary. There is more to it in him being portrayed throughout his confirmation hearing for Treasury as “a tool of Wall Street.”[2]

In his book on his stint as Treasury Secretary, Geithner writes that in his early days as president of the New York Fed, he had deep concerns about the sufficiency of bank capital levels. Notwithstanding this concern, Morgenson continues, “he didn’t require these institutions to fatten their capital cushions before the debacle.”[3] As a defense against the obvious conclusion that he was doing the bankers’ bidding, he claims the rules to raise regulatory capital requirements “were then mired in protracted international negotiations.”[4] So Morgenson did some digging. 

The intrepid journalist “asked Sheila C. Bair, the former chairwoman of the Federal Deposit Insurance Corporation, for her recollection of these events. She replied with an email recalling that in 2006, she attended her first Basel Committee meeting, the international negotiations that Mr. Geithner was referring to. While there, she pushed unsuccessfully to raise bank capital levels. Why was she unsuccessful? ‘I was actively undermined by the Fed, the New York Fed and the comptroller of the currency,’ she said. ‘I later complained to Tim about the way his representative on the Basel Committee had undermined me. He was unapologetic.’”[5] Back in the late 1990s, the trio of Greenspan, Summers, and Rubin turned Congress against Bair when she dared to propose that the financial derivatives markets, including that of sub-prime mortgage-based bonds, be regulated. So the regulatory capture may be much larger than Geithner, with the wider implication that the American democracy had already slid into plutocracy—rule by wealth.

Morgenson argues that Geithner’s “dealings with executives at Citigroup, a bank overseen by the New York Fed, are Exhibit A for regulatory capture. While he notes that the New York Fed banned Citi from making major acquisitions in 2005 after illegal activity was found in its Japan operations, he does not mention that a year later his colleagues lifted the ban, wrongly persuaded that the bank had fixed its internal controls. Mr. Geithner writes repeatedly that Citi’s risks were hidden from its regulators. But did he want to see them? His close associations with Citi officials may have blinded him — he was on a charity board with Sanford I. Weill, the creator of Citigroup; was an acolyte of Robert E. Rubin, the former vice chairman; and had frequent meetings with the bank’s top officials as the credit storm gathered.”[6]
What is not said in a memoir can be more revealing that what is said. Of course, Geithner could have been “on overdrive” in his writing to counter the criticism of his ties with the banks leveled at him during his confirmation hearing to be Treasury Secretary. He barely won the confirmation vote in the U.S. Senate.

An even stronger case of regulatory capture at the hands of Geithner can be made. Crucially, Morgenson misses and Geithner does not mention that Sanford Weill, Citigroup’s largest single stockholder in 2003, had the bank nominate and push for Geithner for president of the New York Fed. Lawrence McDonald mentions this “power behind the throne” in his book on Lehman Brothers,  A Colossal Failure of Common Sense. It is reasonable to assume that while at the New York Fed and even at the U.S. Treasury, Geithner never forgot who brought him to the dance. I’m guessing he also knew how he could be dealt out of the game—meaning by Wall Street, not Main Street.

1. Gretchen Morgenson, “Geithner, Staying on Script,The New York Times, May 17, 2014.
2. Timothy Geithner, Stress Test (Random House: New York, 2014), p. 2.
3. Morgenson, “Geithner, Staying on Script.”
4. Timothy Geithner, Stress Test.
5. Morgenson, “Geithner, Staying on Script.”
6. Ibid.

Monday, July 21, 2014

GM’s CEO: Ridding GM of Its Dysfunctional Culture or Enabling It?

I suspect that we tend to vastly underestimate the amount of energy, or raw force, sufficient to rectify an organization’s dysfunctional culture. The typical assumption is that replacing the CEO is not only necessary, but also sufficient. “A fish rots from the head down,” one might say. However, the head of a fish cannot necessarily stop, not to mention reverse, an infection spreading somewhere in the body. A sordid mentality can easily spread once it has taken hold in an organizational body. Indeed, such a pathogen can develop defense mechanisms geared to the standard antibiotics. To rely on the body to heal itself involves considerable naiveté. Relying on GM’s CEO Mary Barra to exculpate the mentality behind the faulty ignition-switch lapse and ensuing cover-up is thus arguably based on a faulty assumption of sufficiency.

On July 17, 2014, U.S. Senator Claire McCaskill, chair of the Senate Subcommittee on Consumer Protection, Product Safety and Insurance, demanded of Barra, who was testifying before the committee, “How in the world did Michael Millikin keep his job?” Stating that Millikin should be fired, U.S. Senator Richard Blumenthal noted that lawyers on Millikin’s staff were involved in “cover-up, concealment, deceit and even fraud.”[1] In return, Barra defended GM’s top lawyer as having “high integrity.” Moreover, she said that Millikin is a key part of the legal department she wants at the company—the “new GM,” as she had previously described GM under her helm. Yet can having fired only 15 people for their roles in the faulty ignition-switch episode, which led to 13 deaths and a delayed recall of 2.6 million cars, possibly turn an “old” company into a new one? The assumption that the enabling of covering things up had been limited to the 15 people fired (with financial incentives to leave—hardly a message of deterrence) is as faulty as the problematic ignition-switch itself.

To take Barra’s opinion of Millikin as having high integrity as a given involves ignoring the possibility that Barra wanted both to present a picture of a “new GM” to the world and protect GM veteran employees—essentially having it both ways. Put another way, relying on Barra means ignoring her conflict of interest.

Taking into account Barra’s possible motives, McCaskill took a look at the support for Barra’s defense of her company’s top lawyer. Millikin had said that information lawyers in his department had in April of 2013 of the link between ignition-switch and airbag failures did not get to his desk; hence he did not know of the defective switches until February 2014. If this is true, the senator reasoned, then Millikin is guilty of either “gross negligence or gross incompetence.” Whether the head of GM’s legal department acted with integrity or not, his job description includes running his department. That Barra, a manager herself, somehow omitted this point is odd. To borrow a line from the film, Inglourious Basterds, the head of the American Nazi-hunters told a German informant, “Yeah, we got a word for that kind of odd in English; it’s called suspicious.” It was suspicious that the informant arranged a meeting place at a pub being frequented by Nazi officers.

In overlooking Millikin’s failure to keep abreast of important information reaching his subordinates, Barra was essentially protecting the “old GM” even as she was selling a “new GM” to the world. There’s a word for this; it’s called lying. Were she serious about removing the culture enabling unethical and incompetent management in the company, a wholesale replacement of personnel would be needed throughout the company. To be sure, such a mammoth effort would have to take place over some time, in stages (and without giving the old guard financial incentives to leave). “Crime does not pay” and “Incompetent management is not to be tolerated” would be the messages sent in word as well as deed, and this is what integrity is all about. Contrariwise, trying to have something both ways in line with a conflict of interest is just more of the “old GM.” Even though Barra came in after the ignition-switch cover-up, indications point to her having joined the old guard even as she gives lip-service to a new GM. 

The old will of course take care of the old, so a new spark must infuse considerable energy into a company gripped by the status quo as its default in order to move the entire entity to a new, higher orbit. That is to say, much ballast must be tossed over as the trust is engaged. We as a society tend to assume that the movement comes about from mere window-dressing by a CEO. We are naïve.

1. All quotes in this essay come from James Healey, “Senators Tell GM to Fire Top Attorney,” USA Today, July 18, 2014.

Tuesday, July 15, 2014

Wall Street’s Maker-Taker Rebate: An Inherent Conflict of Interest

On June 14, 2014, the U.S. Senate Investigations Committee held a hearing on “High-Speed Stock Transactions and Insider Trading.” The issue at hand concerned the payments that wholesale brokers and exchanges make to brokers for going through the brokers and exchanges, respectively. An academic study had found that the broker or exchange that pays the most is not typically the most efficient, and thus in the best interest of the investor. Essentially, the payments give rise to a conflict of interest for the retail broker, who is supposed to put the client’s financial interest first, before his or her own. Is greater disclosure, such as Sen. Levin suggested, sufficient? I contend that a conflict of interest that is inherently unethical warrants removal rather than countervailing measures.   

Investors assume that exchanges such as the New York Stock Exchange are not tilting the game-board. Empirical evidence indicates that this assumption does not hold up. (Image Source: Reuters)

Thomas Farley, President of the New York Stock Exchange Group, testified that a conflict of interest is inherent in the maker-taker pricing schema. It results in a proliferation of order-types, he added, many of which exist solely to help market participants take advantage of the maker-taker spread. It is significant that a conflict of interest is inherent in the pricing itself, for the implication is that the entire schema is unethical. Put another way, even if an individual broker withstands the draw of the money, the system itself is blameworthy. This has wider implications for systemic conflicts of interest more generally; namely, they may be unethical even if no one has exploited them.

Even if there is not an actual conflict (i.e., being exploited) resulting in bad behavior, Farley explained, the appearance of conflict matters. “Markets rely on confidence,” he said. There may be an appearance in maker-taker pricing if a broker-dealer’s interests are not aligned with their customers. This can potentially arise with the pricing. There are examples where a broker-dealer has an incentive to post a price on a high make-rebate venue even if the execution quality at that particular venue is not as high as another venue. That arises specifically because of, or is certainly exacerbated because of maker-taking pricing. This is why there is a conflict inherent in it.

Farley’s reasoning is impeccable. The sheer appearance of a conflict of interest undermines trust, and thus confidence. Bradley Katsuyama of IEX focused on this point in explaining that the maker-taker rebate system is a significant issue because “it’s a principle-based issue. . . . It comes down to the foundation of why markets exist, and people’s trust in those markets. Trust is really about me saying that without me paying attention, the right things are happening in my best interest, and when you find out that they’re not, that’s what undermines it.” In other words, the investor-broker relationship is inherently compromised; just the chance of the conflict being exploited at the investor’s expense naturally prompts the client to look over his or her shoulder.

Unfortunately, as Sen. Levin noted, the average investor won’t make the judgment on best execution, so any suspicion would not find satisfaction. That is to say, the “buyer beware,” or caveat emptor, feature of the free market would not suffice to counter the harm inherent in the conflict of interest; greater disclosure and transparency, forced by the government, would be necessary. That is not to say that such a reform would necessarily happen. Even though Farley said, “We are seeking support for the elimination of maker-taker pricing,”[1] passing the legislation would mean taking on powerful (i.e., very wealthy) interests. As Katsuyama aptly pointed out,  “We’ve gotten a lot of anger from Wall Street. . . . People embedded in the status quo don’t want to see change happen.” In other words, people who profit by a conflict of interest naturally (but not ethically) protect it. This is another way of saying that it was likely being exploited. Indeed, such a likelihood is itself supportive of the claim that a structural or systemic conflict of interest is itself (i.e., inherently) unethical. To be sure, this is by no means a settled matter among the scholars on the topic.

Even in settling with greater disclosure as a sufficient remedy, rather than outlawing the price schema itself, Levin was either giving in to the political reality of a plurocratic (i.e., wealth-driven) political system or tacitly acknowledging that a conflict of interest that is inherently unethical is not so dire that it must be rooted out rather than merely countered. This is in essence what the folks who argue that conflicts of interest are unethical only when they are exploited are saying. In my view, they are understating the ethical problem, given the proclivity that human beings have to prefer their own self-preservation and enrichment over the interests of other people.

 1. Sarah Lynch, “Stock Exchange Pricing Model Comes under Fire at Senate Hearing,” Reuters, June 17, 2014.

Saturday, July 5, 2014

Can the Euroskeptic States Topple the E.U.?

Can we say that an E.U. state is Euroskeptic? If so, Britain would be a consistent candidate for the label. Yet what about when Tony Blair was the prime minister? Poland and the Czech Republic have also swung back and forth in line with the electoral winds within those states. If states are less fixed than typically thought with respect to being Euroskeptic, then what looks like intractable skepticism may in fact be more easily overcome at the state level. It follows that the E.U. itself has more chance than typically presumed to obviate its own decline and dissolution.
When Poland had a conservative government, for example, it was easy to view that state as being in the Euroskeptic camp. Then a change of government brought the state firmly in support of Angela Merkel’s pro-integrationist position. Similarly, the Czech Republic under Vaclav Klaus resisted any further transfer of governmental sovereignty to the European Union. Klaus was a “state’s rights” man if there ever was one. Then Milos Zeman because president, and overnight the prospect for a Czech push for more European integration improved markedly.
Did the residents of the Czech Republic suddenly become pro-Europe when a pro-integrationist party took power in the Castle, or are the labels more a function of partisan politics? 
“I very much believe that though the future development will not be smooth, I’m convinced that it will lead to greater integration, sooner or later, and therefore a president who believes that we should be part of the hardcore of integrated, democratic Europe, is for me a signal that the danger that we would finish on some kind of periphery of our own continent is now gone forever,” Jan Kavan, a former Czech foreign minister, said following the election.[1] Similarly, Deutsche Welle argued that “Milos Zeman is certainly more pro-European than his predecessor Vaclav Klaus, who never missed an opportunity to attack the pace and direction of European integration.”[2] Does the remarkable shift mean that the state moved to the federalist column, or is it more accurate to say that Czech electoral politics shifted slightly, resulting in a change of party in power? The second possibility means that Euroskepticism is more vulnerable at the state level, and thus less of a threat to the Union.
Even in Britain, Tony Blair had been much more pro-E.U. than David Cameron. Although polls showed a shift in popular sentiment against the E.U. from 2012 through 2014, due in part to the risks in the debt crisis and the E.U.’s muted or gradual response, the conservative party's rise to power meant that "the E.U. as a network" position had a microphone, and thus Britain could be perceived as a Euroskeptic state. 
Looking now at the three states together, the shift to pro-E.U. governing parties in Poland and the Czech Republic raises the possibility that Britain may become increasingly isolated for as long as the Euroskeptic conservative party is in power. This could make that prime minister, David Cameron, even more determined to withdraw his state from federal competencies and related programs. Any scapegoating by federal officials or other state leaders could intensify and spread the Euroskeptic attitude in Britain. Should the Tories fall from grace electorally, however, all bets would be off, as they say, on the trajectory of greater distance continuing. 

Therefore, the future for Europe might be brighter than momentary appearances or stereotypes may lead us to suppose. It is equally true, however, that state politics in any state could turn sharply, even if temporarily, against Europe. With state-level politics having such significance for a state having a Euroskeptic or integrationist party governing, the E.U. itself has less solid sand to stand on, even if Euroskeptic state governments are temporary.  

1, “New Czech President No Stranger to Controversy,” Deutsche Welle, 29 January 2013
2, Ibid.

Friday, July 4, 2014

Distrust of the E.U.: Prompting European Integration?

A Eurobarameter poll conducted by the European Commission between 10 May and 26 May, 2013 found that the number of Europeans who distrust the E.U. had doubled over the preceding six years to a record high of sixty percent from thirty-two percent.[1] The trust was lowest in the “bailed out” states of Greece and Cyprus. The people polled cited the five bailouts, record unemployment, and low economic growth as significant factors. In the state of Britain, 68% of the residents said they have little faith in the Union. Yet there is reason to be cautious in predicting the E.U.'s demise. In fact, closer European integration may actually result. 

First, in the history of the E.U. and the E.C. before it, a consistent pattern can be found in which periods of “crisis” actually prompt further European integration rather than ruin. Theoretically speaking, political pressure builds during a political, economic, or social crisis such that previously intractable political obstacles are overcome. Speaking at the European Parliament in 2012, for example, Angela Merkel spoke for the state government of Germany ironically in suggesting the transfer of additional governmental sovereignty to the E.U. at the expense of the state governments. “Much still has to be done to win back trust in the European Union as a whole,” she told the federal lawmakers. “We cannot stop halfway. We have to be creative: We have to find our own new solutions.”[1] By not stopping halfway, the Chancellor meant that even more integration than was currently the case would be needed to decrease the popular distrust of E.U. institutions. The difficulty is in the fact that state leaders must not only acquiesce, but also give the push for changes to the E.U.’s basic law at the expense of the states’ own power in the system. Additionally, such efforts, which constitute political leadership, run counter to the tremendous weight of the Euroskeptics’ “states’ rights” ideology (formerly known as nationalism). The history of the U.S. suggests that the ideology can quickly lead to bloodshed between the states at the expense of the Union.

Secondly, a high level of distrust could spur the E.U. legislative chambers to push through populist laws, including rules, regulations, and directives, and even changes to the basic or constitutional law, in an effort to improve the reputation of the E.U. among its citizenry. For example, a month or so after the poll, the E.U. Commission proposed to put a cap on fees that banks can charge on credit and debit cards. Standing up to the sordid banks is not a bad strategy for gaining popularity. In 2013 and the following year, efforts to have the president of the E.U.’s executive branch chosen by popular vote; each E.U. citizen would cast a vote for the chief executive.

The U.S. selects its federal chief executive by popular vote, modified slightly by each voter’s state population in what is known as the Electoral College. In having the people’s representatives in the European Parliament vote for the chief executive and the governors of the states then having their say through the European Council, the E.U. too takes into account the citizen vote and the state level in the selection. Although the E.U.’s version is closer to traditional federal thinking (e.g., Athusius in 1604), a movement in the direction of a direct popular vote would help assuage the impression that many E.U. citizens have that a democracy deficit exists at the federal level. To be sure, such a deficit is indeed in the traditional theory, wherein the states rather than their respective citizens are members of federal bodies.[2]

It was not until 1787 in Philadelphia in Pennsylvania that the U.S. confederation broke the classical model by making the citizens “dual citizens”—that is to say, citizens both of their respective member state and of the Union. The E.U. is based on this model, and thus evinces modern rather than classical federalism. So populist efforts to strengthen the role of E.U. citizens at the federal level are quite possible, and would both improve the people’s confidence in their Union and move it further away from the danger of dissolution due to the power still welded at the state level at the expense of the federal level.

In short, just of news of the euro’s demise was exaggerated during the bailouts, fears of the breakup of the Union were overblown in 2013. The history of European integration is a story of one step back, one step forward. Incremental change is not necessarily linear or even straight forward, and of course it does require leadership to triumph over the inevitable inertia of the status quo.

1. The EurActiv Institute, “Merkel Preaches Federalism to MEPs, Warns Britain against EU Exit,” 8 November 2012.
2. That theory came out of federations that were international alliances, such as the Spartian League and the Athenian alliance. In Althusius’s Politica (1604), the citizens belong only to guilds, which in turn are members of cities, which in turn are members of provinces, etc. Each of the corporate bodies is a federation, hence the system is isomorphic, with each level structured like all the others. 

Hobby Lobby: On the Significance of the Case

For all the controversy stirred up by the case of Hobby Lobby v. Sibelius(2014) on whether an employer must comply with the mandate for contraceptives coverage in the Affordable Care Act, the significance of the decision handed down in a 5-4 majority opinion by the U.S. Supreme Court may be less than some commentators were predicting. 

As evangelical Christians of the Southern Baptist section, the Greens did not object to 16 of the 20 contraceptives mandated for employer coverage in the Affordable Care Act. Indeed, fundamentalist Christians “largely support the use of birth control by married couples.”[1] The Greens considered Plan B, Ella, and two intrauterine devices as tantamount to abortion, in that the means prevent a fertilized embryo from implanting in the womb.[2] Blocking implantation would “terminate life,” Green argued. “We won’t pay for any abortive products. We believe life begins at conception.”[3] Ending human life after that time, Green wrote in an open letter, is "something that is contrary to our most important beliefs."[4]

Arguably, a Hobby Lobby check to the company’s insurance company for the employee health plan pays for the plan itself, rather than for particular items that the insurance company pays for when a medical practitioner prescribes them for employees. In other words, it is the insurance company’s business, literally and figuratively. Even so, Steve Green would undoubtedly have felt blameworthy morally and religiously had he not explicitly excluded the offensive medical products from the plan for his company's account, for without his decision abortions would occur. Yet here too are several problems, which effectively mean that the significance of the case has been blown out of proportion.

Firstly, killing a few human cells may be immoral to some people, yet is the practice irreligious in nature? Theologically, the Creation is not the same as the biological process by which a human being begins. Furthermore, Jesus is not represented in the New Testament as prohibiting abortion, even though he did include other moral teachings in his preaching. Steve Green may have been conflating a theological doctrine with a moral principle and a biological process.  Put another way, abortion can be reclassified as a moral issue, in which I suspect it would be easier to come to a compromise, societally.

Secondly, Steve Green's labeling some contraceptive devices as means of abortion is a subjective call. Is preventing a fertilized egg of a few cells from implanting on the wall really like killing a fetus? Relatedly, as Green points out, even those abortive instruments are just a subset of contraceptives. The notion that the company’s health insurance plan for employees excluded or would exclude the pill (as distinguished from the “morning-after pill) is thus a popular misconception. That is to say, the claim that the ruling means that women working at Hobby Lobby would not have contraceptives covered is incorrect, so the importance of the court’s decision likely escalated beyond merit in this respect too.

So too, the breadth of the closely-held corporation limitation in the ruling was immediately debated, with Ginsberg predicting in her dissent that the door would eventually be open for virtually any company with any sort of religious conviction to use the ruling to obviate a law that the executives or majority stockholder do not like. “Although the court attempts to cabin its language to closely held corporations,” she wrote, “its logic extends to corporations of any size, public or private.” She added that corporations could object to “health coverage of vaccines, or paying the minimum wage, or according women equal pay for substantially similar work.”[5] However, Alito wrote that the Religious-Freedom Act applies only to closely-held for-profit corporations run on religious principles. To be sure, wriggle-room exists even within this delimitation, for Alito wrote that those corporations would be unlikely to prevail if they object even on religious grounds to complying with other laws than the Obamacare mandate.[6] What is unlikely to Alito is not necessarily so to other justices, as it is a judgment call. Even so, Ginsberg's leap to any for-profit corporation seems to be untenable given the explicit delimiting stipulation in the majority opinion. 

So it is vital that the controlling small group or family of owners apply principles from their religion to their commercial enterprise. Without the separation of ownership and control that is typical of a large corporation, a closely-knit group or family of owners can indeed orient their company to religious as well as commercial purposes. Hence the Greens referred to their business as a matter of stewardship.[7] This situates their commercial objectives within a bubble of religious aims. Adam Smith situates his Wealth of Nations within his theory of moral sentiments; religious sentiments can also serve as a buffer.

On opening Hobby Lobby, Steve Green's father declared its Christian principles. Like Chick-A-Flick, the stores would be closed on Sundays “to allow employees time for family & worship”—according to a sign on the front doors.[8] The Green family’s foundation, whose funds presumably have their source in Hobby Lobby, extends charitable gifts to gospel outreach efforts as well as social services in Oklahoma.[9] A court would presumably want to find such evidence of religious claims in action, as well as assess the salience of the aims relative to attention paid to commercial objectives. To the extent that those agendas contravene the cited religion or religious principles, the case for religious exemption is undercut. 

It follows that the ruling hangs on the manager-owners' religious objectives, with strong control element rendering the company as an instrument. So I think the nexus being situated at corporate legal personhood is misplaced, even if Alito does make use of the doctrine. In her dissent, Ginsberg makes the point that human beings are religious. The "exercise of religion is characteristic of natural persons, not artificial legal entities."[10]

Alito comes closer to this point than many people realize, for he links Green's religious objectives to the doctrine, writing that a "corporation is simply a form of organization used by human beings to achieve [their] desired ends. When rights, whether constitutional or statutory, are extended to corporations, the purpose is to protect the rights of these people."[11] In the case of a closely-held corporation, the corporation is an extension of the will of the few who both own and control. Similarly, my (limited) bank account does not itself enjoy religious rights, but I can use it (because I control it) to fund religious causes by writing checks. Put another way, the sum as more than the parts applies to corporations that have many stockholders because none of them controls their respective corporation as an extension. 

Therefore, even though Alito’s majority opinion is based in part on his interpretation of a corporation as a legal person, the exercise of religious freedom goes through the corporation as an extension rather than being based in the artificial person itself; that is, the closely-held caveat implies that the operative right was being exercised by Steve Green and any other close owners. Their specifically religious imprint on the for-profit company—that is, using it for religious as well as commercial purposes—means that they, rather than the company itself, are the source or basis of the religious agency that extends itself through the corporate structure extending beyond their fingertips. 

It follows that the hiring process should include explaining to the prospective employees that they too would be part of that extension. Hence, Green has stressed that the “greatest misconception” about the case “is that we are trying to impose our religion on these workers or others. Not at all! That would violate our religion to do that.”[12] As he saw it, anyone agreeing to work for Hobby Lobby knows of, and agrees to, the dual purposes of the closely-held corporation. Perhaps part of the problem is that Green’s hiring subordinates did not make this point clear (without discriminating, of course).

It could also be argued, however, that the anti-abortion stance is not a fundamental or important Christian belief. After all, Jesus does not even mention the issue in the New Testament. Recall Green's statement that he applies Christian principles to his business; the implication is that those principles are important theologically. In fact, the Greens' stance may actually be moral in nature, rather than theological, as Creation can be distinguished from the biological process by which an egg is fertilized its cells multiply.  

Therefore, the stance may not actually find adequate cover under Christian auspices understood theologically. Traditionally, the Court has required that accommodations on account of the freedom of religion passage in the First Amendment be based in an established religion; claiming that your own religion or your own version of an institutional religion requires you to enact a pot-smoking ritual every night is not going to cut it. Clearly, opposition to abortion on religious or moral grounds is not frivolous or made up by individuals, but neither is the stance a central tenet theologically in Christianity. This could open the door to other claims of other religious issues whose importance in religious terms may be overblown, and thus without meriting accommodation.

Moreover, basis of Green’s case may not even be religious freedom; rather, property rights could be the underlying issue, for Steve would also have the right to orient the business to serving social causes, for example, as in the case of Ben & Jerry’s (ice-cream), even at the expense of profit maximizing. Generally speaking, the profit-maximization principle is merely the default, with stockholders of a corporation having the right to alter the aim of their combined, incorporated wealth even at the expense of profitability.

As a personal aside, I have been inside a Hobby Lobby store only two times; the first was to buy a mother’s day gift, and the second constituted my attempt to buy a candle, the melted wax I would use to make up for a deficit in a half-burnt candle at home. So I was not picky about the candle, just that I needed only one. When I saw two long, thin candles connected as if Siamese twins joined by a wick-like umbilical cord at the tip of their tiny heads, I asked the front-area manager if I could buy just one of them, as both candles were broken.

“They come as a pair!” the stern woman crowed as if blissfully unaware that they were broken.

“But they are broken,” I sheepishly replied as I held them up to give her a good look.

“Makes no difference,” she said as she walked away. Her attitude resonated with the dysfunctional culture infecting businesses and other sectors back in my hometown.

From this curt exchange, I had the impression that the Greens should attend to more pressing “bread and butter” concerns than whether the insurance company used for employee health insurance pays for a few morally objectionable medical items. All the attention and energy that the Greens devoted to what in business terms is a minor issue, and perhaps even their dual-purpose approach itself may suggest that Steve Green really is not that good at management, at least in regard to hiring and training. 

At a deeper level, I see a pattern in that both the “contraceptives issue” and the “candle issue” may both involve “making a molehill into a mountain”—that is, overdoing relatively small things and thus missing the big picture. In my case, Hobby Lobby lost not only revenue on the candle, as I left the store in disgust, but also a future customer. 

Sometimes I suspect that human nature itself contains a short-circuit when it comes us being able to calibrate the importance of matters we take to be important. Perhaps this is a matter of conceit, being all puffed up with our own determinations, as if we could not possibly be wrong. Sadly, other people can suffer needlessly as a result, and this may be a cost that is all too invisible even to the well-meaning religious among us.

1. Daniel Burke, “Hobby Lobby: The Bible Versus Behind the Battle,” CNN, June 29, 2014.
2. Ibid.
3. Cathy Grossman, “Hobby Lobby’s Steve Green Stands on Faith Against Obamacare Mandate,” Religion News Service, March 17, 2014.
4. Patricia Walston, "Letter from Hobby Lobby Founder and CEO,", March 27, 2013.
5. Adam Liptak, "Justices Rule in Favor of Hobby Lobby," The New York Times, June 30, 2014.
6. Ibid.
7. Grossman, "Hobby Lobby's Steve Green."
8. Ibid.
9. Ibid.
10. Richard Wolf, "Birth Control Ruling Deals a Blow to Obamacare," USA Today, July 1, 2014.
11.Grossman, "Hobby Lobby's Steve Green."
12. Burke, "Hobby Lobby: The Bible"

Thursday, July 3, 2014

On the Political Power of Nuclear Power: Japan's Radioactive Plutocracy

Reversing his campaign pledge to reduce Japan’s reliance on nuclear power even as he had just been elected as prime minister of Japan in 2012 (Tepco’s Fukushima Daiichi nuclear-power plant meltdown having occurred in 2011), Shinzo Abe announced that he would have more nuclear reactors built in Japan. “They will be completely different from those at the Fukushima Daiichi nuclear power plant,” he said in a television interview.[1] Adding a silver lining on to a rather gray, radioactive cloud, he said, “With public understanding, we will be building anew.”[2] This change in policy is dramatic, for the previous government, that of Yoshihiko Noda, had sought to phase out nuclear power in Japan by 2040. In fact, Abe’s own party, the Liberal Democratic Party (LDP), had in its platform the goal “to establish an economy and society that does not need to rely on nuclear power.”[3] That the shift took place within the LDP suggests a shift in its power-dynamics, with the pro-nuclear sub-faction astonishingly having gained the upper hand over its rival while memories of the tsunami-triggered meltdown were undoubtedly still fresh.

                Prime Minister Shinzo Abe of Japan at the Fukushima Daiichi Nuclear Power Plant. (Image  Source: Itsuo Inouye)
It is perhaps no accident that Japan’s biggest business lobby, the Keidanren, was publicly lobbying for the government to restart the closed nuclear reactors in Japan. One might add to the mix the political influence of TEPCO, the company that owned and ran the dangerous Fukushima Daiichi reactors. Abe’s abrupt turn-about constitute a rarely visible sign of the actual political influence that large business lobbies weld even over prime ministers.

Moreover, the case suggests that powerful private interests can indeed be at odds with the public good—even when that constitutes the very survival of a people. Because private interests are likely to have tunnel vision relative to a view of the whole without such a rigorous gravity of their own interests, a plutocracy—rulership, either de facto or de jure, by wealth—is apt to be purblind in steering the ship of state ahead. When rocks lurk just below the water’s surface or icebergs silently stand by in the dark of night, a course taken incrementally and in the interest of just one part of the ship is apt to be purblind. To continue in this way not long after icebergs have been sighted and the ship has been hit borders on the insane; at the very least, the tacit acquiescence by the rest of society to let a powerful sector dictate to a government constitutes a reckless enabling not unlike someone who gives car keys to someone who is drunk and caused an accident just the year before (and is still intending to drink and drive!).

The larger problem lies in assessing whether democracies tend to degenerate not into mob rule as Plato and Aristotle had thought, but, rather, to being ruled by a few wealthy private interests that have figured out how to convert their huge stock of capital into political muscle. It is no accident, for example, that by 2014 the big American banks that were considered too big to fail in 2008 had 30 percent more in assets, and U.S. Government officials had absolutely no intent to break up those mammoth banks. Even if a causal relationship cannot be established, a restorative remedy may be elusive and extremely difficult to implement, practically speaking.

[1] Hiroko Tabuchi, “Japan’s New Leader Endorses Nuclear Plants,” The New York Times, December 30, 2012.
[2] Ibid.
[3] Ibid.