Thursday, October 19, 2017

The SEC and the Courts on Wall Street Settlements in 2011

The SEC enforcement staff, including its chief, Robert Khuzami, decided to kick a gift horse in the mouth rather than to “take a lesson” and perhaps come out stronger for it. At issue was the rejection by U.S. District Judge Jed Rakoff of the SEC’s proposed $285 million settlement with Citigroup. In his ruling, Rakoff denounced the penalty as “pocket change” to the bank, which would not even have to admit to any wrongdoing. Investors duped into buying into a $1 billion deal called Class V Funding III had lost $700 million. Betting at the time of issue against half of the assets in the deal, Citigroup did not share knowledge of its hedge with the investors.

The reaction of the SEC staff in Khuzami’s department was simply to “put down their pencils” and wonder how they should go about arranging settlements with financial firms accused of misconduct before and during the financial crisis of 2008. The SEC “doesn’t know what to ask for anymore in the settlements,” one of the people familiar with the Citigroup settlement said. Rather than take the judge’s judgment to heart, Khuzami urged the five-person commission running the SEC to vote to approve an appeal, and they did so. Rather than take the less convenient course of insisting that the banks too big to fail that manipulated their own clients at least admit wrong-doing and reimburse the losses, Khuzami viewed the judge’s ruling as if it were a political obstacle to be obviated by asking an appellate court to ignore it. Given the political muscle that must surely go with Citigroup’s wealth, Khuzami could have been assuming that the bankers would see to it that sufficient pressure would plied on enough appellate judges to make the obstacle easily avoidable. In other words, Khuzami was likely assuming that Rakoff was a fluke, given Citi’s influence—perhaps even in the SEC itself.

Considering the power of regulated banks such as Citigroup, it is not unreasonable to expect the chief executive of the U.S. Government, the President of the United States, to deviate from his avocation of influencing legislation far beyond his minority role as a veto. Rather than spending so much time hitting the stump to get voters to 1) influence their representatives in the legislature and 2) re-elect him, the president could get involved in the question of whether the verdict would be appealed. Lest it be said that that would introduce politics into the mix, I would counter that politics were already very much in the mix both in terms of the five-person SEC vote and in Khuzami’s response to the ruling (i.e., as an obstacle rather than as something to incorporate into future settlement offers). I would even say that politics was involved in Treasury Secretary Tim Geithner’s blessing of the decision to appeal, and therefore also likely a factor in the president’s decision not to intervene. Citi (and one of its major stockholders) had been Geithner’s sponsor when he was chosen to be president of the New York Federal Reserve.

Politics might also have been involved in the timing of the SEC’s announcement on the day following the appeal decision that the agency was suing the former chief executives of Fannie Mae and Freddie Mac for misleading investors and Congress on the volume of subprime mortgages on the books. Khuzami made the announcement himself, and it was well-covered in the media. Lest the decision to appeal in order to save a settlement deemed by a judge as too friendly to a major Wall Street bank be viewed with lackluster by the public, the timing of the Fannie and Freddie announcement could be anticipated to quickly impose a perception of going after the bad guys—even if the two conveniently-demonized organizations had been taken over by the very government that was suing them. The public would not be likely to suspect a double-standard for private-sector, well-connected banks, such as Citigroup.

Regardless of the political connections of Wall Street banks, for the U.S. president to tell the public that Wall Street should be held accountable only to look the other way on the SEC’s appeal decision—perhaps with the stated reason that politics should not be involved—seems duplicitous at best. As the chief executive, the president has a legitimate superordinate role to play in overseeing the decisions in the agencies within the executive branch. For a chief executive to claim that he or she should not impose on a subordinate department is a good indication that a subterranean agenda is in play. Furthermore, such an excuse evinces a refusal to assume responsibility (see #2 above). Too accustomed to seeing presidents obsess over pending legislation and propose still more (and act as commander in chief as well as figure head), the American citizenry has nearly lost any appetite for holding its presidents accountable as the chief executive of the executive branch—which extends beyond the West Wing. In the case of the SEC’s decision, the president was doubtless not willing to overrule his Treasury Secretary for political reasons.

Rather than deciding to appeal the ruling, the SEC should have accepted—with the president’s (or Treasury Secretary’s) intervention if necessary—the judge’s feedback as valid. Given the power and “too big to fail” risk of financial institutions like Citigroup, the government regulators act recklessly in accepting a “pocket change” no-guilt settlement. In announcing the decision to appeal, Khuzami said Rakoff’s position was “at odds with decades of court decisions that have upheld similar settlements by federal and state agencies across the country.” Precedent for precedent’s sake could merely be a vote for the status quo that favors even the fraudulent on Wall Street. We cannot assume that the stream of past court decisions necessary warrant being kept.

Clearly, Khuzami believed that requiring wrongdoers on Wall Street to admit to the wrongdoing would backfire on the government. Requiring an admission of guilt from defendants “could in practical terms press the SEC to trial in many more instances, likely resulting in fewer cases overall and less money being returned to investors,” Khuzami said. Just because powerful banks have a lot of money and power to throw at a trial, however, does not mean that the U.S. Government should cower over in trepidation or try to out-maneuver an inconvenient ruling that can actually be useful. Had he kept to the judge’s ruling, Khuzami could have gone back to Citi to say that more would be needed to avert a trial. It would not be his own opinion, after all, and contrary to Khuzami’s view, a judge’s opinion is not just an opinion; it is a ruling.

As for the issue of money damages and the number of trials, Khuzami was missing the forest for a few trees. For the viability of the U.S. and global financial system (and economy), banks too big to fail should be held accountable. It is therefore worthwhile even going to trial and staying the course through any appeals fueled by the banks’ deep pockets. At the very least, establishing a few precedents in terms of seeing that justice is served might have aided in the SEC’s credibility in negotiating settlements with teeth. Higher money damages would undoubtedly have followed.

In short, it would appear that the staff at the SEC needed more of a public service mission in which they could feel that they were making a difference in standing up to real power. In other words, they were not sufficiently fighters for the public good—the viability of the financial system and the economy as a whole. Instead, they were too interested in taking the route that is most convenient in terms of fear and stasis. It is in this realm that the chief executive can and should lead, if indeed he has that fire in his belly.


Jean Eaglesham and Suzanne Kapner, “SEC Cops Want to Fight U.S. Judge,” The Wall Street Journal, December 15, 2011.

David Hilzenrath, “SEC to Appeal Federal Judge’s Rejection of Citigroup Deal,” The Washington Post, December 15, 2011.

Chad Bray and Nick Timiraos, “SEC Sues Former Fannie, Freddie Executives,” The Wall Street Journal, December 16, 2011.

A U.S. Visa Fast-Track For Rich Investors

The New York Times reported in December 2011 that affluent foreigners had been rushing to take advantage of a U.S. immigration program. The foreign applicants must invest at least $500,000 in construction projects within the United States. The number of applicants had nearly doubled since the end of 2008 to more than 3,800 in the 2011 fiscal year. The intent of the program is to spur economic development at a time of high unemployment. Yet the program has also been characterized as a cash-for-visas scheme. Besides the question of whether the program’s rules have been stretched in New York City to qualify projects in prosperous areas for special concessions, an ethical question can be raised concerning who should get a visa.
Obviously, the program’s designers must have known that only wealthy people could qualify. A public-interest ethical argument could be made that they deserve a green card because they contribute to economic development out of which jobs for Americans can ensue. Indeed, to the extent that the additional investment results in more economic activity, the visitors making the investment in 2011 could have been helping to forestall a double-dip recession. This was a distinct possibility at the time, given the E.U. debt crisis.
The ethical issue is in the exclusion of people who are not wealthy. The principle of fairness would seem to mandate that just as many non-rich foreigners be granted green cards above the ordinary limit. However, this would seem to be rather artificial—a sort of tit for tat—as in “we’ll accept your tax cut if you accept ours.” Moreover, in the context of high unemployment, any such increase in visas should not add to the supply of labor.
John Rawls suggested that in designing such a system as applying for a green card, a veil of ignorance as to whether one will be rich or poor should be utilized. Rawls’ thinking was that if the designers cannot know whether they or their friends will be rich or poor, then the proposed system design will be fair (i.e., there would be the chance that one’s friends are poor foreigners unable to get a green card). While fair in itself, this ethical device may not adequately take into account the public interest that could be satisfied by only one segment (e.g., the rich). Should the U.S. renounce the possibility of more economic development, particularly at a time of high unemployment, just because poor and middle-class foreigners cannot participate?
Related to the matter of income and wealth, it can be asked from both the public interest and ethical standpoints whether capital investment is more valuable economically than highly skilled and educated foreigners. To be sure, the latter ought not crowd out citizens and existing residents who have comparable skills and knowledge, and it is presumably possible to further train and educate existing citizens and residents.
For example, the very same issue of the New York Times containing the story of the green cards for foreign investors reported that M.I.T. was announcing an expanded program that would still allow anyone anywhere to take M.I.T. courses online free of charge, but would add online labs, self-assessments and student-to-student discussion. Also, for a small charge, a certificate can be obtained. At the time, the university’s free OpenCourseWare included nearly 2,100 courses and had been used by more than 100 million people. Rafael Reif, the provost, gave the following as the operating assumption: “There are many people who would love to augment their education by having access to M.I.T. content, people who are very capable to earn a certificate from M.I.T.” To be sure, a certificate would not be a degree, but in terms of non-professional jobs the former may be sufficient. “The most important thing is that it’ll be a certificate that will clearly state that a body sanctioned by M.I.T. says you have gained mastery,” Reif added. The notion that cost (and debt) ought not be an obstacle to a natural drive to learn more, whether in terms of skills or knowledge, is foreign in the United States (and increasingly in Europe as well).
Yet from the standpoint of economic development as well as jobs, viewing education as an investment rather than as a purchased product would likely pay substantial dividends. Where such an approach to vocational training and higher education falls short for citizens and residents, welcoming the best and the brightest from abroad—even training and educating them at online programs such as M.I.T’s—may be an investment policy even more beneficial than that of attracting additional capital investment in construction projects.

Tamar Lewin, “M.I.T. Plans to Expand Its Free Online Courses,” The New York Times, December 19, 2011. http:///2011/12/19/education/mit-expands-free-online-courses-offering-certificates.html

Patrick McGeehan and Kirk Semple, “Rules Stretched as Green Cards Go to Investors,” The New York Times, December 19, 2011.

Monday, October 16, 2017

Bankers Writing Financial Reform Law: A Case of the Wolves Designing the Chicken Coop

The financial reform bill approved in December, 2009 by the US House of Representatives proposed to regulate the financial industry and keep firms from growing “too big to fail.” The bill can be likened to a ship made of Swiss cheeze, yet seemingly seaworthy. A key intention of the bill was to gain control over the vast market in “over the counter” derivatives by forcing trading onto open exchanges, where regulators can monitor it. Unregulated derivatives were behind much of the havoc that nearly brought down the financial system in 2008, including the subprime-mortgage-backed securities that put many firms underwater and the credit default swaps sold by AIG, the giant insurance company that sucked up about $180 billion in bailout money. The $592 trillion global market in these mostly unmonitored derivatives remained in 2009 among the most profitable businesses for the biggest banks—Goldman Sachs, JPMorgan Chase, Citigroup, Bank of America, and Morgan Stanley—and Wall Street doesn’t want Washington tampering with it. Early versions of Frank’s bill allowed many derivatives to continue trading off exchanges. The bill, Frank wrote, “could be subject to manipulation” by “clever financial firms” seeking to evade a requirement that they trade derivatives on open exchanges.

The story of how those loopholes got into the derivatives bill, even with Frank at the helm and the wind of public outrage at his back, shows just how powerful the Wall Street banking lobby remained nonetheless—and just how complex Wall Street’s financial instruments had become. Many of the key lobbyists were in 2009 in the same gang that helped get us into this mess before, and they were spending huge sums a year after the near meltdown. In the first three quarters of 2009, financial-industry interests  spent $344 million on lobbying efforts, putting them on pace to break all records. This did not include political donations and issue ads. Even more impressive was the lobbying strategy that money was buying. The banks sought to stay in the background and put their corporate customers—a who’s who of American business, including Apple, Whirlpool, and John Deere—out in front of the campaign. “This is an orchestrated, well-funded effort by the banks to manipulate our legislation and leave no fingerprints,” says a congressional staffer involved in drafting the legislation. The financial industry argued that curbs on derivatives do hurt just Wall Street, but also the corporations in Main Street America—the “end users” —that need them to hedge risks.  However, the more custom-made and out of public sight a derivative is, the harder it is for investors—and regulators—to assess its fair value and real risk. This makes it easier for the banks to charge a large “spread” and earn big profits. Frank heatedly denied that he'd been fooled, though he conceded he was catching up on some of the details of the bills he was pushing through. “I’ve become responsible for dealing with a lot of things that are new to me. I didn’t have a great deal of knowledge. I’ve been relying on a whole lot of people,” Frank said. In allowing some exemptions from exchange trading, Frank said he was merely accommodating the corporate end users—not Wall Street—who want to continue doing these private trades in derivatives.  The Wall Street lobby didn’t give up. After Frank had toughened up his stance on derivatives, the lobby tried to redefine what certain kinds of exchanges do.

The money that the industry can use to mollify congressional critics and bolster allies was not the only problem. The problem was even more intractable. Both Frank and his staff (and the corresponding committee in the US Senate) relied on the expertise of the banking industry in the fashioning of regulation for the industry.  Frank admitted that he didn’t know enough to keep on top of the drafts submitted by the industry (and end-users).  Additionally, it was difficult for him and his staff to assess where the industry’s “recommendations” were more “convenient” (meaning self-serving for the banks) than informational.   The financial instruments (e.g., derivatives based on mortgages) were at the time so complicated that congressional staffers who wrote the legislation depended on drafts submitted by the industry itself without being able to adequately screen them for bias.  There is an inherent conflict of interest in an industry even providing information. Therefore, I wonder whether the practice was worth its benefits to congressional staffers. 

The case seems to me like that of having a wolf provide the sketches for the design of the chicken koop, as if the design were an objective plan without any holes.   Even so, without the information from the industry with the vested interest, legislative staffs often do not feel competent to legislate on the complex markets of modern finance.  Indeed, they may not be, given the complexity out there.  But that is not a given.  We miss this point. To reduce the informational asymetry, Congress could direct that the markets be simplified to what they and the regulatory agencies could understand and thus regulate effectively. Opponents of the House bill claimed that the changes ensuing from the bill would limit consumer choice and stunt financial market innovation. Shortly after the House bill passed, President Obama suggested these risks are worth taking.

While applauding House passage of overhaul legislation, the President expressed frustration with banks that were helped by a taxpayer bailout and even as they were “fighting tooth and nail with their lobbyists” against new government controls.  The bank lobbyists spent more than $300 million in 2009 trying to scuttle the bill.  This alone should be enough to shut every congressional office to the lobbyists.  How widespread is the fecklessness!  As the wake of the bill’s passage, Obama said the economy was only then beginning to recover from the “irresponsibility” of Wall Street institutions that “gambled on risky loans and complex financial products” in pursuit of short-term profits and big bonuses with little regard for long-term consequences. “Americans don’t choose to be victimized by mysterious fees, changing terms and pages and pages of fine print. And while innovation should be encouraged, risky schemes that threaten our entire economy should not,” he said. “We can’t afford to let the same phony arguments and bad habits of Washington kill financial reform and leave American consumers and our economy vulnerable to another meltdown.”

So where were our legislators on this point?  Missing in action, most of them.  However much Obama's remarks can serve as a palliative, it must be admitted that the President could have gotten on the banks and refuse to sign a final bill containing deflating loopholes gained by the efforts of the lobby with a vested interest in the legislation.   I don’t believe the President would have risked his re-election contributions from Wall Street by telling Congress to be firmer in resisting the banker taskmasters.  Hence, the U.S. Government is unlikely to take on the very existence of the banks too big to fail even as the most profitable of them quickly returned to risky trading on their own accounts.

Too often, congressional legislators (and the President) wince when it counts, ignoring the inherent conflict of interest in the industry’s warning of the end of the world.  We need to accept the fact that ery reform has a cost, and that “reform” does not mean “catastrophe.”  If we capitulate to the wolves because there might be a cost otherwise, we miss the greater cost in capitulating.  That cost is not only economic, for it includes the selling of ourselves and our government to the highest bidder and the loudest bully.  When I look around the world, I see fecklessness at home.

By comparison, the British and French states of the E.U. set a 50% windfall tax on ALL banker bonuses within their respective states.   Throughout the U.S., it has been difficult simply dealing with the bonuses of the bankers at the banks that were bailed out; we were so afraid that the credit markets would collapse from a tax or that we shouldn’t touch the other bonuses.  Treasury limited the cash compensation for executives at companies that received the largest taxpayer bailouts to $500,000 and delayed some other payouts. The 25th through the 100th top earners at Citigroup, GMAC, American International Group and General Motors had to take more than half their compensation in stock, and at least half had to be delayed for three or more years. About 12 executives were granted exemptions to the $500,000 cash cap because they were necessary for the companies to “thrive, be able to compete, and not lose key people.”  The European industry-wide approach was stronger, and less apt to result in “talent poaching” that was likely to occur where only TARP reciprients are targeted.

Why is that we were convinced that we couldn't or shouldn’t go beyond the TARP reciprients in limiting exorbitant executive compensation?  Is imposing compensation (in all its forms) limits to protect the market from firms too big to fail really beyond the pale?  Is it really so much a threat to economic freedom? Certainly, it is a legitimate role of a government to protect the viability of the market.  The lack of any enacted windfall tax on bank bonuses (or compensation) in the Congress in 2009 or 2010 intimates the subterranean power of Wall Street in Washington.  Indeed, according to The New York Times, “heeding complaints from banks, the House rejected an effort to allow bankruptcy judges to restructure mortgage payments, a plan that has passed the House before but not the Senate.”  When the same thing happened in the U.S. Senate, Sen. Dick Durbin said publically that the banking lobby owns Congress.  House members also agreed to relax some of the proposed new controls on trading in derivatives. Rather than subject all over-the-counter derivatives to open trading, the bill would have subjected such derivatives only if they were traded between Wall Street firms, or with a major player like AIG. But the transactions between dealers and customers will remain largely hidden, so customers will not be able to compare the prices they are being charged with the prices charged to other customers.  That’s nice for the banks.  We miss this point, paying attention instead to speeches.  Words.

We are not keeping our eyes on the ball, folks; rather, we all too easily allow ourselves to get distracted.  In watering down financial reform, we agree to construct fake walls  on what reform is viable and constructive.  We convince ourselves that we must play inside the pen because insiders have told us that we should. We take harsh words against the pen on our behalf as tantamount to tearing it down.   In actuality, the words are a subterfuge meant to assuage us so we don’t vote differently in the future.  The wolves know that mere words can’t tear down the walls they have directed our representatives to observe.  We have become like herd animals, and our leaders like subterfuges.  It is no wonder that “real change” contrary to the vested interests has been restrained at best.  If a new consumer protection agency is the high-water mark of reform (i.e., banks too big to fail being allowed to go on…even as they have returned to risky trades for much of their 2009 income), we really do deserve the next financial crisis.  …or can a speech going after the financial industry obviate such a thing from happening again?

Sources: ; ; ; ;

Flavor of the Month: The Achilles' Heel of American Democracy?

The New York Times Sunday Magazine ran a feature toward the end of 2009 on Joe Biden, who was then Vice President of the United States.  Besides his experience and knowledge from having been a seasoned U.S. senator, Joe Biden is a man genuinely content in his own skin, and, it might be said, genuinely happy.  This, perhaps more than anything else, is vital to high level public official because sound judgment is important in those jobs. Ruling is not simply about how much one knows, or even how much experience one has; it is fundamentally about feeling at ease in who one is.  Ultimately, a positive vision springs from one’s state of mind and innate values.  One need only contrast Joe Biden with Richard Nixon, for example. Foreign policy comes up for both, but their mentalities could not be different.

My question is this: to what extent is our “Electoral College as popular election” geared to selecting the best candidate for president?  If the most popular is apt to be a people-pleaser, how comfortable is he (or she) likely to be in his (or her) own skin?  Furthermore, is the most popular necessarily seasoned with experience?  In short, if our current mechanism for selecting the president is oriented to privileging the flavor of the day, is this really the way we want to pick our presidents?    When we see a people-pleasing president cave to the business interests for support because popularity is not a sufficient basis of legitmacy, should we really be surprised?   What I see is a seasoned and knowledgeable vice president who is generally happy and getting along with people at the White House and in Congress, yet he did not do well at all in the popularity contests (i.e., the primaries).   I suggest that we have it backwards if we assume that Joe Biden is best as vice president because he did not fare well in the electoral contest.  As a case in point, he has been urging restraint in acquiescing to the pressure to add troops to Afganistan.  He wants a narrow focus, rather than a sensationalistic “surge.”  I suspect that he would stand up to big business and the military were he president because he wouldn’t need their approval to be content in his own skin.  Were he president, I suspect he wouldn’t need a second term.  Could that be said of a person who relishes popularity?


Wednesday, October 11, 2017

De-Funding Obamacare

It is odd that even after a bill becomes a law, it can be defunded, thereby effectively killing it even though it has not been voted down.  One would think that it would be required to pass the funding that is required by the law. The Republican Party has strategized on how to deconstruct Obama’s health-insurance law through various means.

Republicans could turn to the annual appropriations and budget process or push stand-alone bills to delay or stop funding for provisions of the law they dislike, including the individual mandate, the health insurance exchanges and the Medicaid expansion. They might also work to weaken provisions in the bill that deal with Medicare physician reporting requirements that some physicians find onerous and block the creation of a nonprofit research institute to examine the effectiveness of various medical treatments. Mandatory funding, which comprises much of the health measure that began in 2014, will continue unless Republicans can change current law. Discretionary funding must be approved each year but differences between House and Senate versions of appropriations measures must be ironed out and that generally produces a compromise package. Why all of the law’s funding would not be mandatory as part of the law defies logic and government functioning. Also, how the mandatory funding could comprise much of the law when the individual mandate, the exchanges, and the medicaid expansion can be defunded, is also beyond me.

A major problem with the defunding strategy is that since so much of the bill is inter-related, trying to dismantle it piecemeal could lead to unintended consequences. While the individual mandate is unpopular, “you can’t pull it out of the law without all sorts of other elements falling apart,” Reischauer says. And scrapping the mandate, which requires most people to have coverage or pay a penalty, would anger health insurers — a core GOP constituency. Insurers have agreed to abide by new consumer protections, such as not denying coverage based on a pre-existing medical condition, in exchange for 32 million new customers. Hospitals agreed to payment cuts on the premise that more people would have health care and hospitals would have less uncompensated care. In other words, because the health insurance industry got basically what it wanted—the mandate without a public option—it would be highly unlikely that certain parts of the law would be defunded unless it were in the interest of the health insurance companies.  Therefore, the mandate is not apt to be defunded unless the rest of the law is to go down too.

I contend that law should not be allowed to be defunded. That is, upon passage, the law should have its required funding established as a matter of law.  Secondly, I contend that private companies with a vested interest in a law should not be allowed to have such power that they can tailor the law to their liking. Extant industries have too much power in the US Government.  As a reflection of this condition, we over-rely on private companies and the market—ignoring their downsides. Where basic necessities such as access to basic health-care is concerned, our over-reliance can be fatal.


A Bit of Federalism in ObamaCare

Senator Ron Wyden has written to government officials of Oregon to encourage them to “come up with innovative solutions that the Federal government has never had the flexibility or will to implement.” This is significant because he is a democrat. As long as a state covers the same number of uninsured and keeps coverage as comprehensive, the following can be waived:

1. the individual mandate to purchase insurance (i.e., what Virginia and Florida are suing over)
2. regulations about business taxes
3. federal standards for minimum benefits
4. allocation of subsidies in the insurance “exchanges.”

These are called section 1332 waivors. There is also some flexibility on medicaid--but how much flexibility do these waivors proffer? The states might be able to determine how the uninsured are to be insured. For instance, they could go single-payer. Or could they?The federal allocation of subsidies in the insurance “exchanges” can be waived, but can the “exchanges”?

There is a trade-off involved in federal standards and state waivors. If the federal standard is too high (e.g., the number of uninsured covered and the amount of minimum coverage), then not much freedom is involved in the waivors because the standards must be met regardless. Given the diversity within the Union and our system of federalism, the US Government should have been oriented to coming up with minimum standards for health-care rather than trying to make it a federal responsibility. By minimum, I mean that below which is unacceptable for a state in this union. For instance, it could be that universal health-care is a minimum if health care is to be considered an American right. The states, rather than the general government, would then be required to pass laws to implement the minimum standard in any way they preferred. They could determine the means, whether single-payer or exchanges. I’m not sure that the existing waivors, which do not begin until 2017, allow for such flexibility as would accommodate the various political ideologies of our states. Once power is grasped, it is very difficult indeed to let go of some of it.

Source: Wyden Defects on ObamaCare, WSJ, September 3, 2010, p. A16.

Making Too Big To Fail Costlier: A Check on Empire-Building

Testifying before the Financial Crisis Inquiry Commission on September 2, 2010, Ben Bernanke, chairman of the Federal Reserve, observed, “As of 2003 and 2004, there really was quite a bit of disagreement among economists about whether there was a bubble, how big it was, whether it was a local or a national bubble. We certainly were aware it was a risk factor, but frankly by the time it was clear it was a bubble” it was too late to address it through monetary policy. The New York Times also reported that he spoke favorably of forcing huge banks to hold much more capital, particularly if they were systemically important — so much capital, indeed, that being big would be costly. He advocated that the increased capital requirements should include capital that is more aligned with risk and able to absorb losses more effectively, and that works in a countercyclical manner, so that banks have more of it during times of stress.
Given the difficulty involved in recognizing a bubble even as it crests, Bernanke’s statements on capital-holding changes make sense. Absent breaking up banks too big to fail, making it very costly for them to be big is the next best option. The regulators would be wise to be on the look out, however, for bankers who try to hide their banks’ true sizes (and risk). Given the empire-building proclivity in the business world, designing a system that makes bigness more costly could result in an overall balance of forces. The key is to make being big sufficiently costly that the drive to empire-build is sufficiently checked in the banks.


Monday, October 9, 2017

Catalania as a State in the E.U.

When Catalania held a referendum on whether to break off from the E.U. state of Spain, the E.U.’s basic law was silent on whether a state’s region would be a new state. The Prodi Doctrine, however, states that a region seceding from a state is automatically no longer part of the European Union. Such a region would have to apply for statehood as if it had been outside of the Union. I submit that such a stance is problematic.
Firstly, “using the euro as a Catalan currency could prove problematic.”[1] Disentangling the region more generally from the Union economically would face formidable challenges. The free movement of workers, for instance, would no longer be possible.
Secondly, to become a state, Catalania would face the unfair hurdle of needing the ok of every extant state, meaning that formerly Spanish region would need the permission of the Spanish government. The latter would likely exploit the conflict of interest that would be involved. Generally speaking, a party to a secession dispute should not be able to veto statehood for a former region of the state. Considering how many states were in the E.U. at the time of Catalania’s referendum on Catexit, the federal requirement that every extant state approve any proposed statehood is problematic. More generally, giving every state a veto even on a matter of basic (i.e., constitutional law) hampers the interests of the federal level of governance. I submit, therefore, that a two-thirds majority is a more viable (and fairer) requirement for the role of the states in cases of proposed states. Spain and other states friendly to the state would not so easily exclude Catalan out of resentment or political vengeance at the expense of the E.U.

[i] Damian Grammaticas, “Could the EU Throw Out an Independent Catalonia?”, October 9, 2017.

On conflicts of interest in government (and business), see: Institutional Conflicts of Interest.

Amtrak: Avoiding the Obvious

According to The New York Times, Amtrak’s management “knew for years that they would have to replace large sections of deteriorating track in Pennsylvania Station in New York City.”[1] The management instead had engineering crews apply “short-term fixes to rows of rotted ties, crumbling concrete and eroded steel.”[2] Incredulously, the management was putting off replacing the tracks in part “to give work time to a nearby passenger hall renovation.”[3] Additionally, the management sought to minimize taking tracks out of service even on weekends so as not to disrupt service. In 2017, three accidents at the station finally got the management to commit to undertake an emergency repair program that “cut back service through the summer for thousands of passengers daily.”[4] Even by the objective of minimizing impaired service, prioritizing a hall renovation and putting off needed track repairs are problematic. The deeper problem is that of seriously misjudging utility.
The utility gained by passengers from a renovated hall is rather superficial, whereas the disutility from derailments at a station could result in passengers deciding to no longer travel by train. Put differently, limited service disruptions on weekends pale in comparison to having trains derail coming into, or leaving a station. Even if the latter are mistakenly deemed low-probability/high impact events, the business calculus that favors short-term fixes over long-term stability is problematic.
I suspect that Amtrak’s management had a hypersensitivity to passengers’ sense of utility because of basic impairments in the routine conduct of the trains. The route between Pittsburgh and Philadelphia, for instance, has been severely impacted as Amtrak trains must wait for other trains to pass because of track ownership. The prioritizing of freight over passenger trains is itself problematic, so the ownership of the tracks that Amtrak uses is as well. Barring outright ownership of the tracks, Amtrak should insist on contracts giving priority to the passenger trains.
I suspect that Amtrak’s management (including on the train level) has looked too tolerantly on delays. Traveling between California and Arizona on an overnight train, I was surprised (and dismayed) to learn that the train stopped somewhere in the desert because a man had been smoking marijuana in a bathroom. The conductor could have waited until the next station stop. A car’s designated employee even woke up all of the passengers in that car by shouting at the man in spite of the fact that he was no longer smoking. I was also surprised when an employee on the train arrogantly informed me that wifi is only for those passengers who had purchased sleepers. That customer service, and thus utility, can be so misjudged is itself a red flag on Amtrak’s management.
Besides having to put up with delays between station-stops and bad on-board service, having too many such stops on a given route can also be distressing to passengers. Why not have express trains run between San Francisco and L.A., for example, two or three days a week? Also, passengers have often had to accept traveling at slow speeds. To be sure, the local laws and bad track conditions go beyond the company’s control. Even so, that the company’s management decided to market its Acela train running between Boston and New York City as “high speed” nonetheless set up passengers to be less than satisfied. I think only twenty minutes were cut by the “high speed” train between the two cities.
In short, the utility of the product in this case may itself be so bad that the company’s management became distorted on just what constitutes real passenger utility. The management’s attention has not been on core matters, whether they be track replacements or the very functioning of the trains on the tracks. The lesson for all companies is that attention should be primarily on the basic quality of the products or services themselves.

[1] Michael LaForgia, “Delaying Repairs on Decrepit Tracks,” The New York Times, October 9, 2017.
[2] Ibid.
[3] Ibid.
[4] Ibid.

Sunday, October 8, 2017

Spain’s Government: Measuring the Will of the People

“’No government in the world’ could tolerate the threatening of its unity,” said Mariano Rajoy, the prime minister of the E.U. state of Spain after a week of protests pro and con on whether the region of Catalonia should secede from the state.[1] On October 1, 2017, the region had held a referendum on the question in spite of the efforts of the state police to stop the vote. Ninety percent of the 40% of the region’s residents voted in favor of breaking off from Spain, but the active presence of the police means that the results could not be taken as an accurate reading of what the population of Catalan wanted.
I contend that the state government should have permitted the referendum because democracy itself depends on a people’s self-determination. In intimidating the vote, the state government inhibited a result that could be taken as the people’s will. The respective sizes of the political protests could not be taken as indicative; neither could pronouncements by Catalan or state officials either way. Sergi Miquel, a Catalan lawmaker, insisted that the turnout would have been much higher had the police not acted violently against potential and actual voters, but we cannot surmise how that turnout would have voted. He had an interest in portraying the averted turnout as pro-secession, while the state’s prime minister had an interest in portraying the Catalan people as pro-Spain. Only a fair and open referendum could have revealed what the region’s people wanted, and democracy itself prizes the will of the people even above a government’s political and territorial interests.

That Spain is an E.U. state mitigated what was on the line (i.e., the significance of secession), assuming that Catalan would be a state too. Generally speaking, being part of the same federal system would mean that Catalan and Spain would be part of the same political system and thus have some laws and regulations in common. One of the prime benefits of federalism is that such commonality coexists with differences that reflect different cultures and self-identifications of peoples. People in Texas are both Texans and Americans. So too, Catalan people would be both Catalans and Europeans; Spaniards are of course Europeans as well. In other words, both Catalans and Spaniards would be E.U. citizens even if the region were to secede and become an E.U. state, and this track would mitigate the significance of secession. It follows that the state’s drastic efforts to violently curtail the referendum can be seen as excessive, as well as being at the expense of democracy. It may be that government officials generally are inclined to lose perspective and resort to force because they can. I submit that force in a democracy should be a last resort, especially when the use interferes with taking the measure of the will of the people.

[1] Patrick Kingsley and Jason Horowitz, “Amid Catalan Crisis, Thousands Hold Rallies in Madrid and Barcelona,” The New York Times, October 7, 2017.

Dubai Bankers and Responsibility: A Question of Presumed Complicity

Reacting to the debt troubles of Dubai World (which was carrying $59 billion in debt in 2009), the director general of the Dubai Department of Finance, Abdulrahman al-Saleh, said  “Creditors need to take part of the responsibility for their decision to lend to the companies. They think Dubai World is part of the government, which is not correct.”  This sentence strikes me as odd.  Al-Saleh was suggesting that in deciding to make a loan to a company, a banker takes a risk, which entails the possibility of working with the company if it comes up short in cash.  Is such flexibility in the vocabulary of the typical loan officer, much less in the culture of major banks?  I doubt it.

On the same week that Dubai World’s problems were being made public, the Obama administration announced plans to pressure mortgage companies to reduce payments for many more troubled homeowners, as evidence was mounting that a $75 billion government-financed effort to stem foreclosures was foundering.  "The banks are not doing a good enough job,” Michael S. Barr, Treasury’s assistant secretary for financial institutions, said in an interview. “Some of the firms ought to be embarrassed, and they will be.”  Even as lenders had accelerated the pace at which they were reducing mortgage payments for borrowers, a vast majority of loans modified through the program remained in a trial stage lasting up to five months, and only a tiny fraction had been made permanent. Mr. Barr said that the government would try to use shame as a corrective, publicly naming those institutions that move too slowly to permanently lower mortgage payments.  However, shaming is not the only weapon in the government’s arsenal. 

The Treasury Department waited until reductions were permanent before paying cash incentives that it had promised to mortgage companies that lowered loan payments. “They’re not getting a penny from the federal government until they move forward,” Mr. Barr said.  A week after Barr’s statement, the Treasury Department said it would withhold payments from mortgage companies that weren't doing enough to make the changes permanent. ”We now must refocus our efforts on the conversion phase to ensure that borrowers and servicers know what their responsibilities are in converting trial modifications to permanent ones,” Phyllis Caldwell, who was named to lead the Treasury Department’s homeownership preservation office, said in a statement.  So here we find that dreaded word—responsibility—as if it applied to the mortgage issuers as well as the homeowners.  Considering Senator Dick Durbin’s statement that the banking industry owns Congress (which he said after the industry’s lobby effectively scuttled a bill to allow judges to adjust mortgage terms for homeowners in trouble—even as the banks played a role in the bad mortgages), it is not surprising that even two years later, little benefit had come to mortgage borrowers from the U.S. Government, even as the banks had been rescued by TARP funds.

The banking industry has been more powerful, even though it was at least partially complicit in the crisis. Of course, Wall Street bankers have instinctively resisted claims that they were part of the problem that led to the financial crisis in September of 2008. Al-Saleh’s admonition to lenders that the bankers in his country step up to the plate was ignored in favor of the mantra, “it's the other guy’s fault so why should I pay?  I'm not budging.”  This is the mentality of a spoiled child.  The rest of us don’t see it as such when it applies to people in expensive suits because we are too impressed with the trappings of money and power.  As long as bankers get away with making their own rules in the halls of governments, the power ties will remain as though undisciplined children.

Sources: ; ;

Saturday, October 7, 2017

Leadership by Elected Representatives: Transcending the Politics of Slashing Vulnerable Federal Programs and Avoiding Tax Increases

On January 20, 2011, months before the Republicans would use leverage of a baleful debt-ceiling-default to extract additional cuts, the Republican Study Committee (RSC)—a group of fiscally conservative members of the U.S. House of Representatives—announced a plan by which $2.5 trillion could be cut from the U.S. Government's spending over ten years. According to The New York Times, the proposed cuts “would exclude the military, and would not touch the big entitlement programs, Medicare and Social Security. As a result, [their] effect on the entire array of government programs, among them education, domestic security, transportation, law enforcement and medical research, would be nothing short of drastic." The leaders of the RSC claimed that the cuts were “appropriate and necessary, given the government’s $14 trillion debt and annual deficits at their highest levels since the years just after World War II." The RSC "proposed generally reducing agency budgets to their levels in 2006 — the last time Congressional Republicans controlled the budget process — and then freezing them, with no annual inflation adjustments.” The RSC also recommended “slashing the federal workforce by 15 percent and canceling pay raises for five years, for a total of $2.29 trillion in savings.” Finally, the proposal included “an additional $330 billion in cuts to specific programs, including Amtrak, foreign aid and even the Washington subway system" (Source #1).


Back in July 2009, The New York Times reported that most Americans continued to want "the federal government to focus on reducing the budget deficit rather than spending money to stimulate the national economy" (Source #2). Nevertheless, Congress and the President went ahead in 2010 with extending the Bush tax cuts, which were expected to add an expected $850 billion to the deficits of 2011 and 2012. The President had proposed to extend the tax cuts for the lower and middle classes, which would be more apt to spend rather than save the difference and thus stimulate the economy then in a weak, jobless recovery. The congressional Republican leadership demanded that the tax cuts be continued for the wealthy as well, even though the latter could afford to pay more in tax and would be less apt to spend than save the money from the cuts. If the proposed spending cuts were “necessary” given the sizes of the deficits and debt, it would seem that the tax cuts—even those likely to be spent and thus stimulating—would have been a luxury the U.S. Government could ill-afford. That is to say, the deficits and debt could play second fiddle to stimulating the economy, only to be the reasons for “necessary and appropriate cuts.”

Besides dovetailing with the Republican goal of less government—particularly at the federal level—the combination of tax cuts and budget cuts sends mixed signals as to the importance of the U.S. Governments deficits and accumulated debt. Within the proposed spending cuts alone, cutting in some areas while leaving others—notably defense—completely untouched sends similarly schizophrenic signals regarding the seriousness of the deficits and debt. If the financial affairs are perilous, the U.S. Government could ill-afford protecting defense contractors and other sacred cows.

To be sure, Americans polled overwhelmingly said that they prefer cutting government spending to paying higher taxes, according to The New York Times (Source #3). The RSC's proposal was in line with this finding. Also, the proposal was in line with the poll's finding that nearly two-thirds of Americans do not want Medicare or Social Security benefits cut even to reduce deficits. At the same time, unlike the RSC’s proposal, the poll indicated that Americans by a wide margin preferred cutting the Pentagon's budget to cutting benefits in Medicare and Social Security; the RSC proposal treats all three areas the same (leaving them all off the chopping block).

However, those who are led by polls cannot lead, for leading involves moving the polled rather than being moved by them. Furthermore, the citizenry may not have fully aware of how serious deficits of over $1 trillion and a debt of over $14 trillion are to the viability of the United States. The seriousness of the deficits and debt require tax increases and spending cuts (including sacred cows) even if the general populous is not much bothered by the threat.

Representatives have to use judgment to know when to be agents reflecting the will of the people who sent them and when to lead constituents who sent them but would view the indebtedness as more precarious had they studied the matter more fully. In other words, elected representatives sometimes need to be critical of what their constituents think is in their true interest and that of the United States as a viable system. As faithful agents, representatives must look in such cases to the best interest of their district and to the United States as a viable concern. Going beyond polls, leaders are oriented to protecting the led even from themselves.


1.      David M. Herszenhorn, “G.O.P. Bloc Presses Leaders to Slash Even More,” The New York Times, January 20, 2011.
2.      Dalia Sussman, “New Poll: Bring Down Debt, Don’t Spend More,” The New York Times, July 29, 2009.
3.      Jackie Calmes and Dallia Sussman, "Poll Finds a Willingness to Cut Spending, Just not Medicare or Social Security," The New York Times, January 21, 2011, p. A11.

E Pluribus Unum: Unity without Uniformity

On January 12, 2011, President Obama spoke at the memorial service for the fallen victims of the assassination attempt on Rep. Giffords. “What we can’t do is use this tragedy as one more occasion to turn on each other,” the President said. “That we cannot do. As we discuss these issues, let each of us do so with a good dose of humility.” Had we really been turning on each other? It is as though a bystander had pointed out to two people arguing that they were indeed shouting.  "Were we really shouting?" one might ask the observer in astonishment--to which the observer would nod and add, "You guys might try a bit of humility," rather than, as the President observed, "pointing fingers or assigning blame.” 

The night after the president's speech, I watched Karen Armstrong, the former nun and author of History of God, on the PBS program, Charlie Rose. Armstrong pointed out that discussion in which others' motives are presumed and impugned involve a certain arrogance.  Each of us is a mystery to ourselves, she added.  How can we be so sure of the other partisan's motives? 

Similarly, President Obama said in his speech, “Let us use this occasion to expand our moral imaginations, to listen to each other more carefully, to sharpen our instincts for empathy, and remind ourselves of all the ways that our hopes and dreams are bound together.” Empathy and humility are attributes antipodal to anger and pride. How often are the former two invoked in political discourse? How often are two partisans reminded that they have been turning on each other, in effect?  Are Americans really turning on each other?  Is the house so divided and thus acrimonious?  It could indeed be that we, the American people, have allowed ourselves to be unwittingly drawn into a fight in which the pundits on television and radio benefit financially from the escalation.

I do not believe that we are a warring people intrinsically, though we do seem to be vulnerable to artful and manipulating public figures.  Perhaps we are too readily inclined to engage in hero worship.  Indeed, there could have been some of that involved in the 2008 Presidential election. We do tend not always to rise to the occasion in managing or resolving real differences, whether in campaigns or in voting. Popular sovereignty, our Founders averred, relies on a virtuous and informed electorate. This involves the citizens feeling a sufficient civic duty to take a serious look at real differences and make a solid decision on election-day that reflects their own respective political and moral ideologies. To be sure, fundamental differences do exist.

Paul Krugman, for example, pointed to a "deep divide in American political morality," in which he believed there is "no middle ground." He took the health reform law passed in 2010 as a case in point. "One side saw health reform, with its subsidized extension of coverage to the uninsured, as fulfilling a moral imperative: wealthy nations, it believed, have an obligation to provide all their citizens with essential care. The other side saw the same reform as a moral outrage, an assault on the right of Americans to spend their money as they choose." This difference can perhaps be characterized as pitting a moral imperative of a right to life in terms of survival (and the immorality of selfishness) against the moral imperative of property rights (and the immorality of theft via high taxes).  It is no wonder that tempers flared in the debate amid such emotionally-charged language.

Politics involves conflict over things that people hold dear—their values and beliefs. Representative democracy has the beneficial feature whereby relatively cool representatives debate and decide such policy. How quickly the Rights of Man became savage mobs in Paris in 1792. Does liberty translate into a mass of people, out of control and rushing into a prison to disembowel priests and slice limbs off aristocrats? Political discourse can be much worse than that to which President Obama had in mind when he characterized the American people as having been turning on each other. The extent of the "deep divide" in America can, with the aid of human nature, issue in violence, but this need not be, and I contend that we are a too peaceful a people to be led so astray by our passions abetted by media personalities and demagogues.  We may be making it more difficult on ourselves by willowing practically all public policy through the federal government.

We do have fifty republics we can draw on to have the sort of diversity of policy that could reduce the pressure on us to resolve the deep divide into one size as if one way could fit all. However, this solution would require tolerance. Burgess avers that there "is an important moral dimension to federalism, as it is all about toleration, mutual respect, and equality of partnership, amongst other principles" (Burgess, p. 70). For example, people in Idaho who not want government mandated health-care coverage must be willing to tolerate Massachusetts's mandate (and subsidies), and vice versa. With empathy and humility can come tolerance.

We are doing pretty well with religious tolerance, at least relative to historical instances of persecutions. In the seventeenth century, for example, four Quakers were burnt in New England—ostensibly for refusing to pay a church-tax that would go to a church they did not support. In the case of the contemporary uncivil public discourse, perhaps it would help to recognize that one size does not fit all in an empire-scale union--that ironically unum is strengthened precisely by tolerating more pluribus. I suspect this point has been lost on Americans since the founding.

We should not be surprised that there are substantial differences in a country that stretches across a continent and then some. In European terms, we are a union of nations--our states are equivalent in scale and political type (i.e., semi-sovereign political units of a union) to their countries. Accordingly, I contend that the U.S. Government ought to start dealing with those countries at the E.U. level.

In short, perhaps we have turned on each other because we have forgotten what we--the United States--are. Having lost sight of our polities, we have unwittingly suffered our differences to fit into the narrow funnel of uniformity, which we assume is requisite for unity. According to Burgess, “the formal organization of human relations [undergirding federal systems] must be founded upon ‘diversity’ as its cardinal principle. Consequently, we require unity but not uniformity” (Burgess, p. 68).  This is especially applicable where the federal system is on an empire-level.

In effect, we have forgotten the meaning of e pluribus unum; we have lost touch with what we are. Perhaps our angry public discourse is in part an eruption of our own subterranean angst, whose existential source is simply a hazy sense of being lost or adrift in some way. One cannot but be lost if one has forgotten what one is. We have forgotten that we, the U.S., are a union of republics that are commensurate to European countries. 

Sandra Day O'Conner once remarked at a small group setting, "Congress is acting like a state legislature." Evidently, Congress had forgotten what it is. If a person or group loses touch with what they intrinsically are, it likely won't be long before the wayward ship runs up against a reef. So it is only natural to feel a sense of angst while adrift without a sense of what one is. The tenor of our public discourse is merely a symptom. The question is whether we will treat it as such and dive deeper to get at the real problem, which lies in our own lack of understanding of what we are.


Paul Krugman, “A Tale of Two Moralities,” The New York Times, January 13, 2011.

Burgess, Michael, “Federalism and federation,” in European Union Politics, Michelle Cini, ed. (Oxford: Oxford University Press, 2003), pp. 65-79.

Wednesday, October 4, 2017

Vertical and Horizontal M&A: A Bias in Antitrust Policy?

The Obama Justice Department developed a track record in challenging horizontal mergers and acquisitions—those in which a company buys a direct competitor—in industries that are already highly concentrated. In deals that are not between direct rivals, such as those that occur in vertical integration, the Obama Administration approved the deals, albeit with the imposition of legally binding restrictions on the acquirer’s ability to use its “in house” supplier to engage in unfair competition.
As one example of unfair competition through the use of a purchased distributor, Standard Oil under John D. Rockefeller bought a company that owned and operated pipelines through which oil was transported. Besides using the company to obtain competitive information, he made sure that higher rates were charged to competitors—even though who had no other means of transport available. Where practicable, going by pipeline was preferable to barges and railroads from a cost standpoint—although Rockefeller obtained substantial rebates from the railroads (from his volume or market power—this point is subject to debate). In addition, the railroads granted Standard Oil drawbacks—a cut from the railroad’s business in servicing other customers, including competitors of Standard. Given Standard’s sheer volume, the rationale went, trains being used to haul others’ product were not available for Standard and thus represented a cost in terms of foregone volume transported. Even so, from the ethical standpoint of fairness, both the rebates and especially the drawbacks were subject to substantial critique—especially that of Ida Tarbell, whose text (History of the Standard Oil Company, 1904) on Rockefeller’s helmship of Standard was scathing.
More than a century later, the Obama Justice Department allowed Comcast to take control of NBC Universal and Google to buy travel software maker ITA Software. The government’s rationale is that companies can save money from synergies and thus lower prices for consumers (or increase salaries, retained earnings or dividends). Even in a competitive market, however, the “lower prices” scenario seems to have doubtful validity, given tacit collusion on price, non-price means of competing, and executive managers’ interests in increasing their compensation and keeping investors happy.  Similarly, by the way, reducing companies to being “job creators” is not only reductionistic; it also demonstrates an ignorance of what businesses are designed to do (i.e., earn profit by selling widgets—jobs being merely a means).
Moreover, the assumption that “legally binding restrictions on the acquirer’s ability to use its prize to unfairly harm competitors” are a sufficient means of checking or thwarting baleful consequences from what is an institutional or structural conflict of interest seems to be highly tenuous, in my opinion. Just as water in a stream “seeks” ways to go downstream even when temporarily blocked (and a cat obstructed from food laid out continuously seeks ways to get around the obstacles), the managers of company A that owns company B, which acts as a supplier or distributor for competitors of company A, will doubtlessly (and inevitably) seek ways around the restrictions. In the parlance of trade, such ways are known as “non-tariff barriers.” They are notoriously difficult to stop (think: stop the cat).


In conclusion, the Obama administration’s differential treatments of vertical and horizontal mergers and acquisitions evince a bias caused by understating the strength of a structural conflict of interest that is inherent in one company buying a distributor or supplier that services competitors of said company. Perhaps the underlying culprit is an understating of the more sordid aspects of human nature combined with an overstating of the efficacy of government regulation. If highly concentrated, massive stocks of capital, such as are evinced in banks or companies that are too big to fail, represent a risk both to competitive markets and to representative democracy, then not only should both vertical and horizontal mergers and acquisitions be subject to higher hurdles, but also existing companies that are too big to fail should be broken up, as the U.S. Supreme Court broke up Standard Oil a century ago.

Thomas Catan and Brent Kendall, “After AT&T: The New Antitrust Era,” The Wall Street Journal, December 21, 2011.