TARP and Foreclosures: A Matter of Misplaced Priorities

Neil Kashkari wrote up the U.S. Treasury department’s Break the Glass Bank Recapitalization Plan in April, 2008—months before the financial crisis—as a “just in case.” It was essentially the TARP program.  Karshkari states in his plan that governmental purchases of toxic mortgage-based assets would do “nothing to help homeowners without [there being] a complimentary program.” He notes that should there be a crisis, “there would be enormous political pressure” for relief going to homeowners in trouble.  Considering the noted downside to his plan, he may have viewed any such pressure from “the masses” as a problem to be ignored rather than even assuaged.  He also admits in his plan that it would provide “no guarantee banks [would] resume lending.”  It is odd that his was made explicit yet not dealt with.  He does gloss an alternative option (C) that would involve refinancing the troubled mortgages, though he assumes a (needlessly cumbersome) case by case basis and that the servicers would determine which loans to put into the program.  The culprits could opt out to insist on the higher payments. In other words, Kashkari was assuming that the government shouldn’t or couldn’t force the banks to take write-downs.  As a former Goldman Sachs man himself (like his boss at the time, Henry Paulson), Kashkari probably didn’t want to propose anything that the bankers wouldn’t view as being in their interest.

The full essay is at "Essays on the Financial Crisis."

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?

Some of the Sources: 

Michael Hirsh, "Why Barney Frank Is Furious about Financial Reform," Newsweek, December 9, 2009.

Stephen Castle, Katrin Bennhold, and Steven Erlanger, "France Joins Britain in Move to Curb Big Bank Bonuses," The New York Times, December 10, 2009.

Carl Hulse, "House Approves Tougher Rules on Wall Street," The New York Times, December 11, 2009.

Private Financial Interests in the Public Square: Crowding Out by Design

Is the typical American self-centered and greedy, or is there a civic-mindedness that yearns to bracket one's own interests?  In other words, is there more to American society than being the sum of the parts? Is there something more than the aggregate?  I don’t mean to criticize individualism here; creativity and liberty, for example, are individualistic traits that highlight a person's character and virtue. Nor do I mean to point to one of the two major parties. One could point to the democrats protecting unions at the expense of a free market for labor just as one could point to rich republicans holding tax cuts hostage unless they are included even though they could afford higher taxes.  If there is something more to American politics than asserting one's own interests, who is to represent the civic component?

The American Founding Fathers assumed that a given republic requires a certain level of disinterestedness or impartiality among the citizenry. The Founders thought that gentlemen freed up from the pressures to make money were obliged to serve in government precisely because selfish monetary pressures would be less pressing among the already rich. So the Founders were startled when common folk began winning more state legislative seats.  The concern was that the immediate economic interests of the folks would carry the day over what would be needed legislatively for the public good.  Reading this, a modern American is apt to be surprised that the Founding Fathers might not have been so populist as the American mythos might have suggested. The Founders might also be critiqued for being blind to the possibility that moneyed gentlemen might legislate in the interest of their class at the expense of the folks. In short, American populism may not have been an ideal at the inception of the union of states. The question here is less historical, however, than on how and by whom the pubic good might be asserted.

Lest one look to the presidency, the sheer amount in financial backing renders the occupant captive to the financial elite, which in turn has a vested interest in its own interest and the status quo in which it has done so well.  Real change in the public good at odds with the status quo is not likely to come from the White House. Lest one look to the U.S. Supreme Court in protecting individual rights, the fact that justices are nominated by the president and confirmed by the U.S. Senate, which among other things represents wealth, suggests that the high court will stamp rather than impede extensions in Congressional and presidential power, which in turn has a strong financial-interest backing.

The question of standing up for the public good where the financial elite such as Wall Street has a direct financial interest in perpetuating systemic risk was at the fore in the wake of the financial near-meltdown in September of 2008.  The subsequent banking regulation reform was highly watered down by Wall Street's involvement in the very writing of the law. For example, the existence of investment and commercial banks that are too big to fail was not seriously questioned, not to mention confronted. Instead, "incentives" not to increase further in size were included. Whereas in history monoliths such as Standard Oil and ATT were broken up by the high court, Congress could not bring itself to break up the still risk-prone banks even in the wake of the banks' self-induced crisis.

So the question remains: what of the public or common good--the public square that goes beyond the sum of the parts?  Who, if anyone, is to stand up to the vested interests to push through real change that is necessary to the survival of the United States as a going concern?  I suspect that the usual suspects have the American public debating secondary issues so such primary questions are kept off the radar screen of public discourse. Lest it be forgotten, the American media companies are interwoven into corporate America. There may be a vicious self-perpetuating feedback cycle wherein the public is kept from raising a movement that would question the matrix on which the financial elite has thrived. The question may thus be whether this cycle can even be broken.

Federalism Facilitating Self-Preservation

The rights to life, liberty and the pursuit of property (Locke) or happiness (Jefferson) can all fit within a federal system that enables its two systems of government—that of the federation itself and the republics  or (member) states—to check and balance each other. The alternative, at least for a federal empire, may be a return to the state of nature.

The complete essay is at Essays on Two Federal Empires, available at Amazon.

The U.S. National Debt: On the Addiction of Living Beyond One's Means

Twelve times a thousand times a billion  Such a number can only be known abstractly to the human mind.  A person is not apt to see 12 trillion widgets and thus fully realize how many that number signifies. Just in an abstract sense, however, the number can be understood represent debt that is beyond sustainability.   If not, then exactly how much signifies the threshold over which any additional debt will never be paid back? The U.S. federal debt stands at $12 billion as 2009 is drawing to a close.  If this amount is difficult for us to contemplate, how realistic is it that the debt will ever be paid off? that the debt has been growing since the late 1990s may mean that the question of paying off the federal debt might never be seriously entertained. 

In December, 2009, The New York Times reported, “With the national debt now topping $12 trillion, the White House estimates that the government’s tab for servicing the debt will exceed $700 billion a year in 2019, up from $202 billion this year, even if annual budget deficits shrink drastically. Other forecasters say the figure could be much higher. In concrete terms, an additional $500 billion a year in interest expense would total more than the combined federal budgets this year for education, energy, homeland security and the wars in Iraq and Afghanistan.”[1] As much as the interest expense is expected to be (and the implied difficulty in paying down the debt, let alone covering its interest expense, it may be even harder before long.  Again, according to The New York Times, “Americans now have to climb out of two deep holes: as debt-loaded consumers, whose personal wealth sank along with housing and stock prices; and as taxpayers, whose government debt has almost doubled in the last two years alone, just as costs tied to benefits for retiring baby boomers are set to explode.”[2]

While the deficit-spending is perfectly understandable in the context of a financial crisis and otherwise likely economic depression, such spending has hardly been saved for such times.  In fact, it has been part of “normal” US Government budgeting.  What the newspaper doesn’t mention is that even in the late 1990’s when the government was running surpluses and the economy was booming, only part of the surfeit was used to reduce the government’s debt.  At the time, Bill Clinton’s administration used the “rationale” that the boom that had been going on since the mid-1980s would go on for another fifteen years from the late 90’s.   Even had that forecast been realistic, I’m not sure that all of the government surpluses together could have eliminated the public debt.

In any case, fiscally the US Government has been out of balance for decades.   What might be the cause?  Two candidates come readily to mind.  The American culture is a rather self-consumption-oriented society wherein spending beyond one’s means is not a matter of moral disapprobation.  In other words, the problem may boil down to a “gimme, gimme, gimme” mentality—a lack of maturity, really.  Secondly (and relatedly), representative democracy itself may itself favor spending over taxation to cover it.  

Any normative constraint that might operate at the individual level may not exist at the institutional level where representatives are effectively rewarded for bringing home the bacon and punished for raising taxes.  Although it could be argued that the representatives should be more responsible nonetheless (as their goal ought not be simply to be reelected), we can point to ourselves, the American citizens, as the force behind the unsustainable fiscal situation.  We don’t have to endure incumbants who have spent in deficits, but we do.  The US House incumbancy rate almost guarantees that once someone is elected, he or she can be virtually assured of being re-elected in two years, und so weiter.    

The problem, in other words, lies within us.  Too few of us value self-discipline in ourselves.  We are unwilling to call other people on their profligate credit-card spending, and we refuse to vote out of office those representatives who have voted outside of a financial crisis for an unbalanced budget.  Consider how different a people we would be were to insist at the ballot box that our representatives actually make a contribution to paying down some of the debt (again, not during a financial crisis) each year during their terms.  

How different we would be if we held our officials accountable for more than scandal.   How different we would be if we “just said no” to the credit card companies and went without the plastic (using debit cards that could be used only on positive balances and having a savings account for emergencies).  If we look at the US Government as unsustainable, what we are really saying is that we, ourselves, are fundamentally flawed as concerning being adults.  The problem, in other words, transcends finance and politics.  We are living beyond our means.

1. Edmund L. Andrews, "Wave of Debt Payments Facing U.S. Government," The New York Times, November 22, 2009.

2. Ibid.

Integrity in the Job-Description of a US Senator: On the Role of the Senate's Design and Purposes

Micheal Bennet, who represented Colorado as a U.S. Senator, told a journalist in 2009 that the possibility of losing his seat  in 2010 should not hold him back from voting for health-care reform even if it were unpopular in Colorado.   The journalist, of CNN, asked, "If you get to the final point and you are a critical vote for health care reform, and every piece of evidence tells you, if you support that bill, you will lose your job, would you cast the vote and lose your job?" Bennet replied, "Yes."[1] Voting in line with the best interests of his fellow citizens would evince a degree of political integrity that I suspect few in the biz have today. However, might a representative be wrong and his or her constituents right about the long term best interest? Is a U.S. senator necessarily smarter or more capable of insight? Lest Bennet be criticized here for failing to have represented his constituents, one might take a look back at Madison’s Notes to the constitutional convention for guidance. 

The complete essay is at Essays on Two Federal Empires.

1. Josh Gerstein, "Bennet Willing to Sacrifice Seat over Health Vote," Politico, November 11, 2009. 

Twenty years after the Berlin Wall fell: Vor zwanzige Jahre ist die Mauer gefallen

It was a gray rainy Monday in Berlin, yet the sun was shining for those in Europe who are celebrating the fall of the iron curtain.   Twenty years ago from that day, it would have seemed surreal to the east Germans who could suddenly simply walk across a border without fear of being shot.  People simply walked through.  “I just wanted to set foot on your side,” one man said.  “Can I cross over there and visit my parents?” a woman asked.  The east German police could only say, “go ahead.”  There would be no criminal penalties.  Before long, people climbed the wall and started chiseling away.  “The wall has to go,” they cried, “Sie ist zu Ende.”

A state the size of Montana in the EU, the united Germany is today a positive force in Europe.  The fears that gave rise to the European Coal and Steel Cooperative are no longer extant.  To be sure, the existence of the EU renders Germany less a potential threat to its neighbors.  However, Germany is playing a far more positive role in European politics than simply being contained.  In fact, Germany is among the states that have been most supportive of the EU, both monetarily and in terms of supporting further political integration.

   

The lessons of war are not lost on the descendents of those Germans who lost two wars in the twentieth century. The lesson is: a federal union in Europe is the best chance to obviate future war.  The seventeenth century alone demonstrates just how much strife can occupy a century. The problem is perhaps how to give the European Union enough power to prevent war while not giving the union so much power that it can tyrannize over what is innately a heterogenious empire-scale continent. The United States face the same problem, though that union is much closer to the consolidation end than to dissolution.   As much as Europeans may fear consolidation, justifiably looking at American history as evincing such a trajectory, I believe that the illusion that the EU is simply an alliance (in spite of having a supreme court, parliament, and executive branch) ought to be feared just as much.   The former east Germans ought to know the decadence in propaganda.   To be sure, the denial in the US of the empire-level consolidation is just as dangerous.  Both refusals to come to terms with how each of these unions has changed is like refusing to remove one’s blinders before driving.   

In both federal unions, a realistic assessment is requisite to reforming the governance structures to achieve a balance of power between the respective federal governments and the respective state governments.  Common action, such as to forestall war and regulate interstate commerce, and cultural and ideological distinctiveness can each be accommodated; in fact, each can serve as a check on the other, such that neither one can snuff out the other.   Surely one of the lessons learned by the east Germans was that concentrations of power ought to be suspect, given human nature.

Institutional Conflicts of Interest

Although conflicts of interest do not inevitably lead to unethical conduct, they raise the probability that it will occur. Just as a tornado watch indicates that conditions are favorable to the formation of a twister, a conflict of interest evinces conditions favorable to unethical decisions. Interests conflicting in a conflict of interest pit an obligation against either another obligation or self-interest. That is to say, such conflicts tend to involve deontology and egoism.


The full essay is at Institutional Conflicts of Interest, available at Amazon.

Nationalism in Europe: Forestalling Ever Closer Union

Ask a European if the E.U. government could ever consolidate power from the state governments and you would probably get, Nope, we identity with our respective countries. The problem is, such attachments can change. Indeed, they have changed. Europeans alive after fifty years of "ever closer union" would do well to look back at the U.S. after its first fifty (or one hundred) years to get a sense of how the E.U., too, could change. 

The complete essay is at Essays on Two Federal Empires, available at Amazon.

Health-Care Insurance Reform: A Spectrum of Alternatives with Respect to Federalism

So not to work at cross-purposes, public policy at the federal level of a federal republic should not be at odds with federalism. Put another way, public policy enacted into law that weakens the constitutional archetecture of a governmental system undercuts  is neither prudent nor wise. Heath insurance reform provides us with a case in point. 

In 2009, the U.S. Senate’s majority leader, Harry Reid, proposed a government-run “public” health-care insurance option with an “escape hatch.”   “A state could refuse to participate in the public insurance plan by adopting a law to opt out.”[1] While this proposal would barr a State refusing the public option from participating in the coops that are also a part of Reid’s proposal, the basic “opt out” arrangement is in line with federalism and, moreover, with the inherent heterogenious or diverse nature of an empire spanning across and continent and beyond. In contrast, Olympia Snowe’s preference for “a fallback, safety-net plan” that would trigger the public option in States where insurance companies fail to offer affordable plans is antithetical to federalism because the States would have no choice in whether the plan was triggered.

The approach most in line with federalism would be for the health-plans to be designed in the State governments, with the U.S. Government focused on matters that the States cannot (not will not) do, such as presenting a united foreign policy to the world.  If there is a lowest common denominator for health-care in the US as per the fundamental principles of the Union, a basic program passed by the U.S. Government would be consistent with also having State plans.   Next closest, the U.S. Government would supply money for health-care, which the State governments would decide how to spend.  Even less in line with federalism would be the design of the programs being done by Congress and the WH, with separate opt-outs for the public and coop insurance plans.   Reid’s proposal was less in line with federalism, and finally, as least in line with it, was Snowe’s preference.

1. Robert Pear and David M. Herszenhorn, "Public Option Push in Senate Comes with Escape Hatch," The New York Times, October 26, 2009.

The Consolidation of Power in the American and Roman Empires: On the Rise and Fall of Empires

The American federal government was for at least a century, and perhaps even longer, primarily involved in defending the new empire and regulating commerce between the republics (or states more generically). By the dawning of the twenty-first century, the U.S. Government had grown both in scope and in the number of employees on its payroll while the governments of the republics had been reduced to functioning as little more than local governments. In other words, Congress had come to act like a state legislature, while the states had accepted their status as mere localities. This fundamental shift with respect to American federalism, as well as the empire-“kingdom”-city arrangement, bears a striking resemblance to the Roman empire. By implication, this similarity might lead us to some conclusions regarding the future the United States within the larger story of the rise and fall of empires.

The complete essay is at Essays on Two Federal Empires.

On Term Limits & Representation in the U.S.: The Anti-Federalist View

In the New York convention for ratifying the U.S. Constitution, Melancton Smith favored having the state legislatures rotating their U.S. Senators rather than keeping the same men in the Senate for life. "It is a circumstance strongly in favor of rotation, that it will have a tendency to diffuse a more general spirit of emulation, and to bring forward into office the genius and abilities of the continent. If the office is to be perpetually confined to a few, other men of equal talents and virtue, but not possessed of so extensive an influence, may be discouraged from aspiring to it."[1] This argument could easily be applied to the people electing U.S. Senators.

The complete essay is at Essays on Two Federal Empires.

1. Herbert J. Storing, The Anti-Federalist (Chicago: University of Chicago Press, 1985), p. 348.

The European Council and the U.S. Senate: Intergovernmental Institutions in Modern Federalism

As part of comparing the U.S. and E.U., pointing to similarities between the U.S. Senate (especially as originally designed) and the European Council is particularly valuable because both institutions constitute the intergovernmental, and thus international, aspect of their respective unions. By contrast, both the U.S. House of Representatives and the E.U. Parliament constitute purely governmental, or “national,” bodies irrespective of the state governments. Hence both the E.U. and U.S. governments are hybrid governmental/intergovernmental, and thus neither national nor international.

The complete essay is at Essays on Two Federal Empires.