Thursday, February 6, 2020

Politics and Religion: President Trump at a National Prayer Breakfast

Politics and religion intermeshed can be a nasty business. Franklin Graham, son of Billy Graham, witnessed every venue of his planned tour in Europe cancel because Franklin had “called Islam ‘evil,’ attacked laws increasing rights for transgender people, and told his followers that the legalization of same-sex marriage was orchestrated by Satan.”[1] Although criticizing another religion is religious in nature, turning to laws renders the attack political too. Although Franklin Graham may have assumed that many of his co-religionists would agree with him both in religious and political terms, wading into controversial political matters risks alienating people who are or would otherwise be religious followers. Even the willingness to traverse into the political realm may not be liked by some religionists, whether followers or not, especially if the incursion is into a controversy. Some co-religionists may agree with the distinctly religious belief, yet hold dissimilar political views. Such distance created between religionists can weaken a religious leader’s credibility and even following in the religious domain. Politicians dragging their respective religious faiths into the political domain can also be problematic, though authentic applications can pay off even if there is a cost politically. The incursion of Christianity at the end of U.S. President Trump’s trial in the Senate and as he took a victory lap can demonstrate the complexities of religion distended into another domain.

[1] Rob Picheta, “Evangelist Preacher Franklin Graham Planned a Seven-City UK Tour. All Seven Venues Have Dropped Him,”, February 6, 2020(accessed same day).

Tuesday, February 4, 2020

Bank Bonuses and Dividends After the Financial Crisis: On the Power of Banks in European and American Government and Society

Dividends are typically based on how much a bank (or company, moreover) has profited, less whatever capital is needed from the profit. Similarly, bonuses are based, at least theoretically, on how the managers and the nonsupervisory employees alike perform as well as how the bank performs. In their respective ways of shoring up banks amid the financial crisis of 2008, the E.U. and U.S. differed on how easy it would be for banks to pay dividends and bonuses, as well as to have access to governmental funding. These differences reflect both the relative power of the financial sector in the governmental sector and the cultural attitudes toward business. 
“Under proposals outlined by the European Commission president, José Manuel Barroso, banks would be required to temporarily bolster their protection against losses. . . . Extra capital for European banks should be raised first from the private sector, then from [the state] governments, according to the proposal. Only when those avenues have been exhausted should a euro zone bailout fund be tapped, it said. Banks should not be allowed to pay dividends or bonuses until they have raised the additional capital, according to the proposal.”[1] The bankers much raise additional capital before government coffers could be tapped and dividends and bonuses could be paid. 
As an aside, the nature of the E.U.'s federal system is also relevant, as state funds would be tapped; only when they are exhausted would a federal fund be used. In the case of the U.S., the states were to be shut out of the solution. This reflects the more general shift from federalism to consolidated power at the federal level. The European federal system was at the time more balanced, and thus more viable.
After Lehman Brothers went under in September 2008, the U.S. Government took “swift action to ensure its banks had a strong cushion of capital.”[2] The banks first (rather than last) resort of capital would come from the Federal Reserve Bank (as created money) and TARP funds enacted by Congress. The bankers did not have to raise additional funds, and they could pay dividends and bonuses even though the government bailout was supposed to be used to expand lending, which largely didn't happen. The banks could take the governmental funds with few if any strings attached. Also, the U.S. Treasury allowed banks to pay back the funds earlier than perhaps advisable because the bankers wanted to be free to pay whatever bonuses they saw fit for themselves.
The difference on whether dividends and bonuses should be allowed at troubled banks reflects a rather basic ideological difference between the E.U. and U.S. concerning whether economic liberty ought to be limited even in cases in which the economic entities are culpable. In short, is a bank (or business) whose management has performed very badly, as in recklessly taking on too much debt, justified in paying out dividends and especially bonuses nonetheless? If traders knowingly sell crap to even their best customers, as traders at Goldman Sachs did in the case of the subprime-mortgage-based financial-derivative bonds, should those traders expect to get bonuses anyway? Competence and ethics are thus both relevant. 
Admittedly, the bonus system on Wall Street had made its way into calculations of standard or basic compensation, such that the bankers had come to expect at least some bonus each year, regardless of performance. However, this expecation (and practice) contorts the very meaning of a bonus; it is not to be expected because it is granted for good or excellent performance, or even ethical conduct. U.S. officials tacitly bought into Wall Street's convenient notion of a bonus, whereas E.U. officials held onto the basic fact that a bonus is an extra, not a given, and, moreover, that raising additional capital as a hedge against systemic risk is more important than bonuses (and dividends). 
I suspect that because the E.U., at the time at least, had major parties on a broader political spectrum than that of the U.S., the financial sector did not have as much power over governmental institutions as in the case of the United States. Put another way, the U.S. political landscape was more tilted in favor of the financial system. Goldman Sachs, for instance, gave $1 million to Barak Obama's 2008 presidential campaign. Furthermore, the U.S. Supreme Court ruled in Citizens United (2010) that corporations could give unlimited amounts of money to political campaigns. Meanwhile, the "hard left" was represented only by "liberal Democrats," whose power has been typically diluted in the Democratic Party. Even the liberal wing of the Democratic Party does not reach the Left parties in Europe in terms of Socialism, for example. 
Therefore, I submit that the interests of corporations, including their stockholders and managements, are distended in American politics. Perhaps not by coincidence, the culture itself is amenable to business. For example, business values have gained a greater footing in how education is conceptualized at many universities in the American States. Since 1980, for example, both universities and students have reduced education to vocation in assessing a major's worth in terms of its potential for resulting in a good-paying job. The criteria for higher education are not so limited, or warped. In terms of teaching, corporate power-point presentations, which were ubiquious in business settings, became more common not only in "teaching by bullet-points," but also in what students would study for exams. 
The cultural value of business in American society, combined with the monied/political power of corporations (including banks) in the halls of government can explain why the American response to the incompetent bankers differed so much from the European response. This is a good case study particularly because it is ludicrous that a no-strings governmental response would follow the bankers' pathetic abuse of the subprime derivative bonds. The sector had even lobbied to keep financial derivatives from being regulated! That bonus were granted attests not only to warped judgment, but to the cultural and political situs of the financial sector in America. I suspect that many Europeans, even E.U. officials, were shaking their heads in disbelief. 

1. Stephen Castle, “Europe Tells Its Banks to Raise New Capital,” The New York Times, October 13, 2011.
2. Ibid.

Saturday, February 1, 2020

Brexit as a Contribution to Political Development

Britain’s secession from the E.U. was, I submit, based on a reaction within the state against it having given up some of its sovereignty to the European Union. The American states too were originally (i.e., from 1776) fully sovereign until they gave up some limited (i.e., enumerated) sovereignty to the federal level in 1789. In 1861, South Carolina, like Britain, also sought to secede based on the view that too much sovereignty had been transferred. Unlike the UK, however, SC (and then the other seceding states) resorted to force. Although the process of Britain’s secession was arduous, I submit that South Carolina and federal officials had been excessively rigid. Even though the “dual sovereignty” of the European and American federal systems is perpetual, only the E.U. allows for peaceful secession. This evinces a step forward in the political development of federalism. Both a federal union and a strongly anti-federalist state are better off with secession being possible, especially if the process is peaceful. Europe deserves to be congratulated, and America would do well in taking a lesson in order to benefit from the advance. Peaceful secession can be done in a federal system of dual (i.e., federal and state) sovereignty.

Although several possible rationales were put forward both for South Carolina (and the other confederate states) and the United Kingdom seceding from their respective empire-level unions, I contend that in both cases the enormous distance and thus tension between confederalism (i.e., the states retaining sovereignty) and modern federalism (i.e., dual sovereignty was the root cause. In both cases, the belief that the federal level had too much governmental sovereignty at the expense of that of the states was in play. In both cases, moreover, the respective unions were seen as confederations. In the case of SC, this belief supported the argument that a state could justifiably secede. In the case of the UK, Prime Minister David Cameron referred to the E.U. to an association and Britain as a member. This view is utterly incompatible with the E.U.s basic law due to the feature of dual sovereignty. Joining an international organization as a member does not involve any transfer of the member’s governmental sovereignty.
Not even the European Economic Community, the predecessor of the E.U., was an international organization because sovereignty was split. In Flaminio v. E.N.E.L. (1964), the European Court of Justice stated, “By contrast with ordinary international treaties, the EEC treaty has created its own legal system which, on the entry into force of the treaty, became an integral part of the legal systems of the member states and which their courts are bound to apply.”[1] Even the superiority of the ECJ over state supreme courts involves a transfer of sovereignty because a state cannot overrule the ECJ; the state is bound rather than at liberty in this respect and has thus lost some sovereignty. Interestingly, the Court nonetheless refers to the EEC as founded by an international treaty, though not an “ordinary” one. Dual sovereignty characterizes modern federalism, which began with the American constitution, so not even confederalism, wherein the states retain full sovereignty, is sufficient to characterize the EEC (not to mention the E.U.)! The reference to a EEC non-ordinary treaty is thus problematic.
I suspect that the gravitas of nationalism may explain the Court’s odd legal invention of a non-ordinary international treaty wherein sovereignty is split within an overarching legal system (i.e., modern federalism). I am reminded of a line from The Euthyphro, a Socratic dialogue. Euthyphro suddenly remembers that he has an appointment as soon as he realizes that he has lost the debate. Socrates quips, “Oh Euthyphro, you are a rascal!” Rather than own up to the fact that international treaties do not split sovereignty within an overarching legal system, the Court stated that the EEC international treaty was not ordinary, and yet the ruling explicitly affirms: The transfer by the states from their domestic legal system to the Community legal system of the rights and obligations arising under the treaty carries with it a permanent limitation of their sovereign rights.[2] In fact, the EEC could exercise direct effect in obligating the residents of a state without the state’s involvement.
The E.U. shifted even more sovereignty from the states to the federal level and continued direct effect, and expanded the federal governmental institutions to include a parliament and an executive branch (with a president), so the case that the E.U. federal system includes dual or split governmental sovereignty is even stronger. Even so, David Cameron referred to the Union as one of the international organizations to which Britain happens to belong. Even the Court ruling about the EEC would challenge such a characterization, albeit in a vague way.
I submit that enough of the residents of the E.U. state of Britain viewed the E.U. as an international organization and thus as having an illegitimate claim to any sovereignty that secession was good both for the state and the Union. Put another way, the state’s predominant notion of what the E.U. was conflicted violently with what the E.U. actually was at the time: a federal system characterized by dual sovereignty (i.e., modern federalism—not even confederalism!). A real difference of opinion on something is can be understood as a deep fault-line, and thus as destabilizing at best. A house divided so fundamentally does not stand much of chance in the long term. Therefore, it was to tremendous benefit both to the E.U. and its most wayward state that the secession was not only allowed, but also accomplished peacefully. The arduous process, in other words, was well worth all the headaches. The American case demonstrates that resorting to force can go terribly wrong.

1. Flaminio Costa v. E.N.E.L., Summary, Case 6-64, 15 July 1964.
2. Ibid.