Columbia: The United States of South America?

On March 8, 2026, The Associated Press reported on the voting in Columbia that took place that day “for a new Congress and to select candidates . . . in a primary-style contest ahead of a presidential election in May.”[1] This description could hardly be more “American,” in the sense of referring to the United States. I contend that this allusion to the U.S. is overdrawn. Were Columbia to apply for membership in the U.S., the accession would pertain to becoming a state, rather than to Columbia as a United States of South America merging with the other United States. Put another way, even though Columbia appropriated from the federal level of the U.S. in creating a presidency, a Congress that in turn consists of “The Senate” and “The House of Representatives,” and a presidential election process that includes something akin to primaries, Columbia corresponds to the American states (only without being members of a union as they are) rather than to the United States. Columbia’s accession into the U.S. as a state would not instantiate an empire within an empire.

One way of distinguishing Columbian politics from politics at the national level in the U.S. is to point out that the timespan for presidential campaigning in Columbia in 2026 between the “primaries” and the presidential general election was just months. Whereas that is plenty of time to campaign across Columbia, much more time is needed for U.S. presidential candidates to campaign in 50 states. Accordingly, the U.S. presidential campaign “season” is much longer—with the primaries themselves taking place over about 6 months. This is a great way to grasp the qualitative leap (i.e., rather than being a matter of degree) that separates and distinguishes a state from a union that is composed of many such states. Although only a few months are between the nominating political conventions and the general presidential election in the U.S., and only a few months are between the Columbian “primaries” and that presidential election, the American presidential campaign “season” is significantly front-loaded in part because the U.S. is an empire-scale federal system wherein the states play a role in the election of the federal president and thus should at least theoretically be campaigned in. It is not enough to campaign in an area the size of Columbia, for example.

Shifting from process to institutional analysis, Columbia’s system of government as unitary can be distinguished from the U.S.’s federal system. Although imitation has been said to be the highest form of flattery, referring to Columbia’s upper and lower legislative chambers as together being a Congress is misleading. In the United Colonies, which predates the United States, the Continental Congress was so named because it was viewed as international meetings rather than as a domestic legislature. So too, the Congress during the Articles of Confederation was understood to be an international body because the states were then sovereign countries. Although this changed in 1789 when the three branches of the federal government went into effect, the U.S. Senate was understood to be founded on principles of international law. Although the states were then only semi-sovereign (some governmental sovereignty having been delegated to the federal government), that polities rather than individuals would the members of the Senate and that the member-polities all would have the same number of votes meant that the U.S. Senate is an international chamber (i.e., founded on such principles, rather than national principles). The latter principles apply to the U.S. House of Representatives, so with the Senate, the Congress can be construed as a hybrid national-international institution. In utter contrast, Columbia’s Congress is solely domestic in nature—not a thread of international fiber being mixed in. This is so, too, of the legislatures of the U.S.’s member-states. So, in this way too, Columbia can be seen to correspond to a state in the U.S. rather than to the U.S. itself.

Indeed, one reason why federalism fits so well for the U.S. is because of its empire-scale and the related interstate cultural heterogeneity. Massachusetts is very different than Oklahoma, culturally speaking, and Texas is very different than Hawaii. The claim that the regions of Columbia differ culturally to such an extent is based in part on the category mistake of treating a state-scale polity as being commensurate with, or equivalent to, a union of such states.

One implication of seeing Columbia in this light is that it and its neighbors could form a United States of South America, whose Congress would be hybrid-based on international and national principles of government. The Senate of such a Congress would represent Columbia and the other states rather than individual citizens (the direct election of U.S. senators by citizens of the respective states may thus be problematic). Were such a United States of South America in existence, a federal check on power-abuses at the state level would be possible (though not guaranteed). The need for and lack of such a check when the Columbians went to vote in March, 2026 is clear from the assertion made at the time by Columbian Defense Minister Pedro Sánchez “that a group of at least 2,400 people ‘allegedly heading to vote’ were detected trying to enter Columbia at an illegal border crossing with Venezuela in Norte de Santander, despite announced border closures during the election process.”[2] Sixty buses were waiting to take the people to voting stations. Columbia’s simple rather than federal polity did not include such safeguards as would surely come from the U.S. federal government were citizens of one state sent into another state as campaign volunteers to attempt to vote there. In the words of Sánchez, an “avalanche of illegal voting” happened in Columbia on March 8, 2026.[3] Whereas claims of widespread electoral fraud in some of the U.S. states in the 2020 presidential election were met with investigations by Congress and the U.S. Justice Department, which crucially are distinct from any of the state governments, the Columbian government had only itself to investigate why busloads of foreigners allegedly voted for candidates for president even though that government may have been blameworthy. It is not as if Columbia constituted a United States of South America. Of course, political corruption can occur at virtually any scale; the U.S. Federal Government is hardly immune, and neither is the government of the tiny polity of Rhode Island, for instance.

My point is merely that even though Columbia’s legislature is called a Congress and includes a chamber called a senate, Columbia does not have the checks and balances that are built into an empire-scale federal polity such as the United States. Even if some of the U.S. states had federal systems, those states would not thereby be equivalent to the U.S., or, more generally, to an empire-scale and international-national hybrid federal government.

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1. Astrid Suarez, “Colombians Are Electing a New Congress and Choosing Presidential Candidates,” The Associated Press, March 8, 2026.
2. Ibid.
3. Ibid.

Police Ignoring Laws in Florida: A Case of Systemic Corruption

Systemic corruption means not only that a department or agency has an organizational culture that allows for and may even laud corruption, but also that a city hall, as well as larger jurisdictions such as member-states and even federal agencies may be enabling the corruption by looking the other way and even lying to cover-up the lower-level corruption. A study at Florida Atlantic University published in the Journal of Criminal Justice identifies 24 categories of police misconduct in Florida from 2012 to 2023. Even though it is tempting to highlight violent illegal acts by police employees, lying regarding criminal law and refusing to take reports of criminal activity may be more detrimental because such misconduct is probably more common than is the violent sort. If so, the extent of corruption and the underlying false sense of entitlement by police patrol-employees and even their supervisors may be vastly understated in the United States.

The “24 categories of police misconduct” in Florida range “from assault/battery to weapons offenses, manslaughter, homicide, extortion and false statements/perjury (lying under oath).”[1] The results of the study state that “the most considerable incidence of police misconduct offenses was related to officer failure to report and perjury.”[2] The incidence of this type of corruption was higher than “sexual-related crimes” and “(d)rug and alcohol-related offenses.”[3] The serial lying to citizens and refusing their requests for police reports reflects back on the faulty use of psychological screening on police applicants. The propensity to bully too is indicative that such screening has been substandard and therefore should be drastically fortified.

The police department in Largo, Florida, which is located just north of St Petersburg and west of Tampa, is a case in point. As of 2025 at least, police personnel who have taken oaths to enforce (and thus acknowledge) Florid law were to take reports of fraud. “It takes several people to have reported a case of fraud for us to make a report,” one police employee told me when I called to confirm the wayward policy. The statement demonstrates not only corruption, but also a sordid breach of rationality, for if no initial reports of fraud by a person against another are allowed, then it would be impossible to make a complaint after several other people have done so regarding the same culprit. Incredibly, that same police employee nevertheless maintained that in Florida, reports of fraud are made to the police local departments.

That same squalid department also has a policy that landlords, including local individuals and property-management company employees, can enter rented residential space at any time for any reason because, as I heard when I called to confirm, “there is no such thing as trespassing on a person’s own property.” The department even lies to residents by claiming that neither the town nor Florida has any laws protecting tenants from what is in fact trespassing. The Largo police department took the decision to ignore section 82 of the Florida statutes, which stipulates the conditions under which a property-owner can enter leased premises. The sheer extraordinariness of the lie should not be overlooked, for a brazen, hardened corrupt mentality can be inferred, especially when wielded like a club by police employees who have sworn an oath to uphold rather than ignore and lie about the law.

As for Florida’s Law Enforcement Agency, the official line is that there is no state-level agency in Florida that oversees local police departments; the internal affairs offices of local police departments are the only avenue for complaints. That such a pertainent agency can so easily be coopted by their “brothers in arms” opens up the ethical problem of a conflict of interest. The office of Lori Berman (D), Minority Leader of the Florida Senate, also insists that no state-level avenue for complaints by residents of local police corruption exists; only the towns and counties could take such complaints. In investigating this problem by speaking with one of Berman’s employees, I suggested that federal oversight of corrupt local police departments is also possible. The result was a patronizing, “Now let’s slow down,” reply. I had heard enough, so I called Congresswoman Anna Luna’s office, whose district includes corrupt Largo. I asked which office in the U.S. Department of Justice I could contact regarding a corrupt police department, but was told by one of Luna’s enabling employees, “We have nothing to do with the U.S. Department of Justice.” Enabling the corruption of a local police department is itself a corruption, as is lying about the oversight of federal agencies by the U.S. House of Representatives. 

There is a saying in philosophy, “turtles all the way down.” A thread of corruption extending from local fraud, a lying local police department unwilling to uphold (or even acknowledge) the law, the state of Florida that is presumably unconnected from local agencies or departments, and federal office-holders from Florida for whom federal oversight does not exist either in the Congress or the U.S. Department of Justice qualifies as the epitome of systemic corruption. Just as an unethically dysfunctional culture of a company like Arthur Anderson, Wells Fargo, and Enron is notoriously difficult to dislodge or cure with disinfectant, a corrupt local police department encased and enabled at the state and Congressional level is as intractable as they come, utterly impervious to correction and reform. Translucent sunlight may be in short supply in the sunshine state.

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1. Gisele Galoustian, “Study Finds Police Misconduct ‘Hotspots’ Across Florida,” News Desk, Florida Atlantic University, July 30, 2024.
2. Ibid.
3. Ibid.

Is Healthcare a Human Right?

Humanity still has not come to a consensus on what are entailed specifically within the rubric of human rights. Even in terms of those specifics that have come to be generally held to be human rights, such as in designated war crimes and crimes against humanity by international agreement, the lack of de jure and de facto enforcement render such agreement nugatory in practice. As a result, calls for human rights are in effect calls for warring to stop. The enforcement that goes along with laws legislated by governments render any consensus on what constitutes human rights more substantive in practice. This is undercut, however, in empire-scale polities of polities, such as the E.U. and U.S., to the extent that human rights are carved out at the federal level to applied across differing cultures. Such ideological diversity between the American member-states has triggered drastically-different notions of just what are included as human rights to be played out in Congress. The debate over the government-financed health-insurance program for the poor in 2025 illustrates such a lack of consensus, which in turn suggests that the member-states should play more of a role in how or even whether to provide free insurance to the poor. Sometimes, one size doesn’t fit all. In short, the matter of federalism is very relevant up front, before matters of the proper role of government itself and of human rights are decided. In other words, the qualitative and quantitative differences between a union of states and a state are very relevant up front, lest states eventually peel off in utter frustration with a one-size-fits-all approach to policy-making to fit an empire composed of member-states.

As the U.S. Senate considered changes to the Medicaid program, Republican Sen. Josh Hawley acknowledged “that the main cost-saving provision in the bill—new work requirements on able-bodied adults who receive health care through the Medicaid program—would cause millions of people to lose their coverage. All told, estimates are 10.9 million fewer people would have health coverage under the bill’s proposed changes to Medicaid and the Affordable Care Act.”[1] Millions would be relegated to not getting medical attention or going to the emergency rooms of hospitals mandated to treat the uninsured, who would be strapped with unaffordable medical bills and thus bad credit-reports.

That a significant number of poor people in the United States would lose health-insurance was known and anticipated by the legislators. Speaking on the bill as it was taking shape in the U.S. Senate, Sen. Hawley said, “I know that will reduce the number of people on Medicaid.”[2] What, then, justifies the loss of health coverage? The senator answered this question by adding, “But I’m for that because I want people who are able bodied but not working to work.”[3] In other words, being able to have access to medical services should be conditional on having a job. The conditionality itself means that health care is not a human right because such rights are inherently unconditional.

Some or even many of Sen. Hawley’s constituents doubtless favored excluding medical services from being included among other human rights, perhaps in the belief that people who are able to work but refuse to work do not deserve to be kept alive if they fall sick, which in turn can be based on a belief that only the strong of any species should survive. Sen. Hawley represents Missouri, when is generally conservative. Sen. Warren of Massachusetts, on the other hand, would find that the conditionality and thus the exclusion of medical care from human rights much less popular in her member-state. Such a wide divide by state on this question would be unlikely in the E.U., even between the states of Hungary or Poland and Sweden or the Netherlands. The European notion of subsidiarity would thus be more applicable in this case to the U.S. than the E.U., given the greater diversity of ideology on the question in the United States. In other words, federalizing universal healthcare would come with less ideological tensions between E.U. citizens in different states than between U.S. citizens in different states; there was more consensus within the empire-scale European Union than within the American bloc.

The imposition of work requirements as a condition for the poor having access to medical treatments may be just fine with most people in Texas and Utah, for example, and yet be very objectionable to most people in Vermont and Connecticut. To conflate these various member-states as being ideologically and culturally homogenous is suboptimal and comes with political costs as opposition pressure is likely to result where the federal policy is unpopular; more optimal politically would be transferring the program of Medicaid to the member-states so their respective peoples could tailor the program—or even cancel it—according to their respective political ideologies. The notion that policy in another state should reflect one’s own views is anathema to federalism, and even to there being empire-scale unions of states. Toleration within a union is thus necessary lest one size be applied throughout and eventually republics break off in frustration, as Britain did from the European Union due primarily to anti-federalist sentiment.

In short, finding a large gap from consensus in Congress (or in the E.U.’s legislature) can be an indication that a policy question would be better resolved by the member-states than at the empire-level, given the heterogeneity between states on the question. Congress and the federal president applying work requirements on what most people in some states regard as an unconditional human right may be intolerable emotionally to those people, but so too, Obamacare had been viewed as an intolerable overreach of government to most people in some other states. Behind this chasm, ideological and thus as emotional as cognitive, lies a basic disagreement on just what should constitute human rights, and thus be an obligation of government. In other words, besides different political philosophies of the proper role of government, different moral principles are involved on the question of whether government should pay for healthcare for the poor. In a federal system, the matter of where such a divisive policy question should be decided should be decided before both the proper-role-of-government and the human-rights questions are decided, or else the federal system itself would be compromised and thus put at risk.

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1. Leah Askarinam, “The GOP’s Big Bill Would Bring Changes to Medicaid for Millions,” Apnews.com, June 15, 2025.
2. Ibid.
3. Ibid.

On the U.S. President as Chief Executive

As the chief executive of the U.S. Government, the president is tasked with executing the law—the passage thereof involving both the Congress and the presidency. It follows that a president cannot legally stand in the way of appropriated federal funding of projects and programs once such allocations have become law. For otherwise, a president could simply ignore appropriations passed by the Congress and signed into law by a previous president. The powers of the unitary executive would reach dictatorial proportions. Within roughly one week of being sworn into office for his second term in 2025, U.S. President Trump decided to pause all foreign aid, and “grants, loans and other federal assistance . . . to ensure spending is consistent with Trump’s priorities.”[1] Those priorities, I submit, would properly have influence on bills in Congress that were not yet laws, as per the legislative veto-power of the presidency and the ability of a president to put pressure on members of Congress by speaking persuasively directly to the American people. The value of leadership available to a presiding role should not be ignored. In terms of symbolic leadership befitting a presider in chief, refusing to enforce laws sends the wrong signal. To be sure, delaying rather than cancelling funding that has already been appropriated as law may fall within reasonable discretion that goes with the executing, and thus executive, function. However, the size, or magnitude, of the federal spending being held up but not cancelled may test the test of reasonableness. This may also be so if the political dimension—that is, the salience of political judgment in the issues involved—is significant.

President Trump “issued an executive order for a 90-day pause in foreign development assistance pending a review of efficiencies and consistency with his foreign policy.”[2] At the time, the United States was the world’s largest international-aid donor; in 2023, $68 billion was spent for this purpose. That number includes “everything from development assistance to military aid.”[3] Interestingly, military funding for Israel was exempted from the delay even though the ICC had issued a warrant for Israel’s sitting prime minister for decimating the civilian population of Gaza, the International Court of Justice (the UN’s court) had ruled the occupation and military attacks by Israel to violate international law, and Amnesty International had found sufficient, credible evidence of genocide perpetuated by the Israeli government. If this exception to the U.S. president’s 90-day delay—and Trump unfroze Biden’s hold on the delivery of the 2000lb bombs to Israel because, Trump said, that country had bought them—reflects Trump’s foreign-policy priorities, then the matter of selectively delaying foreign aid cannot be reckoned as merely technical in nature; rather, the salience of the political dimension means that even a 90-day delay could be unreasonable without Congressional consent in the enacting of resolutions or even law.

With regard to pausing grants, loans and other federal assistance—excepting Medicare and Social Security benefits—again the sheer scale of the funding involved and the salience of politics in the decision to delay test the limits to what is and is not within the reasonable purview of executive discretion in executing federal law that includes federal spending. “Diane Yentel of the National Council of Nonprofits said the order could stop cancer research, food assistance and suicide hotlines.”[4] If so, even a significant delay could be unreasonable as well as contrary to the law concerning SNAP (federal food-assistance to 42.1 million individuals as of the fiscal year 2023) because—to put it bluntly—an awful lot of people need to eat on a daily rather than a monthly basis. Again, the president’s political-ideological judgment here is arguably debatable (hence suggestive of a Congressional legislative role even in the delay): delaying food assistance to Americans while exempting military aid to Israel from delay. Both, and especially juxtaposed, are contentious politically (i.e., ideologically). Furthermore, the memo delaying domestic financial assistance, “signed by acting OMB chief Matthew Vaeth, calls on government agencies to temporarily pause their financial assistance [programs], so they can review spending that could be impacted by the various orders Trump has signed” relating to diversity programs, “woke gender ideology, and the green new deal.”[5] It is difficult to square such overtly political reasons with a technocratic delay in the execution of laws. Of course, this is a judgment call, for the length of the delay is also a relevant factor. Aside from the financial assistance to Americans bearing on sustenance, a few month’s delay may be reasonable, but both the scale of the foreign and domestic funding and especially the political rationales for the delay arguably make the delay a significant political matter rather than merely an executive function in implementing law.

My assessment should not be assumed to be in line with my own political ideology, for I oppose affirmative action programs as being contrary to merit and woke “thought-police” as being repugnant to free-speech liberty; I am not obliged to “give my personal pronouns” (in fact, “one” is the neuter third-person singular pronoun in English). I assume, moreover, that we are all human, all too human in fact, and thus that none of us have a monopoly on truth to be imposed on others. My point here is that the use of reason to dissect even a controversial issue, such as presidential power in the U.S., should not cower to the bullying force of the mind’s own ideology. Incidentally, this point is vital in distinguishing between scholarship and opinion-pieces.

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1. James Fitzgerald and Ana Faguy, “White House Pauses Federal Grants and Loans,” BBC.com, January 28, 2025.
2. Ibid.
3. Ibid.
4. Ibid.
5. Ibid.

Certifying a U.S. Presidential Election: A Constitutional Conflict of Interest

That it should go without saying that a constitution providing a government with its basic framework and procedures should not contain any conflicts of interest makes it all the more astonishing when an actual constitution is found to contain a obvious yet undetected conflict of interest that could be exploited by an institutional or officeholder and yet is easy to obviate, or fix. The implication in such a case is that a society can be too comfortable with institutional conflicts of interest without realizing that if such a conflict is exploitable, it is likely that it eventually will be even if not right away. Because U.S. President Don Trump’s pressure on his vice president, Mike Pence, on January 6, 2021 to refuse to certify the votes of the electors in some of the states did not result in any serious proposals to have another office than the vice presidency preside, a societal tolerance for even known conflicts of interests in general and in a constitution more particularly can be inferred. I submit that such a tacit willingness to continue with the status quo can eventually put even a republic itself at risk.

Speaking on January 6, 2024, U.S. Vice President Kamala Harris referred to her constitutional duty of presiding in a joint-session of Congress tasked with certifying the election that she had lost as something she took very seriously. The American people should not have to worry about whether a vice president might exploit the presiding role by resisting or thwarting a peaceful transfer of power. “Today was obviously a very important day,” she said, “and it was about what should be the norm and what the American people should be able to take for granted, which is that one of the most important pillars of our democracy is that there will be a peaceful transfer of power.”[1] Such a transfer lies at the core of representative democracy, so it is important that any risk of any impediment, whether an opportunistic person outside of a constitution or something lying in a constitution itself, be minimized. It is not, in other words, a minor matter.

Simply tasking the loser of an election with presiding over the counting of votes and the announcement of the winner should give anyone pause. At the very least, no one should be duty-bound to perform such a function—which can be thought of as “rubbing one’s face” in the affair, which can feel humiliating to the person.

Furthermore, politically, whether a vice president is a candidate for president as Harris was or is pressured to do the partisan or personal bidding of a president as Pence had been, having a partisan office preside is itself problematic not only for the presidency itself in terms sheer credibility, but also for a vice president in terms of the election process itself. Simply put, the vice president who is running for president or for another term as vice president is an active player in the contest and thus should not preside over the tabulation and certification of the results. As simple as this is to grasp, it must be difficult for enough Americans that the problem has been allowed to persist.

This is especially damning because the conflict of interest is easy to remove. The chief justice, or any justice, of the U.S. Supreme Court would be a natural fit for the presiding role as the judiciary is not (supposed to be) partisan. Put another way, a sitting president pressuring the vice president to declare some state slates of electors invalid is more likely than pressuring the chief justice to do that same. Institutionally, given the separation of powers in the U.S. Government, reaching out to the chief justice would be much more difficult than trying to pressure a vice president of one’s own administration. Having the chief justice, who swears in presidents, preside over the Congressional counting of the Electoral College votes for president as both the sitting vice president and Speaker of the House look on makes so much sense that it is sad state of affairs when the status quo is almost mindlessly retained even four years after the conflict of interest could have been exploited, with a riotous mob of partisans literally breaching the Capitol to convey additional pressure.

Putting the loser of an election in the position of having to publicly announce the victor is the smoke that points to an underlying constitutional conflict of interest; a mob pressuring a loser on a presidential ticket to abuse the presiding role of the vice president is more like fire than smoke. That the ensuing public discourse did not contain a proposal of a constitutional amendment assigning the task to the chief justice of the U.S. Supreme Court reflects very badly not only on the elected office-holders (and the media), but also on the American people, as it is government ultimately by the people. Perhaps a people gets the government, and constitution, that they deserve, for institutional conflicts of interest should be obviated whether in government, business, or in non-profit institutions.

Neither institutional relations nor processes should contain conflicts of interest that can be exploited because human nature is itself rather inclined to exploit them because of the instinctual urges that manifest as self-, office-, and institutional-interest even at the expense of the interest of the whole. Even though governments and economic systems tend to be based on such interests, the latter don’t have to be encouraged by the ongoing existence of institutional conflicts of interest. Continuing with the status quo can itself be thought of as a choice—one that reflects a certain underlying set of beliefs and assumptions that are valued, and even the extent of basic awareness.  Having seen not only smoke, but even fire, a people can indeed be faulted for having insufficient awareness, and this verdict is perhaps even more damning than that which concerns the naivete concerning human nature being able to withstand conflicts of interest without exploiting them in the long run. The sting of these verdicts hurts all the more when an institutional conflict of interest can be obviated relatively easily with a solution that is, or should be, obvious. Because power is that which is channeled in a political constitution, risking the exploitation of a conflict of interest that is in a constitution is not a smart choice if a viable, ongoing republic is desired.

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1. Aditi Sangal, “Congress Certifies Trump’s 2024 Election Win,” CNN.com, January 6, 2025.

The U.S. Supreme Court Reining in Regulatory Agencies: Implications for the Imperial Presidency

In Loper Bright Enterprises v. Raimondo handed down by the U.S. Supreme Court on June 28, 2024, a majority of the justices overruled Chevron v. Natural Resources Defense Council, which had been the precedent giving regulatory agencies considerable discretion in coming up with specific regulations, given the penchant of the Congress to write vague laws. In the overturning case, a group of fishermen had objected to having to pay for government observers to board the fishing boats to monitor the fishing. On the merits, it does seem unfair for regulatory agencies to charge the regulated to be regulated. In overturning Chevron, however, Loper has much broader implications, chief among them being in terms of separation of powers—specifically in reining in the expanding power of the executive branch, here at the expense of the judiciary.   

Chevron had “required courts to give deference to federal agencies when creating regulations based on an ambiguous law.”[1] Loper could stimulate thought on whether Congress must necessarily promulgate law using vague language. Certainly Congress is capable of being quite specific when writing in loop-holes, or “carve outs,” for particular companies or industries in exchange for political campaign contributions. Moreover, from hearings, Congressional committee staff are surely capable of narrowing the discretionary area in which regulators can exercise considerable power that is essentially that of law-making. So one effect of Loper could be a shift of power from the executive to the legislative branch.

The decision also stood to “shift the balance of power between the executive and judicial branches.”[2] Although CNN goes on to claim that the decision “hands an important victory to conservatives who have sought for years to rein in the regulatory authority of the ‘administrative state’,” strengthening the role of the judiciary to look at administrative rulings is not in itself pro-business, as a judge could come down on an agency as being too lenient to an industry. The notion of regulatory capture, wherein whether from relying on data from a regulated industry or in exchange for lucrative future jobs in the industry for regulators, especially given government salary levels, means that giving courts more of a role in being able to evaluate and overrule agency rule-making and decisions could be a needed check against compromised regulators. At the same time, it is true that because the Supreme Court is the head of the judicial branch of the federal government, a decision that shifts power from one or two of the other branches to the judiciary puts the Court in an institutional conflict of interest (and the justices in personal conflicts of interest as their power would likely increase). Perhaps Congress should have been the branch to decide on the role of the judiciary with respect to the agencies in the executive branch.

Shifting power from the executive branch to the two other branches, especially the judiciary in this case, can also be viewed as a mild correction to the steadily increasing power of the U.S. presidency. In The Imperial Presidency, Arthur Schlesinger traces the increasing power that has come at the expense of the other two branches. The claim of such a correction may be problematic, as reining in regulatory agencies is not the same as reining in a president’s power, such as in exercising the bully pulpit in being able to speak directly to the American people directly as well as through a president’s surrogates. Also, a president as commander in chief and in promulgating foreign policy is unaffected.

It can even be argued that as presidents have typically been oriented to proposing broad policies for Congress to enact through law, that a president’s attention has been minimal in running the administrative agencies—essentially in supervising the cabinet secretaries in their administrative roles at their respective agencies. Such overseeing geared to specific regulations is, I submit, a function that presidents should attend to even more than proposing policies for Congress to enact. In other words, presidents should resist the sensationalistic allure of forming and publicly and privately “selling” policies or ideas for new programs to the extent that the time and effort of a president is monopolized thereby such that functioning as head of the executive branch, which implements law, is slighted. It could even be argued that the latter function should be primary. Were it in fact primary, then Loper would indeed be capable of redressing the historical trend of the imperial presidency to some extent because taking an active role at the regulatory stage would be a significant part of the actual power exercised by presidents. As of 2024 at least, Loper did not really touch the problem of the imperial presidency increasingly compromising the balance of power between the three branches of the U.S.’s federal government.

If democracy is ever at risk in the U.S., it would likely succumb to the hubris of an imperial president rather than to lawmakers in Congress writing laws with more specificity or judges overruling regulatory rulings. According to General Haig, President Nixon considered sending military forces to the Capitol to stave off impeachment during Watergate. Decades later, in December, 2023, protestors of the Congressional counting of the presidential votes of the states’ electoral colleges headed over to the Capitol from President Trump’s rally at the White House and successfully delayed the counting. On the very same day as its Loper decision, the U.S. Supreme Court handed down a ruling on another case—a decision that “limited the power of prosecutors to pursue obstruction charges” against the January 6^th protesters at the Capitol.[3] To the extent that that ruling could enhance the imperial presidency itself, June 28, 2024 at the Court may actually have been a net-gain for the presidency.

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1. John Fritze, “Supreme Court Overturns 1984 Chevron Precedent, Curbing Power of Federal Government,” CNN.com, June 28, 2024 (accessed June 29, 2024).
2. Ibid.
3. John Fritze et al, “Takeaways from the Supreme Court’s Decision on January 6 Charges and What It Means for Donald Trump,” CNN.com, June 28, 2024 (accessed June 29, 2024).

On the Role of the U.S. Supreme Court in Safeguarding the Peaceful Transfer of Power

In the E.U., the state governments and federal institutions can ask the European Court of Justice (the ECJ) for an opinion on a legal matter. This is rare in the U.S., though waiting for a dispute to winds its way formally through district and appellate courts may be unduly bureaucratic, not to mention lengthy. On December 11, 2023, Special Counsel Jack Smith asked the U.S. Supreme Court the ECJ’s counterpart, to decide whether the former U.S. president Donald Trump had any immunity from criminal prosecution of his involvement in the riot at the U.S. Capitol that interrupted the formal counting by a joint session of Congress of the Electoral College presidential ballots. The trial was set to begin the following March, and the question of the former president’s immunity had to be decided before the trial could begin. Hence the “extraordinary request,” which I contend should not be extraordinary given the time frame and the important role of the highest court in safeguarding American democracy from domestic threats.

The prosecutor asked the U.S. Supreme court to review district Judge Tanya Chutkan’s ruling that Donald Trump is not immune from “the election subversion prosecution case.”[1] Trump’s lawyers had argued that Trump’s actions in speaking outside the White House on January 6, 2020 were part of his official duties because he was protecting the American democratic system from alleged vote-fixing by Democrats. Chutkan rejected that argument, pointing out that the speech was oriented to Trump’s re-election and thus was not part of a president’s official duties—efforts to secure another term extend beyond the performance of the office within the current term of office.  Essentially, applying to continue in an office is not a function of the office. Chutkan classified Trump’s speech as falling under the rubric of campaign speeches even though the election had passed because he was using the speech to try be re-elected by Congress (by disputing the authenticity of several state electoral ballots).

To be sure, it was not as if Trump went with the option that he was considering of surrounding the Capitol with tanks—something President Nixon had also considered doing in 1974 during the Watergate scandal, which by the way ended up prompting him to resign. Instead, Trump was trying to throw the election to the Congress by pressuring it to vote on the validity of several of the Electoral College ballots that had been submitted by the state governments to be counted. The U.S. Constitution does give Congress a role in presidential elections, both in certifying the ballots and electing a president outright if no candidate gets a majority of the Electoral College votes. Had there been evidence of significant election fraud that would justify Congressional votes on the Electoral College ballots from several key states such as Arizona, Pennsylvania, and Michigan, then Congress could have intervened while staying within the constitutional framework. It was Trump’s way of applying pressure, by instigating a mob to disrupt the official counting, that resulted in the federal indictments that run just short of insurrection. By the way, I asked a judge on the D.C. district court why he thought Trump had not been indicted on insurrection. “It’s too messy,” he replied. “Isn’t that charge and a conviction based expressly on it necessary for someone to be barred from running for office in the U.S.?” I asked. “No,” the judge replied. “A judge in Colorado is looking at that now,” he added, presumably without there being a trial. It’s a pity that no one asked the U.S. Supreme Court to rule on what a Colorado judge was doing in lieu of a trial on the facts decided by a jury.

Perhaps even more than the presumption of innocence unless convicted of a crime, the rule of law applied even to U.S. presidents is vital to American democracy. Writing to the U.S. Supreme Court, the prosecutors with the special counsel insisted that “nothing could be more vital to our democracy” than holding a former U.S. president accountable for breaking a law.[2] Indeed, a “cornerstone of our constitutional order is that no person is above the law. The force of that principle is at its zenith where, as here, a grand jury has accused a former president of committing federal crimes to subvert the peaceful transfer of power to his lawfully elected successor.”[3] Many democracies have turned into military dictatorships precisely because the peaceful transfer of power was not respected. With a past of rule by kings, both domestic and colonial, many African countries have had trouble with the peaceful transfer of power. As a result, the foreign direct investment of multinational corporations has not been as large as the continent would need to develop economically. Even though it was hard to imagine a military coup in the U.S. in 2023, the precedent of a president getting away with having violated the U.S. Constitution could begin a slippery slope downward. More than sufficient grounds existed in 2023 for the U.S. Supreme Court to fast-track the question of Trump’s immunity.

The question of whether the trial could go forward was subject to time constraints; were the trial date of March, 2024 delayed pending the question of Trump’s immunity from prosecution going through the lengthy appellate process, the question of Trump’s guilt could still be unanswered by the next presidential election, in early November, 2024. Even though several presidential candidates were insisting that they would support a convicted felon for president, presumably voters would want to know whether Trump had committed a crime in attempting to thwart the results of the 2020 presidential election before casting their respective ballots.

Hence, the prosecutors wrote to the U.S. Supreme Court, “Respondent’s appeal of the ruling rejecting his immunity and related claims, however, suspends the trial of the charges against him, scheduled to begin on March 4, 2024. . . . It is of imperative public importance that respondent’s claims of immunity be resolved by this Court and that respondent’s trial proceed as promptly as possible if his claim of immunity is rejected.”[4] The public importance has to do with the electorate having as much information as possible concerning the charges against the presidential candidate before going to the polls that upcoming November.

The fast-tracking would not be without precedent. In US v. Nixon (1974), the U.S. Supreme Court fast-tracked the question of Nixon’s claim of presidential privilege in being immune from a Congressional subpoena for the Oval Office tapes. “In that case, the high court moved quickly to resolve the matter so that one f the Watergate-era cases could proceed swiftly.”[5] It was not long after the ruling that the White House handed over the tapes to a congressional committee, and Nixon’s political fate was doomed from that point. Indeed, the difference between Nixon’s public persona and what he had been saying behind closed doors stunned many Americans who had no idea that even a “law and order” president could have such a squalid criminal mind. The public interest in furnishing the American electorate in 2024 with as much crucial information as possible on one of the presidential candidates can thus be appreciated. It should not be “extraordinary” for the U.S. Supreme Court to see to it that Trump’s federal trial could take place in time for the 2024 presidential election. Winding down the clock, to use a sports analogy, should not be a tactic that any defendant in a criminal trial should be able to use effectively, especially if accountability protecting the peaceful transfer of power is at issue.

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1. Hannah Rabinowitz and Devan Cole, “Special Counsel goes Directly to Supreme Court to Resolve Whether Trump Has Immunity from Prosecution,” CNN.com, December 11, 2023.
2. Ibid.
3. Ibid.
4. Ibid.
5. Ibid.

Is the U.S. Congress Too Beholden to the Financial Industry?

That financial deregulation had any traction at all following the financial crisis of 2008 in the U.S. is stunning, for the implication is that Wall Street money has tremendous influence in the U.S. Governent even after Wall Street banks have screwed up (even in triggering a financial crisis!). 

According to Gary Gensler, head of the Commodity Futures Trading Commission in 2012, Congress stood with the big banks in the struggle to shield Americans from the risks and excesses of Wall Street even after the financial crisis of 2008. He pointed in particular to a proposal from the U.S. House’s Appropriations Committee to cut his agency’s funding by 12 percent.[1] The CFTC had been given expanded powers by the Dodd-Frank Act in 2010. Doubtless the proposed budget-cut had something to do with that. It is astonishing that such a proposal would come in the wake of a financial crisis caused in large part by Wall Street bankers taking too many risks. That the agency was then tasked with regulating the problematic $700 trillion market on derivatives—a task that dwarfed the agency’s regulatory power over futures—suggests that the decision to cut the agency's budget after the financial crisis was especially agrevious, being based, I submit, in Wall Street's denial over its harmful role in triggering the financial crisis in which subprime-mortgage-based bond derivatives collapsed in value even as banks including Goldman Sachs were trying to unload the "crap" as good values. 

CFTC Chairman Gary Gensler staring down the big banks

That an industry with a vested interest in rolling back financial regulations could have any influence at all over elected representatives reflects the general ignorance or naivity concerning conflicts of interest. In a COI, a private interest predominates even if the good of the whole is being estolled. A bank-rolled member of Congress can used the espoused public-interest rationale advanced by the banking industry as cover to hide the cosy relationship. For example, a bank's public affairs department could put out the word that increased financial regulation, even after a financial crisis, is really socialism. The bank-rolled members of Congress could then use the socialism scare-tactic on their respective constituents while quietly accepting the large campaign-contributions from the banks. Meanwhile, the American people feel secure that such representatives are protecting them from a threat rather than enabling one.

1. Alexader Eichler, “CFTC Head Gary Gensler: Congress ‘Sides With Wall Street’,” The Huffington Post, June 8, 2012. 

For more on the conflicts of interest in the financial sector (and others), see: Skip Worden, Institutional Conflicts of Interest, available at Amazon.

.U.S. Constitutional Checks and Balances Under Threat: Congressional Oversight

Ambition checked by ambition. The assumption that political ambition can be counted on is the key to the “checks and balances” feature of the U.S. Constitution. Each of the three “arms,” or “branches,” of the federal government is checked by at least one other. This is not to say that the other arm takes over the function or even has greater competence; rather, the other arm is oriented here to providing accountability on abuses of power and investigating cases of gross negligence or incompetence. An offended branch should thus not be permitted to claim that oversight is not appropriate because it interferes with the function the branch. Treating oversight by another arm of the federal government as inherently partisan or illegitimate eviscerates the vital “check and balance” aspect of the U.S. Constitution. 

In disputes on oversight between two branches, the benefit of the doubt ought to go with the overseeing branch because it is only natural for human beings to resist being held accountable and so accountability itself needs a boost. I have in mind the case the director of national intelligence, Joe Maguire, blocking the inspector general from sharing an intelligence-whistle-blower’s complaint with Congress in September, 2019.

The contents of the complaint included a phone call between President Trump and another national leader in which Trump made a commitment. Ukraine was relevant. Rep. Adam Schiff, chair of the House Intelligence Committee, had been concerned that Trump’s delay in assistance to Ukraine had been politically motivated. The Democrats had planned to investigate whether Trump’s withholding of military assistance was not to get the Ukrainian government to reduce corruption, but, instead “to coerce the Ukrainian government into pursuing politically motivated investigations” into Joseph Biden, President Obama’s former VP and a contender to run against Trump in 2020 for president.[1]

Providing the U.S. House Intelligence committee with the contents of whistleblower complaint was “generally required by law.”[2] The executive branch insisted that the requirement must involve the funding, administration or operations of an intelligence agency, whereas Democrats maintained that the law did indeed apply. Regardless, Congressional oversight of the executive branch goes beyond particular statutes mandating the providing of whistle-blower complaint information to Congress. Nevertheless, the inspector general, Michael Atkinson, wrote to the committee that the complaint fell within the jurisdiction of the director of national intelligence and “relates to one of the most significant and important of the D.N.I.’s responsibilities to the American people.”[3] Atkinson was conflating a jurisdiction within the executive branch with oversight by another branch of the government. Put another way, oversight does not in itself rid the director of his jurisdiction; rather, oversight investigates the contents within that jurisdiction. Furthermore, that the director of national intelligence has an important job does not mean that it is immune Congressional oversight of the executive arm. I submit that the importance of the job is an argument for a greater need for oversight—not less.

It is as if Atkinson believed that the intelligence agencies were immune from such oversight, and thus from the vital checks-and-balance feature of the U.S. Constitution. For oversight to be viable, the branch of the government being overseen cannot decide whether oversight is allowable. Rather, the branch doing the overseeing can make that assessment and the other branch can contest it in the courts. The judiciary arm would serve as a check against the overseeing arm. In other words, the prerogative in the executive branch of somehow being beyond Congressional oversight stands in the way of the functioning of the checks-and-balances constitutional design. Ambition should not be allowed to bar contending ambition. What employee of a company would claim, “I can’t do my job if there is any supervision of my work!”? What department would claim that it is exempt from oversight from the company’s management because of the nature of the work being performed? Rather than cohere, such a company would eventually break apart.

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1. Julian E. Barnes et al, “Whistle-Blower Complaint Sets Off a Battle Involving Trump,” The New York Times, September 19, 2019.

2. Ibid.

3. Ibid.

The FAA Deferred to Boeing on the 737 MAX Jet

After a misfiring-prone automatic stall-prevention device on the 737 MAX jet had caused two accidents in which 346 people died, an internal review at the U.S. Federal Aviation Administration, a regulatory agency, found that the regulators had relied too much on Boeing employees to conduct the safety inspections of the planes. Incredibly, Congress expanded the industry-reliance practice of the agency in 2018. Both the FAA and Congress were admittedly motivated by the added efficiency that such “sub-contracting” could bring. However, to focus on the economic benefit while ignoring the inherent (and obvious) conflict of interest in “sub-contracting” to the very companies that are regulated by the FAA is itself a red flag. A subservient or over-reliant regulatory agency cannot be a check on a company’s claims of not having sacrificed safety or even safety checks in order to focus more on profitability.  Of course, the political influence of a large company such as Boeing may have played a role in the FAA’s “back-seat” approach, but in this case the government’s own interest in stretching the coverage of its human resources may have been dominant. That such an interest could involve minimizing or ignoring outright such a blatant conflict of interest may point to a wider culture in which institutional conflicts of interest are presumed to be innocuous or even benign rather than too toxic to permit even if they have not been actively exploited.  

During the FAA certification process for the 737 MAX, Boeing didn’t flag the automated stall-prevention feature as a system whose malfunction or failure could cause a catastrophic event.”[1] The FAA’s report does not point to any fabrication on the part of the company. The problem is that “FAA engineers and midlevel managers deferred to Boeing’s early safety classification.”[2] No check on the company’s determination could be in such deference. It is astounding that managers at a regulatory agency could have neglected or ignored this basic point, which gets at the raison d’etre of any regulatory agency. C’est vraiment incroyable.

In fact, the company’s initial safety classification allowed “company experts to conduct subsequent analyses of potential hazards with limited agency oversight.”[3] The operative assumption in this practice seems to be that experts cannot be initially wrong, or that they could eventually catch their own errors, and that such experts are not subject to pressure from managers to get the planes in the air and generating revenue that can at least cover payments on the planes themselves.

Even worse, the FAA classified certain Boeing employees as “designated agency representatives.”[4] Employees of a regulated company cannot represent the regulatory agency, for such a designation is itself an institutional conflict of interest. It is, in effect, to designate one wolf as a police-wolf around a hen house! How can this not be obvious? I submit that only in a permissive culture can such blind-spots thrive. The FAA’s practice of designating some employees of regulated companies as being able “to act for the agency” was set up by the FAA and “endorsed and expanded” by Congress with “the aim of freeing up government resources to focus on what are deemed the most important and complex safety matters.”[5] Was not something that had killed hundreds of people an important safety matter? FAA managers might retort, “But we didn’t know this except in hindsight.” Exactly. This is precisely what minimizing or ignoring a huge conflict of interest can do.

See Institutional Conflicts of Interest, available at Amazon.

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[1] Andy Paztor, Andrew Tangel, and Alison Sider, “FAA Left 737 MAX Review to Boeing,” The Wall Street Journal, May 15, 2019.

[2] Ibid.

[3] Ibid., italics added.

[4] Ibid.

[5] Ibid.

The U.S. Department of Justice: Big Banks May Legitimately Be above the Law

The Financial Times reported in 2013 that lawmakers in the U.S. Congress were claiming that the Department of Justice had been “too soft on big banks and their executives by failing to bring criminal cases related to the financial crisis.”[1] In the five years following the financial crisis of 2008, no Wall Street executive was criminally charged with fraud. The U.S. Justice Department chose not to go after the bankers for their lack of due diligence regarding their purchases of sub-prime mortgages from mortgage originators. This in spite of the fact that at Citibank, for example, a manager in the bank’s due diligence department estimated that 50% to 80% of the approved mortgages did not meet the bank’s credit policy, and yet Robert Rubin, the CEO at the time, did not act on the manager’s email. This suggests that a criminal complaint could have been lodged against the bank itself, but then what would be the implications for the financial system should Citibank had gone under after being found criminally guilty? Does it even hold that a guilty verdict would mean bankruptcy? Simply stated, a company can be so large that its failure due to a guilty verdict could harm innocent third parties, including stockholders, employees, suppliers, and even the general public if the bankruptcy triggers a systemic collapse of the financial system. Such concerns are called collateral consequences. 

After the collapse of Lehman Brothers in September 2008, systemic risk became a particularly salient concern for criminal prosecutors at the U.S. Department of Justice. Swayed by a desire to minimize the potential disproportionate harm to innocent parties from a verdict-triggered major bankruptcy, the prosecutors believed they were obligated to consider collateral consequences even if that meant that the really big banks would be immune from criminal prosecution. To such banks, this could be used as a competitive advantage because keeping within the constraints of law in making money would not apply. I contend, therefore, that the U.S. Government should not have taken collateral consequences into consideration. 

 Mythili Raman testifying before Congress. mainjustice.com

Mythili Raman, Acting Assistant Attorney General in the Criminal Division, argued that collateral factors as a group should be considered. Testifying before Congress on May 22, 2013, she cited “the disproportionate impact on innocent third parties, including the public at large,” as being entirely appropriate for prosecutors to consider.[2] Her reference to the general public means that systemic risk was among the legitimate factors in her view, and yet she also said, “the size of a corporation will never be a factor in and of itself and that no institution is too big to prosecute.”[3] Crucially, her position was that one particular consequence should never be the only factor. “A single collateral consequence cannot be the reason.” However, she added that “collateral consequences are issues that we must and do consider.”[4] Because banks too big to fail tend to have more than one significant collateral consequence (e.g., many stockholders and employees, as well as systemic risk), such banks may be too big to jail.

In testimony before Congress in March 2013, U.S. Attorney General Eric Holder had admitted that the lawyers in his department were wary of the “negative impact” on the economy from prosecuting a large financial institution. “(I)t is a function of the fact that some of these institutions have become too large.” Differing from Raman, he thought the size of large banks “has an inhibiting influence – impact on our ability to bring resolutions that I think would be more appropriate. . . . (a)nd I think that is something that we – you all – need to consider.”[5] I want to unpack this rather robust admission, for it is significant.

Firstly, the Attorney General was hinting at what Sen. Kaufman had observed while in office. Namely, it should not have been the F.B.I.’s concern whether the Wall Street banks continued as viable concerns. In other words, systemic risk or even collateral consequences more generally had no business being considered by prosecutors whose job it was to enforce the law. Including systemic risk among the collateral consequences thus further compromised the rule of law. As Sen. Charles Grassley put it, “It was stunning to hear the nation’s top prosecutor acknowledge that, from the justice department’s perspective, the big banks are too big to jail. This is worrisome for the fair application of justice in our country.”[6]

Secondly, the Attorney General was suggesting that Congress should reduce the size of the biggest banks—those with over $1 trillion in assets. This would have removed the specter of banks being too big to jail. Also, by implication, Holder had concluded that the Dodd-Frank Act would not be sufficient to solve the "too big to fail" problem. That law was premised in part on the theoretically beautiful but practically insufficient assumption that imposing disproportionate capital reserve requirements on the biggest banks would not only be enough to keep them sound even in a financial crisis, but would also prompt the banks' boards to reduce the size of their banks. Besides of cost-advantages in being so large, and getting even larger as the five biggest banks have since done, the psychology of empire-building, which had gripped Lehman's Dick Fuld so, can easily dismiss the disproportionate costs of retaining or enlarging size. 

Regarding the implications for the U.S. Department of Justice should the biggest banks have taken the bait and voluntarily reduced their respective sizes, it is clear that if no systemic risk (i.e., of being too big to fail without taking the whole financial system down) were to exist, then third-party collateral damage would not be disproportionate so the banks (and bankers) could be prosecuted. Accordingly, the Huffington Post observed at the time that lawmakers “may be encouraged to apply even more public pressure on efforts to crack down on big banks.” [7] Lawmakers having received campaign contributions from those banks, however, would hardly do so. In fact, those members of Congress would even defend the large sizes of the biggest banks. 

Exceptions admittedly existed. Rep. Sherman, the chair of the full committee, noted while Raman was testifying that the fact that the Department of Justice considered collateral consequences rather than simply enforced the law was enough justification to break up the big banks. Putting aside the issue of size for the conduct of banking (e.g., whether a gigantic sized bank is necessary to make huge loans or would a syndicate of banks do as good of a job and spread the risk), having powerful people and organizations de facto above the law is something that just cannot be permitted in a republic. So on this basis alone, the rationale goes, society had an overwhelming interest in braking up the largest U.S. banks. 

Unfortunately, being too big to fail has carried (and still carries) with it tremendous political power—muscle that could have been used all too easily to resist legislative proposals (or even public debate) oriented to seriously downsizing the mammoth banks. This has the real problem since economic power became so concentrated in large corporations and banks: can a republic resist the power of its most powerful for the good even of the economy, and the public societal good more generally? Were the big banks pulling the strings that led to Raman’s assertion that collateral consequences “must and should” be considered in deciding whether to prosecute? Whether Raman realized it or not at the time, the implication that the rule of law applied impartially should be compromised by the magnitude of the predicted collateral consequences from a corporate conviction is, euphemistically speaking, troubling.

See “The Untouchables,” Frontline, January 22, 2013 and Essays on the Financial Crisis: Systemic Greed and Arrogant Stupidity, available at Amazon.

1. Shahien Nasiripour and Kara Schannell, “Holder Says Some Banks Are ‘Too Large’,” The Financial Times, March 7, 2013.
2 Congressional Hearing, “Who Is Too Big to Fail: Are Large Financial Institutions Immune from Federal Prosecution?” Financial Services Committee, Oversight and Investigations Sub-Committee, U.S. House of Representatives, May 22, 2013. See also the letter to sub-committee members; Shahien Nasiripour, “Too-Big-To-Jail Dogs Obama’s Justice Department As Government Documents Raise Questions,” The Huffington Post, May 22, 2013.
3. Ibid.
4. Ibid.
5. Nasiripour and Schannell,  “Holder Says Some Banks Are ‘Too Large’,”
6. Ibid.
7. Ibid.

Big Bankers and the U.S. Government: A Coalition Circumventing Accountability on Wall Street

It is interesting that the U.S. Department of Justice did not pursue the fraudulent bankers on Wall Street not only during the Bush presidency, but also the following presidency, that of Barak Obama.  Not coincidentally, Goldman Sachs was the single biggest campaign contributor to Obama’s 2008 candidacy for president. It would seem that Wall Street had both political parties in a net by the time of the financial crisis in September, 2008. A sector of the economy being able to control both major parties is bad for not only industrial policy (i.e., favoritism), but also democracy. In short, a government should have enough strength to constrain a business sector, rather than being subject to it. The latter condition implies continued vulnerability should greed again get ahead of itself on Wall Street. By nature, greed, if allowed to go on running on its own steam, accumulates more and more momentum. 

The New York Times reported in 2011, “legal experts point to numerous questionable activities where criminal probes might have borne fruit and possibly still could. Investigators, they argue, could look more deeply at the failure of executives to fully disclose the scope of the risks on their books during the mortgage mania, or the amounts of questionable loans they bundled into securities sold to investors that soured. Prosecutors also could pursue evidence that executives knowingly awarded bonuses to themselves and colleagues based on overly optimistic valuations of mortgage assets — in effect, creating illusory profits that were wiped out by subsequent losses on the same assets. And they might also investigate whether executives cashed in shares based on inside information, or misled regulators and their own boards about looming problems. Merrill Lynch, for example, understated its risky mortgage holdings by hundreds of billions of dollars. And public comments made by Angelo R. Mozilo, the chief executive of Countrywide Financial, praising his mortgage company’s practices were at odds with derisive statements  he made privately in e-mails as he sold shares; the stock subsequently fell sharply as the company’s losses became known. Executives at Lehman Brothers assured investors in the summer of 2008 that the company’s financial position was sound, even though they appeared to have counted as assets certain holdings pledged by Lehman to other companies, according to a person briefed on that case. At Bear Sterns, the first major Wall Street player to collapse, a private litigant says evidence shows that the firm’s executives may have pocketed revenues that should have gone to investors to offset losses when complex mortgage securities soured.”[1]  David Skeel, a law instructor at the University of Pennsylvania, remarked, “It’s consistent with what many people were worried about during the crisis, that different rules would be applied to different players. It goes to the whole perception that Wall Street was taken care of, and Main Street was not.”[2]

Elliot Spitzer, the Attorney General of New York, was preparing to go after some big bankers until he stopped when a lawyer at the U.S. Department of Justice (DOJ) told him to back off because the department would be moving against the bankers. However, it did no such thing; the DOJ would not in fact "move" against the bankers. So it is suspicious; the lie may have been fabricated in Washington, D.C. to protect the bankers. If so, elected representatives including the president who had received sizable campaign contributions from the bankers themselves or their banks would be prime suspects. To suggest that an elected official would not protect a major contributor is like asking water to go up hill.  The subterfuge used by the DOJ at the time was that if the department went after the bankers, the banks themselves, which were too big to fail without taking the financial sector and even the economy with them, would become too unstable.
Incredibly, not only did the bankers not get punished; the banks got bailouts, which the bankers could use to pay themselves bonuses! This included bonuses at Goldman Sachs for selling "crap" (i.e., the subprime-mortgage-based bonds) to even good clients and of course lying about how solid the bonds actually were. 

Bank regulators, who can be "captured" by regulatees not only due to reliance on information from them, but also political pressure from the regulatees' political protectors in Congress and the White House, may have played a role too. According to The New York Times, bank regulators referred 1,837 cases to the Justice Department in 1995. In 2007-2010, an average of only 72 a year was referred for criminal prosecution.  “The Office of Thrift Supervision was in a particularly good position to help guide possible prosecutions.” From the summer of 2007 to the end of 2008, O.T.S.-overseen banks with $355 billion in assets failed. The thrift supervisor, however, did not refer a single case to the Justice Department between 2000 and 2010. The Office of the Comptroller of the Currency, a unit of the Treasury Department, referred only three in that decade.[3]

The relationship between the head of Thrift Supervision and the CEO of Countrywide is particularly revealing.  In March 2007, Countrywide was regulated exclusively by the regulatory agency. That agency was overseen at the time by John M. Reich, a former banker and Senate staff member appointed in 2005 by President George W. Bush. Reich was on all for deregulation. Robert Gnaizda, a former general counsel at the Greenlining Institute, a nonprofit consumer organization in Oakland, Calif., said he had spoken often with Reich about Countrywide’s reckless lending. Gnaizda says that when he suggested to Reich how he could build a case against Mozilo, the CEO of Countrywide, Reich “was uninterested. He told me he was a good friend of Mozilo’s.”[4] Reich subsequently refuted that the two were friends. “I met with Mr. Mozilo only a few times," Reich insisted, "always in a business environment, and any insinuation of a personal friendship is simply false.”[5] Even a few business meetings can be sufficient and the same ideology can be sufficient, however, to bend the ear of a regulator. Besides, Reich had reason after the financial crisis to deny any friendship with a man largely discredited due to the mortgage-producing antics at Countrywide. Mozilo’s flush fingers may have stretched as far as the chairman of the Financial Crisis Inquiry Commission, Phil Angelides. The New York Times reported in 2011 that he had told two deputies that Mozilo and Countrywide were off limits, though Angelides subsequently denied having made the statement. Instead, he pointed instead to the Republican opposition to hearings on Countrywide in Congress.

I suspect that whether of the deregulation crowd or Democratic, both parties, being of part and parcel of the establishment, had by the financial crisis of 2008 become too close to the vested interests on Wall Street to effectively regulate its banks and bankers, and thus to be in a position to investigate cases of regulatory failure. In other words, when the necessary relationship between financiers and regulators breaks down, accountability does as well. Without the regulators and DOJ being able to constrain excessive greed by holding the people in the financial sector accountable, continued vulnerability to the financial system collapsing as it almost did in September, 2008 can be expected even if it is ignored.  

See Essays on the Financial Crisis: Systemic Greed and Arrogant Stupidity, available at Amazon.

1. Gretchen Morgenson and Louise Story, “In Financial Crisis, No Prosecutions of Top Figures,” The New York Times, April 14, 2011.

2. Ibid.

3. Ibid.

4. Ibid.

5. Ibid.