Wall Street Snuffed Out President Clinton's Goal of Homeownership for the Poor

It is one thing for the head of a government (or a government’s executive arm) to set a praiseworthy goal that is in the public interest, and quite another thing to rely on the financial sector to implement it. Finance has its own means tied to its own goals, with plenty of greed in the mix. Governmental officials may tend to minimize the potential damage from ego-laden greed to the goals of public policy. Such policy ideally strives for the good of the whole, whereas the goals of a private sector of a part. This could account, at least in part, for the financial crisis of 2008 and the continuing bear market in housing in much of the U.S.

According to The Wall Street Journal, housing prices had fallen for 57 consecutive months by May 2011.[1] Even though the recession had officially ended in June 2009, the real estate market still had yet to hit bottom.[2] Since the housing peak in 2006, home values nationally were down 29.5 percent, according to Zillow.com. Compared to the same time in 2010, prices were down 8.2 percent in the U.S. markets. In that year, house price depreciation had slowed or stabilized because of tax credits of up to $8000 that expired during that summer. Accordingly, negative equity became even more prevalent in the first quarter of 2011, when 28.4 percent of all single-family homes with mortgages were "underwater."[3] Monthly declines for February and March were "really staggering," according to Stan Humphries, Zillow's chef economist. He claimed that the declines reflected "the true underlying demand," which was "being completely overwhelmed by supply."[4] Fannie and Freddie sold more than 94,000 foreclosed houses in the quarter; this represents 23% more than in the previous quarter.[5] The increase in supply from the foreclosures was at relatively low prices, hence the impact on the market was particularly depressing.

A declining housing price translates into lost wealth for the homeowner. When home values decline, the values of mortgages often do not go down as well. Homeowners lose some of their equity, or the stake they have in their home. When equity becomes negative—that is to say, when the value of a mortgage exceeds the value of the property—homeowners become especially vulnerable to default and foreclosure. “Falling home prices can create a vicious cycle. When a property falls into foreclosure, it tends to depress the values of properties around it, making those homes more likely to experience a similar fate. [In 2010], nearly 2.9 million homes received a foreclosure filing, and more than 2.8 million homes got one in 2009.” based on the data provider RealtyTrac.[6] More foreclosures further reduced the value of residential mortgage-based securities, which in turn reduced the asset-values and returns of companies and individuals investing in the CDOs (collateralized debt obligations) worldwide. This investment asset essentially has mortgage-borrowers pay the holders of the respective CDOs, whose value is thus based on the value of the underlying mortgages.

Problematically, the holders of the CDOs, not the originator of the mortgage, assumed the risk that the mortgage borrowers might stop their mortgage payments. The mortgage servicers had sold their mortgages to an investment bank such as Lehman Brothers, which in turn would pass the then-securitized mortgage-based bonds on to investors such as Deutsche Bank and the two major banks of Iceland. Neither companies such as New Century (or Countrywide) nor investment banks like Lehman would face any risk unless they happened to be holding a significant number of the risky mortgages (or real estate) when the merry-go-round finally stopped in 2008.

Countrywide was bought up by Bank of America (by Ken Lewis, CEO at the time) and Lehman Brothers went bankrupt. Both Lewis and Dick Fuld (of Lehman) could be said to be empire-builders—meaning expansion at virtually any expense and even as an end itself. Pure ego plus greed. New Century and Lehman both assumed that they would never get caught with their pants down holding toxic mortgages. They were both wrong—oh so wrong. To be so wrong and yet blame the consumers is, at the very least, bad form.

Unfortunately, the housing market was “plagued by scandal” in the first quarter of 2011.[7] Homeowners and investors filed “numerous lawsuits alleging that big banks misplaced or even faked crucial mortgage documents.” After it was “revealed that companies that processed foreclosures signed thousands of documents daily without even reading them, potentially violating the law, some of the biggest banks temporarily halted their foreclosure proceedings” in the fall of 2010.[8] I suspect, however, that the failure of the underwriters (and compliance folks) is a red herring; most of the sub-prime residential mortgages required no documents proving income or even a job, and many of those mortgage applications contained lies known or even encouraged by the brokers. Not unexpectedly, the brokers and borrowers have differed on whether the latter should be expected to have resisted the, “It’s ok, really. Trust me,” from the “professionals.” In any case, the (in many cases) first-time homeowners were used, and the greed of the mortgage producers was ultimately behind it.

The claim, for example, made by some mortgage brokers and Wall Street securitization arrangers that the borrowers should have somehow known better than to sign low- or no-document subprime mortgages with steep ARM resets of up to double-digit interest rates is more than just disingenuous; the brokers had assured the potential homeowners that the inevitable increase in home equity appreciation from the rising housing market would give them the 20 percent equity stake that was necessary at the time to refinance into a fixed mortgages at a decent, constant interest rate. The brokers did not care whether the borrowers enabling the double commissions could make the higher ARM (adjustable rate mortgage) payments in case they might kick in. One might even say that the system was rigged by the mortgage-producing companies such as Countrywide at the expense of first-time mortgage-borrowers. Preying on the newbies, in other words, could characterize the system’s basis. Of course, such preying is unethical, for it puts others in harm’s way unless the prey should have known better, which I dispute. In short, it was not a fair fight when the harm came as even AAA-rated subprime (i.e., risky) mortgage-based CDOs ruptured in the financial crisis of 2008. 

In conclusion, although Clinton’s goal of putting poor people in their own homes had been laudable, constructing ARM mortgages with resets that low income people could not afford and relying on a rising market to obviate them was a recipe for years of a bear housing market. In other words, the system that the financial world established blocked Clinton’s goal from being sustainable, and thus achieved. Of course, Wall Street was not in the game to do Clinton’s bidding; finance had its own goals, which went on through two terms of George W. Bush in the White House. In retrospect, Clinton should have used government regulation to establish a viable system in sync with the goal rather than allow his henchmen—most notable Alan Greenspan at the Federal Reserve, Robert Rubin, Secretary of the Treasury, and Larry Summers also of the Treasury, to push Congress to keep the CDOs unregulated. In other words, Clinton, in trying to position himself in the political middle, followed Carter in adopting a deregulatory position even as it ultimately rendered his laudable goal unattainable and even reckless.

See Essays on the Financial Crisis and On the Arrogance of False Entitlement, both available at Amazon. 

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1. Nick Timiraaos and Dawn Wotapka, "Home Market Takes a Tumble," The Wall Street Journal, May 9, 2011, pp. A1-A2.

2. William Alden, “Home Prices Fall Again in Biggest Drop since 2008,” The Huffington Post, May 9, 2011.

3. Ibid.

4. Nick Timiraaos and Dawn Wotapka, "Home Market Takes a Tumble," The Wall Street Journal, May 9, 2011, pp. A1-A2.

5. Ibid.

6. William Alden, “Home Prices Fall Again in Biggest Drop since 2008,” The Huffington Post, May 9, 2011.

7. Ibid.

8.Ibid.

Oligarchic Social Media Companies: Willowing the Internet Unethically

Too much power in a few hands is inherently dangerous. That goes for private as well as public, or governmental, power. In the world of social media, the companies that own and control the platforms are essentially governmental in nature in that the executives promulgate rules and, ideally, see that they are enforced. The downsides to too few platforms—each with an extraordinary amount of power—involve a constricting of ideas, or content, on the internet, and potentially unanswered violations of the rights of the social-networks’ respective users. The public policy repercussions, I submit, include applying anti-trust law to social media companies such that none gets to become as massively dominating as Facebook had been allowed to become.

In an open letter in March, 2018, Tim Berners-Lee, the inventor of the World Wide Web, proposed a regulatory framework to balance the interests of the social media companies and their users. In the wake of the Facebook scandal then involving the psychological-political manipulation of up to 50 million users by a third party, Cambridge Analytica, the obvious inference was that privacy rights were in dire need of being shored up by regulators as Facebook’s management had failed even to notify the users of the invasive  use of their data. Yet a single-minded focus on that problem risks missing a more subtle one.

Berners-Lee points in his letter to the “concentration of power” in a few social media companies that “creates a new set of gatekeepers, allowing a handful of platforms to control which ideas and opinions are seen and shared.”[1] As a result, the “Web that many connected to years ago is not what new users will find today. What was once a rich selection of blogs and websites has been compressed under the powerful weight of a few dominant platforms.”[2] The bloggers who can make good use of Facebook’s algorithm get to see their ideas (and blogs) popularized, whereas bloggers who eschew Facebook stand a greater chance of being relegated to a marginal position on the internet.

I am a case in point. I could have made use of Facebook for years to promote essays I have posted online, but I made a decision on principle not to use Facebook because of how that company had treated my attempts to create and use an account. On my first attempt, Facebook suspended my account because I had sent some text with a link to one of my academic articles to some scholars whom I actually knew. No one at Facebook bothered to ask me if my posts were spam. I was deemed to have sordid motives without much evidence to support the projection of distrust. I deleted the account. A few years later, I tried again. That time, Facebook demanded that I upload a clear facial picture of myself so I could be identified. Facebook had verified my phone number and email address, and thus my name, but strangely those were not enough. I had not yet even used the account and thus could not have violated any of the company’s use-policies, so the projection of distrust onto me was unacceptable to me. So I deleted that account rather than supply a picture of myself to be scanned. I was also concerned how the facial recognition software would be used, especially when combined with other basic information I had included in the profile. It turns out I had reason to be concerned, for even if my personality had not been construed and I had not been subject to political manipulation psychologically, the fact that Facebook failed to prevent the invasive actions by a political firm in 2015 means that other harvesting of data could have been going on without the users being informed. Even before that scandal broke, I did not trust Facebook’s staff.  

I suspect that the fact that I had written a booklet, Taking the Face off Facebook, had something to do with Facebook making it difficult for me to create and use an account. That the platform was at the time so huge means that keeping me off made it much more difficult for me to popularize my essays at The Worden Report. If so, Facebook was exploiting a conflict of interest by keeping off ideas critical of Facebook’s management. Although I made considerable use of LinkedIn and some use of Twitter, I felt as though I was swimming upstream in steering clear of Facebook as a possible means of publicizing my site. Even though business ethics was one of my areas of expertise, and thus of the essays on my site, I felt a strange feeling in actually making a stand ethically against my own use of Facebook even though I really could use the added publicity for my site.

A faculty member at the University of Chicago business school wrote me interestingly just after the Facebook scandal became public that if only I would get on Twitter and Facebook and attack the positions of other people, my essays would be picked up by the major media and I would no longer be making things harder on myself than need be. If only I “attack people.” Really? The University of Chicago must be quite a place! Another ethical line in the sand that I would not cross. Years earlier, I had stopped attending the Academy of Management “academic” conferences because the “scholars” had made a “blood sport” out of tearing apart scholars giving paper-presentations. I found that I could be helpful to the presenters by instead suggesting fruitful directions rather than trashing what had already been written. Any dead wood would eventually fall off from the tree anyway, whereas a useful insight would be sited and thus popularized. I had the same philosophy about my essays, sans any “facilitator” like Facebook. I suspect that Facebook’s culture might have been allowed to become akin to that of the Academy of Management. If so, vindictiveness could be added as a reason why the range of ideas on the internet has been narrowed, and why more attention was not devoted to enforcing policies on the third-party uses of user data. With great power comes great responsibility, so does the power remain when it has become clear that the responsibility has been lacking?

In short, social media companies like Google and Facebook had been allowed by the U.S. Government, and ultimately the American people, to get too big—too much coverage and control of the internet. There should have been another platform similar to Facebook’s that I could have used to reach more readers. Heather West of Mozilla stated at the SXSW conference in 2018 that people were “realizing the power that technology has in our lives and [were] asking technology companies to be more transparent and responsible.”[3] I doubt that, and, besides, I submit that something more than asking was needed. Social media companies like Facebook were clinging at the time to their mantra that they merely provide platforms rather than the content (or even curating it). That is similar to Goldman Sachs insisting in the wake of the financial crisis of 2008 that the bank merely puts markets together, rather than acts also as a proprietary player in them. At the SXSW conference, Kara Swisher of Vox Media and Christiane Amanpour of CNN mocked Twitter and Facebook for insisting, “We’re a tech platform that facilitates media.”[4] A conflict of interest is in even just that, for which media is to be facilitated and which relegated as problematic? Clearly, fake political ads are problematic, but are the social critics whose range includes critiquing social media companies also problematic? Perhaps Facebook’s actual role is a blend of public and private—a private sector government, one might say. If so, democratic accountability, and even that by stockholders, is problematic and thus not to be relied on.

The answer is more government regulation of companies like Facebook, essentially meaning that the public governance functions of Facebook should be overseen at the very least by public policy rather than corporate governance and pressure from users. But government regulation has its limits. Regulators cannot be everywhere, and they cannot get at the problem of the willowing of the blogs on the internet due to factors controlled by the social media companies. For there to be a true democracy of ideas on the World Wide Web, alternative platforms of substantial but not dominating scale  must be viable without being snuffed out by a bloated platform like Facebook’s. Breaking up that company could mean that potential upstarts would get a chance to grow without being bought out and shelved by the giant. Oligopoly is not good for competition, and whether or not an industry is permitted to attain an oligarchic structure is a matter for governments to decide, and ultimately electorates.

For more on this topic, 

See the essay, "Facebook: A Distrustful Company."

See also the booklet, Taking the Face off Facebook

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[1] Rob Pegoraro, “SXSW Takes a Skeptical Look at Tech,” USA Today, March 13, 2018.

[2] Ibid.

[3]Ibid.

[4] Ibid.

Gary Cohn of Goldman Sachs in the White House: A Hidden Agenda?

Rex Tillerson, the U.S. Secretary of State fired by U.S. President Donald Trump and former CEO of Exxon, an international oil company based in the U.S., did not allow his difference with the president of tariffs on steel and aluminum to be a deal breaker. In this respect, the ex-CEO was not doing his company’s bidding. That is to say, he was not primarily in public service to serve the private interests of a multinational corporation. Unfortunately, this cannot be said of Gary Cohn, the ex-president of Goldman Sachs who quit as Trump’s chief economic advisor just after the tariffs were announced. Tariffs in general and especially to protect goods in another sector are not in the interests of a major American banks with substantial international business. If the former president of Goldman Sachs had taken the post in government to further Goldman’s interests, the question is whether public service is mere window-dressing at the highest levels of government—plutocracy being the real name of the game.

In a statement at the time of his resignation, Cohn wrote, “It has been an honour to serve my country and enact pro-growth economic policies to benefit the American people. In particular the passage of historic tax reform.”[1] That reform lowered the corporate tax rate and thus was a financial benefit to Goldman Sachs. Cohn left this point out and instead cited the benefit to the American people, which might thus have been a mere subterfuge designed to hide the possibility that the ex-president of Goldman Sachs was actually doing his firm’s bidding.

That Cohn was instrumental in getting the corporate tax rate reduced and that he resigned at least in part because President Trump acted aversely to Goldman Sachs’ interests in enacting tariffs—even just as a negotiating tactic in the trade negotiations then going on—suggests that Cohn had taken the governmental post to safeguard and promote the financial interests of Goldman Sachs. Perhaps President Trump had been obliged to fill the position with such a person in exchange for having accepted campaign contributions from the firm or even the financial industry more generally. It would then be no accident that the Secretary of the Treasury was also a Goldman alum.

The larger question regards whether the public interest can be served in a political economy in which large companies have substantial political leverage over aspiring candidates for office via campaign contributions. At the time of Tillerson’s firing, President Trump remarked that he was finally able to have a cabinet of his own—of his choosing. This statement implies that he had been obliged initially to hand over several cabinet positions to people not of his own choosing. Had Exxon purchased the de facto first chance to fill the Secretary of State position, and Goldman Sachs the U.S. Treasury and chief economic advisor positions? With public statements insisting on having served the American people, which would hardly be need to be said were it true, it should come as no surprise that the American people have been kept in the dark concerning the influence of “dark” money on “public” offices at the expense of the public good.

For more on this topic, see Institutional Conflicts of Interest

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1. Kate Kelly, Maggie Haberman, and Peter Baker, “Gary Cohn to Resign as Trump’s Top Economic Advisor,” The New York  Times, March 6, 2018.

Russia's Putin Embraced BP

The Russian state-owned company, Rosneft, reached separate agreements in October 2012 to buy TNK-BP from BP and a group of Russian billionaires. According to the Wall Street Journal, the deal represents “an acquisition that promises to reshape the Russian oil industry in favor of the state-owned company.” The Russian federal government was set to own or control nearly 50% of the Russian oil industry. Lest it be supposed that the legacy of inefficient state enterprise might compromise that industry in Russia, the state would have the benefit of literally sitting on the same board with representatives of the experienced oil producer from the private sector. By implication, the traditional dichotomy between public and private could be further blurred, such that the easy labels of “socialism” and “capitalism” may become less and less relevant or useful (except in the rhetoric of American presidential contests). Rosneft itself is a case in point of privateness and publicness coming together with a shared vocabulary or at least financial aim. Before addressing this point, I present the basics of the deal itself.

Robert Dudley, CEO of BP, talking with Vladimir Putin at the Kremlin.   Source: Telegraph

According to the Wall Street Journal, “(u)nder the terms of the transaction, BP will receive $17.1 billion in cash for its 50% stake plus shares representing 12.84% of Rosneft, worth $9.7 billion on the bid date. It will then use $4.8 billion of that cash to purchase an additional 5.66% of shares Rosneft from the Russian government, taking its total holding up to 19.75%, BP said in a statement. . . . BP will get two seats on Rosneft's nine-person board as part of the deal and expects to be able to account for its share of Rosneft's earnings, production and reserves on an equity basis.” Rosneft would acquire the other half of TNK-BP for $28 billion from the AAR consortium of Russian oligarchs. “Rosneft will finance the transactions, which have a total cash value of $45.1 billion, from a combination of existing cash resources and new borrowings.”  In short, we’re talking about a lot of money—a lot at stake. In other words, the implications of the deal deserve a lot of attention and analysis.

Expanding on the traditional notion of interlocking directorates, BP would be sitting on the board alongside officials or representatives of the Russian government. The latter would be able to nurture and develop contacts in the corporate world and BP would have access in Russia far beyond Arctic exploration rights.  That is to say, collusion could become worse, and this could undercut the public interest in the interest of private gain—private here applying both to corporate retained earnings and government coffers. That is to say, government itself could become more “private” and less “public,” leaving the public interest without a proper guardian or advocate.

The deal gives the Russian state an interest in the well-being of a foreign private company. This in turn would give the company some leverage in terms of Russian regulations. In other words, BP could use its alliance with the state to essentially “capture” Russian regulatory agencies. "This is a good, big deal, not only for the Russian energy sector, but also for the Russian economy," said Russian President Vladimir Putin, after a meeting at which he approved Rosneft's acquisition of TNK-BP in a meeting with the company's Chief Executive, Igor Sechin. The Russian president would thus have an interest in protecting BP as well as the joint venture. That is to say, from the standpoint of the bipolar dichotomy of “socialism vs. capitalism,” the cosy relationship proposed in Russia puts government and private ownership literally in the same room and having the same financial purpose. Mutual back-scratching would be almost inevitable, not only concerning the interests of the Russian state and BP, but also particular government officials and company executives.

Lest it be thought that privatizing the nearly 50% of the Russian Oil industry that would be controlled by the Russian state would be preferable—this option being more in line with the traditional “public vs. private” paradigm—it can be asked whether Russian oligarchs are preferable to Putin’s state. The tradeoff might come down to one of whether the state is really distinct from organized crime in Russia. There might not be much of a difference, with the exception that state-corruption is slightly more transparent. Even if the distinction is meaningless practically speaking, it can also be asked whether the oligarchs deserve their wealth and profits, especially if they came out of cheap post-Soviet sell-offs based on connections. For that matter, the anti-democratic response of Putin can cause one to ask whether his government deserves the added revenue. The Wall Street Journal reports, “A Rosneft takeover of TNK-BP would bring the Russian state's control over oil production to nearly 50% and mark a major milestone in Mr. Putin's reassertion of Kremlin control over the strategic oil sector, much of which was sold off in the privatizations of the 1990s to well-connected tycoons like AAR's owners. Since Mr. Putin came to power in 2000, the tide has turned the other way in an industry the Kremlin depends on both as a source of international influence and more than half of all tax revenues.” One might ask whether Putin deserves this even as he represses political opposition—even arresting a major figure following a “documentary” on television produced by the state. Faced with the abuses that more wealth and BP-connections might give the Russian president,  a reasonable person might be left with the conclusion that neither Putin’s pals nor his government is worthy of owning vast wealth; the world envisioned by Adam Smith as against the concentration of great wealth might come out the winner, even if only in the world of thought.

In addition to the downside, which may admittedly be so abstract and contrary to the status quo to be of any practical effect,  it is also worth pointing out that putting government officials and business managers in the same room could enhance both the efficacy of government regulation and corporate public affairs departments.  That is to say, knowing the otherness of the other could improve how one relates to the other “above board.”

Being on the same board, government officials or their representatives in Russia would no doubt see up close how private business executives “think” (i.e., the logic of business), while executives in the private sector (at BP) would gain a better understanding of the political calculus of government officials. That is to say, business and government would take one step closer together from that of “arm’s length” transactions and the regulatee-regulator relationship. Understanding how the other thinks is indeed a good thing where two parties must interact (e.g., regulation). At the very least, the efficacy of government regulation could in principle be enhanced as it could be put in sync with how managers think.

Understanding how business managers use regulation strategically—even preferring more regulation because it is easier for one’s own company than one’s competitors to comply—can enhance a regulator’s ability to craft regulations that achieve the desired public-policy outcome.  In other words, being able to anticipate the policies that business managers would enact in reaction to a proposed regulation can give the regulator a sense of the outcome up front. The regulation can thus be tailored with the anticipated reaction in mind such that the outcome sought would stand a better chance of resulting. A regulator could anticipate, for example, how managers would attempt to circumvent the proposed regulation, and the latter could be adjusted to close off that possibility.  A Russian official who has seen BP executives in action on Rosneft’s board could say to a regulator of another industry, “No, that won’t work; they would only do X to get around it. I know how they think.”

In terms of corporate public affairs departments (and corporate lobbyists in general), feedback from a company executive who knows how government officials think could advise on how to appeal to them on their own terms. A BP executive with experience with Russian government officials on Rosneft’s board could say to the director of BP’s government affair’s department in Russia and even another country, “If you really want the legislator to pay attention, bring up X because X is likely to be on his or her mind.” That is to say, fit the company’s strategic objective within the political calculus. Knowing the otherness of the other is necessary both to regulators in crafting more effective regulations that are not undercut by the other and to corporate public affairs directors who want to influence legislators and regulators.  As discussed above, however, there is also a downside, and it should not be disregarded either.

In summary, the modern world of extensive territorial empires and great concentrations of private wealth in the form of corporations can leave the individual business practitioner and the small investor in the dust along with the public at large. There is indeed value to public policy and government regulation in government officials deepening their understanding of how business executives think. Similarly, corporate public affairs departments could use more insight on how government officials tick. At the same time, the financial stakes and related cosy relationships as evinced in the proposed deal in Russia increase the risk of collusion at even personal financial benefit at the expense of the common wealth and general welfare of the people and even society at large. Putin might conclude, for example, that what is good for BP is good for Russia. This represents a very dangerous step (similar to “What is good for GM is good for the U.S.”) away from democracy in the direction of plutocracy. The question is perhaps less on whether the old “public vs. private” world is antiquated than whether government is really still government—governing the whole in the interests of the whole rather than certain parts—and whether large corporations are still private. On the latter point, it is worth remembering that Clive of the East India Company had a private army in Bengal at his disposal and the title of governor from the state. Indeed, the notion that the CEO of a private company would also be the governor of a territory might give us pause in reflecting on the governmental power that a large public-private partnership might have in Russia.

Source:

Selina Williams and James Marson, “Rosneft to Buy Entirety of TNK-BP,” The Wall Street Journal, October 22, 2012.

Justice as Fairness: Writing Down Greek Debt

In 2012, 80% of Greece’s private creditors agreed to “voluntarily” convert their Greek debt into debt of a bit less than half the face-value (plus a lower interest rate). With such a proportion having agreed to the swap without triggering credit default swap insurance payouts, Greece could get the E.U. to agree to force the remaining 20% to involuntary write-downs. That would trigger the credit default swaps, at least in theory.

The full essay is at "Justice as Fairness: Greek Debt."

U.S. Senator Rand Paul on Civil Rights and the BP Explosion

U.S. Sen. Rand Paul (R-KY), was the Tea Party candidate who challenged the Republican establishment to win the party’s Senate nomination in Kentucky on May 18, 2010. A day later, he publicly criticized a plank of the Civil Rights Act of 1964. Specifically, he said in an interview with Rachel Maddow on MSNBC television that he supported the sections of the Civil Rights Act that applied to public accommodations but had concerns when it came to its applicability to private business. He had raised similar concerns earlier in the day about the Americans with Disabilities Act in an interview on National Public Radio. Asked by Maddow if a private business had the right to refuse to serve black people, Mr. Paul replied, “Yes.” In so answering, the new senator failed or refused to distinguish private property that is open to the public from private property, such as a person's home, that is not. 

In citing the rights inherent in private property, Mr. Paul, an eye surgeon, was refusing to recognize the “publicness” in a business being open to the public, as distinct from someone’s house, which is not open to the public. In other words, Mr. Paul was ignoring the qualification to private property that comes into play as soon as said property is opened to the public.  Such property is quasi-public precisely because it is open to the public.  Hence, society, through its government, has a right to dictate the obligations going with that element of publicness.  Mr. Paul would have been on firmer ground had he limited his statement to private clubs, such as country clubs, which do not receive public money and are not open to the public.  However, even here, if people associate in a way that hurts others by intentionally excluding them, there might be an argument in favor of subjecting them to the Act, though such an argument seems weaker than those for freedom of association and on private property not open to the public.

Rand Paul also said on ABC TV that President Barack Obama’s criticism of BP in the wake of the Gulf oil debacle sounds “really un-American.”  Paul said that the president’s response is part of the “blame game” that’s played in the United States. The game, he argued, leads to the thinking that tragic incidents are “always someone’s fault” when sometimes accidents just happen. Sen. Paul was ignoring that BP overrode Transocean in directing its employees not to use “mud” to maintain pressure in the well as cement “corks” were being inserted.  Also, managers at BP claimed to have the technology to stop any leak or spill when no such technology existed. In short, the managers at BP put the Gulf at risk in order to cut corners so as to earn more profit (as if $2 billion a month was not sufficient).  Rather than go after the mentality of shirking amid a “more, more, more” mentality wherein nothing is ever enough, Paul went after the representative of the victim–society as a whole.  That is to say, he added insult to injury by going after the victim rather than the culprit.  In so doing, he ignored key elements of the culpability.

Listening to the candidate on the Maddow show on MSNBC, I was more concerned by the way he chose to evade questions than by his failure to take “being open to the public” into account in his view on civil rights law. At one point, Rachel Maddow asked him, “yes or no,”  on whether he would exclude private businesses from the Civil Rights law.  He replied that he was against the violence that took place in the 1960s in association with Walgreen’s lunch-counters. Beyond not answering the question, Mr. Paul seemed to be continuing with what he wanted to say–ignoring the question entirely as a mere interruption to be dismissed. I noticed a few times that after Maddow did indeed interrupt him, he simply picked up with what he had been saying.  Could his ignoring the questions be related to his ignoring the “open to the public” qualification and the risky shirking of BP?  In other words, might it be that Mr. Paul simply does not see what is inconvenient to his world view?  If so, I contend that this character trait is far more alarming than even his evasions and his over-simplified view on private property and the oil spill.  If you have ever tried repeatedly to tell someone something only to have your statement ignored as the other person continues on with what he or she was saying, you know what I mean. Sadly, I suspect that Rand Paul didn't notice it. This character flaw is by no means limited to him. Nor is this an invitation for partisan aspersions on the Republican Party.

Rather, I suspect that not answering questions--even asking one's own instead of given any answer to a question outstanding--is a growing attitude in modern America. I have witnessed it myself in emailing people I don't know on matters involving an actual or potential commercial transation. Does the computer come with Office 2007? Reply: When you would like to come by to look at it?  But what about Office 2007?  Or take apartment hunting:  Are utilities included in the rent? Reply: Call me to make an appointment to see the unit. Nietzsche would have a field day with such a mentality that vaunts itself as superior by "virtue" of its own assumed dominance. The basis of Rand Paul's non-answer, in other words, could have been an attempt to dominate beyond his place on Maddow's show. In other words, his non-answers could have been refusals rooted in a will to power that was biting off more than it could chew on someone else's show.

In terms of having a will to power based on strength, many of the stations or offices in modern society that we view as being entitled to dominate are in fact weak.  Nietzsche points to the modern moralist's thou shalt not as an attempt by the weak to dominate beyond their innate weak constitution. He also points to the attempts of the modern manager to dominate in such terms (and the priest as well). In watching various personalities giving non-answers while being interviewed on television, I find myself wondering if they know they are doing it. If they do, they are indeed rascals; if they do not, their stygian pathology is much deeper than I am equipped to investigate. Perhaps the modern illness is malignant narcissism to such an extent in a personality that the delimited perspective eclipses even awareness of what oneself is doing.

Sources: 

1. The Rachel Maddow Show. http://www.msnbc.msn.com/id/37273085/ns/politics-decision_2010/

2. Adam Nagourney and Carl Hulse, "Tea Party Pick Causes Uproar on Civil Rights," The New York Times, May 20, 2010.