24 October 2014


Go here to read a report listing the colleges and universities with the highest student loan default rates. The top (or bottom, depending on how you look at it) are community colleges. Nearly all the rest are are public universities. I'm surprised that the for-profits aren't on the list. (See some earlier posts about for-profit schools and student loans here and here.)

On a brighter note, on Friday I will be attending The Temple Law School Whitford Symposium. The symposium honors one of my University of Wisconsin law professors, Bill Whitford, and features a very strong lineup of presenters in the fields of contracts, bankruptcy, and commercial law generally.

Bill was on the Left even at Wisconsin but, unlike most leftists (and unlike most ideologues on the Rights as well), bill had a great sense of humor and didn't take himself too seriously. In all events, it should be a good time.

23 October 2014

And It's Still Feasible!

As I posted several months ago here, Martha Kopacz, the "feasibility expert" appointed by the judge overseeing the chapter 9 bankruptcy of Detroit, had delivered her written report in which she concluded that Detroit's plan was "feasible." Much water has flowed over the dam since her initial report as Detroit has modified its plan several times to satisfy creditor objections. Thus, her testimony Wednesday (reported here and here) that the plan remains feasible (but not "by much") is the last piece of evidence in the confirmation hearing.

Those who want to know more about the amorphous standard of feasibility can read my soon-to-be-published article Who Bears the Cost? The Necessity of Taxpayer Participation in Chapter 9 (which you can download for yourself by going here).

Expert Kopacz carefully hedged her conclusion with warnings about "no margin for error," the need to reform the city's purchasing practices, and the necessity that the elected city council toe the line set in the plan. Without wishing to play the role of curmudgeon, let me confess my doubts. City government is a democracy of a sort and the long-time beneficiaries of Detroit's unsustainable largess haven't disappeared. Whether they will be suppressed for long in favor of "good government" remains to be seen.

22 October 2014

Megillath Esther and the "Rule" of Law

Go here to read a fascinating article by colleague Craig Stern: Megillath Esther and the Rule of Law: Disobedience and Obligation. Cribbing from the abstract:

Strange is Megillath Esther, the Scroll of Esther. It mentions God not once, yet it is second only to the Torah, the Five Books of Moses, for wealth of rabbinic commentary. It recounts part of the sacred history of the Jews, yet it is set in Persia. It emphasizes the obligation of Jews to observe the holiday of Purim, yet it emphasizes at the same time the importance of violating legal obligations. Perhaps no other book of the Bible offers such a mix of plotting and ironic reversals, of mass partying and mass killing, of folly and deadly earnest.
All the same, perhaps no other book of the Bible offers wisdom on the legal order of more importance to contemporary America. The Scroll of Esther — often called simply, “the Megillah” — supports a fundamental rule of law while observing that some laws may be foolish and more honored in the breach. If America has become a land where it may be expected that the typical resident commits, in the words of Harvey Silverglate, “[t]hree [f]elonies a [d]ay,” and where the Executive Branch uses prosecutorial discretion as a dispensing power, it may welcome a lesson on how the rule of law might endure such a time. Perhaps the Megillah was written “for such a time as this.” (Esther 4:14.)
The Megillah exists to commemorate both God’s deliverance of the Jews and also the annual celebration of that deliverance, Purim. The record of the Jewish community’s taking upon itself the obligation to keep the festival of Purim culminates the Megillah. That obligation is one of law. But the story of the Megillah turns repeatedly upon instances when the heroes of the story disobey law, sometimes without penalty, and sometimes even with great advantage. And so arises the biggest irony in a work noted for its ironies: The Megillah imposes the obligation to obey a law founded indirectly upon disobedience to laws. To do so successfully requires that it distinguish between laws to be kept and laws not to be kept. Furthermore, it must make the distinction clear and authoritative enough that the two categories marked by the distinction do not bleed into one another. This distinction is essential to the Megillah. It also is essential to the health of a legal system of the sort now to be found in America.
In (my) summary: When "law" is no more than a barely rational whim, the Jews in Persia treated it with no more respect than prudence demanded. When law conforms to God's will or reason, however, honor is due. Thus, Paul's admonitions in Romans 13 must not be abstracted from the whole of God's revelation. In other words, not all that passes as law binds the conscience.

I wholeheartedly commend the Stern's elaboration and analysis of the Megillath Esther to my readers' attention.

13 October 2014

A Quick Post From Kauai

Columbus Day hiking the Waimea Canyon? Sounds good to me.

But on a more serious note, you might want to read Jeffrey Shulman's Sacred Trust or Sacred Right? (download here). Cribbing from his abstract:
It is commonly assumed that parents have long enjoyed a fundamental legal right to control the upbringing of their children, but this reading of the law is sorely incomplete. What is deeply rooted in our legal traditions is the idea that the state entrusts parents with custody of the child, and the concomitant rule that the state does so only as long as parents meet their legal duty to take proper care of the child.
One might wonder who entrusted parents with authority before the rise of the modern state but Shulman would probably believe the answer of antiquarian interest only. Now it is the modern Enlightenment state in whose view "the law of parent-child relations has long embodied a belief that education (a 'leading away from') is the path away from childhood and toward intellectual and moral enfranchisement."

Shulman's view is consistent with the father of the English Enlightenment, John Locke, so it's no surprise it has come to dominate the current legal understanding of the parent-child relationship. 

08 October 2014

Not Just Iowa Anymore

A few years ago I posted here, here, and here about the extraordinary prices Iowa farmland was fetching. I also observed that part of the run-up was due to the incentives created by the U.S. federal government's subsidy of ethanol production. For some strange reason I thought that turning food into fuel was not a good idea.

But looking across the pond, at England in particular, we read in The Economist (here) that English farmland is also experiencing a dramatic rise in value. The English situation differs from that Stateside for several reasons. First, there's simply much less arable land in England than the United States. In addition, "farmers are growing richer. They have benefited from a global surge in commodity prices: wheat, for example, is 80% more expensive than it was five years ago. As commodity prices rise, banks have been more willing to lend."

The Economist does not opine on the reasons for the world-wide increase in commodity prices but I suspect it has to do with the increasing demand for meat and processed food in the developing world. As millions of Chinese and Indians move from poverty to something like a middle class lifestyle, their taste for what Westerners have enjoyed for generations increases as well.

And, for what it's worth, prices for all commodities have not increased. The driver of of the astronomical prices for Iowa farmland was high prices for corn (maize) and soybeans and both have fallen dramatically since 2012. It remains to be seen if highly-leveraged Midwestern farmers (and their banks) will be able to hang on to what they bought.

07 October 2014

Stockton's Feasibility Still An Issue

Go here to read an excellent news account about what's still at stake in the Stockton, California municipal bankruptcy. As I noted last week, Judge Klein concluded that Stockton had the power under the Bankruptcy Code to cut pensions notwithstanding state law to the contrary. The city, however, doesn't want to cut pensions and the news report adds that its lone holdout creditor doesn't care.

The report goes on to note--quite correctly--that the court has an independent obligation to find a city's plan is "feasible" before confirming it. And feasibility remains the nub of Stockton's confirmation battle. For more about feasibility read my article Municipal Bankruptcy: When Doing Less Is Doing Best (download here).

For what it's worth, I believe Judge Klein will ultimately find that Stockton's plan is feasible. Without a stakeholder leading the feasibility charge, I don't see a judge taking up that cudgel and administering a beatdown on his own. Yet even if Stockton's plan is confirmed, stay tuned to see if the city runs back to bankruptcy court within a decade.

06 October 2014

Avoiding A Maelstrom In Detroit? Or Sucking Up To the Rich and Powerful?

Why not try to sell Detroit's art collection to raise money to pay the city's debts? According to Emergency Manager Kevyn Orr, " it would greatly harm a city museum and cause turmoil in the community, especially among powerful, wealthy patrons." (Read account here.)

Upsetting wealthy patron?! Of course not, What could creditors left with billions unpaid have been thinking?

More seriously, there are other, more appropriate reasons why Detroit can choose not to "monetize" its art collection, although none ultimately persuade me. But even to suggest that fear of "powerful patrons" suggests that Detroit's mindset remains more like a banana republic than a model of financial probity.

05 October 2014

Some Conservative Communitarian Thoughts

Not by me--although I fully endorse them--but by Jamie Smith, which you can read by going here. Titled "Social Reform As If History Matters," Smith succinctly and clearly spells out the implication of subsidiarity and sphere sovereignty as means by which a society moves toward the common good.

The common good is distinguished, on the one hand, from progressivism, which identifies "common" with "public" and "public" with the state. In the contemporary progressive view of life, the state is the principle means by which the good of all advances. Thus, any non-governmental entities such as family, church, school, etc. exist only at the state's sufferance and only to the extent the state determines they add value to the vision of the good determined by the elites who pull the levers of state action.

As Smith describes the progressive point of view,
Imagine how all of this sounds if you believe that "government" is synonymous with "public" and the "common" good is synonymous with the "public" good: to challenge the state's monopoly and to encourage non-state communities will sound like a strategy for excusing ourselves from loving our neighbor and seeking permission to set up enclaves that benefit "me and mine." Indeed, if you treat "public," "government," and "the common good" as basically synonymous, then anything "private"—anything outside of the state—is going to be seen as selfish and unjust. 
On the other hand, a popular version the libertarian vision of the common good is merely the aggregation of individual goods, hardly the stuff of a vibrant civil society.

Countering the suspicion from the Left with the individualizing atrophy of the Right entails that conservatives must provide a vision that addresses the mess of the current society as it is actually is. Appeals to subsidiarity and sphere sovereignty alone will not persuade the many in the middle who hunger for freedom and order. Eviscerating Leviathan state will not immediately generate the "little platoons" that constitute a well-functioning social order. Smith's prescription is a dose of real history:
We need to beware of policy proposals that are "principled" but fail to attend to history. Society is never a blank slate. We always already find ourselves in some historically determined moment. Our "here and now" is always the product of a "there and then." While good policy should be informed by enduring, even timeless wisdom, it is always policy for a particular people at a particular moment with a particular history.
In other words, Smith is something of a Red Tory. I'm not sure if there's much to distinguish Smith's take from my common-law conservatism so I'll county myself one of his fellow travelers. 

But to Smith's application; consider: "Now, when we call for limiting the state's monopolies in order to make room for other spheres of social flourishing, we have to recognize that, for many, the state is all they've got." In other words, the thick middle between state and individual has been so evacuated of substance that for vast swathes of modern Western populations there is nothing other than the state to hold matters together. Given that state of affairs,
Those who rightly seek to foster civil society outside government, and who do so for the sake of justice and common good, need to concurrently address how to care for all those who, severed from any meaningful little platoons, are effectively wards of the state.
As Smith later puts it, "[conservative] reform can only be enacted in the messiness of history, so challenging the monopoly of the state should not be confused with burning it to the ground." Reality, not ideology, is called for as we confront our fraying ends of our society.

02 October 2014

Theology of A State?

Some time ago I posted here a piece about the implications of a "California state of mind" on theology. I compared la nouvelle théologie of the Reformed two-kingdoms sort (R2K) with the broader insights of Monica Ganas, author of the book, "Under the Influence: California's Intoxicating Spiritual and Cultural Impact on America" in which she argues that the "idea" of  "California-ism," the ability to recreate oneself free from past entanglements, whether familial, cultural, or religious, drives culture wherever one lives in America. I concluded that the former may represent a particular reaction to the extraordinary idolatry of California-ism.

Whether I overstated my case as one comment suggested, I want to direct my readers to yet another book that focuses more specifically on the effects of California on the theological endeavor (or is it the other way around?). In any event, go here to read a post by one of the editors of "Theology and California: Theological Refractions on California's Culture."

Until reading this review/advertisement, I had not known that there was such a thing as "California Studies." Silly me. Seriously, the summaries of the book chapters, written by serious folks, suggests that "Theology and California" isn't beach reading but may provide valuable insights on what undoubtedly remains America's most culturally significant state.

(For some more academic observations on R2K in historical context, read my review of David VanDrunen's book, "Natural Law and the Two Kingdoms: A Study in the Development of Reformed Social Thought" that you can download by going here.)

BIG News from Stockton. Maybe.

Followers of my blog will know that I've regularly inveighed against the heavy-handed tactics of the California Public Employees Retirement System or CalPERS. Go here, here, and here for a sampling. Under California law, CalPERS has the unilateral power to set the rates cities must contribute to the pensions they maintain for employees AND the unilateral power to charge what amounts to a penalty to cities that have the temerity to withdraw from the CalPERS-administered pension system AND the power to impose a lien on all city assets to compel payment of whatever CalPERS decides is owed.

At least that's what California law says.

But the city of Stockton is under federal jurisdiction because it filed a Chapter 9 municipal bankruptcy last year and Bankruptcy Judge Christopher Klien has concluded that California law is trumped by the Bankruptcy Code. Read about it in the New York Times DealBook here. CalPERS has the power to set the "exit fee" that Stockton must pay but that's only a claim and like any other claim in bankruptcy must get no more than its ratable share of what the city pays out over the course of the next several decades. In other words, Judge Klein concluded that he had the power under the Bankruptcy Code to knock off ("avoid") CalPERS's lien on city assets. Thus, CalPERS must share in the pot life regular folks.

And in that Judge Klein is correct. For a lengthy explanation of why I think he's right download and read my recently published article, Municipal Bankruptcy: When Doing Less Is Doing Best (here).

But there may be less to this decision--as momentous as it is--than meets the eye because Stockton doesn't want to stop paying CalPERS. I suppose we could replace the "Stockholm Syndrome" with the "Stockton Syndrome" to describe the situation where the captive begins to identify with the captor but that's essentially what's happened here. Stockton was so fearful of challenging the behemoth CalPERS that's it's fallen in with the bully at the expense of other creditors (like bondholders).

Yet hope remains. Judge Klein didn't approve Stockton's plan that treats other creditors less favorably than CalPERS so perhaps between now and the end of October Stockton will work up the fortitude to modify its plan to ensure that it does not "unfairly discriminate" in favor of the Powerful One at the expense of the many.

01 October 2014

Debt Forgiveness Pays

Some time ago I posted a series of comments about the twin virtues of promise-keeping and forgiveness. You can read them here, here, here, and here. While the virtue of promise-keeping regularly receives legal sanction through the the legal system (think contract law), the virtue of forgiveness features less prominently tucked away, as it is, in bankruptcy law. One supposes that the imbalance in the laws's pedagogy of virtue lies in the mundane: creditors have more political power than debtors.

Even though debt forgiveness is more limited than debt collection, it appears that a robust system of bankruptcy law like America's is good for more than the debts it discharges. Go here to read an insightful account of a research study that concludes that bankruptcy is an efficient policy of social insurance:
Getting approved for Chapter 13 bankruptcy protection "increases annual earnings by $5,562, decreases five-year mortality by 1.2 percentage points, and decreases five-year foreclosure rates by 19.1 percentage points."
While not part of the research study, I think it's also important to note is that these benefits accrue not only to the debtors but have positive effects on third parties and not only immediate family members. Reduction in foreclosure rates also benefits neighboring property owners.

The standard economic argument against liberal bankruptcy laws posits that the gains to debtors will be offset by the cost to other consumers of credit. In other words, the rest of us pay marginally more for credit because some don't pay at all. Such a result, even were it true, might nonetheless be warranted as a form of compulsory insurance. In other words, we all pay a small insurance premium in the form of higher interest rates to protect ourselves from the downside risk of the occurrence of certain financial contingencies.

But even the "common sense" observation that reducing access to bankruptcy would save the rest of us money isn't true.

Another study linked in the news account account concluded that the benefits from Congressional tightening of access to consumer bankruptcy in 2005 accrued to the financial services industry, not other consumers. Of course, that provides investors with interests in that industry with unbargained-for upside risk but, as I noted recently, that's simply another example of rent-seeking in the public square.

All in all, the virtue of forgiveness has tangible benefits, which shouldn't surprise anyone who has read the Gospel accounts.

30 September 2014

Detroit Bankruptcy: The Final Deal May Be Struck

Go here to read the latest news account of what appears to be a deal with Detroit's remaining large creditor, Financial Guaranty Insurance Corporation (FGIC). My earlier accounts of FGIC's increasingly isolated position can be found here and here.

All of which is to say that confirmation of Detroit's plan of adjustment seems almost a forgone conclusion. It shouldn't be. Serious questions about the plan's feasibility remain. (Check my Municipal Bankruptcy: When Doing Less Is Doing Best (download here) and Who Bears the Cost? The Necessity of Taxpayer Representation in Chapter 9 (download here) for explanations of feasibility and its requirements.)

Yet with the skids greased and the public looking forward to a quick exit from the straitjacket of bankruptcy court supervision, I expect Judge Rhodes to enter an order confirming the plan before the end of October.