10 October 2017

Job Opening at Concordia University School of Law

If you're interested in working with at-risk law students (or, to phrase it more delicately, if you're interested in Academic Success), there may be a job for you at Concordia University School of Law. Read about it here.

An added consideration: Concordia is in Boise.

09 October 2017

Modifying the Student Loan Bankruptcy Discharge. Or, Dick Durbin and Me

It's a rare occasion that Illinois Senator Dick Durbin and I agree but go here (if you can, it may be behind a paywall) to read about the latest (un)doings in Congress about the nondischargeability of student loans bankruptcy.

The relevant portion of the post on Bloomberg reads,

Durbin, the No. 2 Senate Democrat, told Bloomberg BNA via email Sept. 11 that he was “proud to have reintroduced” legislation — ‘The Fairness for Struggling Students Act,’ (S. 1262)— to restore the Bankruptcy Code's pre-2005 treatment of private student loans and take “an important step toward addressing the student debt crisis in America.”          

The key to my support is the conservative point: "to restore the Bankruptcy Code's pre-2005 treatment of private student loans." Until 2005, only federal student loans could not be discharged in bankruptcy. (The history of how that state of affairs came to be is another story for another time.) (Minor correction: yes, it is possible to get a discharge of student loans in bankruptcy but it's difficult, expensive, and relatively uncommon. Read here and here.)

Just why private lenders to students should get the same treatment as our federal government has never been clear. After, all private student loans are not like taxes, something that must be paid to keep the government running. Prohibiting borrowers from discharging private student loans simply subsidizes private lenders. (Who, come to think of it, may be large campaign donors. But that couldn't explain anything, could it?)

As I explained here, the incremental subsidy that nondischargeability adds for making private student loans has played a part in driving the increasing costs of higher education. And there is no legitimate warrant for lining the pockets of either lenders of college administrators.

So, back to the beginning, or at least back to 2005. Although I give Durbin's proposal a zero chance of success, it illustrates that "what is" has not always been the case and that "what is" may be unwise.

21 September 2017

Doux Commerce and the Chicken-and-the-Egg Conundrum

A few folks might be familiar with the doux commerce thesis of 20th century social philosopher Albert Hirschman. In short, commerce makes men good:
Commerce attaches [men] one to another through mutual utility. Through commerce the moral and physical passions are superseded by interest...Commerce has a special character which distinguishes it from all other professions. It affects the feelings of men so strongly that it makes him who was proud and haughty suddenly turn supple, bending and serviceable. Through commerce, man learns to deliberate, to be honest, to acquire manners, to be prudent and reserved in both talk and action. Sensing the necessity to be wise and honest in order to succeed, he flees vice, or at least his demeanor exhibits decency and seriousness so as not to arouse any adverse judgement on the part of present and future acquaintances; he would not dare make a spectacle of himself for fear of damaging his credit standing and thus society may well avoid a scandal which it might otherwise have to deplore. (Emphasis added.)
Hirschman is in good company. Adam Smith, Montesquieu, Thomas Paine and many others thought the same. Reversing the teachings of the Classical and Christian traditions they believed that the virtues of liberal toleration are the result of trade and commerce.

Nate Oman (previous posts on Oman's work along these lines here, here, and here) agrees. And he's written a full-length book explaining why: Nathan B. Oman, "The Dignity of Commerce: Markets and Moral Foundations of Contract Law" (Chicago 2017).

I'm sceptical and so is Mark Movesian. It's not that markets are not intimately connected with morality but it's not clear which comes first. Movesian, quoting Edmund Burke, believes that morality comes first. As he notes here in his review of Oman's book, 
The conservative critique of the doux commerce thesis, associated most closely with Burke, carries considerable power. Burke favored markets, toleration, and pluralism, but he didn’t see any of them as inevitable, and he didn’t think markets alone could produce the other two. For Burke, the doux commerce thesis had cause and effect backwards. The market doesn’t create virtues and habits; rather, it depends on pre-existing virtues and habits, like law-abidingness, probity, toleration, and trust, all of which people bring to it from the wider culture, especially from religion. Without those pre-existing virtues and habits, the market could not exist.
I've read enough of Oman's previous works to believe I would agree with Movesian's observations. But for those who are interested in this question, I'm confident that Oman's book would be an excellent place to start. 

(For another, more technical review go here.)

19 September 2017

And They're In (Or, Call 'Em "Debts 'R' Us")

Toys 'R Us in bankruptcy, that is. I posted yesterday that about the likelihood that the toy retailer would go the Chapter 11 route but I didn't think it would happen only hours later. But it did. Read the news here.

For those who are interested, the largest unsecured creditor of Toys 'R Us is Bank of New York for a cool $208 million. Of course, BNY is acting as trustee for the bondholders whose notes are scheduled to come due in 2018, which Toys 'R Us knew it couldn't pay.

The leading trade creditors are Mattel ($135 million), Hasbro and Graco (tied at $59 million), and then a bunch of folks around the $30 million mark (Lego, Spin Master, and Just Play).

The first-day orders haven't been posted but I'll keep checking back.

18 September 2017

Will Toys 'R Us Be Next in Chapter 11?

Less than a month ago I posted here about the possibility of the bankruptcy of the venerable Sears, Roebuck & Co. Today's word of warning has to do with a relative new kid on the block, Toys 'R Us. Read about its potential Chapter 11 here.

I plan to follow either or both cases if they happen because I have a peculiar interest in inventory financing.

If you happen to have a Sears or Toys 'R Us gift card, don't despair. Every significant retailer that has filed for relief under Chapter 11 has received approval from the Bankruptcy Court to honor gift cards. Technically, holders of gift cards are mere unsecured creditors. The Bankruptcy Code, however, provides that the claims of such folks have a priority (up to $2850) over most other unsecured creditors.

Of course, even priority claims are subordinate to the property-based claims of secured creditors but it's a rare secured creditor that would want the publicity that would come with flushing gift card holders down the drain. There is thus no need to go out and spend that gift card immediately, although I'm sure Sears and Toys 'R Us would be pleased if you did.

12 September 2017

Hartford in Chapter 9? Storm Clouds Brewing

There's been something of a lull in municipal Chapter 9 bankruptcies of late. Since Detroit (a couple of my posts here (before bankruptcy) and here (when it was over)), not much has happened. The extraordinary bull market in stocks, now about to enter its ninth year, has inflated the value of municipal and state pension investments and thus disguised how underfunded their pension systems really are.

But that may be about to change. Go here to read about Hartford, Connecticut. (You can read even more here in The Wall Street Journal but it's behind a paywall.)
Hartford Mayor Luke Bronin said Thursday that his city could file under Chapter 9 within 60 days without the necessary support from the state, labor unions and bondholders. Bronin seeks an additional $40 million from the state to avoid bankruptcy. Malloy and top lawmakers have said throughout the year that the budget provides enough to Hartford.
(Not surprisingly, given the highly-charged politics surrounding municipal bankruptcy, some members of Hartford's city council disagree.)

Back to the Mayor: "Without support from the state, labor unions, and bondholders." Just what does that mean?

Hartford is Connecticut's capital and is home to many insurance companies. Why can't it simply raise the resources it needs from its real-estate-tax-paying base? Why look to outsiders to solve Hartford's fiscal woes? Principally because the largest tax paying corporations like Aetna, can move out. And Hartford's human residents can't afford much more.

What Hartford wants from the state is quite simple: $40 million. All Connecticut taxpayers should chip in to help out Hartford, says the mayor. This isn't quite the shakedown it may seem. As Connecticut's capital, Hartford, like Pennsylvania's Harrisburg, is home to many state offices that pay no real estate taxes. Like  Harrisburg, providing public services to people and state-owned property that pay no taxes places an unequal burden on city taxpayers.

What Hartford wants from its union and bond creditors isn't as clear but I suspect it can be summed up in "less and more:" less pay and benefits for workers and less interest but more time from bondholders. Perhaps Hartford even wants bondholders to agree to less principal but I'm confident that's a nonstarter.

But what are the underlying causes of Harford's situation? For the answer to this complex question I'll send readers to my article When Doing Less Is Doing Best (also here). For some observations of what can be done I suggest Who Pays the Price: The Necessity of Taxpayer Participation in Chapter 9 (also here) and Who Bears the Burden: The Place for Municipal Residents in Chapter 9 (and here). 

One more thing: it's not only Rust Belt cities like Hartford. Go here to read the story behind the story of Seattle's battle to impose an income tax on its residents.

10 September 2017

More on Not Being an Evangelical

I've previously opined that the term "Evangelical" serves no useful purpose. As I wrote earlier this year here"Evangelicalism in America is little more than a watered-down version of Protestant Christianity adapted to and subsisting in the market economy." (I take no position on the use of Evangelical in other cultures; it’s “Evangelical” in the good, old U.S. of A. that I’m writing about.)

One might think me merely a crank but Thomas Kidd, a serious historian and committed Baptist seems to have come around to my way of thinking. (For my review of his co-authored “Baptists in America” go here.) You can read his entire post (and watch the embedded interview) here but I'll quote some of what I take as his most salient points.

Whatever its historic value, the word “evangelical” in America has become inextricably tied to Republican politics. This is because the dominant media is far more interested in the political expressions of religion than in religion itself.

But it is also because strong majorities of white evangelicals support Republican candidates, including Donald Trump. Because it has become inextricably politicized, “evangelical” has become an essentially divisive term among Bible-believing Christians, as many African Americans, Hispanics, and others cannot identify with the political ramifications of being an “evangelical,” especially after the election of President Trump.

Kidd’s specific concerns about "Evangelical" are primarily political. Or perhaps "anti-political." Mine, as I posted here, had to do with its collapse into the American culture of business success and therapeutic pragmatism:

Also characterizing the "nice" God of American Evangelicals--and perhaps an effect of it--felt the need to "market" Christianity in the most inoffensive, undemanding way possible. Churches become little more than places where some nice people hang out to experience their nice God. And when pure niceness fails, modern business marketing is called on to increase attendance.

Kidd goes on to ask a follow-on question: If not Evangelical, what?

What else will we call ourselves? That may be the biggest problem with not using “evangelical.” … Just identify with your denomination. (For me, that means Baptist.) Or you can tell people you are a follower of Jesus Christ, or a gospel Christian.

Or, as I prefer, confessional Protestant. In any event, retaining “Evangelical” seems unwise from whatever direction we approach the question. Sometimes a tent becomes so big it serves no purpose and collapses of its own weight and that time has come for Evangelical.

06 September 2017

Biblicism Right and Left

As I remarked here some years ago in a post titled "The Bible and Conservative Politics," conservative Evangelicals had no principled way of deciding when and how specific biblical legal teachings should form part of the modern civil law. As I concluded, 
One should not rule out of bounds arguments in the public square that do appeal to authority, including the authority of the Bible. But if Evangelicals wish to make such arguments, they would be well-advised to be able articulately to answer the question why the modern state should enforce the prohibition against theft and not the commandment forbidding idolatry.
To cause equal-opportunity offense, it is important to observe the Prog-Left Evangelicals do the same and nowhere more often of late than with respect to immigration in general and DACA in particular. The Bible has much to say about treatment of strangers and sojourners in the land of Israel and virtually all of it is positive. Jonathan Burnside and Christopher J.H. Wright have done much to bring out the depth and situated-ness of Torah on these and related issues. God does and his people are to welcome the stranger/alien/sojourner and treat them equally according to (almost all of) the Law. And the prophets pick up and even extend this theme. As Jeremiah Unterman notes in “Justice for All”,
Most interesting is the statement in Ezekiel's depiction of the future division of the land in the time of redemption that "'the gerim [strangers/resident aliens] who reside among you, who have given birth to children among you,' are given land within the tribes among whom they reside (47:22-23)--something that the Torah nowhere considers.
So, does the teaching of the Torah as adumbrated by the prophets provide the singular roadmap for American immigration policy? It would seem not. As Mark Tooley writes here, “There should always be great caution in claiming direct biblical commands for political specifics. Evangelicals, who historically emphasize Scripture alone as authority, are especially prone to this rhetoric of ‘biblical’ policy goals.” And Tooley concludes that
It is facile to claim, as is routine for many religious activists, that divine commands to Israel about caring for the poor or sojourners directly mandate specific welfare or immigration policies for any nation state of today. Activists on these causes instead need actually to provide arguments and evidence for their perspectives. They also need modestly to accept the need for compromise in a consensual modern society not governed by kings and prophets with access to direct divine inspiration.
Bible-affirming Protestants of whatever political persuasion need to recover the moral-theological resources of the past and understand the nuanced policies of the present if they hope to do anything more than signal their virtue on any issue including immigration law.

05 September 2017

And the Winner Is ...

Image result for wim decock theologians and contract law

... Wim Decock. ??
Decock has received the 2017 Novak Award from the Acton Institute. Read the news release here. I'm working my way for the second time through Decock's extraordinary work, "Theologians and Contract Law: The Moral Transformation of the Ius Commune." I will be making significant use of it in a book chapter on the doctrine of unconscionability. (Go here for a post in which I mention unconscionability in connection with the apparent absence of moral judgment in contract law.)

Decock's book is remarkable in a number of respects. First, his command of early-modern legal and theological Latin is exceptional. I am thankful he puts his English translation in the body of the text but he includes the Latin in a footnote. Second, he works diligently to explain why there was such a close connection between moral theology and the civil law through the course of the 15th through 17th centuries. Decock's book contains an embarrassment of riches but let me ignore those and pick up on a side note.

Working through confessors' manuals, canon law treatises, civil law treatises, and moral theologies, Decock helped me to appreciate all the more the stunning Reformation insight of Martin Luther--justification by faith alone.

Consider the following quote from Francisco Suarez, perhaps the leading Catholic theologians of law of the 16th century:
The road to salvation passes through free actions and moral rectitude. Since moral rectitude strongly depends on law's being, as it were, the rule of human action, the study of law is a major part of theology. In treating of laws, the sacred domain of theology investigates nothing less than God himself in his function as a legislator. ... It is a task of a theologian to care for the consciences of the pilgrims on earth. Yet the rectitude of consciences is dependent on observing the law just like moral depravity is dependent on breaking the law, since a law is every rule which leads to the acquisition of eternal salvation if observed--as it must--and which leads to the loss of eternal salvation when it is broken. The study of law, then, pertains to theologians, to the extent that law binds conscience.
Prior to the Reformation and continuing on the Catholic side of the divide thereafter,
one's standing before God depended on conscientious obedience to the law of God. As the etymology of the term suggests, justification was understood as the process of being made right or just. And becoming just was a straightforward--albeit difficult--matter of obedience to law.

By toppling the edifice of justification by obedience, Luther put in motion the separation of law--even the Christian-infused civil law of the ius commune--from its previous place as a locus of theology. Moral and legal casuistry, were no longer relevant to one's standing before God. Thus, in the first instance we should not understand Luther's cry for freedom of the Christian conscience from the law as referring to the law of Torah. After all, Luther burned a leading treatise on the canon law, not the Old Testament.

The opposite, however, was not true: even for Luther the Scriptures and theological insights remained relevant to civil law. After Luther, among Protestants what had been a two-way street between the civil law, as reworked by Catholic moral theologians, and the Christian's ultimate destiny became a one-way street. Theology could speak to the civil law but the civil law could not speak to the Christian conscience. This explains why the civil law, including the Roman law doctrine of laesio enormis as developed and expanded by 500 years of Catholic legal and theological tutelage into something like unconscionability did not change in Protestant lands with the Reformation.

And it is also important to note that even though Protestants rejected input of the civil law in justification, they retained it to varying degrees with respect to the doctrine of sanctification. It shouldn't be surprising that sanctification, the doctrine of the Christian life, absorbed some elements of the civil law. In other words, Protestants still did moral theology. After all, by the 16th century the extant civil law owed much to the biblical text and centuries of Augustinian theology filtered through Aristotle's Ethics.

Of course, modernity placed a roadblock to even a one-way street of theology speaking to the civil law. What is even more regrettable, however, is the death of moral theology in any meaningful respect for the Christian life. In fact, what passes for Christian ethics in the popular mode today also rejects meaningful theological instruction. (See a few of my posts about this state of affairs known as Moral Therapeutic Deism herehere, and here.) 

30 August 2017

"Moral Markets"? Truth or Fiction

I've previously posted about the relationship between a market-driven economy (i.e., capitalism) and the Christian faith. Over five years ago I posted a piece here in which I mused on the question of whether a political economy in which more-or-less free markets are the primary forms of exchange necessarily erodes individual virtue and morality.

On the one hand, "there are as many capitalisms as the are political economies in which there is a market for goods and services. The presence of a market does not determine whether its exchanges corrode or maintain the natural and social bonds in which it is enmeshed."

On the other, "from my limited observations, the corrosive effects of the market seem darn-near inevitable."

And I ended with a plea: "What then? Well, that's the question for which I have no clear answer. If you do, let me know."

At long last Marcel Canoy writing for the Acton Institute has gotten around to answering my question. Go here to read a piece titled "The Market Is (Not) Virtuous." Canoy begins by making a helpful distinction between the intellectual father of market capitalism, Adam Smith, and his evil twin, Bernard Mandeville. Smith strongly believed that a market economy depended on virtue. Not altruism in the sense of selfless disinterest, but the virtues of fidelity and justice in a life inescapably market by self-interest. For Smith, self-interest did not equal selfishness. Mandeville, in anticipation of Ayn Rand and neo-classical economists generally (try here and here), dropped all pretense of virtue and understood the market as the forum for combat among individuals driven only by greed.

But why, asks Canoy, if classical economics and the roots of market theory are consistent with virtue, is someone like Mandeville lumped with Smith as a founder of market theory? And why does contemporary market activity seem bereft of virtue? In other words,
Why do we see so many counterexamples? Greedy capitalists who get away with persistent cheating, income disparities which in some countries take on surreal and even disruptive proportions, and companies that systematically cross the line with child labor, weapons or environmental pollution. We cannot dismiss this as unfortunate incidents or collateral damage. Is it not actually the rightist movement that needs to ponder over its sins?
Canoy's answer: "The market fails in a moral sense, not because supply and demand do not come together, but because underlying public values (such as environmental protection or animal welfare) are not sufficiently guaranteed." In other words, markets fail because some market participants fail to internalize all costs of production including (some) (many) moral costs. The virtue-less market continues to function in a formal sense even though non-participants like children and the environment subsidize production of goods and services. In a material sense, however, such a market dissolves the virtues it could--should--promote.

What's the solution according to Canoy? Here he's a bit weak but at least points us in the right direction:
Markets are only virtuous to the extent that societies make them so. This requires a well-functioning government that protects values that are not naturally priced (such as child rights or sustainability). But it also requires that markets are embedded in [a virtuous] society more broadly.
Markets are not virtuous in isolation from other social forces. A judicial power is required that protects property; A democratic system that controls the government; A competition authority that monitors whether there is sufficient competition; A free press acting as watchdog; Social cohesion that contributes to a collective moral compass. Only then can the market be virtuous and encourage virtuous behavior in its participants.
I wish Canoy had addressed the insights of public-choice theory, which takes a Mandeville-ian approach to the governing process but he's certainly right to point us to the notion of non-market public justice. The market cabined by justice is a good thing. A market unconstrained by powers outside itself produces a comfortable (for some, anyway) path to perdition.

P.S. Another good piece here about the utility and disutility of the "economic way of thinking."

28 August 2017

Sears: It's Only A Matter of Time?

In this morning's news feed from the American Bankruptcy Institute:
U.S. department store operator Sears Holdings Corp. is having trouble stocking shelves, as some vendors have fled while others are demanding stricter payment terms because of difficulties hedging against default risk, Reuters reported on Friday. The strain in Sears’ supply chain is exacerbated by the scarcity and high cost of a type of vendor insurance known as accounts receivable puts, which ensure a supplier will be paid even if the retailer files for bankruptcy, according to interviews with Sears’ vendors and insurance brokers. “It’s too expensive,” Michael Fellner, owner of Montreal-based women’s wear company Lori Michaels Apparel & Manufacturing Inc, said of the specialized vendor insurance. He said he stopped shipping to Sears in March, when his insurer stopped providing coverage. Two other small vendors told Reuters they stopped supplying Sears this year because they could not afford the insurance, whose cost spiked after Sears warned in March of “substantial doubt” over its ability to continue as a going concern. They asked not to be identified discussing confidential commercial arrangements.
In other words, the possibility that the parent company of Sears and K-Mart will find itself in Chapter 11 is increasing. As followers who read my many posts on the bankruptcy of Family Christian Stores may remember (here and here if you don't), I have a particular interest in issues related to inventory financing. (A recent post on the related topics of drop-shipping, purchase-money security interests, and consignments here).

Rest assured: If Sears does seek to reorganize, I'll be following this aspect of the case carefully.

24 August 2017

The Prescience of Harold Berman

On pages 83-84 in his magisterial "Law and Revolution: The Formation of the Western Legal Tradition" (1983), Berman wrote:
In the late twentieth century the prehistory of the Western legal tradition takes on special significance. Western society during the past two generations has been characterized increasingly by fundamental divisions of race, class, the sexes, and the generations. Bonds of faith have grown weak and bonds of kinship and of soil have given way to vague and abstract [but increasingly assertive] nationalisms. With the breakdown of stable communities, the West no longer has confidence in law as a way of protecting spiritual values against corrupting social, economic, and political forces. There is, of course, no returning to the past--least of all, to the remote beginnings of Western civilization. Yet it is important, in a time of skepticism, for the skeptics, above all, to ask by what historical route Western man has come to his present predicament, and to confront their own nostalgia for an earlier age [that did not exist, or a secular age to come that will never arrive] ... .

The words in [brackets] are my interpolations.