01 September 2014

Squirrel: It's What's for Breakfast

Alternate title: God's recyclers.

Last week as I was driving down our street I noticed a dead squirrel on the road. No loss, I thought. After all, squirrels are little more than rats with bushy tails. Returning home less than an hour later I noticed cast of turkey vultures alongside our house.
Three vultures in our yard
I suspect the ones with the black heads are younger
Young 'uns

while the more unattractive ones are the adults.
Mom and Dad?

Of course, none of them had stopped simply to pass the time of day. Moving the squirrel from the road to our property gave everyone time for a leisurely breakfast of fresh road-kill.

Heavier than you'd guess
No problem for dad

  Then its was off to sniff out some lunch.

29 August 2014

The Problem For TWU Is ...

... totalitarian libertarianism. TWU, Trinity Western University (about which I've blogged here, here, and here) is a Christian university in Vancouver, British Columbia, that is planning to add the study of law to its curriculum. In order for a graduate of TWU to be admitted to practice, however, the bar councils of each province must accredit the law school. Accreditation would not be a problem if, as in the United States, the only matters at issue related principally to the quality of education. A number of Canadian bar councils, however, have seen fit to adjudge that no graduate of TWU can be qualified to practice law because the university requires its students to sign a pledge acknowledging that they will not engage in sexual activity outside of marriage. (And marriage is defined as between a man and a woman.)

Go here to read the latest news release from TWU. The bar council of British Columbia, where TWU is located, voted overwhelmingly to accredit the school. Members of the bar council, however, have petitioned to reverse the decision, which will appear on the agenda of the bar council on September 26. In the minds of some, an institutional commitment to a position supported by thousands of years of historical tradition, and widely held until little more than two decades ago, renders university graduates unfit to practice law.

The petitioners' position drips with irony: In brief, freedom of sexual association means there can be no freedom of institutional association. Because persons of the same sex are entitled to marry, no one who goes to a school that believes otherwise is entitled to practice law.

Such a state of affairs would have been unimaginable as late as the early 1990s. So what accounts for such a widespread and rapid reversal of opinion?

For a superb answer to that question read Steven Wedgworth's post "And the Culprit Is ... Libertarianism!" Drawing from Mark Lilla's essay in The New Republic, "The Truth About Our Libertarian Age: Why the Dogma of Democracy Doesn't Always Make the World Better," Wedgeworth identifies the problem as a Western-culture-wide turn to "dispositional" libertarianism. (The addition of the adjective "totalitarian" is mine.)

I've previously decried political libertarianism here, here, and here. Dispositional libertarianism is far more toxic. Quoting Lilla,
[Dispositional] libertarianism is not an ideology ... It is a dogma. The distinction between ideology and dogma is worth bearing in mind. Ideology tries to master the historical forces shaping society by first understanding them. ... Our libertarianism operates differently: it is supremely dogmatic, and like every dogma it sanctions ignorance about the world, and therefore blinds adherents to its effects in that world. It begins with basic liberal principles—the sanctity of the individual, the priority of freedom, distrust of public authority, tolerance—and advances no further.
As Wedgeworth observes, dispositional libertarianism is a uniquely blind ideology (not that I have any truck with ideology in any form). Maximizing individual autonomy is the sum unreflexive total of the intellectual content of dispositional ideology. Anyone--and certainly any institution--that isn't committed to a project of such maximization must be excluded from the public square. Hence, while on the one hand committed to radical freedom, a dispositional libertarian is equally committed to not thinking about limits on such radical freedom.

Quoting Wedgeworth,
Most [dispositional libertarians] don’t ask about the unity of virtue in the commonwealth. They just see a problem, see a sort of solution in libertarian prescriptions, and, most of all, enjoy the outlet provided by libertarianism. It has a cash-value pragmatism about it, and so it can unite lots of people without ever reconciling their conflicting beliefs. It helps them to feel better.
Dispositional libertarians do not--indeed, cannot--see the irony noted above. They are so unthoughtfully committed to enjoying their individual freedom that they cannot perceive that freedom is built on a foundation of virtue and, in particular, the public virtues. The concept of virtue is empty in a world in which pleasure-maximizing individuals determine the use of public power.

If individual life has no end or purpose beyond pleasure, then public life is equally bereft of purpose. And an institution that dares to profess an-individual-limiting virtue--like TWU--stands condemned.


28 August 2014

Two or So Contrasting Views of Christians and Contemporary Society

While not diametrically opposed, Daniel Golebiewski's essay, "Christian Traditional Values Prefiguring the Development of Human Rights" (download here) and Lue Yee Tsang's blog post "Eliot and Benedictine Renewal" (link here) take radically different approaches to the political implications of the Christian faith in the contemporary world.

I had hoped after reading the abstract of Golebiewski's essay that he would further the arguments I had made in my symposium article, Looking for Bedrock: Accounting for Human Rights in Classical Liberalism, Modern Secularism, and the Christian Tradition (download here). To my regret, I was disappointed. Instead of a careful historical examination or theological justification for modern human rights, Golebiewski does little more than cut and paste a number of selections from contemporary Catholic "social justice" thinkers. It's not so much that he's wrong but that he doesn't interact seriously with the critiques I and many others have made of contemporary human rights theory and practice.

Tsang's post, by contrast, springs from a thoughtful comparison of two significant thinkers. On the one hand, Tsang takes up the challenge of of Alasdair MacIntyre's suggestion that an appropriate response by Christians to an increasingly antagonistic secularist-dominated world is a new monasticism inspired by the model of Saint Benedict. On the other hand, Tsang posits T.S. Eliot's book published in 1940, "The Idea of a Christian Society," as an alternative approach in which only a state characterized by a tolerant Protestant established Church can assure all citizens of their human rights. According to Eliot, classical Enlightenment Liberalism would not, in the long run, be able to sustain itself.

So, indeed, seems to be the case a few dissenting SCOTUS decisions not to the contrary. Eliot was prescient; classical Liberalism has been swallowed by a Progressivism that is less and less content not to foist its agenda of sexual (and economic) autonomy on all inhabitants of its polity. (Earlier thoughts herehere, and here.) Shall we escape to MacIntryre's neo-Benedictine monastery? Why would anyone expect the corrosive power of autonomy to stop at the monastery walls? And what of Golebiewski's sentimentalistic account of human rights? Are rights grounded in the vacuous notion of social justice adequate to protect those who seek to live life coram deo? Hardly.

But all need not be lost. Following the insights of English Church reformer Thomas Cranmer, Tsang proposes an inversion of MacIntryre's approach: "Thomas Cranmer’s reform of the Daily Office of prayers turned the monastery inside out. As monks became secular divines serving the Church of England’s parishes and dioceses, they took Benedictine spirituality to the layman." In other words, the Church became the church and so influenced society and culture.

(For another thoughtful disquisition on the subject read Peter Augustine Lawler's piece What Is American Conservatism here.)

I have only touched the surface of Tsang's observations (and have ignored Lawler's altogether) and suggestions so I strongly urge folks to read his piece; it is very helpful

27 August 2014

A Primer On Equity

Go here to read a short post by friend Ruben Alvarado on the Roman origins of the legal concept of aequitas or equity. Students of the common law may identify the origins of equity with the English Courts of Chancery and may further believe John Selden's canard that "equity is [no more than] the length of the Chancellor's foot," that is, equity has no formal substance and simply is the whim of the judge who exercises her discretion. Alternatively, those who practice in U.S. bankruptcy courts may associate equity with the historical assignment of jurisdiction for the original bankruptcy legislation in England.

Yet as Alvarado indicates, the Roman concept of equity is much richer and deeper and greatly influenced both the Medieval canon law and even the common law.

For my thoughts on equity you can download God's Bridle: John Calvin's Application of Natural Law (detailing historical notions of equity in both Greek and Roman thought and its place in natural law thinking in Calvin's thought) and, for the more technically minded, Third Time's the Charm: The Coming Impact of the Restatement (Third), Restitution and Unjust Enrichment in Bankruptcy (demonstrating that "equity" in contemporary American jurisprudence is just as substantively "lawful" as the common law).

26 August 2014

Putting Repos Back Where They Belong

WARNING: Inside bankruptcy baseball.

For a short and as-clear-as-I-could-make-it primer in repos (and other obscure financial contracts) read my piece about poor Farmer Rex titled A Fable of Financial Contracts: A Guide for the Perplexed (download here). For a sophisticated argument that the exemption of repos from the effects of bankruptcy should be reduced, read Rolling Back the Repo Safe Harbors (download here). Cribbing from the abstract:
Recent decades have seen substantial expansion in exemptions from the Bankruptcy Code’s normal operation for repurchase agreements. These repos, which are equivalent to very short-term (often one-day) secured loans, are exempt from core bankruptcy rules such as the automatic stay that enjoins debt collection, rules against pre-bankruptcy fraudulent transfers, and rules against eve-of-bankruptcy preferential payment to favored creditors over other creditors. While these exemptions can be justified for United States Treasury securities and similarly liquid obligations backed by the full faith and credit of the United States government, they are not justified for mortgage-backed securities and other securities that could prove illiquid or unable to fetch their expected long-run value in a panic. The exemptions from baseline bankruptcy rules facilitate this kind of panic selling and, according to many expert observers, characterized and exacerbated the financial crisis of 2007–2009. The exemptions from normal bankruptcy rules should be limited to United States Treasury and similarly liquid securities, as they once were. The more recent expansion of the exemption to mortgage-backed securities should be reversed. (Emphasis added.)
Filing bankruptcy stops creditors in their tracks. Collective action is the hallmark of bankruptcy and forms the basis of the "creditors' bargain" justification for corporate bankruptcy. Thus, letting some creditors get paid even though others cannot is fundamentally unfair. Even claims that have a strong moral priority, which ultimately have priority in payment, can't flout the bankruptcy filing. They too must participate in the process.

Beginning in 1978 and proceeding incrementally since then, Congress has given repos, which are undisguised loans, greater and greater freedom from the limits of bankruptcy. It turns out that some creditors are more equal than others, and, not surprisingly, those creditors also happen to be large contributors to congressional campaigns.

So what, you ask? Note the italicized sentence in the abstract. The power of some creditors to get their money out before "others" causes the "others" to try to beat the highly-favored ones to the punch and get their money out even before bankruptcy. A reverse cascade, so to speak. This phenomenon was clearly a contributing factor to the meltdown of several financial firms in 2008, which, in turn, was a large part of the financial crisis whose effects linger to today.

In short, the authors' conclusion is sound and Congress should make the change in the Bankruptcy Code.

Don't hold your breath.

25 August 2014

First Week Complete!

Last week I completed teaching my first week of classes for the fall 2014 semester. Regent Law School starts earlier than most schools but we end a week earlier, which is fine with me.

Between my afternoon and evening sections of Contracts, I have about 60 first-year students. Fewer than the go-go years a half-decade ago but certainly a nice complement. Regent has survived the buffeting of the drop in law school applications better than most of its peers because of its mission. There are many fine law schools across the country including several in Virginia so, unless the school is one of the ├╝ber elite, it must have something distinctive to justify its existence.

Many of Regent's students could attend law school elsewhere so it is the mission that brings them here. That mission, summarized by Dean Jeff Brauch here, presents a vision of law and legal education that transcends analytic abilities, job-ready skills, and even ethical character formation (what's known as "professional identity" nowadays). Grounded in the reality of a transcendent order that bears on all of life, legal education at Regent is quite different than was mine at the University of Wisconsin 30 years ago. And different in a better sense.

Of course, the first week is only one of thirteen and all of us will need to remind ourselves of the importance of that mission in the dark days of winter while taking--and grading--exams.

24 August 2014

What Conservatives Need To Do

Go here to read an excellent piece in the American Conservative by Brian Brown titled "Why Conservatives Should Reform Philanthropy." In short, even though conservatives, following Burke and Tocqueville, often speak of the value of mediating institutions, broadly characterized as civil society, they don't do as much to create and sustain civil society as they could:
While today’s conservatives agree that the space is important, they are much more interested in the “protecting” part than creating and sustaining. They fiercely man the wall, defending the citadel against all threats, while the city inside decays
Thus, instead of conservative-leaning folks at the helm of American philanthropic organizations, most have been led for many years by the progressive sort who seek use modern management theory to team "civil society" with the state to achieve ends that in many respects are inconsistent with an ongoing, vibrant civil society.

Brown goes on to explain the origins of thinking about the importance of civil society, tracing the concept to Cicero, and suggests that a defensive focus, virtually limited to the family (ignoring "the countless other pieces that make up, or have made up, civil society: philanthropy, nonprofit organizations, social entrepreneurship, fraternal organizations, and the like"), means that conservatives have in effect withdrawn from civil society. As Brown puts it, "Conservatives say they want less government, they say they value civil society, but they can’t have less government unless civil society actually does the things it’s supposed to do." And without, committed and time-consuming personal involvement, we can expect the multiple elements of civil society to continue to wither and die.

Brown doesn't spend much time on the question of why conservatives have retreated from the messiness entailed by being part of civil society. I would attribute it in significant part to the virtual eclipse of conservatism by libertarianism. (Go here, here, and here for some comments on the inadequacy of libertarian political theory.) Ideologies are particularly inept when it comes to working in reality and libertarianism is no better than progressivism when it comes to a vision of what civil society is for. Being against the Leviathan state is not enough. Being for a few strands of the tapestry of civil society isn't enough, either.

Philanthropy should be "about effectively structuring and empowering human relationships, not replacing them. But with a few quiet exceptions, conservatives working in the nonprofit sector have mostly gone along with whatever the Big Philanthropy trend happens to be." Effective philanthropy involves working with and learning from others, especially those "others" who are on the ground. Until conservatives do more and squawk less, American civil society, including those strands most dear to most conservatives, will continue to fray.

20 August 2014

Pushing the Envelope in San Bernardino

What's an executory contract and why should I care? Executory contracts are an important species of assets in the world of bankruptcy law. Any contract on which both parties still owe duties to the other are classified as "executory." Thus, if you sell your car to me in return for my promise to pay the purchase price in installments we have an executory contract. As soon as you deliver the car to me, however, the contract is no longer executory because you no longer have any duties, only I do (the duty to pay).

All of this is a long way to explain why collective bargaining agreements are executory contracts. Both the employer and the bargaining unit of employees owe the duties described in the CBA to each other.

And the conclusion that CBA's are executory is a big deal in bankruptcy, especially municipal bankruptcy, because the Bankruptcy Code permits a debtor like the city of San Bernardino, to reject its CBA with, let's say, its firefighters union. Which is precisely what San Bernardino has proposed to do. Read about it here.

But note the reason why San Bernardino is making this move: to cut benefits. The explosive growth in public employee benefits in California occupies a chunk of my article, Municipal Bankruptcy: When Doing Less Is Doing Best (download here). San Bernardino is not seeking to cut accrued benefits because that would incur the wrath of CalPERS, which would be something akin to a death wish. Even seeking to cut future benefits will provoke strong union opposition but the city should prevail. ... which suggests that it's time for the union and the city to make a deal.

19 August 2014

The Trial Before The Trial in Detroit

Although the hearing on confirmation of Detroit's plan of adjustment is not officially scheduled to begin until August 29, a crucial witness testified and was cross-examined yesterday. Apparently economist Robert Cline would have unable to appear during the scheduled hearing and was permitted by the court go go out of turn, so to speak. This is not entirely a surprise since Judge Rhodes had originally scheduled the trial to begin on August 18 and pushed it back only because of a decision by the Sixth Circuit Court of Appeals. (Read about that decision and the one-week delay here.)

In any event, witness Cline testified on one-half of the requirement that a plan be feasible. Feasibility comes in two pieces: Will the city have enough income? And does it propose to pay enough for required municipal services? For a thorough discussion of the first half of the test read  Who Bears the Cost? The Necessity of Taxpayer Participation in Chapter 9 (download here). For the initial piece of my analysis of the second part of feasibility, read Who Bears the Burden? The Place for Participation of Municipal Residents in Chapter 9 (download here).

The principal objector, Syncora, attacked Cline's conclusion that the city would raise enough tax revenue because he failed to consider how Detroit might in fact be able to generate more tax revenue. In other words, Syncora believes Detroit is trying to low-ball its creditors. This argument does not actually go to a plan's feasibility. Instead, it pertains to yet another requirement of confirmation, that a plan be in the best interests of creditors. If you want to know about best interests (and more) read the first in my trifecta of municipal bankruptcy articles, Municipal Bankruptcy: When Doing Less Is Doing Best (download here).

18 August 2014

More Good Advice for the Prime Minister of India

Go here to read an article in the Hindustan Times reporting on the pleas by one of the directors of the Reserve Bank of India (the equivalent of a combined U.S. Federal Reserve Bank and Federal Deposit Insurance Corporation) for enactment of a bankruptcy code in India. I've made the same plea for years (here, here, here, and here) but to no avail. The former Congress-led coalition government wasn't paying attention. Perhaps, however, the more business-minded BJP majority will listen.

Seriously, a market economy needs a system by which to move assets from entities that are losing money to ones that can deploy them in more productive ways. Business bankruptcy is not "moral" in the commonsense way morality is commonly taken. Business bankruptcy is primarily about efficiency--producing more as cheaply as possible. A market economy is well-tuned when as many people as possible can satisfy as many of their subjective desires as possible (backed by money, not force). Whether a market economy produces a virtuous people can be doubted.

What can't be doubted is that India has moved past its constitutional preambulatory statement that it is a "socialist republic." Socialist countries didn't need bankruptcy for business firms, or so it was thought. (China is proving that even nominally socialist countries need a system of bankruptcy but that's a story for another day.) Market economies most certainly need a transparently legal mechanism by which to take ownership of firms away from those whose competence has been tried and  found wanting by the market.

Bankruptcy also has the salutary effect of getting nonperforming loans off the balance sheets of banks, which is why the RBI cares about the problem. Underperforming businesses are bad for the economy. Nonperforming loans to underperforming businesses are bad for banks. Bad banks are bad for a nation's fiscal and monetary system, which is bad for the economy, Etc.

Here's hoping Prime Minister Modi reads my blog.

15 August 2014

Delay in Start of Detroit Bankruptcy Trial (And More Time to Read My Latest Article)

Reuters reports here that Judge Steven Rhodes has pushed back to August 29 the start of the mammoth hearing on confirmation of Detroit's plan of adjustment. Although Reuters doesn't mention it, I'm confident that part of the reason is to give all parties time to digest my latest foray into Chapter 9 municipal bankruptcy, Who Bears the Burden? The Place for Participation of Municipal Residents in Chapter 9 (Part 1) (download here).

Seriously, the delay gives arch-opponent Syncora (here, here, here, and here) more time to prepare (and Detroit more time to make a deal).

The delay also gives the rest of you time to read my initial piece, Municipal Bankruptcy: When Doing Less Is Doing Best (download here), and my soon-to-be-published second salvo, Who Bears the Cost? The Necessity of Taxpayer Participation in Chapter 9 (download here).

14 August 2014

"Service Feasibility," Detroit, and Part 1 of a New Article

Go here to read a Bloomberg report that to the effect that Judge Steven Rhodes has recognized the standing of three suburban Michigan counties to challenge the feasibility of Detroit's plan of adjustment. What's the big deal you wonder? Those who understand the intricacies of the Supreme Court's "standing" jurisprudence might be surprised that two parties that are not creditors and thus have no right to vote on Detroit's plan would nonetheless have standing to challenge it. After all, doesn't clause 1 of Section 2 of Article III of the United States Constitution provide that federal courts may hear only "cases and controversies"? And doesn't a case or controversy carry an implicit notion that a party's pecuniary interests are at stake? And if Macomb, Wayne and Oakland counties aren't creditors, then what pecuniary interest justifies their participation in Detroit's bankruptcy? And just what can these counties proffer that relates to the plan's "service feasibility", anyway?

For an answer to the second question go to my recently published first third of an article that will be presented at Campbell Law Review's symposium on municipal bankruptcy in October. The article's working title is Who Bears the Burden? The Place for Participation of Municipal Residents in Chapter 9. You can download it here. The first part of the article tries to answer two questions: To what traditional or contemporary municipal services are residents legally entitled? And how much funding for these legal duties must a plan of adjustment provide? (If you want a running start on the notion of feasibility in municipal bankruptcy, go here to read an article that will be published this fall in the Widener Law Journal: Who Bears the Cost? The Necessity of Taxpayer Participation in Chapter 9.)

For an answer to the first question--Who has standing to object to a plan's feasibility?--well, you'll simply have to wait until the entire article is published. But if you want a hint, recall two things: bankruptcy court's are not Article III courts and the "public rights" doctrine.