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Free Speech: The Fairness Doctrine
Friday, Nov. 13
3:15 p.m. – 4:45 p.m.
State Room

– Prof. Thomas W. Hazlett, Professor of Law & Economics, George Mason University
– Mr. Seton Motley, Communications Director, Media Research Center
– Prof. Jamin Ben Raskin, Director, Law and Government Program, Washington College of Law, American University College of Law
– Moderator: Hon. David B. Sentelle, U.S. Court of Appeals, D.C. Circuit

Mr. Seton Motley, Media Research Center

Radio act was designed to regulate transmissions for public and those from ships, etc

No limitations on ideas

-Fairness doctrine rescinded in 1987

-Since it was rescinded, we’ve had a blossoming of new ideas in new forums, which wouldn’t exist without rescinding the doctrine

-You should not apply rules against free speech on one venue and not others

-Going forward we need to be wary of limiting

-The left wants to shut down voices with which they don’t agree. The jig is up

-The battle today is in the concept of media diversity and localism, not the fairness doctrine

(Rebuttal)

Public interest best judged by what the public is interested in

They’ll vote with what they listen to

Liberal radio has failed

The voice of public is being heard because they’re voting with what they listen to

It’s not the case that the people owning the airwaves is the same as the government owning it

Hon. Jamin Ben Raskin, American University Washington College of Law

-Just because everybody’s being treated the same way, it doesn’t mean it fair

-The Fairness Doctrine was Constitutional, but whose values need to be updated for today

-Unfairness doctrine: when public resources are converted to private use

-FCC created to alleviate the problems associated with over-competition in early days of radio

-Broadcasters required by FCC to evenhandedly offer time to groups with differing views

-Supreme Court held that this is a scarce resource, so there’s nothing wrong with placing conditions on its use

-Conservatives don’t seem to care about the “decency” rules

-The policy was Constitutional and warranted, but that doesn’t mean it worked very well

-Enforcement a tough administrative task

-But that doesn’t mean it’s partisan

(Rebuttal)

I consider myself a very strong defender of free speech

Are you arguing for a total deregulation?

If you we’re going to deal with current situation, we need to think about media conglomeration, which poses a greater threat to free speech than the fairness doctrine could

-The right of reply was designed to give people who were attacked an opportunity to respond

-No one is arguing to bring the fairness doctrine back

-This debate is a proxy for current debates about core issues like media conglomeration

Prof. Thomas W. Hazlett, George Mason University School of Law

–Red Lion decision notes that if there had been information that the decision would have a chilling effect, that it would have been decided differently

-Lifting the restraint of the Fairness Doctrine in 1987

-There isn’t really a debate about whether there is a chilling effect associated with the FD

-People who want the fairness doctrine typically say that they want to chill certain views

-The fact that there is a finite number of radio licenses is a complete myth

-They are no different than any other property right

-It’s an imaginary concept that has stumbled all the way to twenty-first century

-Public interest doctrine came directly from the FCC

-Limits on competitive entry helped radio corporations and regulators,

Now it’s time for the first amendment to give the rest of us what we want

-Airwaves should be treated as any other commodity, as private property

-We should turn the FCC into a court, which would rule on property rights

-Cable news looks a lot more like free speech that the 1970s when news came through three lookalikes, whose executives were having dinner at the white house, by the way

Address by the Honorable Michael B. Mukasey

2:15 p.m. – 3:00 p.m.

Introduction

Tells how Mukasey, before being confirmed as Attorney General, said that if President did anything against Constitution he would tell him to change course or he would quit.  So when Congress tried to stop wiretapping, he refused to seek confirmation votes, stating that the statute cannot change the Constitution, which allowed President to defend the nation.

General Mukasey stands to a standing ovation

Commends introducer for fighting against injustice rather than suffering, at considerable expense to himself.

Jokes that he will pick up where he left off last year.  (audience laughter)

References the news this morning that principle operative and mastermind of 9/11 will be brought to U.S. to stand trial.  He considers the decision to be unwise and shows a refusal to accept that we are at war with a religiously idealistic people determined to kill us.

But first some good news on intelligence gathering:

Amendments passed in 2008 have been beaten back, and intelligence gathering authorities have stayed in place. Foreign security specialists were used to devise plans for tracing international money transfers.  DHS said they had used the same type of technique under Bush, what an official called continuity we can believe in. (audience laughter)

More after the jump.

(more…)

Religious Liberties

• Prof. Alan E. Brownstein, Boochever and Bird Chair for the Study and Teaching of Freedom and Equality, University of California, Davis, School of Law
• Prof. Ira C. “Chip” Lupu, F. Elwood and Eleanor Davis Professor of Law, The George Washington University Law School
• Hon. Michael W. McConnell, Richard and Frances Mallery Professor of Law, Stanford Constitutional Law Center, Stanford Law School
• Moderator: Hon. Brett M. Kavanaugh, U.S. Court of Appeals, D.C. Circuit

Kavanaugh

Understanding the scope of the establishment and free exercise clauses has always confounded us, and we hope the panel today can provide some clarity.

McConnell

I am going to address topics of conventional wisdom that liberal democracy requires secularization, and that our establishment and expression clause are the legal embodiment of that movement.  I suggest that is not historically what the 1^st amendment was about.  Instead it was about preventing the govt. from controlling the formation of public opinion.  It is more akin to free enterprise and free press than to any specific secularization impulse.

The founders’ wanted govt. controlled by public opinion, not other way around.  Establishment should be close relative of free press clause, to prevent govt. from controlling institutions that form and share opinions.  Disestablishment is not aimed at theocracy, but instead govt. control over church for govt.’s own purposes.

Parliament actually authorized the King James Bible.  The thirty-nine articles of faith of the Church of England were voted on by Parliament.  Church was thoroughly under control of state, which used church as an instrument of social control, to inculcate the idea that good Christian subjects would be obedient to the King.

In US, Church of England was disestablished in every county it was established (every county south of PA).  People were taxed to support church and people were required by law to attend church.  Govt. in some states controlled who were ministers.  This is the type of establishment that the Constitution took aim at.

No public schools until 1830’s so the issue was not even on the table for Founders.  Our new America was not going to have any institutions for the control of public opinion.

Disestablishment was based on understanding that separating church and state depended on limited govt.  Quotes Loche on boundaries b/t civil govt. and church.  Loche’s “wall” b/t church and state was identical to the idea that the proper sphere of govt.  is to protect population against domestic and foreign fraud and violence and to maintain order of society, not education, charity, arts, economy.  However, once the govt. crosses this boundary, relations b/t church and state become more difficult.

Conflict b/t free exercise and free enterprise.  Maybe there should be a free enterprise clause. LOL

Mercantilists believed govt. should control resources of society, much like free exercise leaves religion free of govt. control, b/c religion is more likely to flourish if left alone.

Wealth of Nation’s has a chapter about the establishment of religion.  Smith wrote that religious officials whose pay was guaranteed by state would not be as enthusiastic.

Freedom does not depend on limiting religious influences, rather freedom depends on limiting govt. control over religion.

More after the jump.

(more…)

Labor: Wall Street, Labor Unions, and the Obama Administration: A New Paradigm for Capital and Labor?
Friday, Nov. 13
12:00 noon – 2:00 p.m.
Chinese Room

– Mr. Harold Meyerson, Editor-at-Large, The American Prospect
– Ms. Amity Shlaes, Senior Fellow for Economic History, Council on Foreign Relations
– Mr. Damon A. Silvers, Associate General Counsel, American Federation of Labor-Congress of Industrial Organizations
– Prof. Todd J. Zywicki, Foundation Professor of Law, George Mason University School of Law
– Moderator: Hon. Steven J. Law, Chief Legal Officer and General Counsel, U.S. Chamber of Commerce

Moderator: Hon. Steven J. Law opening remarks:

quoted from Amity’s “The Forgotten Man” – likened the current economic decline to the decline of the Great Depression

Mr. Harold Meyerson:

unemployment is up, underemployment is up, people are working fewer hours or lower paid positions than they were before.

in the under 35 population, only 31% feel that they can save money for later; used to be 52%

in the 60+ population, higher % are working than in past years and many are pushing off retirement even further

retirement is becoming a luxury of the elites and unreachable to the average worker

recently there has only be a 5% increase in unionization – it is too hard to unionize in the private sector due to laws that favor private corporations over unions

is there a changing paradigm?  He hopes so.  He’d like to see greater enforcement of the minimum wage laws and enactment of laws more favorable to unionization so the youth entering the work force can

if we continue to slip behind, we will no longer be the world power we have been used to

Ms. Amity Shlaes:

in 1937 song “Nice work if you can get it” gives insight into the conditions of the Great Depresion

that was a reference to prostitution, but the song caught on and is romanticized

late 30’s created a new social divide – the depression had lasted too long – what explains the longevity?

the labor price was too high

in the 20’s companies faced with economic decline either laid off workers or cut wages – when the economy lifted, they hired back workers and providing raises again

in 1929, President Hoover encouraged companies to keep wages high so that workers would have money to spend

companies who laid off were more hesitant to rehire back

the Wagner Act caused wages to increase

the country saw a depression within a the Great Depression

the plan was perverse – wages were 20% higher than they should be based on trend

unionization in the 30’s did not help labor – it helped some workers – overall work hours were down (fewer were getting paid, fewer were employed) and wages were up (for the few who were employed, they had more money than the market trend)

are we headed to a new paradigm?  fears that we are following the old paradigm with regard to labor-price matters

proposed a new song title “Nice economy if we can get it”, but we can’t

Mr. Damon A. Silvers:

all kinds of arguments about history are possible when those who lived it are dead

he sees 4 big problems that have to be addressed:

1. wage-productivity gap.  post-war America wages and productivity were tied tightly together until the 80’s when they separated.  they were tied again briefly in the 90’s, but separated again.  the equation is complicated by wages in the form of healthcare insurance, but that high cost to employers is barely an increase in wage to employees since that itself is an overinflated cost.  Understanding the gap is crucial to understanding the pressures on modern employees.
2. structural trade deficit.  China’s money is pegged to the U.S. dollar – this is not an accurate picture of worth.  they lend us money, we purchase imports from them, they lend us more.  the “compression of global risk spreads” is problematic.  Risky lending without charging a premium for the risk leads to inaccurately priced loans.
3. financialization of our economy.  financial activity is an intermediate function and should not be 40% of our economic base.  quotes the President of the AFL-CIO as saying “finance should be the servant to the economy, not its master.”
4. our approach to energy.  both a big problem and an opportunity.  our energy use policies are not sustainable, but there is the opportunity to take the lead in developing new energy policy.

How do we relate this to capital, labor, and government?

labor and business have a joint interest in solving – we need a solution that is viable in a global economy – other nations increasingly are gaining a comparative advantage in various industries

we have to ask ourselves, what kind of society do we want to live in?  what are the outcomes of the changes of the 1930’s?

the social conflict that is engendered by labor-market flexibility is undesirable and dangerous

these changes are not how you would want society to be founded

we need a strategy to deal with these 4 structural problems

he hopes the Obama administration is attempting to do that, but is unsure that the political system is prepared to accept a solution

Prof. Todd J. Zywicki:

Fears that we are entering a new paradigm that will lead to long term stagnation, social inequity, and decline

the paradigm threatens the rule of law specifically regarding contracts and property law

threatens the rule of law:

demonstrated by the Chrysler case – he is disgusted by this case

the lynch pin of bankruptcy has always been that the priority goes to the secure creditor

in Chrysler, secured creditors received 29¢ to the dollar, while the UAW received 50¢ to the dollar

the UAW essentially stole money from the secured creditors (rousing applause)

perhaps even more distasteful is the way the government played a role in Chrysler

banks who were on TARP basically rolled over and allowed the demise of those who were not – they were safe because they were on “government welfare” – they acted in “moral cowardice”

as soon as we start the game of allowing some emergencies to overrule property rights, we lose the rule of law

threatens the economy:

there is an increased risk of lending and additionally have to consider the political risk

http://online.wsj.com/article/SB124217356836613091.html

if dealing with a company with political risk, and they have credit problems, and can’t get private loans, the government will have to bail them out again

Fannie & Freddy are prime examples

when corporate giants become too big to fail, they gain the comparative advantage over everyone else because they don’t have to worry about financing – they know the government will have to bail them

if the top 10 are too big to fail, what happens to number 11?  obviously they merge with another smaller company in attempt to become one of the top 10 – perverse incentive to rent sharing

long term threat to free enterprise

President Obama is obviously not an economist – when he learned about Public Choice, but he must have mistaken what he was taught – Public Choice theory is a cautionary tale, not a how-to manual

what is perhaps most pernicious is the rent extortion the government is engaged in by using politics to play corporations against each other

what is essentially happening is the government is saying to corporations “we have a right to destroy you, and you have a right to buy back your life”

wrap up:

Ms. Amity Shlaes:

(regarding a question comparing the U.S. unemployment to Europe)

“Why do we want to be like Europe where you has no future?”

remarks on the posttests in France over labor law and the response was to say that the youth cannot have what their parents had – this points to the very problem of a social welfare system – it denies the youth that which they are most entitled to: economic growth and prosperity in their own lives

Prof. Todd J. Zywicki:

it all comes to basic economics

in a recession, either have to cut wages or cut employees – there are only 2 options – you cannot both keep the employees and continue to pay them the same wages

unions create economic rents – just look at the number of discrimination cases from the 1950’s where a union is the defendant – initially unions were run based on favors and who knew who

since 1963, women who had been excluded through the union networks entered the work force

Ms. Amity Shlaes:

If past is prologue:

in the 1950’s we were the only power around – there were no economic challenges – we were protected – that’s why there was no disparity between wages and productivity

so, how do we deal with that now?  protectionism is not the answer

freedom, education, and freedom to become educated are the answers

the teachers union is the union to support above all

Financial Services: Re-Privatization of the Financial Sector
Friday, Nov. 13
12:00 noon – 2:00 p.m.
East Room

– Mr. John A. Allison, Chairman, BB&T Corporation and Distinguished Professor of Practice, Wake Forest University School of Business
– Prof. William Black, Associate Professor of Economics and Law, University of Missouri-Kansas City School of Law
– Mr. Michael Paese, Director of Government Affairs, Goldman Sachs
– Mr. Alex J. Pollock, Resident Fellow, American Enterprise Institute
– Mr. Andrew J. Redleaf, Founding Partner and Chief Executive Officer, Whitebox Advisors LLP
– Moderator: Hon. Jerry E. Smith, U.S. Court of Appeals, Fifth Circuit

Smith, Moderator

Starting in 2008, govt. took unprecedented steps to intervene in financial sector.

Amount of credit risks borne by taxpayers has risen dramatically over the last year.  As we recover, the question is when to re-privatize.

Pollock

After quoting Hobbes, he asks how we can put the large “leviathan” we have created “on a diet.”

First TARP: equity investments in over 600 companies.  Is there hope it can withdraw?  Govt. likes having expanded control over financial entities.

Quotes Jesse Jones, who ran RFC in the 30’s and “insisted it be operated on a business basis.”  Pollock thinks this role as a fiduciary for the taxpayers is a good idea.

The investments in Freddie and Fannie (F&F) seems to be a dead loss.  They must be broken into 3 pieces: dead loss; a truly-private mortgage finance business; and a truly-govt. entity requiring congressional appropriations for whatever it does.

Fed’s balance sheet, which is mostly the balance sheet of the Fed Reserve Bank of NY, looks remarkably like a commercial bank’s balance sheet.  Deposits at Fed are higher than $1 trillion, which is the equivalent of putting money in the mattress.

I propose Fed should have negative interest rates in excess reserves.  This would encourage private banks to do something else with the money, so maybe the Fed would have to buy fewer commercial assets.

FDIC has liability that exceeds its assets, so it wants all available capital to new banks to be enforced, but we need the opposite.  To encourage the idea we need banks to be unencumbered by TARP, regulation, etc. This could help Leviathan lose a few lbs.

Black

Opens with a joke about there being two refugees from federal loan bank system at one end of the table.

I want to concentrate on uninsured portion of financial industry: mortgage bankers. They followed 4 step plan:  Grow like crazy, make terrible loans, leverage out the wazoo (sp?), and put no loss reserves on the books.  If you do all 4 you are guaranteed to report record profits, no risk, guaranteed as long as bubble is inflating.

If I want to grow rapidly, the standard way is to buy market share by reducing your yield.  But, if I grow by making loans to people who can’t repay I can expand demand rapidly and charge them premium interest rates.

Then you must gut underwriting standards and change organization so the rules are that anything goes, instead of encouraging people to block bad loans.  People were actively discouraged if they raised objections on loan quality.

This produces bizarre results. Genius of voluntary exchange is that both parties benefit… this is pretty darn good.  But, we have the reverse occurring.  Both principles were made worse off.  No mortgage bankers exist anymore, essentially.  People who received loans took a big hit too.  There has been no greater destruction of working class wealth than bringing them into houses they cannot afford at the absolute top of a bubble.  They are virtually all under water on mortgages from 2005-2007. We showed Gresham’s Law.
Gresham’s dynamic hurts the traditional values and entire moral tenor of business.  This is not deposit insurance.  What makes mortgage bankers for almost ten years make loans that would destroy the institution? (open question to audience, no takers).

How many agree this is strong evidence against Community Reinvestment Act? (10 hands for, 0 against).  No coincidence the “liar loans” were made by this portion of the market.

Allison

We need to understand the cause of financial problems

1. Crisis is result of govt. policies.  U.S. is mixed economy, which varies by industry.  Most regulated part of the economy caused our problems… not a coincidence
2. Bubble formed and grew and then affected other areas.
3. Market participants made serious errors that made crisis worse.

If highway is falling down, government owns it. If financial system is falling, government owns it.

Getting rid of normal, cyclical failures pushes the problems into the future.

Greenspan created a negative real interest rate: rate of inflation higher than interest rate.  Bernanke then created an inverted yield curve: short term rates are higher than long term rates – very destructive for banks.

FDIC seems benign but it creates loss of discipline.  Gives examples.

Clinton allowed F&F to have half their portfolios in housing market, which woried economists, who said reaching these goals could take out the financial system within 10 years…

F&F could never exist in free market and drove everyone out of prime business, then created broken model, which spilled into capital markets and people copied this model.

Barney Frank is mentioned and some groans and boos can be heard.

So what is the cure? Yes, market participants who screwed up should face consequences, but a better long-term strategy would be to move to private backed banking system based on private monetary system. We should go back to gold standard – it’s harder to find, you can’t just print it (crowd laughs).

We will eventually go bankrupt, there is no reason to believe politicians will impose discipline – this is the real risk of having a Federal Reserve.

We should raise capital requirements for banks, shift risk from taxpayers to shareholders.  Choice would be raise capital or shrink.  Citigroup has failed to raise capital and been bailed out three times, and each time they’ve come back and done worse.

We need to eliminate about 90% of regulations – this is what makes system so inefficient.

(Prolonged applause, he was definitely a crowd favorite.)

Redleaf

4 points:

1. I see this story as a about a dozen “too big to fail” institutions, about 12 – F&F at the top and Goldman at the bottom.
2. We’ve mostly had a policy of “strategic ambiguity” toward too big to fail institutions.  We have been deliberately ambiguous about who would get what help in what circumstances.  Term used now is “effectively guaranteed,” but what does this mean?
3. Disclosure in financial sector is absolutely horrible.  Where to start?  Bear Sterns’ income statement was about 10 lines long – we don’t know much about their assets.  Publishing would put the taxpayer at disadvantage, they said.  But they had term financing as long as they need it, so there’s no reason they couldn’t provide line-by-line detail.
4. The root of the solution is disclosure, commensurate with public involvement in financial institutions.  Move away from strategic ambiguity toward explicitly unguaranteed or explicitly guaranteed money.