More Banking Mystifications

By James Kwak

Apparently, both parties have platform planks calling for the reinstatement of the Glass-Steagall Act of 1933, the law that separated investment banking from commercial banking until it was finally repealed in 1999 (after being watered down by the Federal Reserve beginning in the late 1980s). Bringing back Glass-Steagall in some form would force megabanks like JPMorgan Chase, Citigroup, and Bank of America to split up; it would also force Goldman Sachs to get rid of the retail banking operations it started in a bid to get access to cheap deposits.

In his article discussing this possibility, Andrew Ross Sorkin of the Times slips in this:

“Whether reinstating the law is good idea or not, the short-term implications are decidedly negative: It would most likely mean a loss of jobs as part of a slowdown in lending from the biggest banks.”

I looked down to the next paragraph for the explanation, but he had already moved on to another unsubstantiated claim (that the U.S. banking industry would be at a competitive disadvantage). So, I thought, maybe it’s so obvious that Glass-Steagall would reduce lending that Sorkin didn’t think it was worth explaining. I thought about that for a while. I couldn’t see it.

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That’s So PC

By James Kwak

In an article about political correctness in contemporary politics, Amanda Hess of the Times writes:

“Politically correct” was born as a lefty in-joke, an insidery nod to the smugness of holier-than-thou liberals. As Gloria Steinem put it: “ ‘Politically correct’ was invented by people in social-justice movements to make fun of ourselves.”

As far as I can tell from publicly available sources, Amanda Hess went to college during the George W. Bush administration, so I take it she is working from sources (like Gloria Steinem) here. But she’s not far off the mark.

I went to college in the late 1980s, which is when the concept of political correctness was spreading. My first recollection of political correctness is of a friend saying, “That’s so PC,” talking about someone else who was always sure to participate in the left-wing cause of the day. “Politically correct” absolutely was a phrase that lefties came up with to make fun of themselves. And it did not have the connotation of criticizing other (politically incorrect) people that it has today. If you were PC, that just meant that you were against the Nicaraguan contras, in favor of divesting from companies that invested in South Africa, against discrimination against people with AIDS, in favor of a nuclear freeze, and so on. Those were the issues–not the vocabulary used by rich white frat boys.

In other words, being politically correct meant adopting the appropriately subversive position on every issue. It was a faintly derogatory term because it implied that you didn’t think about issues independently; you just lined up on whatever side the left was supposed to line up on. “Politically correct” was a way to describe the herding behavior of left-wing people–not a way to criticize right-wing people.

Today, political correctness has become one of the favored bogeymen of the Trump campaign and of conservatives in general. People of my generation could genuinely be either baffled or aghast: It was a JOKE! Don’t you get it? But etymology is not destiny, of course. Conservatives have changed political correctness into something it wasn’t back in the old days, and that’s just the way it is.

But in its original meaning–the idea that you have to toe the party line, to be the hardest of the hard core–it is among conservatives that political correctness reigns supreme. On virtually every issue–taxes, Obamacare, abortion, Medicaid block grants, Dodd-Frank, guns, climate change, even the theological status of Barack Obama and Hillary Clinton–every Republican falls in line for fear of offending the omnipotent Base. Do you really think that every Republican member of the House and Senate honestly believes that human activity has not had an impact on the climate? Do they honestly believe that allowing anyone to carry a gun makes the world a safer place? But they have to pretend that they are as stupid as they sound for fear of offending Exxon Mobil, the NRA, and the conservative activists who really do believe that climate change is a fantasy concocted by intellectuals and that the best solution to crime is more guns.

So yes, political correctness is a problem. It’s a problem among Republicans. As for Democrats, who can’t even figure out if we are for or against the TPP, we can’t even get our act together enough for political correctness to be an issue.

Good-Bye, SSRN

By James Kwak

You may know that SSRN, the shared web server for social science and law papers, was recently bought by Elsevier, a publishing company that charges what many people think are outrageous amounts for subscriptions to its journals or access to individual papers. Recently, Elsevier appears to have started taking down papers from SSRN without notifying the authors, even when the authors in some cases had valid permission to publish those papers on SSRN.

Elsevier’s defense is that this was a simple employee mistake (maybe like forgetting to rewrite direct quotes from someone else’s speeches?): “A couple of processing emails were sent incorrectly and in the wrong order.” I’m not buying it, though. Even if the wrong email was sent, they were still taking down papers unilaterally without bothering to ask if the author had the appropriate rights. If they’re not doing it in response to a DMCA notice, and they have people doing it manually, they could at least send the email first before deleting the paper.

If you’re interested in the issue, there is some detailed analysis in the comment section of PrawfsBlawg. In any case, it was enough for me to stop using SSRN. In my view, SSRN is really just ugly, clunky PDF hosting anyway. The main way I use it is as follows:

  1. Find out about paper through some better filtering mechanism (email, blog, Twitter, or, most often, Google).
  2. Google the title of the paper.
  3. See link to paper on SSRN.
  4. Follow link and download paper.

As you can see, nothing about that process relies on SSRN; if the paper were hosted anywhere else within reach of Google’s robots, it would work just as well. In theory, SSRN could be a place for people to actually discover relevant work, but for the most part it fails miserably at that because (a) it’s not as comprehensive as Google, so you can’t rely on a search there and (b) its usability is stuck in the mid-1990s.

So anyway, I uploaded my papers to a new page on my personal website, which allows you to download PDFs just as well as SSRN does. It’s hosted by, which means that you could do the same with about ten minutes of setup effort and another minute or so per paper, all for free. Or I imagine you could use bepress or SocArKiv. It really doesn’t matter. As long as your paper is somewhere on the Internet that is visible to Google, it will work just as well.

Now: How can I completely eliminate my papers from SSRN (not just take down the PDFs) so they don’t appear at all? It’s not at all apparent from their horrible user interface.

Update: Thanks to anon for pointing out the MODIFY button. SSRN’s support page discusses a REMOVE button that doesn’t actually exist. Now my papers are all inactive on SSRN.

Big Tents

By James Kwak

“This is a Hillary Clinton, Elizabeth Warren, Bernie Sanders party. Our party has moved right, their party has moved really left.”

That’s Paul Ryan on the Democratic Party. In Vox, Matt Yglesias points out that Ryan is being disingenuous, but only  “in part.” Yglesias goes on to say this:

“In a fundamental way, Ryan is correct — in 2016, the center of gravity in the Democratic Party is much closer to Bernie Sanders than it was in 2006 or 1996.”

Except, that just isn’t true.

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CEOs, Politics, and Other People’s Money

By James Kwak

I am, on paper, a corporate law professor, because—well, I guess because I used to work for a corporation (two, actually), and the books I write sometimes have corporations in them, and I teach business organizations as part of my day job. (Secret for those looking for a job as a law professor: UConn was looking for someone to teach corporate law, and I wanted the job, so that’s what I said I could do.) But I’ve made it this far writing exactly one corporate law paper (my summary here), and that was actually about corporate political activity—namely, whether and how shareholders can challenge political contributions that they think are not in the corporation’s interests.

It is well known by now that, in Citizens United, Justice Kennedy committed one of the true howlers of recent Supreme Court history:

With the advent of the Internet, prompt disclosure of expenditures can provide shareholders and citizens with the information needed to hold corporations and elected officials accountable for their positions and supporters. Shareholders can determine whether their corporation’s political speech advances the corporation’s interest in making profits, and citizens can see whether elected officials are “‘in the pocket’ of so-called moneyed interests.”

The obvious problem is that there is no disclosure of corporate contributions to 501(c)(4) social welfare organizations and 501(c)(6) associations (such as the Chamber of Commerce), and even contributions to 527 Super PACs can be easily laundered through intermediary entities whose owners are secret. The second, slightly less obvious problem is that, under existing standards, there is precious little that shareholders can do to “hold corporations accountable” for political donations. Given the traditional deference that courts show to decisions made by corporate directors and officers, the latter have pretty much free rein to do what they want with their shareholders’ money.

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Mysteries of Money

By James Kwak

Have you heard this story before?

The first assets deemed safe were coins made of precious metals.  As a technology, coins had many problems: they could be clipped or, debased by the sovereign. They had to be assayed and weighed to determine their value in the best of times; whole currencies would collapse in the worst, when the “fraudulent arts” gained the upper hand. Coins were bulky, too, and vulnerable to theft. But they worked: they were always liquid, their edges could be milled to prevent clipping; and, for long periods of time, coins served as fairly reliable stores of value.

As trade expanded, problems with coins gradually led to the creation of paper money – privately-produced circulating debt in all its early forms: moneys of account; bank notes and bills; goldsmith notes; and merchants’ bills of exchange, all of them convertible on short notice into coins.

That’s David Warsh, paraphrasing Gary Gorton, who’s really just recounting conventional wisdom, handed down from economist to economist since time immemorial.

Except it leaves out the most interesting part of the story.

I’ve been reading Christine Desan’s book Making Money, on the history of money in late medieval and early modern Europe. It’s a fascinating story, full of both meticulous historical detail and compelling conceptual arguments about the relationship between forms of currency, political authority, and the creation of the modern state. Continue reading

Candidates Who Matter

By James Kwak

Nine months ago I endorsed Larry Lessig for president because, as I wrote at the time, “If we want real change in the long term, we have to fix the system. That means real equality of political participation, not just the formal equality of one person one vote.” There is no more fundamental issue we face than a political system that is distorted by money from top to bottom. (If you think Donald Trump somehow disproves this idea, consider that fact that, right now, the campaign topic getting the most attention is the Trump campaign’s financial situation, and the strongest evidence that Clinton is likely to win is her financial superiority.)

Larry Lessig’s campaign, unfortunately, never got off the ground, in part because the Democratic establishment bent its own rules to keep him out of the debates. That’s one reason why I’m not giving money to Hillary Clinton or the DSCC or the DCCC—that and, frankly, none of them have prioritized political reform. Sure, I want Clinton to win, but I can’t afford to donate to everyone I’d like to see win. In the long run, what we need are candidates who will put political reform first—not second, or third, or fifteenth.

So here are a two. One is Zephyr Teachout, a law professor better known for embarrassing Andrew Cuomo by winning a third of the vote in the 2014 New York gubernatorial primary despite being outspent by seventy gazillion to one. She’s also an expert on corruption in the political system, having written a serious history of corruption in America. Teachout is running for Congress in New York’s 19th district (which has a primary on Tuesday). She’s already famous, so enough said. (There’s also a documentary about her run against Cuomo that’s raising money on Kickstarter, and could use donations.)

The other is Sean Barney, a classmate of mine at the Yale Law School who is running to be Delaware’s congressional representative. Sean has made political reform his top priority, and he supports a six-for-one public match for small contributions, a new Voting Rights Act, and non-partisan redistricting commissions to end gerrymandering of congressional districts. He’s also been endorsed by Larry Lessig. (And he’s a marine who was almost killed by a sniper in Fallujah before going to law school.)

Running for Congress is hard. Running on a platform of undermining the current system . But if we have a Congress that is wholly dependent on big money, we’re never going to roll back the influence of big money. At the end of the day, whether your big issue is climate change, or workers’ rights, or financial reform, that’s the only thing that matters.

I’m sure there are other candidates out there who are also dedicated to political reform. If you care about the political system, with the June 30 reporting deadline coming up—ironic as it may sound—these are the kinds of people you should consider donating to. So that one day, whether or not you can afford the donation will no longer matter.