|Man Without Qualities
Saturday, June 04, 2005
The Man Without Qualities is not exactly the biggest fan of Professor Lawrence Lessig, as a flip through these web pages will demonstrate. Professor Lessig's whooping and hollering over the Bono Copyright Extension Act, which he tried to overturn on preposterous constitutional grounds that were completely rejected by the Supreme Court in Eldred v. Ashcroft, was one of the most annoying recent distractions in intellectual property law. He actually persuaded a gaggle of economists - some of them Nobel Prize winners - to endorse a silly Amicus brief based on a crude "discounted present value" argument that the Court essentially rejected with the retort: "It is doubtful, however, that those architects of our Nation, in framing the Â?limited TimesÂ? prescription, thought in terms of the calculator rather than the calendar." How Professor Lessig can look any of those economists in the face defies explanation. And Eldred is by no means Professor Lessig's only sin. His friend-of-the-court brief submitted in support of Grokster in its just-argued Supreme Court case against MGM asserts that Grokster should be free of liability even where its users are criminally punished. But the brief is largely anecdotal, and does not even admit that he is in fact challenging long established basics of American copyright law, still less explain why that established approach is wrong. At some point in his life as aging enfant terrible Professor Lessig has got to learn that tabulating what he considers "costs" of a law he does not like is not an effective legal argument, although it may work for media effect. In court, he must show that his version of the costs and benefits balance is the one Congress chose, or indicated the courts should choose (or, in the case of Constitutional challenge like Eldred, that the balance Congress chose is not allowed). He hardly ever does that. He generally seems to be too transfixed by the media effects of his own cute, pseudo-visionary anecdotes. To get this problem under control, he might start by purging from his various biographical sketches all those silly photos of himself staring into space or the luminescence of a flat screen: it is just too hard to tell from those shots whether he was transcendentally inspired or just stoned.
Consider this pearl from the brief:
For anyone offering large files - for example, high quality video - the cost of providing access through the traditional web-hosting model of distribution is prohibitive. The bandwidth costs of distributing a single movie to a single user, for example, can be the equivalent of more than 10,000 people accessing just one webpage. Kevin D. Werbach, The Implications of Video P2P on Network Usage, Video Peer to Peer: Columbia Institute for Tele-Information (2005), at link # 7. Without p2p technologies, the Internet would be an expensive vehicle for distributing such content.That's all very nice, except that the holders of a film's copyright (and its licensees) are the only ones who should be distributing that film, on the internet or anywhere else - and those copyright holders are mostly on the other side of this case from Grokster. If the economic interests lie where Lessig says they do, why is there no group comparable to the assembled American studios (who support MGM) supporting Grokster? Why does Lessig have to rely on Mr. Rogers and a few rock stars for support? This part of the brief isn't so much legal reasoning, it's more like a confession. It goes without saying that the brief comes not within a parsec of explaining why Congress effected these remarkable changes without ever noting it was doing that. In short, the brief is a typical, complete mess.
Lessig's shallowness infatuation with the "new" is not confined to his area of specialization: he even supported the hollow tort lawyer and pseudo-populist John Edwards (he of the non-existent stump speech warm coat) in the last election cycle as someone who offered something seriously "new."
But now Michael M. Rosen, who practices intellectual property law in San Diego, actually finds a few things Professor Lessig has said that may be worth salvaging. But just a few.
Even better, Mr. Rosen draws attention to some really top drawer material from University of Chicago Law School professor Richard Epstein in the form of a cogent and persuasive response to a typical Lessig screed entitled "The People Own Ideas!" Mr. Rosen correctly notes that Professor Epstein ably disposes of much of Lessig's argument (Lessig offers a rebuttal, too). He certainly does. Not surprisingly, the Epstein article is a superb, polite, broad and near total demolition job. The whole thing is worth reading in detail - especially as a corrective to all the Lessig-influenced palaver one finds on the web and the blogosphere.
The Lessig rebuttal could be skipped, but one should read it just to be able to say one did.
Could a deep swoon of the euro help Gerhard Schroeder by making German goods and services cheaper in the export market? The euro is swooning - and just may melt down completely:
An economic adviser to Jose Manuel Barroso, the President of the Commission, gave warning that the situation was "dangerous" and that some countries would want to leave the currency. For the first time financial markets are speculating that the euro may collapse, by offering variable long-term interest rates on government debt in different eurozone countries. ...For all that, a true euro meltdown is unlikely, but could a deep swoon help one desperate politician: Gerhard Schroeder? There have been signs that Schroeder will try to formally "run against the Euro." But it's unlikely that Schroeder can win the election by campaigning against the Euro. Everyone in Germany knows that his government has embraced the Euro in the past. How can he make his change of mind plausible? It's true that Schroeder's rather unpleasant character lends itself to turning on former and appropriate allies - such as the US - for political gain. But running against Bush's war was different: the war was overwhelmingly unpopular in Germany and everyone found Schroeder's opposition to it believable. The present situation is totally different.
Some of the current economic malaise is directly attributable to the rise of the Euro and ECB Unfortunately for Mr. Schroeder, most of the world market, his own national economy and public opinion trends don't work fast enough for him to experience much of a surge before the likely elections in September. Even if the Euroswoon lasts and orders for German exports pick up, it would take many months for the psycholgical effects from those developments to transform a substantial piece of the electorate. So the most likely effect of the EU and Euro trouble will probably to just generally aggrevate the impression that things have not gone well for Germany on Mr. Schroeder's watch. In other words, the big winner in Berlin from the recent Eurotroubles will likely be Angela Merkel.
As noted in a prior post, Warren Buffett and his Berkshire-Hathaway are likely to be among the biggest short-term financial losers from the recent demise of the EU Costitution. Berkshire has over $20 Billion bet against the dollar - much of it in favor of the euro. A continuing deep Euroswoon sure seems to likely to correlate with a deep Buffett swoon.
UPDATE: From the Wall Street Journal:
Some studies by the European Central Bank show that a 5% drop in the value of the euro against the currencies of major trading partners can add -- if sustained over one year -- between 0.5 percentage point and 0.9 percentage point to economic growth. Late Friday in New York, the euro was ... down about 10% against the dollar from the euro's record at the end of last year. .... A depreciation of the euro could result in stronger economic growth than expected in the 12-nation currency bloc. In new forecasts last week, the ECB pegged growth at roughly 1.4% for this year and 2% next year. But that forecast is based on a euro of $1.29 -- nearly seven cents, or 5.5%, higher than its level late Friday. .... It isn't clear how long and to what extent the current political turmoil will continue to weigh on the currency. ... "The question is: What is temporary? What is permanent?" said Otmar Issing, the ECB's chief economist, speaking to reporters in Frankfurt Friday about the euro's recent drop. The comment suggests the ECB isn't ready to revise forecasts based on the recent moves in the exchange rate. ....
A helpful and knowledgeable reader e-mails with a good observation regarding the post below:
By way of counterargument, one might note that Morison is the one and only person to have been convicted of illegally disclosing classified information to the media. And he was pardoned! (in January 2001 by the outgoing President Clinton).I completely agree that the government in its normal configuration is very reluctant to prosecute or persecute media representatives who do these things. But, despite many claims to the contrary, much of this law is pretty clear: Media representatives entering into standing agreements with government employees with the intent of inducing them to convert government confidential information are committing serious federal crimes unless the matter is covered by a "whistle blower" statute. Of course, the media reveal confidential leaks routinely - but where the leak is substantially more than a mere "dump" by the leaker the media representatives involved (and their sources) are just getting away with it. That's true of a lot of tax dodgers, too: Andrew Fastow's wife, for example, was one of very few people to serve time for what she did on her taxes. I'm not aware of a case in which a federal judge or jury has dismissed or acquitted a reporter on well supported conspiracy or aiding and abetting charges respecting theft of confidential government information - especially where the information was leaked pursuant to the reporter's agreement with a government employee who was not a sainted "whistle blower". Isn't that the kind of thing that the darkest versions of the Plame case hypothesize? On the other hand, I'm not aware of "unspecial" federal prosecutors bringing such charges. A combination of prosecutorial discretion and presidential pardons is pretty unreliable protection for the media.
So I'm not so sure that Morison being the only one nabbed so far gives much comfort. For example, Mrs. Fastow found out that the time and circumstances were right (Enron), so off she went to the pokey - despite her young children and the weak charges against her. And the law has gotten a lot stricter on disclosure of confidential government information since Deep Throat days. If the right circumstances arise (some period of national stress arising out of an act of terrorism, for example) the disclosure of confidential information situation could get very ugly very fast.
Even before such a development, things could get very nasty. An ordinary US attorney is unlikely to prosecute, but it's much more likely that an independent prosecutor or a special prosecutor (Mr. Fitzgerald, for example, is a US attorney and a special prosecutor) would do it. His decisions in the Plame case are not those of a federal prosecutor working for the government in its normal configuration. He has been deliberately made mostly unaccountable. The incentives on the now-defunct federal "independent prosecutors" were worse. I think it was largely a mixture of coincidence and strategic considerations that none of the independent prosecutors went after media representatives - but it could have got very bad.
What Mr. Fitzgerald is doing now in the Plame case is a small example. In a bizarre short-sighted political miscalculation, Democrats, the New York Times and other media outlets started howling for investigation of the Plame "leak" - even though it would obviously lead right to them. That stupidity (it's not too strong a word in this case) pretty much neutralizes the media's ability to effectively criticize Fitzgerald as he goes after those reporters. The Times efforts to do so, for example, have been risible.
Much worse than anything contemplated by Mr. Fitzgerald could have been done to the Washington Post and its reporters by an independent prosecutor even at the time of Deep Throat. It's ironic that independent prosecutors were once much beloved by the media, until a Democratic president became the target of so many independent prosecutor investigations - perhaps another example of media thanatos! Of course, another of the many ironies would have been that Nixon would have had no direct responsibility for the resulting damage to the media had that occurred.
The media have obvious mechanisms for holding an elected officer to account - especially with respect to media revelations that put such an officer (or people working for that officer) in a bad light. That's not true of independent prosecutors - perhaps the biggest threat to freedom of expression this country has seen for a while. Thank God they're gone and their threat was never realized!
Now if we could just get rid of the "special prosecutors" and get the media to hold elected politicians (the president) to account for the acts of his non-special Justice Department operatives without destroying the media's own credibility and effectiveness with transparent political agendas. But there's no perfect world. The world with the normal configuration of the government as designed by the Framers generally just seems to be the best of the lot.
Friday, June 03, 2005
Daniel Okrent (penultimate sentence on this page):
If [Paul Krugman] replies to this statement, as I imagine he will, I’ll let him have what he always insists on keeping for himself: the last word.Herr Doktorprofessor Paul Von Krugman (first sentence of his response to Dan Okrent's response on this same page):
Just one last word.No wonder Herr Doktorprofessor is "on vacation." Maybe he will have some time during his "vacation" for a little poetry reading. Perhaps some Robert Burns:
Mickey Kaus helpfully sums up the current state of Deep Throat conspiracist play:
Slate contributor Edward Jay Epstein isn't giving up on the "composite" theory of Deep Throat. ... Hmmm. Doesn't Slate contributor David Greenberg denounce as "insidious speculation" such "reckless Deep Throat guesswork" thatBut Tim Noah seems pretty convinced that Mark Felt's leaks to Woodward and Bernstein at the Washington Post broke federal law:plays havoc with history. The premise of the fabrication and composite and silent coup theories is that accepted history is counterfeit, that the truth about the past can be ferreted out not by studying official records, but by seeking out what remains hidden—which, in conspiracist thinking, is always hidden deliberately.
The likeliest statute under which Felt could have been prosecuted would have been Title 18 USC §641, which prohibits theft of public money, property, or records. The statute is a nasty piece of work, prohibiting not just theft but government leaks. (The relevant language is "conveys or disposes of any record … or thing of value of the United States." Never mind that the people to whom the leaks are "conveyed" are the very taxpayers who paid for the information to be gathered in the first place.) The statute was on the books in the early 1970s when Felt did his leakingFrom the other side of the political spectrum, Gary Aldrich asserts that "Mr. Felt broke numerous federal laws, but received immunity from prosecution by hiding behind the skirts of two reporters at The Washington Post." Woodward has been at pains - on his recent Larry King interview, for example - to argue that he does not believe that Felt's leaks broke any laws. Mr. Woodward's reasoning in reaching that conclusion was rather, shall we say, casual. He essentially argued that Mr. Felt hadn't taken any FBI records or other materials that were covered by statutes criminalizing personal appropriation of government assets. But this is absurd. The statute quoted above covers anyone who "conveys or disposes of any record … or thing of value of the United States." Since the FBI information appropriated by Mark Felt and leaked to the Washington Post was a major factor - perhaps the major factor - in propelling each of these reporters to high profile lucrative careers, and simultaneously settling the Washington Post on a higher, more profitable and influential level on the national media totem poll, it's more than droll for Mr. Woodward to suggest that Mr. Felt's purloined information was not a "thing of value." Mr. Woodward stands to make still more money from the purloined "not-a-thing-of-value" information when his book comes out in July. (Heck, the right person in possession of that information could even have used it to make a killing in the securities and currency markets at the time.)
Where prosecutors have moved in the past, the federal courts have not been easily persuaded that the First Amendment or other public policies offer much shelter for those who appropriate government information unless they have a heart quite a bit cleaner that Mr. Felt's appears to have been. For example:
In 1984, satellite photos depicting the construction of [an] ... aircraft carrier ... were leaked to Jane's Defence Weekly. Following a landmark trial, the leaker-- Samuel Loring Morison, a Navy intelligence analyst-- ended up serving two years in jail. Incredibly, the charge against Morison was espionage, marking the first time that anyone had ever been convicted of a crime, let alone espionage, for providing classified information to the media. (United States v. Morison, 604 F. Supp. 655, appeal dismissed, 774 F.2d 1156 [4th Cir.], cert. denied, 109 S. Ct. 259 ).The court specifically rejected the defendant's First Amendment defense to his conviction under Title 18 USC §641, noting that "[w]e do not think that the First Amendment offers asylum . . . just because the transmittal was to a representative of the press." That means you, Messrs. Woodward and Bernstein. Of course, the media keep giving themselves a "pass" for this kind of thing, as in the article from the Secrecy & Government Bulletin, published by the Federation of American Scientists*, quoted above:
The worst fears engendered by the Morison case did not come to pass, and today most national news outlets routinely report classified information, fueling the congressional oversight process and adding an essential dimension to government accountability. Furthermore, this role is all but universally recognized and accepted.Sure, buddy. Just keep saying that to yourself. Just like you keep saying that you have a right to keep your sources secret even when a federal prosecutor subpoenas their names. They can't send you to jail for contempt, can they?! Actually, they can.
But Messrs. Woodward and Bernstein - and, for that matter, the Washington Post itself - have another agenda item in all this: conspiracy and aid-and-abetting laws apply to thefts of public property under Title 18 USC §641. Mr. Felt did not just dump his information on the Post. The Post and its reporters entered into a long-term agreement with Mr. Felt pursuant to which he converted that public information for reasons quite other than a desire to inform the public. He was nicely aided and abetted by his arrangement with the Post and its reporters, and by the fury his purloined information occasioned.
Yes, indeed. It appears that Messrs. Woodward and Bernstein, and the Post, were likely all guilty of federal felonies here - not just Mr. Felt. Does that take off a bit of their shine? Not that anyone is suggesting they should be, or should have been, prosecuted (even without the statutes of limitations). But such considerations may have played a role in the desire on the part of the Post and its reporters to keep their source secret over the years.
* This passage originally misindentified the article as coming from the Washington Times.
Thursday, June 02, 2005
The Madness Of The Enron Dance II
A larger sense of Kurt Eichenwald's (and the Times') seriously unbalanced state of mind on Enron matters can be found in these passages from his article:
After yesterday's Supreme Court reversal of Arthur Andersen's conviction for obstruction of justice in the Enron case, there were rumblings among former Andersen partners and some legal analysts that this was the proof that the accounting firm should never have been indicted, much less found guilty. ...[T]he reversal makes a retrial legally feasible, though unlikely ... [T]he Supreme Court is essentially arguing, there is no way the appellate courts could know if the Andersen jury cleared the analytical hurdles necessary to conclude that the firm was guilty. None of that, legal experts said, means that the Supreme Court ruling has cleared Arthur Andersen or demonstrated anything about whether it should have been indicted.But for all that, the latest development in Andersen's case is obviously strong evidence of innocence. Why would the government have insisted on obtaining obviously rancid jury instructions thereby exposing the conviction to the obvious huge risk of the reversal that has now occurred to the prosecutors' huge embarrassment? Isn't it obvious that the prosecutors probably did that because they were very much concerned that they could not have obtained the conviction if the jury instructions had been correct? And isn't it equally obvious that a prosecutor should not indict a defendant which had not intended to engage in wrongdoing? The Justice Department should not be spending resources indicting defendants who had not intended to engage in wrongdoing, in this case or almost ever. The class of crimes not including a factor of "wrongful intent" (or something amounting to wrongful intent) worthy of indictment is tiny.
What about his assertion that "the Supreme Court ruling has [not] cleared Arthur Andersen or demonstrated anything about whether it should have been indicted?" Literally, what Mr. Eichenwald writes is technically correct. But it is also tendentious and highly misleading. For example, consider the fact that is also and equally true that the Supreme Court ruling has not cleared Mr. Eichenwald or demonstrated anything about whether he should be indicted.
And, if there is a re-trial of Andersen and the firm is acquitted, it will literally and equally be true that the "not guilty" verdict will not "clear" Arthur Andersen or demonstrate anything about whether it should have been indicted. A "not guilty" verdict simply means that the government was not able to demonstrate guilt beyond a reasonable doubt in the eyes of that jury. Such a result doesn't "clear" the defendant - consider O.J. Simpson - or demonstrate anything about whether the defendant should have been indicted.
What is utterly missing from Mr. Eichenwald's considerations is the essential element of the presumption of innocence. It is the presumption of innocence that "clears" Mr. Eichenwald of every crime of which he has not been duly convicted - and it is that same presumption of innocence that clears Andersen of every crime of which it has not been convicted, including every single crime for which it was indicted in this case. In this country we don't properly ask a defendant for the proof that the [defendant] should never have been indicted, much less found guilty. We rely on the presumption of innocence for that kind of thing. And we do that because hundreds of years of experience have demonstrated to every non-hysterical mind that it is by far the best course of action, even though a criminal trial almost never "clears" the defendant.
The Supreme Court is "essentially arguing?" No, the Supreme Court is not "essentially arguing" anything. The Supreme Court held as a matter of law that the Andersen jury instructions did not comply with existing law.
And what the heck is to be made of Mr. Eichenwald's unexplained crack that "the reversal makes a retrial legally feasible, though unlikely." Isn't this an important case? Doesn't it stand for a principle much bigger than its narrow facts? Of course it is important, of course the Justice Department, the SEC and corporate regulators generally have a lot at stake, and of course this case stands for principles much bigger than its narrow facts.
The real reason that "retrial [is] legally feasible, though unlikely" is that if the jury instructions are fixed for a retrial then Andersen's conviction is legally feasible, though unlikely.
Wednesday, June 01, 2005
Dutch voters just overwhelmingly rejected the European constitution by a vote of 63 percent to 37 percent in a consultive referandum. The turnout was 62 percent, exceeding all expectations. The Dutch "No" vote is expected to further weigh on the euro, which has slipped hugely since the French rejection of the treaty on Sunday.
The biggest individual short-term loser may by Warren Buffett. From Forbes:
Warren Buffett['s] ... Berkshire Hathaway has a $20 billion bet in favor of the euro, the pound and six other foreign currencies.... [H]e is not about to cover his short position on the dollar. Buffett said that he began buying foreign currency forward contracts when the euro was worth 86 U.S. cents, and kept buying until the price reached $1.20. It's now worth $1.33. Buffett said he is not adding new positions now but has been rolling over contracts as they mature.... Now some of [his] assets are antidollar assets. Example: In 2002 he bought bonds of Level 3, a telecom company, that were denominated in euros. In 2000 Berkshire picked up MidAmerican Energy, a gas pipeline company. ... But here's a long-term perspective. He says he may hold foreign currencies "for years and years."
Mr. Buffett can hold his euro positions for as long as he likes, but American accounting rules pretty much require that Berkshire Hathaway mark those positions to market in its SEC filings. And with $20 billion on the line, the aftermath of the Dutch vote and gathering European economic storm clouds have got to take their toll on Berkshire-Hathaway:
The euro's 10.1 percent slide to start this year is its steepest since the first five months of 2001. Europe's common currency is retreating as the region's economy falters. The economic expansion in the U.S. is poised to exceed Europe's for a fourth straight year.
In the Forbes magazine interview linked above, Mr. Buffett defended his currency speculation in various ways, including this:
A continuing fall in the dollar "could cause major disruptions in financial markets. There could be unpredictable side effects. It could be precipitated by some exogenous event like a Long-Term Capital Management," Buffett says, referring to the 1998 collapse of a steeply leveraged hedge fund.So very true. And that's one of the problems with currency markets (or, as insiders call them, the "casinos of the very rich"): they are subject to all kinds of unpredictable side effects and exogenous events.
You know, unpredictable side effects from exogenous events like the Europeans unexpectedly rejecting the EU Constitution that everyone thought would be adopted easily only six weeks ago - and the euro falling to an eight-month low against the dollar. And how about unpredictable side effects from exogenous events like stories claiming that the German finance minister and the president of the Bundesbank were present at a meeting at which the possible break-up of European Monetary Union was discussed, and that the German Bundestag commissioned a report on the legal repercussions of a country wishing to leave the EMU, reports that Germany’s finance ministry had to publicly label “absurd?” [More unexpected side effects from exogenous events: Italy should consider leaving the single currency and reintroducing the lira, Welfare Minister Roberto Maroni said in a newspaper interview on Friday.]
Last quarter, Berkshire lost over $310 million in currency trading because of a stronger dollar over that quarter. But the dollar has done even better against the Euro this quarter than last quarter - as indicated in this chart. Berkshire Hathaway's overall currency positions are complex. They go beyond mere currency futures, into euro-denominated bonds (euro-interst rates are expected to go up following the French and Dutch "no" votes) and "imbedded" euro positions in investments. So it's tough to quantify exacty what the consequences of the strongly rising dollar will be for the company. But it's unlikely to be less than a very serious set back - especially if Mr. Buffett has been putting his money where his public doomy-gloomy dollar riffs are (not always true of the Sage).
Mr. Buffett famously owns homes in Omaha and Laguna Beach, California. I have no idea where he is at this moment. But if he's in Laguna, perhaps he's watching these unpredictable side effects from exogenous events from his own comfy living room:
A landslide sent 18 multimillion-dollar houses crashing down a hill in [Laguna Beach,] Southern California early Wednesday as homeowners alarmed by the sound of walls and pipes coming apart ran for their lives in their nightclothes. At least four people suffered minor injuries.
New York Times reporter Kurt Eichenwald scribes his "analysis" of yesterday's Supreme Court decision overturning the Arthur Andersen conviction:
[I]n truth the Supreme Court's judgment simply underscores the significance of a rule in white-collar cases: a jury cannot properly convict without first being required to conclude that a defendant had intended to engage in wrongdoing. ... In her instructions to the jury, Judge Harmon "failed to convey the requisite consciousness of wrongdoing," Chief Justice William Rehnquist wrote in the unanimous opinion. "Indeed, it is striking how little culpability the instructions required." ...
The article - especially the last sentence quoted above - makes one question whether Mr. Eichenwald has actually read his own book on the Enron disaster. The Economist magazine read that book, CONSPIRACY OF FOOLS - A True Story. As I have noted previously (here and here), the Economist (along with the New York Times ) reviewed and construed that book as absolving Messrs. Lay and Skilling of exactly the kind of criminal knowledge and intent that the Supreme Court now points out is necessary for a conviction - although not of gross negligence and incompetence - as in this passage:
If Mr. Eichenwald is broadly correct, it will make depressing reading for the prosecutors who have accused Enron's former top bosses, Kenneth Lay and Jeffrey Skilling, of being the brains behind this massive fraud. Mr. Eichenwald's criminal mastermind is Andrew Fastow, Enron's chief financial officer, who has already admitted numerous offences and is likely to be the main witness against Messrs Lay and Skilling. Mr. Eichenwald describes how Mr. Fastow and his henchmen, principally Michael Kopper, created a series of investment vehicles - such as LJM, the Raptors and Chewco - that bought assets from Enron, supposedly to reduce the firm's risk but in reality to generate huge fees and profits for Mr. Fastow and his chums. Mr. Eichenwald leaves the reader with the strong impression that Mr. Fastow lacked even a basic understanding of the risks involved in this off-balance-sheet strategy. As for Mr. Lay, he seems to have known presidents George Bush senior and junior far better than he knew what was going on within Enron. Right to the end, he is described as failing to grasp the severity of the problems facing the company he built. Mr. Skilling, too, seems entirely unaware of the crimes being orchestrated just below him in the corporate hierarchy - drinking too much, and swinging manically between jovial over-optimism and deep depression. His decision to quit suddenly as Enron's chief executive soon after taking the job (and just weeks before the company's problems started to become clear) comes across as entirely in character and unrelated to the fraud.
If Mr. Eichenwald book (as construed by the Economist and his employer, the Times) is correct, successful prosecution of Messrs. Lay and Skilling has now been rendered all but impossible by the Supreme Court decision in Andersen. Yet Mr. Eichenwald, and much of the rest of the crowd of anti-Enron medieval dancing maniacs, just don't seem to understand that.
They just seem to be refusing to understand.
My guess is that relations between the Enron prosecutors and the legal teams defending Messrs. Lay and Skilling took a very different turn yesterday. And I'll bet they turned a lot more than necessary to accommodate a bit of a "raised hurdle" for the government.
But I have little doubt the media dancers, at least, will just keep flailing no matter what, as their predecessors did:
A group of people were seen to dance uncontrollably in the streets, foaming at the mouth and screaming of wild visions. They kept on dancing until they collapsed from exhaustion, but even then they flailed about in agony until forcefully restrained. The dancing caught on, and spread rapidly ...
Mr. Eichenwald's article today suggests a kind of agony - notwithstanding the forcible restraint imposed on Enron "analysts" yesterday by the Supreme Court and (in Mr. Eichenwald's case, for example) the conclusions of their own logic. What's mere logic and Supreme Court precedent where there's a dance to be danced!?
Don Luskin has launched the Jayson Awards — named after Jayson Blair, the Times reporter who admitted to a pattern of fraudulent and plagiarized stories — established to recognize Paul Krugman’s most outrageous statements in six categories.
Read the whole thing. It's absolutely hilarious for anyone who has followed the journalistic "career" of Herr Doktorprofessor Paul Von Krugman and seen it for what it is, and should be absolutely excruciating for anyone who has followed that "career" and fallen for Herr Doktorprofessor's palaver. And read the post in the light it is offered: While Herr Doktorprofessor is trying desperately on the pages of the Times itself to fend off Daniel Okrent's obviously correct (and rather understated) charge that "Paul Krugman has the disturbing habit of shaping, slicing and selectively citing numbers."
I also suggest reading the post - and Herr Doktorprofessor's column of one's choice - while pretending that the column actually appeared as part of, say, a 10-K filed with the Securities and Exchange Commission, or as part of some other disclosure to which the fraud standards of Rule 10-b-5 applied:
It shall be unlawful for any person ... To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading... in connection with the purchase or sale of any security.
Rule 10-b-5 pretty much makes the disturbing habit of shaping, slicing and selectively citing numbers unlawful in connection with the purchase or sale of any security. Of course, Herr Doktorprofessor isn't selling securities. He's selling newspapers and political cant. Lucky thing, that is - for him. Herr Doktorprofessor "defends" himself in agitated style on the Public Editor pages. But nobody familiar with securities litigation could think for a moment that such arguments as Herr Doktorprofessor offers up would amount to substantial defenses in a case brought under Rule 10-b-5 (or, for that matter, to ward off a fraud charge from Attorney General Spitzer), especially in the post-Enron era.
Krugmanian Sample: I could explain why 77 percent, not 64 percent, is the right number, but does it really matter? Herr Doktorprofessor says: What's a roughly 25% overstatement between a fiduciary and his beneficiary, anyway? Well, it makes sense to Herr Doktorprofessor!
In the mean time, just for comparison, there's this from today's Wall Street Journal:
American International Group Inc. released its thrice-delayed annual report with a 2.7% hit to net worth .... All the major credit-ratings services in recent weeks have downgraded American International Group's once top-notch debt, raising borrowing costs and removing some of the competitive advantage AIG long had held ....The accounting adjustments ... slashed AIG's previously reported net income for 2004 by 12%... Overall, the restatement reduced AIG's net income from 2000 through 2004 by ... 10%. ...
Picky, picky, picky!
Tuesday, May 31, 2005(0) comments
... but it's Luskin (here and here and here and just keep scrolling!) and Maguire who make the case. YOUCH!
Yes, Paul Krugman is truly America's most dangerous liberal pundit. But the danger he poses is mostly to the credibility of the New York Times!
POSTSCRIPT: Daniel Okrent's frustration with Herr Doktorprofessor's repeated acts of intellectual dishonesty should be read in detail.
Those expressions of frustration, together with Mr. Okrent's original parting shot, raise the interesting question: Why is the New York Times allowing this exchange of accusations between its own operatives to appear on its pages? I cannot recall anything like it in any major media outlet, ever. And, perhaps more interestingly still, can it be the case that the views here of either Herr Doktorprofessor or Mr. Okrent are those of Pinch Sulzberger? - and, if so, what would that mean? Here's one take from "Z Magazine," a source with which I have no particular sympathy, but which has the virtue of being blunt about the issue:
Okrent simply doesn't like Krugman's views. And I suspect that Okrent is expressing the views of his bosses here. When they brought Krugman on as a columnist Times officials thought they were getting a free-trade-friendly economist who would stick to his free trade guns and possibly offer some modest criticisms of rightwing economics. But Krugman blossomed, and became a liberal-left critic of broad scope and exceptional intellectual force. It would have been hard to fire him, so one compromise solution was to add the rightwing David Brooks as an offsetting regular and perhaps hope that Krugman would some day make an error that might justify termination. He hasn't done that yet, but Okrent's smear may be an early step in a termination process.Could Z Mag be right? Could the Krugman/Okrent exchange indicate that Herr Doktorprofessor is being positioned by the Times for ejection from its pages? As a general matter, I would say it is risky to assign the sympathy of an employer to the expressions of a departing employee (Mr. Okrent) and against those of the retained employee (Herr Doktorprofessor, at least for the moment). But the Z Magazine argument has in its favor the fact that it explains a few curious recent developments at the Times. First, as noted above, there is the fact that the Times not only let Mr. Okrent take his parting shot, but is allowing him to trade barbs with Herr Doktorprofessor. In the process Herr Doktorprofessor is coming out as more than a bit of a crank - perhaps even as a kind of obsessive stalker (that is, a metaphorical stalker; one must be so careful in dealing with Herr Doktorprofessor!) of poor Mr. Okrent, as in this passage:
I was at home when he began bombarding me with outraged demands for retraction and apology; I'd completed my tenure as public editor the preceding week, and did not have any files with me. .... If he replies to this statement, as I imagine he will, I'll let him have what he always insists on keeping for himself: the last word. I hate to do this to a decent man like my successor, Barney Calame, but I'm hereby turning the Krugman beat over to him.Dear me, would any Upper East Side coop board in New York let Herr Doktorprofessor buy into the building after reading that? I don't think so. Why did the Times run it? And doesn't it dawn on Herr Doktorprofessor that Mr. Okrent is gone - so their exchange of barbs asymmetrically meaningfully savages Herr Doktorprofessor alone?
Z Magazine says that it would be difficult for the Times to fire Herr Doktorprofessor. That is likely true - at least from a public relations standpoint. The same is probably true of Big Mo, the only other Times columnist criticized by Mr. Okrent who is still at the Times - Bill Safire now having retired. For the fact is that these two columnists, for all their faults, have high profiles and produce widely e-mailed columns. Those are both obvious measures of columnist recognition - as, for example, Greg Mankiw recently observed when recently asked why Herr Doktorprofessor's output had deteriorated so much after joining the Times:
It's strange what's happened ... When he became a New York Times columnist, he decided to abandon writing about economics as an economist does. .... I guess if you're a columnist, you want to be widely talked about and be the most e-mailed.
But those high profiles and widely e-mailed columns are unlikely to survive the pending ghettoization of the Times columnists in the TimesSelect service Venn diagram, as Mickey Kaus points out:
If you drew a Venn diagram of the market niche targeted by the NYT's new TimeSelect service, it would require three circles.
The area of overlap is going to be small. And one thing that will certainly affect is how many people read and, especially, e-mail the columns interred by this move. Won't this removal of the most visible indicia of ongoing recognition give the Times a lot more latitude as to which columnists it retains. It's curious that Maureen Dowd and Herr Doktorprofessor so often find themselves grouped together as particular embarrassments to the Times by its critics. Of course, Big Mo ("MoDo" to some) will always have her aging Clinton-era Pulitzer, which presumably gives her some extra measure of job security. But Herr Doktorprofessor doesn't have one of those. In any event, where is Big Mo? - why hasn't she responded to Mr. Okrent? The Times helpfully explains:
Maureen Dowd is on book leave. Matt Miller, a senior fellow at the Center for American Progress and the author of "The 2 Percent Solution," will be a guest columnist for the next four weeks.
So it looks like Ms. Dowd really can't easily respond at the moment. If Z Mag is right, is that a bad sign for her?
One thing the coming ghettoization of the Times columnists will do is bring considerations of business and finance and market-appeal closer to those people and their writings. It is said that the Wall Street Journal opinion pages are profitable - but those pages have quite a different tone than the loopy and leftist Times version. And putting opinion behind a paid wall may or may not reduce the influence of the walled columnists. The Wall Street Journal, for example, puts its reporting behind a paid wall, but it has left some (but not all) of its editorial pages (OpinionJournal) freely available. That suggests that the influence-and-demographic calculation for walling off a columnist is pretty complex. And then there is the interesting, quiet purge of many Wall Street Journal columnists who were not solidly under the editorial pages - and who sometimes had a more liberal slant than the Journal's opinion pages columnists. Remember Al Hunt? He's around elsewhere. There were others - and they were mostly behind that paid wall. But their disappearance or reduction suggests that their economic contribution (as distinguished from their profile and e-mail recognition) was not enough.
Will the economic contributions of Herr Doktorprofessor and Big Mo to the Times' bottom line be enough once they disappear behind that wall? These two columnists have a particular ability to annoy and outrage influential and savvy readers in exchange for not very good analysis popular mostly in the further reaches of the Democratic Party and beyond. Is that a good thing for the Times bottom line?
Will Herr Doktorprofessor and Big Mo flourish in their little Venn ghetto, or will they soon be sharing office space with Al Hunt?
As noted here previously, the Enron scandal has been shrinking a lot. Today it shrank yet another big notch.
When Arthur Andersen was convicted at the height of the post-Enron hysteria, the Man Without Qualities noted that the jury instructions that allowed that conviction were - to put it charitably - a dog's breakfast.
Today the United States Supreme Court overturned the conviction of the Arthur Andersen in a unanimous opinion:
[T]he jury instructions at issue simply failed to convey the requisite consciousness of wrongdoing. Indeed, it is striking how little culpability the instructions required. For example, the jury was told that, "even if [petitioner] honestly and sincerely believed that its conduct was lawful, you may find [petitioner] guilty." The instructions also diluted the meaning of "corruptly" so that it covered innocent conduct. .... The instructions also were infirm for another reason. They led the jury to believe that it did not have to find any nexus between the "persua[sion]" to destroy documents and any particular proceeding.
So to obtain a conviction of Arthur Andersen, the prosecutors had to rely on a definition of "corrupt" that allowed the jury to convict even if Andersen was found to have honestly and sincerely believed that its conduct was lawful. And, to make matters worse, the trial court judge allowed Andersen's conviction under a statute that criminalizes only acts taken to corrupt a "proceeding" without any "proceeding" being specified.
It is the opinion of the Man Without Qualities that such a definition allowed by the Andersen trial court could not be assigned to the word "corrupt" by anyone not swept up in a hysteria comparable to a medieval dancing mania. I believe that a careful reading of the Supreme Court decision reveals that Court's sheer astonishment at the preposterous, hideous injustice that transpired in the courts below. It's a tribute to the Supreme Court that every single Justice understood. But it's frankly appalling that the trial judge and the normally sound Fifth Circuit Court of Appeals didn't understand.
Monday, May 30, 2005
The French rejection of the EU Constitution is just the latest symptom of a general and inexorably spreading economic anxiety throughout Europe. The Netherlands is now poised to reject that same document. The European system is seriously broken, and may be close to being beyond repair without huge social dislocation. That cannot be correctly said of the US, which has its own, much less severe issues. But while the European electorate and its elite all know (or have a panicky, suppressed suspicion) that the problems are much larger than is officially admitted, few are willing to embrace the necessary reform. In the mean time, the problems just keep getting worse, and the efforts to conceal and deny the extent of those problems themselves just keep growing. Here's another amazing example from the Wall Street Journal:
STOCKHOLM -- Jan Edling, a little-known labor-union economist, is suddenly in the policy spotlight with his assertion that Sweden's real jobless rate is really closer to 20% than the official 5.5% rate.
Some are calling the French rejection of the EU Constitution a "disaster" - which, for some people in the European elite, it is. But my guess is that observers looking back from a few years in the future will see the French vote of May 29 as but a mere harbinger of what is to come. Like the first swallows at Capistrano.
Or, more suggestively, the first irate crows in "The Birds."