The Skelos Reversal: How Do You Tell The Corrupt Politician From The Non-Corrupt?

I first dabbled in commenting on the Dean Skelos prosecution within days after the first criminal complaint was issued against him back in May 2015.  In that first post on the subject, I characterized the charges against Skelos as "remarkably thin."  However, a jury convicted him.  Three days ago the Second Circuit Court of Appeals vacated the conviction.  (That link is to a news article from New York Magazine. The opinion itself is available on the court's PACER system, to which you probably do not have access.)  The vacatur of the conviction does not preclude re-trial.  

For non-New Yorkers who don't recognize the name, Skelos was -- up until he was charged with corruption -- the (Republican) Majority Leader of the New York State Senate.  If it somehow surprises you that the State Senate in this bluest of blue states is (and long has been) controlled by the Republicans, you will start to get an idea of why it might have been a priority for the Democrats to get rid of Skelos.  Skelos's prosecutor was Preet Bharara, whose job, prior to being named by Barack Obama to be U.S. Attorney for the SDNY, was counsel to Chuck Schumer.  

Was the Skelos prosecution just nothing more than the most naked of naked politics?  You can be the judge.  In that May 2015 post I compared the allegations in the criminal complaint against Skelos to some of the well-known facts as to Hillary Clinton -- facts in which Bharara could not have been less interested.  For example:

Seems that Skelos managed to get his son a consulting gig that paid about $200K over four years, $50K or so a year.  Chelsea Clinton somehow got a $600K per year job at NBC News -- a job that even loyal Clinton supporter New York Magazine called "fake."  Of course, nobody took the trouble to tape every phone conversation that Bill or Hillary may have had with NBC or affiliates over the last several years to see if there was any "pressure."     

The important question is, by what criteria can you tell which of these and other actions by politicians is corrupt and which is not?  In the May 2015 post (and elsewhere) I have expressed the view that politics is inherently corrupt; but our legislators and prosecutors and judges seem to be of the view that they have some system or criteria to tell the difference between the corrupt and honest pols.  Today, let's look at the background and the result of the Skelos case, and see what guidance we can get.

My conclusion is, the federal law of political corruption provides no meaningful basis for making a useful distinction between what conduct of politicians is corrupt and what is not.  This hands completely unacceptable discretion to prosecutors to use the laws to get rid of whichever politician they don't like.

As readers of my previous posts know, the current state of the law in this area derives from prior efforts of the U.S. Supreme Court to put some boundaries on the ridiculously vague anti-corruption statutes enacted by Congress.  The most ridiculously vague of the statutes is the so-called "honest services fraud" provision, 18 U.S.C. Section 1346, which makes it a criminal fraud to "deprive another of the intangible right of honest services."   Kindly advise what you think that might mean.  Needless to say, Skelos was prosecuted under that statute (among others).  I would say that that statute should have been declared void for vagueness by the Supreme Court when it got a chance, but in the 2010 Skilling case, instead of doing that, the Supremes saved the statute by saying that it survived as long as the allegations amounted to "bribery" or a "kickback."  And thus there was imported into the "honest services fraud" statute the requirements of the federal bribery statute, including that the quo granted by the politician for the quid from the briber be some "official act."

Is it getting any clearer?  Next, in the 2014 prosecution of Governor Bob McDonnell of Virginia, the alleged "official acts" proved by the prosecutors consisted of the setting up of a series of meetings with state bureaucrats.  (And after the meetings, the bureaucrats never did what McDonnell's benefactor wanted them to do!)  Good enough?  McDonnell was convicted, and his conviction affirmed by the Fourth Circuit, but the Supremes reversed unanimously.  The opinion by Chief Justice Roberts was definitive that merely setting up meetings was not enough to be an "official act" and thus to prove a bribe.  That opinion came down in April 2016 -- after Skelos had been convicted, and while his case was on appeal.

Back to the Skelos case.  Although McDonnell had reached the Supremes, and was in the process of briefing, when the Skelos trial took place, the prosecutors in their usual hubris assumed that affirmance was a sure thing, and thus many of the supposed "official acts" that they proved as to Skelos consisted of setting up meetings.  The prosecutors asked for and got a jury instruction that defined "official act" as "any act taken under color of official authority," without an exclusion for setting up meetings -- basically an almost identical instruction to the one found erroneous in McDonnell.  And the Skelos prosecutor proceeded to argue to the jury specifically that setting up meetings did constitute "official acts."  ("So the defense wants you to think that things like setting up meetings or making calls about a few thousand dollars don’t really count as official actions. It’s just wrong. Flat wrong.”)  Oops!  And thus was the conviction doomed.

But, after vacating the conviction, the Skelos court then takes up the question of whether he can be re-tried.  That issue turns on whether there is sufficient evidence to prove a bribe even after exclusion of the setting up of meetings as being the "official acts."  The court finds that there is sufficient evidence to justify re-trial.  The remaining alleged "official acts" are in two categories:

  1. Voting on a statute, allegedly in a way favorable to the interest of the briber.  The court quotes from its own prior decision in a case called Rosen for the proposition that legislative votes, even routine ones, can be sufficient to constitute the quid pro quo for a bribery case.  ("Payments to State legislators may constitute bribes even if the legislator’s resulting actions are otherwise ‘routine’—such as voting in a certain manner or supporting grants to certain businesses. . . . ")  It appears that the particular vote in question in this case was Skelos's vote on the periodic renewal of New York City's rent regulation regime.  
  2. "Using influence" to obtain approval of a measure by another legislature of which Skelos was not a member.  The particular issue here is that Skelos was trying to get his son a job with an environmental consulting firm, and that firm wanted a contract with the government of Nassau County, which contract required (and got) approval from the Nassau County legislature.  Skelos was not a member of the Nassau County legislature, and did not vote on the matter.  The Second Circuit states:  "Using one’s influence as a high ranking state official to push through county legislation and to bestow a county-issued contract are indisputably formal exercises of governmental power constituting official acts under McDonnell." 

Well, start with number one.  Every single state legislator raises campaign contributions from dozens or hundreds of contributors, and every single state legislator casts dozens or hundreds of votes in the legislature, large numbers of which votes are favorable in some way to some campaign contributor.  The same of course also applies to members of the federal Congress.  If that's all it takes to make a bribe, then definitely every state legislator and every Congressperson is guilty.

And that's a huge problem.  It's a huge problem because if the statutes and case law make no practically useful distinction between corrupt pols and all the other pols, then it inevitably falls to the prosecutors to pick on whatever politician they don't like or want to get rid of, with the assurance that the evidence to prove the "crime" can always be found.  Will prosecutors then abuse this power to get rid of the particularly annoying leading politicians of the opposing political party?  Of course they will.

And as to number two:  It's "indisputably" an "official act" to "push through" (what does that mean?) legislation in a legislature of which you are not a member and in which you have no vote?  Really, Second Circuit?

The current (interim) U.S. Attorney for the SDNY has made a perfunctory statement that he intends to re-try the case.  I tend not to believe the office will carry through on that, particularly if President Trump ever makes an appointment to the office.

Meanwhile, the important lesson here is that the federal law of political corruption absolutely makes no useful distinction that enables you to tell which are the corrupt and which are the non-corrupt politicians.  Or that enables politicians to figure out how to conduct themselves in a way that will not get themselves prosecuted.  Maybe there is no way to draft statutes to make those distinctions in a useful way.  The fact is that politics is inherently corrupt.  The only meaningful way to address the problem is smaller government.

The Cruel, Heartless Expansion Of Medicaid Under Obamacare

You have undoubtedly noticed that the official Democratic talking point about any and all efforts to repeal or even modify Obamacare is that this is "cruel."  OK, sometimes it's "heartless."  Or maybe "a human tragedy."  You are taking away "healthcare" from the people and leaving them to suffer in the streets!  People will die!!!!

Just to warm you up for this post, here is a small roundup:

  • Sen. Richard Blumenthal (D-CT), commenting on the Graham-Cassidy bill on September 20:  "We are on the precipice of one of the most cruel and outrageous legislative acts in recent history."
  • Washington Post, July 20, commenting on the then-current Republican "repeal only" plan:  "CBO again confirms the cruelty of GOP’s ‘repeal-only’ plan."
  • The New Republic, March 14, commenting on another earlier version of Obamacare repeal/replace known as the American Health Care Act:  "[T]he incredible cruelty of the Republican legislation didn’t become clear until Monday, when the Congressional Budget Office . . . estimated it would undo nearly all of the coverage gains we’ve seen under the Affordable Care Act, creating human tragedy on a scale far greater than even pessimistic analysts imagined.
  • New York Magazine, September 5:  "[Trump's position on immigration] contains the same mix of cruelty and desperate incompetence as his position on repealing Obamacare."

Etc., etc., etc., etc.  I mean, isn't it completely obvious that people who have "healthcare" are going to have superior health outcomes to those who don't?

Well, some things that seem like they obviously must be true turn out not to be true at all.  I have linked many times to the famous randomized study from Oregon published in the NEJM in 2013 that spectacularly failed to demonstrate any health gains from putting people on Medicaid.  Then in a post from March of this year, I went through the then-just-published neighborhood-by-neighborhood health data for New York City for 2015 to examine whether those neighborhoods with very high Medicaid participation rates had better or worse health outcomes than the other neighborhoods in the City.  Uniformly and without exception, the high-Medicaid-participation neighborhoods had worse health outcomes, and by large amounts, and on every metric considered.  

And finally, in a post in August of this year, I noted that the full implementation of Obamacare in 2015 and 2016, instead of being accompanied by an increase in life expectancy, had been accompanied by a decrease in life expectancy.  How could that have happened?  I asked:

Could it be because expanded Medicaid is paying for opioids for the vulnerable?  That's a very reasonable hypothesis, although there are not yet enough data to prove it.

It's only been a little more than a month since that post, but some data are starting to trickle in.  And sure enough, those data strongly suggest that large numbers of new Obamacare Medicaid recipients are using their "healthcare" to obtain and use (or maybe sell) opioid painkillers, with very bad follow-on health effects.  An op-ed by Allysia Finley in Monday's Wall Street Journal, "Does Medicaid Spur Opioid Abuse?", collects some facts and figures, which were originally put together by CDC at the request of Senator Ron Johnson (who lost a nephew to a heroin overdose).  Some particularly dramatic examples:

Data from the Centers for Disease Control and Prevention show that overdose deaths per capita rose twice as much on average between 2013 and 2015 in states that expanded Medicaid than those that didn’t—for example, 205% in North Dakota, which expanded Medicaid, vs. 18% in South Dakota, which didn’t. . . .  Between 2010 and 2013, overdose deaths rose by 28% in Ohio and 36% in Wisconsin. Between 2013 and 2015, they climbed 39% in Ohio, which expanded Medicaid, but only 2% in Wisconsin, which did not.

I wouldn't call it definitive proof yet, but all data I have seen so far indicate that a big use of expanded Medicaid has been to obtain prescription painkillers.  Some -- indeed, many -- of those prescriptions will inevitably be abused.

Of course there has been some push back.  Here is an example from the AP, August 31, "Medicaid fueling opioid epidemic? New theory is challenged.":

[U]niversity researchers say Medicaid seems to be doing the opposite of what conservatives allege.  “Medicaid is doing its job” by increasing treatment for opioid addiction, said Temple University economist Catherine Maclean, who recently published a paper on Medicaid expansion and drug treatment. “As more time passes, we may see a decline in overdoses in expansion states relative to nonexpansion states.”

Seems like Ms. Maclean has no data to support her position, but speculates with great confidence that the government program will end up having a positive effect since, I guess, all government programs must inevitably have positive effects because their proponents are such great experts and such good people and so well-meaning.  Right!

Or there's the theory that people do much better in life striving to make it on their own than they do by accepting government handouts.  Anyway, if deaths keep going up more in the Medicaid expansion states than the others, then which one is "cruel" -- Medicaid expansion or not?


The Government's Push For A Cashless Society Won't Go Away

As it previously did back in August 2016, the Wall Street Journal gives over the front page of a special section today to anti-cash crusader Kenneth Rogoff.  At least this time they also print a counter-point article, by a Wharton professor named James McAndrews.  Both artilcles are at this link (probably behind pay wall).

Rogoff's August 2016 effort was the subject of my post at the time, "There's Nothing More Frightening Than Rule By The 'Smart.'"   Rogoff -- MIT Economics Ph.D. 1980, former Chief Economist of the IMF, big time professor at Harvard -- is a perfect example of those people who think they are so smart that they should be allowed to re-design the world, while at the same time they are completely incapable of perceiving the downsides and unintended consequences of what they are proposing.  Among my comments from last year:

Naturally the visions of these geniuses are all variations of the same thing, namely some kind of government program to more closely monitor and/or control the people.  The geniuses know that there is no downside in such programs, first because the programs have been designed by themselves, and second because government programs are administered by all-knowing and perfect government functionaries, who are people like us and can always be trusted to do the right thing.

Getting rid of cash is another instance of government doubling down on failure.  It's like increasing penalties for drug crimes (this time we will stamp them out!) or adding yet one more in-kind distribution to fight poverty.  In the case of getting rid of cash, the previous effort was the law of "money laundering," which has undoubtedly been the single most abject and total failure of all government efforts to micro-manage the people.  (See "The Joke Of Criminalizing Money Laundering.")  Somehow, drug dealing, illegal gambling, and an entire $2 trillion per year underground economy continue to exist.  This will fix it!

Of course Rogoff leads off with the argument that getting rid of cash will reduce crime and tax evasion.  Well, that's open to debate -- and I would bet for the other side.  Then there's this next one, which he seems to think is an argument in favor of eliminating cash:

Another advantage of eliminating large bills would be the effect on monetary policy. The Federal Reserve should be able to implement negative nominal interest rates vastly more effectively in the absence of large bills, which could prove quite important as a stimulative tool in the next financial crisis.

That's right -- Rogoff, along with most other sophisticated monetary economists these days, has convinced himself that it's a good idea for a central bank to respond to a financial crisis by making it impossible for retirees to earn any return on savings unless they are willing to invest in equities.  Is there any actual evidence for this?  None that I know of.

Our counter-pointer Professor McAndrews makes some good points, but also seems to miss many important ones.  His main points are (1) 7.5% of U.S. households don't have bank accounts.  What about them?  (2) There is substantial legitimate non-criminal need for cash; and (3)
The bad guys will figure out ways around this, probably involving drawing legal businesses into criminal activity of helping them launder the revenue.  All good points that I don't mean to minimize.  Here are a few more that McAndrews doesn't mention, from least to most important:

  • The power is out in Puerto Rico, and is likely to be out for a couple of months or more.  How are those credit cards working out for you?
  • In a cashless world, everything you do is subject to monitoring by the government.  Indeed, under the Bank Secrecy Act and its incremental encrustations, the government can monitor all of your bank transactions, and all of your uses of credit cards, behind your back, and instruct your bank not to tell you that you are being monitored.  Is there any chance that a government might misuse such snooping powers against its political adversaries?  If you don't think so, then you have not been paying attention to what's going on.  E.g., from CNN, September 18, "US investigators wiretapped former Trump campaign chairman Paul Manafort under secret court orders before and after the election…. The government snooping continued into early this year, including a period when Manafort was known to talk to President Donald Trump.”  Or see the Susan Rice "unmasking" scandal.  
  • Cash provides a safety valve against ramping up taxation to a higher and higher percentage of GDP.  The more they can stamp out the escape to cash, the more leeway the government has to increase the current 35% of GDP or so annual tax take to more like 50% or 60% or even 70%.  It's to make a more perfect world!  Without a doubt, this is the main objective of the Rogoffs of the world, although they will never state it explicitly.  

The good news is that, despite a number of setbacks, Bitcoin seems to be gradually progressing toward greater acceptability.  It can't happen fast enough.  Meanwhile, you owe it to yourself and your country to use cash as much as possible.  It's part of the never-ending fight for freedom.   

Reasons For Optimism About Climate Hysteria

Large numbers of my friends and acquaintances are climate skeptics, and many of them spend a good deal of their time feeling down in the dumps about the subject.  Their reasoning goes something like this:  Here we have something that should immediately be identified as baloney by any thinking person.  And yet thousands and millions of people seem to have fallen for it.  And not just random people, but people seemingly among the elites of society -- academics and journalists and government bureaucrats.  Most of the media function as propaganda bullhorns to spread the idiocy.  The forces of hysteria have commandeered tens of billions of annual dollars of government funding to pay for their program and spread their message, drowning out and suppressing any opposition.  Their program calls for taking away everyone's freedom and impoverishing the populace with higher costs for energy.  And yet the program seems to be getting adopted everywhere!  

How could a sane person not get depressed about this?  Easy!  Over on the other side of this issue, we have a secret weapon.  The secret weapon is that the supposedly carbon-free energy sources -- or, at least, those supposedly carbon-free energy sources that are acceptable to environmentalists (meaning wind and solar and definitely not nuclear and hydro) -- don't work.  Even worse, wind and solar are not even carbon-free, because it takes large amounts of carbon-based energy to make the turbines or panels or whatever.  Put these two problems together, and governments that try to reduce their carbon emissions by heavily subsidizing wind and solar quickly hit a wall where energy prices for the masses soar through the roof even as the carbon emissions don't go down.  You won't find the New York Times or Washington Post reporting on this, but it's getting harder and harder not to notice.

Let's take a closer look at Germany, which has been the source of quite a bit of news on this subject in the past few days.  On first take Germany would seem more than any place else to be the biggest cause of your depression.  "Transitioning" from fossil fuel energy to wind and solar has been the signature issue for Chancellor Angela Merkel for more than a decade, and as of this moment she seems to be cruising to victory in the election coming up on Sunday.  But don't get the idea that it would make any difference if one of the other candidates or parties managed to defeat Merkel, because there is no political party in Germany of any size or consequence that offers dissent on the "climate change" issue.  The entire country has fallen into the mass hysteria!  (Has anything like that ever happened before in Germany?  Don't ask!)  Germany has moved aggressively to cut its carbon emissions, and was a leader in the 2015 Paris negotiations in making aggressive promises of emissions reductions and in strong-arming other countries, including the United States, to commit to aggressive reduction targets.  Germany is part of the EU commitment to 40% emissions reductions (from 1990 levels) by 2030, and in addition has its own internal goals of reaching the 40% reduction by 2020 (coming right up!) and 95% reduction by 2050.  Impressive!

OK, that's the fantasy.  How about in the real world?  From Jamie Horgan in The American Interest, September 20, "Germany Will Miss Another Green Goal":

Berlin’s grand green energy transition is falling short of the lofty targets that inspired it. Earlier this month, the think tank Agora Energiewende released a report that projected Germany would fall well short of its goal to cut greenhouse gas (GHG) emissions—far shorter than was previously believed. Berlin had committed to cutting 40 percent of its GHG emissions by 2020 as compared to 1990 levels, but as that year looms large, the country has achieved a reduction of “just” 28 percent (a remarkable decrease, though nowhere close to the target), and it’s expected to only shave off another 2 or 3 percent over the next few years. Now, a new study from the BEE renewable energy group suggests that the country is going to fall short of its Brussels-set target of sourcing 18 percent of its energy production from renewables by 2020.

Good job to Horgan for publicizing this, but he's still getting taken in when he says that Germany's existing emissions reduction of 28% below 1990 levels is "a remarkable decrease."  No, it isn't.  That 1990 date was intentionally picked by Germany to scam the rest of the world.  1989 is the year the Berlin Wall fell.  Over the next decade and a half, the Germans shuttered essentially all of the inefficient Soviet-era heavy industry in East Germany.  Germany picked the 1990 start date so that it could take credit for those reductions that would have happened anyway and pretend that this had something to do with saving the planet.

Here is a chart of Germany's year-by-year greenhouse gas emissions changes since 1990.  Source: CleanEnergyWire.   

German GHG emission.png

You will quickly see that Germany hit the emissions reduction wall around 2010.  Since then, its emissions have actually increased in 4 of the 7 years.  Multiply out the changes since 2009, and you will find that Germany's emissions at the end of 2016 were 99.79% of the level they had had at the end of 2009.  This, despite the fact that 2010 was the year they passed the so-called "Energiewende" law.  That's some "energy transition" -- 0.21% emissions reduction in seven years!

How could things be going so badly?  Among other things, Germany caved to environmentalists in deciding to eliminate nuclear power after the 2011 tsunami at Fukushima in Japan.  Nuclear power emits no CO2.  Wind and solar don't work, at least much of the time.  So, what's left?  Coal!  From Bloomberg News, September 21, "How Merkel’s Green Energy Policy Has Fueled Demand for Coal":

By 2030, the eastern German town of Poedelwitz will likely be razed to get at the rich veins of coal beneath its half-timbered houses. The reason: Chancellor Angela Merkel’s effort to steer Germany toward greener energy, which has unexpectedly meant booming demand for dirty coal. . . .  “This is unparalleled destruction of the environment,” says Jens Hausner, a farmer who has seen 17 of his 20 hectares consumed by digging equipment that looks like something out of a Mad Max movie. In a bit more than a decade, the hulking machines are expected to claw through the town’s 13th-century church and 40 or so remaining homes. 

 I like the part about "unexpectedly."  Can anybody in Germany do basic arithmetic?  Apparently not.  And what about the cost?

Germany has spent some 650 billion euros ($780 billion) on subsidies for green power in recent decades. But the country will at best get to 30 percent by 2020, according to Berlin climate researcher Agora Energiewende. Emission reductions “won’t be a near miss but a booming failure,” Agora researchers write. 

Even in a country with a GDP of almost $3.5 trillion per year, that $780 billion of "green" energy subsidies is real money.

Germany's stated goals of emissions reductions are just fantasies.  They will not be achieved, but meanwhile the prices that their people pay for electricity and gasoline and heating oil will soar.  (Germany's residential electricity prices are already about triple the U.S. average.)  Same for California, and New York, and anybody else who tries a comparable strategy.  As of now, you aren't reading much about the magnitude of the disaster, but it is truly a disaster.  The story can't be suppressed forever.  Be optimistic!


Two Proposals For Dealing With Equifax (And Experian And TransUnion)

Even as the big Equifax data breach was exploding into the news a couple of weeks ago, there was a bill that had gotten to a fairly advanced stage of the Congressional sausage-grinder, providing for a limitation of liability for the big credit bureaus in the event of such instances or other violations of the Fair Credit Reporting Act.  The principal sponsor was a guy named Barry Loudermilk of the Georgia-11 (northern Atlanta) District.  (Isn't that odd?  He's one of Equifax's home town Congresspersons!)  NBC News reports on the bill on September 11, with a headline spinning this as "Republicans" seeking to protect their big business allies.  ("Republicans in Congress Want to Roll Back Regulations on Credit Bureaus").  Loudermilk is quoted as follows:

“I have seen how a small technical error, turned into a lawsuit, can affect everyone in a business, including employees, customers, and vendors. Unfortunately, suits under the Fair Credit Reporting Act have skyrocketed in recent years while leaving consumers inappropriately compensated."

Well, I wouldn't think that Loudermilk's bill is going anyplace during the current firestorm.  

Normally, you might expect the Manhattan Contrarian to have some sympathy with legislative efforts to rein in abusive lawsuits, but this one is a little different.  As discussed in my first post on this subject last week, Equifax and its confrères in arrogant credit-bureaudom claim the right to collect all your most private and sensitive information and then to have no relationship with you and no responsiveness to you at all.  And to sell your information to thousands of their customers without giving you any idea who those customers are, what information is being sold, or what those customers are doing with the information.  And if you ask any of those questions, the credit bureaus will refuse to answer.  

Loudermilk does have a point that the current structure of the FCRA is essentially useless in protecting consumers against credit bureau abuse (few can show actual damages, and $1000 statutory damages is not enough to justify any individual lawsuit), while at the same time creating perverse incentives for entrepreneurial lawyers to gin up huge class actions over minor technical violations systematically repeated over thousands or millions of customers.  OK.  But there must be a way to make the credit bureaus responsive to consumers in the same way as every other normal company.  Not that other companies are perfect, but the credit bureaus are ridiculous.  (Try googling any of the three of them and the word "reviews", and get ready for hundreds upon hundreds of scathing one star reviews.  And these are the people who purport to establish your reputation!)

There have been numerous proposals for reform, including many put forth as the issue has been in the news during the past couple of weeks.  I'll discuss two:  one from Bloomberg View on September 15 by an opinion columnist named Joe Nocera, headline "Equifax Should Be a Public Utility";  and the other from a guy named Jim Harper for the Cato Institute made back in 2011, title "Reputation under Regulation: The Fair Credit Reporting Act at 40 and Lessons for the Internet Privacy Debate."

Nocera seems to start out on the right foot:

[T]hey don’t care because they don’t have to. At a minimum, the government needs to create incentives that would reward the companies for accuracy, customer service, and ironclad data security.

But from there it's all down hill.  How to create those incentives, Joe?  His big and only idea is to go from the current model of uber-government regulation to another model of much greater, super-duper government regulation -- the "public utility" model:

[T]here is a solution that is both radical and sensible: treat the companies like public utilities. [Adam] Levitin recently wrote a blog post proposing such a plan. The credit bureaus, he wrote, have no natural right to the data the collect; they only have it because the law tolerates it. Thus, he says, “It’s quite reasonable to qualify that right with a regulatory system.”  As public utilities, they would still be publicly-traded companies, but they would be overseen by a government body. . . .

It's the completely standard answer of doubling down on failed bureaucratic solutions.  If dozens of pages of statute and hundreds of pages of regulations have only brought us complete failure, what makes us think that doubling or tripling the regulatory regime will make things any better?

Harper's much longer report contains a very useful history of how we got where we are in the credit reporting mess.  You won't be surprised to learn -- or maybe you will be surprised -- that once the government got into heavily regulating the credit bureaus back around 1970, there followed a series of statutory amendments, one after the other, each giving the government itself more and more access to the credit bureau databases without consumer knowledge or permission for one after another seemingly laudatory purpose.  The end result of it all has been to turn the bureaus, in substantial part, into an arm of what Harper calls the "surveillance state," all taking place without your permission and behind your back, and without need of a search warrant or subpoena:

[I]n 1989 Congress expanded the “permissible purposes” for which a credit bureau could furnish a report by allowing federal grand juries to take a look at people’s credit files. . . .   Among the 23 amendments passed since 1990, Congress has added child support obligations to credit reports, later making disclosure of credit reports to state and local child support agencies a “permissible purpose.”  In 1996 Congress allowed disclosure of credit report information to the Federal Bureau of Investigation for counterintelligence purposes.  After a heavy revamp of the law’s provisions in 1996, Congress in 1997 allowed the use of credit reports for investigations of people related to security clearances . . . .  Terrorism opened credit bureaus’ files to the government yet further. In the USA-PATRIOT Act, Congress allowed the release to government officials of consumer reports “and all other information in a consumer’s file” for counterterrorism purposes. . . .  In 2006 Congress made it a “permissible purpose” to provide a consumer report to the Federal Deposit Insurance Corporation or the National Credit Union Administration as part of their preparation for appointment as conservator, receiver, or liquidating agent for depository institutions or credit unions. And in 2007 Congress made it a permissible purpose to provide a consumer report to a government agency in connection with the issuance of government-sponsored, individually billed travel charge cards. . . .   

You get the picture.  The fact is that far and away the entity most to be feared for potential misuse of your private information is the government itself, and giving it more regulatory authority only makes that problem worse, not better.

Harper's proposed solution?  He doesn't give a lot of details, but the gist consists of three points: (1) repeal the FCRA in its entirety, (2) declare in a one-line statute that consumer data reported to a credit bureau is held in "a confidential trust for the benefit of the consumer," and (3) let the common law take it from there.

Under this regime, if the credit bureaus want to use your information, they would either need to get your permission, or alternatively pay you (in some form) to allow them to use it.  In the case of credit reporting, you would very likely give your permission, because you would need to have credit bureau reporting in order to obtain credit.  For other uses, the experience with companies like Google and Facebook shows that most people will gladly give up plenty of personal information in return for nominal and often non-monetary consideration like free use of a website.  Others (like yours truly) aren't so glad to do this, so they'd have to pay me more, or maybe they couldn't use my information for other purposes.  Too bad for them.  What about this doesn't work?

The Inevitable Corruption Of "Affordable" Housing

Government handout and redistribution programs promise that they can achieve perfect justice and fairness in human affairs, but somehow we always seem to be coming up short.  The latest example arises once again in the arena of the "worst possible public policy," affordable housing in Manhattan.  

You always knew that the handing out of the affordable housing had to be corrupt.  But the secrets are well kept among the clique of insiders who do the handing to their friends and cronies.  In the last couple of weeks, elections in New York caused a small piece of the cover to be blown off.

September 12 was the date for primary elections for local offices in New York City -- Mayor, Comptroller, Public Advocate and City Council.  Those who know our city will recognize that the result of the Democratic Party primary generally determines the ultimate winner of most of these offices.  Since the City Council has term limits, many seats are open and attract multiple candidates.  That was the case in City Council District 2, which covers a swath of the Lower East Side of Manhattan -- an area that was formerly impoverished but is now rapidly gentrifying.

In District 2, the odds-on favorite candidate was one Carlina Rivera.  Rivera followed the time-tested road to a City Council seat, namely serving as a top staff person of the term-limited predecessor, who then made Rivera the designated successor.  Rivera's husband of several years is one Jamie Rogers, who has recently been serving as the Chairperson of the Community Board that covers the same area.  Rivera ended up winning her ballot line (and therefore almost certainly her seat) with 61% of the vote.  (However, note that turnout in this primary was only about 20%, and Democrats are far from all of the eligible voters.  Likely, Ms. Rivera got the votes of well less than 10% of eligible voters.)

Things started to get interesting about a week before the election when the New York Post on its famous Page 6 reported that Rogers and Rivera were living in a subsidized apartment under HUD's so-called "Section 8" voucher program -- a program whose benefits are supposedly reserved for "the poor."  From the Post:

Carlina Rivera — the leading candidate to replace her former boss, term-limited City Councilwoman Rosie Mendez — lives in federally subsidized Section 8 housing reserved for the poor.  Rivera is married to James Rogers, a Cornell Law School graduate who once worked at the white shoe firm of Sullivan & Cromwell.

Readers not familiar with the ins and outs of the New York big law firm community may not recognize Sullivan & Cromwell as not just any old law firm.  It is the principal outside law firm for Goldman Sachs and for a big chunk of corporate America.  A recent piece at Above the Law puts the starting associate salary there at $180,000, rising to more than $300,000 over several years.  

And over the next several days it only got more interesting.  Turns out that Rogers's dad is a recently-retired partner of Cravath, Swain & Moore -- again one of the very top firms in prestige and profitability.  Partners at such firms earn another order of magnitude above the associates.  The American Lawyer keeps its most recent law firm profitability figures behind a pay wall, but here is a list at Wikipedia from 2012.  Annual profits per partner at Cravath were $3.435 million.  Rogers Sr. was a partner there for about 30 years, which means that he likely has a net worth in the range of $25 - 50 million, and potentially even more.  Then there were the pictures of the younger Rogers competing in sailing regattas with his dad.  This picture from the Post has Jamie on the left out sailing, and Carlina on the right:

Jamie Rogers.jpg

Yes, your tax dollars are subsidizing the rent of these people -- because they have declared themselves to be "poor."  According to this article, their current Section 8-subsidized rent is about $1600 per month, as against a market rent for the apartment of $2775.  You pay the difference.  

You might think that at this point Rogers and Rivera would have been overcome with shame and gone off and crawled in a hole somewhere.  Of course not!  Instead, they immediately doubled down.  They went out and did interviews with the local newspaper, The Villager, which appeared immediately after the election on September 14.    The headline summarizes their defiant attitude:  "We Qualify"

In separate interviews with The Villager, Rivera and Rogers both said that it’s perfectly legal for them to live in the apartment and that their incomes were fully vetted under the requirements of the Section 8 program.

Read the full article and you find out how this works.  It basically goes back to the central deception of the poverty scam, which is the delusional presumption that a family's arbitrarily-defined "income" in any one given year inexorably reveals its permanent status in an immutably fixed social class structure.  In this case Rogers managed to engineer his "income" for one year down close to zero, and used that snapshot to qualify for a Section 8 handout for life.  Essentially, he had opened a mini-chain of coffee shops, a couple of which were not performing.  So he closed those two and took the write-off in a single year in order to offset the income from the others.  Then he and Carlina had their "income" for that year "vetted" by the friendly cronies in the housing bureaucracy.  Voila!  A housing subsidy for life for a couple that by any realistic measure is well into the top 0.1%!

(But wait, you ask -- Didn't the Manhattan Contrarian also artificially engineer his income for one year down to about zero?  Yes!  However, I did not have the gall to use that result to claim subsidized housing for life.)

Well, once Rivera claims her Council seat on January 1, Rogers and Rivera will have a much higher income that will make the Section 8 voucher far less valuable, and indeed they claim they will relinquish it.  But thanks to them for shedding a little light in on how the political insiders game the housing giveaway system.  And they are far from alone among the political class in corruptly claiming for themselves the benefits of housing giveaways intended for the disadvantaged.  Other examples:

  • Council Speaker Melissa Mark-Viverito is a crazed hard leftist who comes out of a privileged upbringing (her dad was a hospital executive) in Puerto Rico.  She lives in a townhouse in East Harlem that was built with city subsidies in the 90s.  According to this Wikipedia article, she acquired the property with a "taxpayer subsidized loan."  The website contains no valuation or transaction history for her property at 211 East 111th Street (I wonder why -- politician's privilege?), but does have information for the comparable property next door (209 East 111th Street).  The latter property was initially bought in 1999 for $349,500, and has a current estimated value of $2.72 million.
  • Then there's my long-time State Senator (recently retired), Tom Duane.  While he was a State Senator he managed to get himself a spot in the Penn South complex in the West 20s.  This is something we call here in New York a "limited equity co-op."  I won't go into the details, but again, these things are deeply subsidized by the taxpayers.  At the time Duane was admitted to Penn South, two bedroom apartments went for completely artificial prices in the range of about $18,000.  Today the market value of such an apartment would be in the range of at least $1 million to $2 million or more. 

Hey, they're politicians.  Of course they know how to work the system to their own advantage!  I have no way of knowing how many of our other politicians have managed to do something similar.

So, do you still think that "affordable housing" initiatives are going to be getting us any closer to the world of perfect justice and fairness any time soon?