Friday, January 13, 2017

Trump. LL Bean, and American Politics in the Age of Mechanical Reproduction

The politicization of LL Bean is only the latest in the ongoing culture war in the United States.
Here, because of contributions by an heir and one of the board members to LL Bean who has supported Trump have  been attributed to the company itself, it has led to a boycott against the company among some who dislike Trump.  It did not help that Trump tweeted endorsement for LL Bean and encouraged consumers to support it. Earlier in the week it was the Golden Globes and Meryl Streep v. Streep.   Both instances point to the politicization and polarization of practically everything in American society.  How did this happen?  The simple answer lies in how our culture has been stripped of its independence and captured by economics.  This is exactly what Walter Benjamin predicted and described.
Walter Benjamin was a pre-World War II social and political critic who was part of the German Critical School.   One of the most influential essays he ever wrote–and well known to many in the arts and cultural theory–was his “The Work of Art in the Age of Mechanical Reproduction.”  Here he argued that t he capacity to mass reproduce original art changed it.    Market reproduction and sale of art would strip the original “aura” or context of an object and art, placing it within a new context and thereby change its meaning also.  Context for art, means everything.  The recently deceased John Berger’s Ways of Seeing is classic in pointing to this, and much of Andy Warhol’s  art–such as with Campbells Soup cans–also articulates how stripping objects out of their original context can convey new meanings.
But Benjamin’s essay asks if mass reproduction of art has striped art of its aura, what has replaced it?  Politics.  He saw in fascism the merger of politics and aesthetics.  But Benjamin’s arguments about art’s reproducability is not simply about art.  His deeper critique is also about the power of market forces to transform the world.  It was Karl Marx in the Communist Manifesto who declared of the power of capitalism to render “ All that is solid melts into air, all that is holy is profaned.”  For Marx the commodification of all of life–work, home, family, and the arts–is what made for part of the class war.  Italian theorist Antonio Gramsci in his Prison Notebooks noted the same phenomena–the use of cultural landmarks as lines in the hegemonic  political wars over class struggles. Capitalization would eviscerate the walls the distinguished what Daniel Bell argued in the Cultural Contradictions of Capitalism  once described as the three distinct spheres of culture–politics, economics, and civil society.  Everything would be commodified, everything politicized.  If as political theorist Michael Walzer once argued that the essence of modern society was the art of separation–ensuring that we draw limits on various activities and institutions–we no longer see that separation.
The politicization of everything as it plays out in the United States seems less class-based  and more partisan.  It was brought on by the failure of our society, in part, to put firm fire walls in place that separate the economic marketplace from the political marketplace.  Allowing for personal  wealth to translate into political influence, letting corporations make political expenditures, and permitting businesses and corporations to speak as if they were real persons, all have contributed to this. But the same is true in letting pop culture and its icons make political statements or use art for political purposes.  Of course the First Amendment protects that right but the side effect is that everything has become or potentially could become a political statement.
Thus, there is nothing now that is not politicized along partisan lines.  Driving Suburu cars versus snow mobiles, shopping at Whole Foods versus eating at Cracker Barrel, watching Duck Dynasty v. Modern Family, all of the are predictors of partisanship as much as registering or voting Democrat or Republican.  In many cases, these fights are side shows, diversions for more fundamental issues that actually should be fought and addressed; yet people become so consumed with the sideshow they ignore the deeper problems of poverty, racism, sexism, and unequal divisions of political and economic power that are the real sources of division in America today.

Thursday, January 12, 2017

Trump Meets Reality: Why his presidency will be weaker than many hoped or feared

            One of the ironies of American politics is that while the US presidency is arguably the most powerful elected position in the world, the office is also surprisingly weak.  As Donald Trump prepares to take office he may be surprised that for all that he says he wants to do, he may be less power to accomplish them than he and his supporters hoped, or his detractors feared.    The truth is that there are many constraints on US presidential power, dictated by the Constitution and the reality of American politics, international relations, and the precedents set by his predecessors.
            Richard Neustadt’s 1960 Presidential Power arguably endures as the single best book every written on the American presidency.  It opens with a quote from Harry Truman in 1952, offering advice to the incoming president and former general Dwight Eisenhower: “He’ll sit here, and he’ll say, ‘Do this! Do that!’ And nothing will happen. Poor Ike—it won’t be a bit like the Army. He’ll find it very frustrating.”  Neustadt’s use of the Truman quote was to underscore a reality of the American president who cannot simply order people about like kings or business CEOs.  Instead the power of the presidency is the power to persuade.
            Article II of the US Constitution defines the formal constitutional powers of the president that have not changed since George Washington.  But as Neustadt and James David Barber in his President Character contend, it the personality or character of the person who is president, along with a host of other factors that define the ability of presidents to persuade Congress, the media, foreign countries, and the American people to follow them.    These factors include rhetorical and media skills, margins of political victory, knowledge and experience of government, public support, the strength of political opposition, and perhaps the overall likeablity of the persons.  Presidential power is to the power to persuade, but that persuasive power is a form of bargaining power.  Some presidents such as Franklin Roosevelt, Lyndon Johnson, and Ronald Reagan were powerful because of these factors.
            From the New Deal until perhaps recently there was a fear of what Arthur Schlesinger, Jr., termed the “imperial presidency.”  Born of the New Deal regulatory state and the reality of the Cold War and Vietnam, presidents were viewed as dangerously powerful and prone to abuse their authority, as did Richard Nixon.  But we are a long way from days of the imperial presidency and as Stephen Skowronek points out in Presidential Leadership in Political Time: Reprise and Reappraisal, context too demarcates the limits of presidential power.  Today, as a result of Supreme Court decisions–many of which clipped Obama’s power when it came to executive orders and Bill Clinton when it came to issues about legal accountability for personal behavior–Trump inherits a far weaker office than it was a generation ago.
            Soon if not already Trump is about to confront this reality.  He and his supporters and his detractors seem to have forgotten that there is this thing called the Constitution and the Bill of Rights which defines the power of the presidency.  Both contain concepts such as separation of powers, checks and balances, federalism, and the basic rights and liberties which presidents cannot violate.  There are some things President Trump cannot do alone with executive orders or even with legislation. He cannot order states and cities around, he cannot order citizens to do things that are illegal.  And even though Congress is of the same party as he is and he will get to appoint federal judges and a new Supreme Court justice, the logic of the political system that the American constitutional framers designed is one that is resistant to sudden and dramatic change.  Congress and the Supreme Court will have their own institutional identities and interests that will make them resistant to being ordered around by President Trump.
            Moreover, while the attraction of many to Trump was him being an outsider, yet unskilled in Washington politics will make it hard to govern.  President Jimmy Carter was an outsider whose presidency was compromised by his lack of Washington skills even though he was a governor.  Trump does not even have that and many of his senior appointees lack that too. They will soon find themselves out maneuvered by the federal bureaucracy, the senior executive service, and all the others who really run the government and know how to make it work.
            So long as Trump continues to fight the reality of American politics he will get nowhere.  Conversely, as the confirmation hearings are starting to show, in areas such as foreign affairs and intelligence gathering there is a powerful establishment and bureaucracy that will crush Trump if he does not learn how to work with them.  Presidents really have little freedom to change the course of American foreign affairs, with the best predictor of what a new president will do is to look at the previous one.  Besides the constraints of domestic politics, international contexts such as real politics and the support or opposition of allies and enemies dictate narrow courses of action for any president.
            All of the above suggests that Trump is about ready to be inaugurated and confront reality.  He will have to operate in a context that would limit any president.  But now also consider that he is a minority president who did not win the popular vote and had one of the narrowest electoral college victories in history.  He was never popular as a candidate with nearly 60% disapproving of him, and recent polls suggest an approval rating of 37%.  Presidents normally are sworn in with lots of good will, Trump will not have that. He enters a weakened office as a weakened president, lacking the traits that Neustadt, Barber, and Skowronek describe as key to presidential success.   It is not an imperial presidency located in Trump Tower that Trump inherits, but a weak office that can do far less to produce jobs, force Mexico to build a wall and pay for it, and abrogate unilaterally trade agreements without facing political and legal problems.    

            He’ll sit here, and he’ll say, ‘Do this! Do that!’ And nothing will happen. Poor Donald—it won’t be a bit like The Apprentice. He’ll find it very frustrating.”  

Friday, January 6, 2017

Donald Trump's Coup

Note:  On June 30, 2015, I posted this work of political fiction as my blog.  I thought it would be fun to repost  and see how much I got right and wrong.  Thoughts?

It was not so much that he made America great again, but when Donald Trump was elected president on November 8, 2016 he transformed the United States in ways that few, including he, could have imagined.
Right from the start establishment politicians and pundits just never understand Trump.  He was consistently derided as having no chance.  First it was that his repeated insults against John McCain, Megyn Kelly and women, immigrants, or Muslims that would doom him. But with each insult his fame only grew.  Then it was the claim that he could not win in Iowa but he did.  Or that his loss in Wisconsin would doom him.  Or that his tirades against the media, his name calling of Hillary Clinton, or even selection of Sarah Palin as his running mate would surely kill his campaign.  Back in June of 2016  as stories mounted about how little money he had raised, or that Clinton had double digit leads in some polls, he was still dismissed.  Nat Silver, the whiz kids of political money ball, said that Trump had barely a 20% chance of winning and who could doubt the person who had so brilliantly declared that Clinton was a cinch to win the Michigan primary .
Even as late as the July Republican convention, despite the riots and arrests outside and one final push by party elites to use the rules to oust him, some thought that Trump would not get the nomination.  But he did.
Trump’s success was in exploiting fear, prejudice, and ignorance.  These are the core elements of what most advertising does–appeal out our vanity insecurities,  and fears.  Trump as the consummate  salesman understood that.  But he also exploited the failures of the Republican and Democratic parties which for the last generation or more has sold the public on free trade, globalization, and open borders, saying that it would benefit us all.  Somewhere along the way these promises did not add up and mainstream national journalists, living in New York City, socializing on the upper east side, and vacationing in the Hamptons, for some reason just did not realize that average people were not reaping the benefits of NAFTA and free trade.  Perhaps they were too busy attending or covering the six figure speeches Hillary Clinton was giving to Wall Street to notice that most people were making less money now while working harder than they did twenty years ago.  Yes as F Scott Fitzgerald once said, the rich are different–they do have more money–but with money comes attitude and Trump played on resentment toward them and the elitism that they, the media, and the Washington establishment all represented.
Trump also understood they way that politics and entertainment had converged.  Politicians  no longer campaigned and the media no longer covered politics–both were marketed.  Trump understood the for-profit spectacle that politics had become and which the news industry wished to deny but depended on. He knew that CNN, MSNBC, and the rest could not resist a good headline and that if he dropped a comment–no matter how outrageous–the media would pick it up and it would fill the news cycle for an entire day.  Trump thus understood how getting headlines for him also meant the media  would get ratings.  They were trapped, and forced to market the presidential elections on Trump’s terms.
But Trump also benefited from running against for many a hugely unpopular and uninspiring candidate who was the face of the establishment and status quo in a year where   neither was a plus.  Clinton struggled to win the Democratic nomination against an aging self-described socialist who  never considered himself a Democrat until he decided to run for president.  Clinton should have easily defeated him, but her difficulties revealed how poor of a candidate she was.  She started a race with 70% approvals and a 50%+ lead over Sanders only to see it disappear.  Some of it yes was sexism.  No doubt there is about 30% of Americans who will never vote for a woman and thus Clinton faced problems from the start.  But she also had many other problems they were not the result of sexism but self-inflicted.
At the end of the day Clinton had no narrative for her campaign.  It was all about breaking the glass ceiling and being the first female president.  That did not cut it with young people, including women, who preferred someone who shared their politics and not simply their gender.  Additionally, whatever narrative Clinton had was one that was either too conservative for an emerging Millennial generation of voters, or one that harkened back to her husband.  In so many ways she was still running, as she did in 2008, for Bill’s third term.  Yet times had changed and what was once thought of as good public policy in the 90s was no long seen the same in 2016.
Hillary–a once youthful Republican turned New Democrat turned sort of progressive during the 2016 primaries and then back to a centrist Democrat who tried to appeal to Republican voters–was perplexed why no one trusted her.  This perplexity was also shared by her core supporters–women over 40–who saw in every criticism of her sexism.  Yet what was also perplexing  in the campaign was why Democrats supported her, let alone women or even people of color.  Clinton  who supported the death penalty, fracking, TPP and globalization , and a militaristic foreign policy, (at least until the primaries), and in the past who supported welfare reform, her husband’s crime bill, and oppose marriage equality until recently, hardly seemed like someone who Democrat or women should support.  Given her positions, it is wonder why she was a Democrat and why so many women who considered themselves progressives supported her beyond the fact that she was a woman. Clinton had a narrative problem along with an identity problem–voters did not trust her and did not like her for sexist and legitimate policy reasons.
Yet Clinton was supposed to win according to pundits and politicians.  But she did not.  She selected Tim Kaine from Virginia and played conventional politics in a year when the normal rules of politics changed.  Similar to Frank Skeffington in the Last Hurrah who never understood how the  New Deal had changed politics and therefore was clueless to how the old rules of campaigning had changed.  Clinton campaigned like it was 1992 again, just like she did in 2008.
The election came down to a core of swing states again, with Ohio and Florida again decisive.  The media and Clinton were distracted by Trump’s huge negatives and by how well she was doing in the popular vote and fund raising comparatively.  She went toe-to-toe negative campaigning but in the end Trump was able to dig deeper, go nastier, and insult better than her. He knew fear, prejudice, and ignorance would make the difference.  Benghazi, her e-mails, and all the other rumors around her stuck along with the image of Crooked Hillary.    In the end, Clinton, like Gore in 2000, won the popular vote by racking up huge majorities in Democrat states, but she lost among swing voters in swing states, handing the Trump-Palin ticket  an Electoral College victory.
Trump’s January 20, inauguration and swearing in were a made for TV event.  The inauguration ball and swearing in was held at the Trump International Hotel at 1100 Pennsylvania Ave in Washington, newly remodeled and just down the street from the White House at 1600 Pennsylvania  Ave. The cost of doing both was billed to the taxpayers and Trump of course profited from it, serving also Trump champagne and steaks. At his swearing in he also announced that Air Force 1 would be sold to save tax payer money, replaced with a Trump charter jet that would be rented by the government from him.
Trump’s inaugural speech–or rant–was exactly what was expected from him.  He said that his first order of business would be to expel all Muslims from the US, along with deporting all immigrants from Mexico. He also renounced NAFTA and all the free trade agreements with China and issued a 40% tariff on their goods.    He issued orders suspending enforcement of Obamacare and declared all EPA orders null and void. Palin was put in charge of a special task force on energy and the environment, and he declared all federal lands open to mining and drilling for oil. Drill Baby  Drill was now the official policy of America.
Trump thought he could simply push through want he wanted but with a Republican House and Senate that flipped to the Democrats, he found that they were less they willing to do his bidding.  He insulted in bipartisan fashion but it did little good.  As the economy began to tank Trump saw his approval rating slip more.  Legal challenges to his orders and actions mounted, coming from both Congress and citizens.  The cases began to choke the federal courts, necessitating Supreme Court review.  But since the death of Scalia the Court was operating one justice shy and it did not look as if Trump was going to be able to get through his judicial appointments.
But whatever one can say about Trump he finally achieved the impossible–he got the Democrats and Republicans to agree on one thing–his impeachment.  Fed up quickly with his presidency there was bipartisan agreement to impeach him.  By the time Trump was to be impeached Palin had already resigned.  Trump was without a vice-president and his impeachment was for self-dealing and disregarding the Constitution and the Supreme Court which had declared many of his act illegal.  This left Paul Ryan as the successor.  Except Trump refused to leave office, defying both the Congress and the Courts.
But Trump’s troubles did not stop there.  Following up on comments he made during the campaign, he ordered th US out of NATO. He ordered troops out of Japan and South Korea, and he torn up the nuclear agreement with Iran.  Early on  much of the career diplomatic staff at the State Department had resigned, leaving the US with few trained officials.  Trump named almost all of his friends as ambassadors, but they shared a common Trump trait–no diplomatic tact.  Soon the US was rhetorically fighting with everyone–even Great Britain who elected their own Trump like figure after Brexit, and President Le Pen in France. Tensions escalated in the Middle East as reaction to the Muslim US ban kicked in and domestic and international terrorist attacks against the US mounted.  Tensions with Iran, China, and North Korea reached a fever pitch, and finally Trump began talking  about nuclear weapons to be used to resolve all these disputes.
Finally the day came, July 4, to be exact.   Trump ordered the military leaders to act or face removal. With the Joint Chiefs of Staff worried about what Trump would do next, and seeing that Congress and the Courts were unable to restrain him, they did they only thing they thought patriotic to save the United States.

Saturday, December 31, 2016

2016 and the Death of Ethics

2016 closes out apparently as the year of death.  For many it will be remembered as the year that saw Prince, Princess Leia, and many other royalty of Hollywood and music die.  It was the year that aging icons of the Baby Boom generation died and when all the sex, drugs, and rock ‘n’ roll did in many of the Baby Boomers themselves.  But another death occurred this year–the death of ethics.
For many 2016 was the year of the death of democracy in the USA and across the world.  Yes and no is the answer.  For good or bad Brexit and Trump point to the strength of populist of democracy and a sign that main stream politics cannot ignore certain voices.  For many, Brexit and Trump are only the tip of an iceberg at something more fundamentally wrong across the world
If one can define ethics to include terms such as justice, fairness, compassion, toleration, dignity, and fair play, ethics to a large extent took a major hit in 2016.   It is easy to point globally and in the United States to how Trump unleashed an ugly side of American politics.  He may not have caused it but he certainly helped enable, resurrect, and personify the ugly side of America that has been here since the days when we burned women as witches in Salem, Massachusetts in 1692-93.  It is that sense of fear and prejudice, ignorance, misogyny, that has always been part of the ugly underside of America that became perhaps mainstream and acceptable again.  It reared itself in the sexism confronting Hillary Clinton’s campaign, and of course in Trump’s where his comments about women, immigrants, Muslims, and just about everyone else not WASP failed to doom his campaign but instead seemed to strengthen himself at every juncture.  It’s not clear what is worse–what Trump dared to say and got away with it–or the fact for so many they said he had the courage to say what they had been thinking for so long.  Trumpism simply captured the underbelly prejudice and a lack of toleration and respect that still existed in our society.
But Trumpism is merely the name for a similar way sweeping the world that features Brexit in the UK, LePen in France, and Orban in Hungary, just to name a few countries.  It is about a intolerance for difference, for immigrants, and for outsiders of any shape.  But these political movements are also again about the lack of human compassion for the plight of Syrian refugees and others who seek a better life elsewhere.  But all of these movements are also about other forms of indifference.  In the USA and across much of the world people starve, the gap between the rich and poor grows, and many are marginalized.
In the US we have an opioid addiction problem which is merely a symptom for deeper issues of poverty, yet there seems to be little interest or will in addressing these issues by either party.  As some of my Democrat friends say, why should I care about these people, they voted Republican, whereas as some of my Republicans friends say, why should I care about gays, lesbians, the poor, and people of color, they vote Democrat. We cannot agree whether Black Lives Matter, Police Lives Matter, or All Lives Matter.  I saw too many people I know take leave of their political and ethical senses, intolerant of political disagreement and basic facts, guilty of confirmation bias and cognitive dissonance. I never knew human misery and compassion wore partisan clothes, but in a polarized world they seem to now.
The death of ethics is also about political ethics.  This was the year that the final vestiges of the post-Watergate reforms died.  Campaign finance reform and the efforts to limit the impact of money in politics are gone.  Obama helped kill it off in 2008 when he opted out of the presidential public financing system and this year neither Clinton nor Trump participated.  It was also about the power lack of candor if not sometimes lying by presidential candidates this year where it became clear we have entered a post-truth, post-fact, political world dominated by fake news and by a mainstream news so anxious to survive in a for-profit journalist world that it was willing to cover anything so long as it made a dollar.  Both the New York Times and the Wall Street Journal seem shrill in both their editorials and political coverage.
Yes there is a structural component to the collapse of political ethics in terms of how money biases the political system, but it is individualistic too.  Trump displays barely a modicum of respect for political ethics. His conflicts of interest test the limits of American politics.  For the Democrats, the collusion of Deborah Wasserman-Schultz, the DNC, the state parties, and the Clinton campaign raise questions about fairness.  Donna Brazile, working for CNN, leaked debate questions to Clinton, and displayed no remorse for her actions.  And in Minnesota, members of the Sports Facilities Authority and their partisan friends and guests were clueless regarding how the allocation of tickets  to the new Vikings stadium was wrong.  I
If fact, no one seems to want to say that the  bad behavior in 2016 was bad behavior.   For those who still believe in truth, goodness, and beauty, that facts matter, and that ethics are important, 2016 was an awful year.   Ethics seemed as if it were located long time ago in a galaxy far, far away.
One can only hope we learn something from a horrible year and that 2017 is better.

Saturday, December 17, 2016

Trump’s Conflicts of Interest: The Problem of Securities Fraud and Insider Trading

A ton of ink and air time has been spent speculating  on Donald Trump’s conflicts of interest as
president of the United States and how either the law may not address his unique circumstances or how Trump’s refusal to honor ethical precedents is troubling.  All of this may be true.  But while all this chatter has been going on almost everyone has missed how a recent Supreme Court decision may have dealt a significant below to the Trump presidency with an interpretation of a securities law that goes back to the New Deal–the prohibition on insider trading.
Donald Trump is probably the richest person every elected president of the United States.  He has a vast empire of business holdings that cover the world. These holdings could potentially create conflicts of interest for him.  Much in the same way that conservatives criticized Hillary Clinton for possible conflicts of interest growing out of her role as Secretary of State and the Clinton Foundation, Trump will face the same as president.  He will be able, for example, to appoint members of the National Labor Relations Board (the agency that oversees private sector  union rules)  or issue executive orders regarding workplace safety issues that could impact his businesses.  Or there are issues regarding how his foreign business holdings might influence decisions he renders  in international affairs.
Past precedent dating back to Jimmy Carter has been to place one’s business holdings in a blind trust so that the president has no control over his business nor knowledge regarding who is running his affairs.  Dating back to Richard Nixon presidents have released tax returns to offer the public a clearer picture of their financial affairs.  Neither of these precedents are law–they are good ethical practices that presidents has followed as a matter of good government.
Trump has essentially rejected both practices.  He has yet to release his tax returns and has indicated that he will not place his business holdings in a blind trust.  At various times his transition team has declared either it will soon address the conflicts of interest issue, but most recently a press conference scheduled to be held on the topic was cancelled.  Trump has also said that he might turn over day-to-day decision making of his business to his children, assuming that this would be enough to cover his ethical problems.  Unfortunately, that too will be insufficient.
The core of the problem is the powerful risk of insider trading.  Back in the 1930s when Congress and President Roosevelt were trying to clean up the mess on Wall Street after the stock market crash in 1928, they passed the Securities Exchange Act of 1934.  Among the major provisions of the law was a provision to regulate securities fraud. Section 10(b) of the Securities Exchange Act of 1934 and the Securities and Exchange Commission's Rule 10b–5.
Securities fraud can encompass  many practices, but one of them is insider trading.  Specifically, it is when those in corporations or businesses in trusted positions trade on information before it becomes public.   Classic examples are when officers of a corporation knows that their business is going to have a very good or bad first quarter earnings report and then before telling the public buys or sells stock in their company.
Such insider trading is considered fraud in several ways.  One is how it allows some the chance to take advantage of privileged informed before the public can use it–this is an abuse of one’s trust or special position.  But it also allows for some individuals to potentially use this information or position to manipulate stocks to their personal advantage.  Many of the Enron executives did that back many years ago when they sold stock based on insider information that revealed their company was tanking even though the public did not know that, or when they manipulated balance sheets of the company to facilitate their own personal stock holdings.  All this is illegal, a felony security violation.
Part of what is also prohibited under insider trading law is not simply a corporate officer trading on privileged or confidential information, but also passing it on to someone else.  Here both the tipper and the tippee may be guilty of insider trading.  Various Supreme Court decisions have sought to define what constitutes insider trading and what has to be proved to show guilt, but on December 6, 2016, in Salman v United States, the Supreme Court issued a decision that significantly  impacts President Donald Trump, his family, and perhaps many business insiders in his administration.
At issue in this case, Salman was indicted for federal securities fraud for trading on inside information he received from a friend and relative-by-marriage, Michael Kara, who, in turn, received the information from his brother, Maher Kara, a former investment banker at Citigroup.  Salman was convicted of securities fraud but argued on appeal that 10b and 10b-5 did not apply to gifts of confidential information and that the law requires the tipper to acquire some material benefit from the tip.  The Supreme Court rejected this argument.
Writing for a unanimous Court, Justice Alito declared:

Section 10(b) of the Securities Exchange Act of 1934 and the Securities and Exchange Commission's Rule 10b–5 prohibit undisclosed trading on inside corporate information by individuals who are under a duty of trust and confidence that prohibits them from secretly using such information for their personal advantage...These persons also may not tip inside information to others for trading. The tippee acquires the tipper's duty to disclose or abstain from trading if the tippee knows the information was disclosed in breach of the tipper's duty, and the tippee may commit securities fraud by trading in disregard of that knowledge. In Dirks v. SEC, this Court explained that a tippee's liability for trading on inside information hinges on whether the tipper breached a fiduciary duty by disclosing the information. A tipper breaches such a fiduciary duty, we held, when the tipper discloses the inside information for a personal benefit. And, we went on to say, a jury can infer a personal benefit—and thus a breach of the tipper's duty—where the tipper receives something of value in exchange for the tip or “makes a gift of confidential information to a trading relative or friend.”

The critical holding in Salman is that liability for insider trading can be established through simply giving te gift of confidential information to a friend, family, member, or others.  The gift alone may be enough to establish liability for both the tipper and tippee. According to Alito:

[A] tipper breaches a fiduciary duty by making a gift of confidential information to “a trading relative,” and that rule is sufficient to resolve the case at hand. As Salman's counsel acknowledged at oral argument, Maher would have breached his duty had he personally traded on the information here himself then given the proceeds as a gift to his brother. It is obvious that Maher would personally benefit in that situation. But Maher effectively achieved the same result by disclosing the information to Michael, and allowing him to trade on it.

Salman in many ways builds upon a 1997 decision United States v. O’Hagen where the Supreme Court articulated the “misappropriation theory” for securities fraud.  Under this theory it is still insider trading if a person  trades in securities for personal profit using material, confidential information without disclosing such use to source of information.  In addition, the 2012 STOCK Act, which made it illegal insider trading for members of Congress to use confidential information to trade on stock, arguably if not definitely applies to members of the executive branch, including the president.
So how does all this apply to Trump?  Lacking a blind trust for his business holdings and where his children or he are still closely involved in the running of his business empire, use of any confidential  information for business purposes could be a form of insider trading prohibited under 10b and 10b-5.  For example, President Trump passes on information about imposing a tariff on a company contemplating shifting jobs overseas.  He or his family now have this information which they then use to buy or sells stock in that company or otherwise use in ways to make securities trades.  Once this government information is given to a corporate officer it becomes insider information and any trading on it before it is made public would be insider trading, securities fraud.
O’Hagen and Salman give the government broad leeway to prosecute for securities fraud when individuals–both tippers and tippees–use confidential information that they have for personal benefit. And just as important, under a series of other Supreme Court decisions private parties are not barred from bringing suits raising securities fraud in some cases.  Thus, even it one worries that  a Trump Justice Department would not prosecute or investigate the president or his family, other private parties are not barred from bringing legal challenges.
Trump, his family, and his network of business holdings implicate many traps for insider trading.  The same is true for his rich friends he is appointing to many of his cabinet and other positions.  The conflicts of interest that may ensue raise not just ethical issues but significant securities fraud issues that could create numerous criminal and civil problems.

Saturday, December 10, 2016

Civil Rights in a Trump Era: Why Telescope Media Should Not Win In Minnesota

The latest battle line for LGBTQ rights in Minnesota is over wedding pictures and movies and it is
being fought between Telescope Media Group and the State Human Rights Department  Telescope is a business claiming a First Amendment free speech or free exercise of religion in its refusal to serve same-sex couples.  Telescope should lose because no business has a First Amendment right to discriminate against individuals.  Freedom of speech and religion grant you as an individual a right to believe what you want, but it does not give a business a right to discriminate.
Recently owners of the Telescope Media Group did an op-ed in the Star Tribune telling their story as a Christian-based business wanting to tell stories about traditional marriages between one man and one woman.  They claim that the Human Rights Department is forcing them to also promote  same-sex marriages, drawing an analogy to a government which would have told Alfred Hitchcock to make musicals and not suspense stories.  This analogy is inapt.  But to understand why, one needs to be clear about the structure of the First Amendment and civil rights law.
First remember that the First Amendment originally applied and only limited the federal government but over time it too now limits state and local governments.  What does this mean?  The First Amendment is a limit on the government–the government may not abridge or limit freedom of speech or religion.  Private individuals and businesses are free to do what they want.  If you choose in your private life–as too many people do–to only associate with those who think the same way as you or who hold the same beliefs as you–that is your right.  No government in the US can tell you who you can invite to your house or tell what books to read or websites to visit.  Conversely, private businesses can do what they want.  The First Amendment does not apply to Facebook, a private business.  It can censor whatever it wants and it is free to do so because it is a private business and the government cannot tell it what content to carry.  In addition, your private employer can fire you because  it does not endorse or support your political views.  Private schools and colleges can impose speech codes. Overall, we are free to think or believe  what we want, including in our artistic expression, and private entities have a similar right.
Second, until the passage of the 1964 Civil Rights Act private businesses were allowed to discriminate in whom they employed or served.  Yes the Fourteenth Amendment Equal Protection clause prohibited discrimination, but again it only applied to the government.  The 1964 Civil Rights Act made it illegal for businesses engaged in interstate commerce (the term actually used is “public accommodations” to discriminate in their employment and customer service policies.  The Act was upheld as constitutional by the US Supreme Court and its constitutionality validity is not in doubt.
Yet the 1964 Civil Rights Act has three important exemptions for our purposes here. First,  there is an artistic exemption.  By that, the law says that if in filming a movie about racial discrimination it wanted to employ white only actors it could do so. This is among a category of exemptions known as a bonifide occupational requirement.   Second, and closely related to BFOQs,  religious organizations receive an exemption too on some matters.  By that, the Catholic Church is allowed to stipulate that in the hiring of a priest he must be Roman Catholic and, for good or bad, he must be a he.  You cannot sue the Church for gender discrimination for refusing to hire a female priest.  Third, the original 1964 Act covers sex discrimination but not discrimination based on sexual preference or identity.  To this day the Act still does not cover this type of discrimination, even though the Minnesota Human Rights Act does prohibit this type of discrimination.
The Supreme Court’s 2015 Obergefell v. Hodges decision legalizing same-sex marriage addressed one form of discrimination which involved government action but it did not address other  issues of civil rights involving businesses.  Absent state laws otherwise prohibiting it, federal law still does not make it illegal to discriminate against members of the LGBTQ community in areas of housing, employment, or customer service.  Soon after Obergefell one saw a rash of “wedding cake” controversies, businesses claiming a religious exemption from having to bake wedding cakes for  same-sex couples.   It also encouraged states like North Carolina to pass bathroom laws targeted against transgender individuals. Telescope Media’s case is a variant of these cases, except adding to it an apparent  artistic creativity or perhaps freedom of association claim.  There are several flaws legally and even ethically with this claim.
Back in the 1980s the Minnesota Jaycees wanted to admit women to their organization in defiance of the national Jaycees which opposed it.  The State of Minnesota sided with the Minnesota chapter, invoking the State Human Rights Amendment which banned se discrimination.  The national Jaycees argued that forcing them to accept women would violate their right to freedom of association and expression.  In Roberts v. United States Jaycees, 468 U.S. 609 (1984), the Supreme  Court rejected that claim and upheld the Minnesota Human Rights Law.  This case alone ought to settle the dispute here, but for Boy Scouts of America et al. v. Dale, 530 U.S. 640 (2000).  In Dale  a closely divided Supreme Court permitted the Scouts to ban gays from their organization by arguing that the Scouts had a protected expressive message against homosexuality that was core to the identity of their organization and that to then allow for a gay scout master would force it to endorse a message it did not support.  The logic of Dale is what is also behind Hobby Lobby and its refusal  to provide birth control coverage to women, and it is a similar logic behind Telescope Media’s arguments.
Some careful distinctions must be made.  There is a difference between artistic expression and conducting a business that serves the public.  Telescope Media is trying to hide its discrimination  behind the former.  If it wants to make bigoted anti-same sex marriage movies it may do so. No one can or should tell them they have to do that.  But if they are operating a business they do not have a right to refuse to serve someone based on their gender preference or orientation.  Allowing a private business to invoke religious or artistic expression as an exemption to anti-discrimination law is not about being politically correct, it is about promoting a fair and just society.  It is creating a level playing field for all.  Telescope Media’s arguments taken to their logical terminus allows them a free pass  to discriminate against serving mixed racial or mixed religious couples (Perhaps in their view Jesus  would have opposed a Catholic marrying a Jew).
Moreover, reliance on Dale is not good.  First, Dale is a much disputed legal precedent that some equate to the same anti-gay animus found in the 1986 Bowers v Hardwick decision which declared consensual adult same-sex sexual activity as not protected under a right to privacy.  That decision was repudiated and overtured in the 2003 Lawrence v. Texas.  Additionally, Dale seemed to blur the line between religious (churches or temples) and non-church entities. Many already think  that religious organizations are given too much freedom to discriminate in ways that violate the Establishment Clause.  Allowing Telescope Media to prevail opens up a bad precedent in simply letting any business to invoke a religious claim as a way around anti-discrimination law.  This is what the flaw in the Hobby Lobby decision was, and the viability of that precedent too is questionable.
The concern of course in a political and legal world defined by a Trump presidency Telescope Media might prevail.  It could but should not.  The current anti-discrimination law is well grounded and would not be easily dismantled or overturned.  But the fact that this is even entertained is a product an era that the Trump presidency may be ushering in. One where equal protection under the law are viewed is as political correctness and not as w hat is demanded in a society that respects fairness, justice, and  civility.   People legitimately voted for Trump for many reasons that should be respected.  But what one hopes is that it was not an endorsement for a return to bigoted behavior  where people felt like they can say the must hurtful things they wanted to one another, or that businesses can hide their prejudice by invoking claims of artistic or religious expression.

Sunday, December 4, 2016

Lessons Learned or Not from the 2016 Election

Perhaps the only thing more dreary and misinformed than the commentaries and emoting leading up
to the 2016 election are the commentaries and emoting that have taken place since.  It has been approximately one month since  November 8, I have given more than a dozen talks to various groups about the election and have listened to more than my fair share of partisan analysis and general emoting about what happened.  Nate Silver once did a book discussing the need to separate the signal from the noise if we want to make good predictions. What are some of the lessons learned or not since then?  In effect, what was and is still now the signal and noise regarding the election?

The Pollsters did not blow it.  Everyone wants to argue that the pollsters blew the election.  No, they did not.  The last national aggregate polls said Clinton had about a 2-3 point lead in the national popular vote.  Guess what?  The near final vote totals are showing her with a 2 or so point lead in the national popular vote.  But remember two things about polls.  First, polls are never pin-point accurate and will be expressed in terms of margins of error of +/- three or so points.  Clinton was within that margin or error.  Second, and more importantly, as I have repeatedly told people, national aggregate polls are worthless when it comes to presidential elections because we do not elect people by the popular vote–it is the electoral college that matters.  What was more critical to examine were the tracking polls in critical swing states and there we saw clear evidence in the last 72 hours or so that the undecided voters were tracking toward Trump.

But the pundits did blow it.  The NY Times at one point gave Clinton nearly a 92% chance of victory and Nate Silver had it up to the high 70s or 80s.  Almost every major media pundit and outlet  was convinced Clinton would win and simply could not see how she could lose to Trump.  ( For the record, I generally placed Clinton’s chances most of the election at about 55% but consistently saw many reasons why Trump would win and apparently I have been told by many people who attended many of my talks in the last year said that I predicted Trump would win).  There are many reasons why they blew it, much having to do with the intellectual or cultural bubbles they lived in, laziness,  or again accepting the same received wisdom of 2008 that said that Clinton was inevitable.

This election was typical in many ways.  In many ways this was a normal election that came down to some fundamentals and basics.  It was an election that was decided by a handful of swing voters n a few swing counties in a few swing states. These were the same states I wrote about in my book, plus Pennsylvania and Michigan.  No surprises here.  In addition, elections come down to candidates  and their narratives–Clinton lacked a clear and consistent reason to why she should be president, Trump had a narrative.  Despite all the hand wringing and speculation of a divided Republican Party, Trump did a better job mobilizing the GOP base and holding it than did Clinton.  Trump moved more of the swings in the critical swing states.  And true to form as with the most recent elections, it was a polarized election that was very close.  Finally, Tip O’Neill once said never assume people will vote for you–everyone wants to be asked.  Clinton lost in Michigan and Wisconsin because she did not campaign there ask for votes, Trump did.  The same almost happened in Minnesota.

The election was atypical in many ways.  There were many ways this was an unusual election.  First both candidates were tremendously unpopular and that created volatility among some in the electorate undecided regarding whether to vote and for whom. Perversely, both candidates did better in the polls when they did not talk or were not covered by the media.  Second, this was the first presidential campaign in American history with a major party candidate featuring a woman.  Before  the election I estimated that approximately 30% of the electoral would never vote for a woman regardless of who she was.  My point was that sexism was a central problem in this election that most pundits and people largely ignored.  It played out in terms the preoccupation with Clinton’s pantsuits, speech patterns, demeanor, and Trump’s language, both verbal and body during the debates and campaign season.    Other factors that made the election unique were how the Democrats seem to have largely lost working class voters, the impact of the FBI director Comey letter, and the  near complete void in terms of issues as a factor in the race.  We should also not forget about the transformation of the made for television election and presidency into the made for social media election and presidency.  Finally, we should not ignore the important role fake news played and how bots and trolls potentially drove much of the election in the social media.

Politainment lives!  I have written extensively about the rise of politainment, or the convergence of the politics and entertainment (and pop culture) where candidates who master the art of generating clicks and views in a 24/7 for profit media cycle will do well.  Trump understood this, Clinton did not.  The mainstream media was so heavily dependent on Trump for dollars and viewers that it could never figure out how to cover him.  The same is true post-election.    Trump essentially owns the news establishment, preventing the media from being able to cover him in any way that is objective or reasonable.

But even beyond the aforementioned themes, there are several post-election reactions or statements that need to be addressed.

Trump will be the president.  Barring the unforeseen Trump will be president.  A lot of people are saying that “Trump is not my president.”  Like it or not he is.  Some see him as a sexist pig or worse  and cannot believe Clinton lost to him.  The reality is she did lose the electoral college to him.  Moreover, yes the sexism in our culture stinks and one can complain about it forever but that sexism is a reality and female candidates unfortunately have to learn how to campaign facing it.

Don’t blame the voters.  I have seen way too many articles or people blame Millennials, or third party voters, or women, or others for why Clinton lost.  Stop blaming the voters!  The fault is with Clinton.  Ralph Nader once said that no one owns a voter and as Tip O’Neill said, you have to ask and earn votes.  Clinton was not entitled to anyone’s vote and she had to earn it.  If people did not vote for her the fault rests with her so blame her and her campaign instead.

Demographics is not Destiny.  This was the Democratic Party mantra and Clinton strategy leading into this campaign.    Demographics matter but so does candidate quality and message.  Moreover, in many ways demographics did matter in this election–white working class are still a majority of the electorate and they still matter and they show up to vote.  Oh, and the electoral college still matters.

The election was not rigged.  There is little evidence to support this a currently understood.  We do not have much information regarding voter suppression yet.  There is little evidence of Russian hacking or the general hackability of US elections.  Moreover, there is no evidence that millions of illegal votes, especially in patterns that would have only voted for Clinton. No party has a monopoly on virtue and there is also no reason to think that the paltry cheating that occurred took place to the benefit of one party or candidate alone.   If we are talking about rigging in terms of the role of money in politics, election rules that hurt third party candidates, and the media bias, then yes it may have been rigged.

This may or may not have been a critical election.    There is some evidence that traditional voting patterns shifted in this election but it is not clear how much and how permanent.  The best explanatory variable predicting election returns this year seems to be educational level.  Areas on balance with people with more college degrees voted for Clinton and Democrats.  No this does not mean stupid people voted for Trump.  It instead suggests a new cultural divide that needs to be understood better in terms of how American elections move forward.

There are no tanks in the streets.  Calm down everyone.  Yes the campaign was awful in tone and  we saw an unleashing of a lot of bigotry.  Yet it started way before Trump and he may simply be the face of a new ugly era already emerging in politics.  Stories from the Southern Poverty Law Center report hundreds of hate incidents since the election but we have no idea how this fits into an existing trend line or in comparison to comparable recent periods.  There is constant hysteria about what will or will not happen with Trump as president.  Calm down.  For the same reason that the rigidity and stability of our political institutions (checks and balances, separation of powers, bicameralism, and federalism) make political change difficult, the same will also prevent any excesses over the next four years.  We should also simply ignore or shrugged off (as David Brooks recently said) the most recent tweets of Trump.

Overall, understand there is a lot of noise out there.  Ignore most of it.