John Berlau

Breitbart the Fusionist Thinker: How the Activist and Tactician Promoted a Key Piece of Conservative Philosophy

by John Berlau on March 2, 2012

in Culture, Features, Zeitgeist

Post image for Breitbart the Fusionist Thinker: How the Activist and Tactician Promoted a Key Piece of Conservative Philosophy

Most of the commentary on the shocking death of Andrew Breitbart focuses on his achievements in new media and technology. Those who loved him and those who hated him recall his pioneering innovations that have changed political activism — on both sides — forever.

Yet as important as these accomplishments are, they represent only half of his achievement. The great irony of Andrew Breitbart is that someone who was never regarded even by most of his allies as a “thinker” — much less as a political philosopher — advanced a key piece of conservative political philosophy. Breitbart geared the fledgling Tea Party movement and much of today’s center-right movement toward “fusionism” — in which defeating Big Government becomes a unifying force of the movement by bringing libertarians and traditionalist conservatives together. As he wrote last year in his book Righteous Indignation, “the need for freedom crossed all cultural, racial and political boundaries.”

Fusionism had its intellectual beginnings with Frank S. Meyer, a founding editor of National Review who, like Breitbart, made the journey from left to right (though in Meyer’s case it was a much further journey from hardcore communism, rather than Hollywood liberalism). I don’t know how familiar Breitbart was with Meyer’s writings, but he became one of the most effective advocates of Meyer’s philosophy through the platforms he created and specific causes he championed.

In his 1962 book In Defense of Freedom: A Conservative Credo, Meyer made the case that freedom was the only path to virtue, because for an act to be virtuous, it cannot be coerced. “Acceptance of the moral authority derived from Transcendent criteria of truth and good must be voluntary if it is to have meaning,” he wrote. At the same time, as summarized by the Acton Institute for Religion and Liberty, Meyer believed that “without using force, intellectuals must persuade people of the virtuous path and must not be afraid to make moral judgments. After all, freedom itself is based on the moral principle that men are endowed with inalienable rights by their creator.”

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The STOCK Act’s Muzzle and How to Fix it in Conference (Update)

by John Berlau on February 10, 2012

in Features, Regulation, Sanctimony, Transparency

Post image for The STOCK Act’s Muzzle and How to Fix it in Conference (Update)

My colleagues David Bier and Ryan Radia contributed to this post.

Per the scenario in a previous post, it’s April 2012. You are a conscientious congressional staffer who still takes seriously the need to be a steward of taxpayers’ money. (Yes, I know for a fact, there are more than a few of these folks around on Capitol Hill.) You are watching closely events surrounding an “omnibus” or “minibus” spending bill deemed even by conservative Republican members as “must-pass” because it funds the military as well as other parts of government.

Suddenly, you hear about an outrageous earmark about to be slipped into the bill that would enrich a Fortune 500 company. You decide to alert a network of fiscal watchdogs you’ve met with over the years to wage an instant campaign against this piece of corporate welfare.

You have all the information in the e-mail and are about to hit “send.” But then you remember something from a briefing you attended a couple days ago. The subject was the STOCK (Stop Trading on Congressional Knowledge) Act – aimed at stopping “insider trading” by members and employees of Congress – that your boss and nearly every other member of Congress voted into law in February.

At the time, you didn’t think the law would affect you since the only trading you do is indirect, through your mutual funds and pension. You were surprised to learn, however, that you now have a broad “duty of confidentiality” that encompasses not just trading on “material, nonpublic information,” but disclosing information to those who might.

You sit back and think, “It is indeed possible that someone I send this to could buy stock in the company, or could short the company based on the coming outrage.” You stare at the computer screen wondering how virtually no one noticed how this law could have potentially criminalized an act of whistleblowing as abetting “insider trading.”

Such a scenario is almost certain if House and Senate versions of the STOCK Act are not modified before a final bill is sent to President Obama. The House passed the bill yesterday with a 417-2 vote after a similarly overwhelming 96-3 Senate vote last week.  Both bills must go to “conference” to produce a final identical bill to be voted on by both houses, giving members an opportunity for a fix to help make sure that whistleblowing and routine communication with outside groups from being caught in the law’s web.

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The STOCK Act’s Muzzle — How “Insider Trading” Bill Could Shut Down Grassroots Communication

by John Berlau on February 6, 2012 · 3 comments

in Legal, Nanny State, Personal Liberty, Sanctimony

It’s April 2012. You are a conscientious congressional staffer who still takes seriously the need to be a steward of taxpayers’ money. (Yes, I know for a fact, there are more than a few of these folks around on Capitol Hill.) You are watching closely events surrounding an “omnibus” or “minibus” spending bill deemed even by conservative Republican members as “must-pass” because it funds the military as well as other parts of government.

Suddenly, you hear about an outrageous earmark about to be slipped into the bill that would enrich a Fortune 500 company. You know how these things work; once the bill hits the floor, it’s very hard to excise one provision. So you decide to alert a network of fiscal watchdogs you’ve met with over the years to wage an instant campaign against this piece of corporate welfare.

You have all the information in the e-mail and are about to hit “send.” But then you remember something from a briefing you attended a couple days ago. The subject was the STOCK (Stop Trading on Congressional Knowledge) Act – aimed at stopping “insider trading” by members and employees of Congress – that your boss and nearly every other member of Congress voted into law in February.

At the time, you didn’t think the law would affect you since the only trading you do is indirect, through your mutual funds and pension. You were surprised to learn, however, that you now have a broad “duty of confidentiality” that encompasses not just trading on “material, nonpublic information,” but disclosing information to those who might.

You sit back and think, “It is indeed possible that someone I send this to could buy stock in the company, or could short the company based on the coming outrage.” You stare at the computer screen wondering how virtually no one noticed how this law could have potentially criminalized an act of whistleblowing as abetting “insider trading.”

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Facebook Filing Blasts Obama-Bush Overregulation of Sarbanes-Oxley and Dodd-Frank

by John Berlau on February 2, 2012 · 9 comments

in Deregulate to Stimulate, Economy, Features

Post image for Facebook Filing Blasts Obama-Bush Overregulation of Sarbanes-Oxley and Dodd-Frank
In his letter to prospective shareholders in the middle of the 201-page “Form S-1” that Facebook  filed yesterday afternoon to launch its much-anticipated initial public offering, company founder and CEO Mark Zuckerberg stated that one mission of Facebook is to “bring a more honest and transparent dialogue around government.”

In one important way, another section of the IPO already does so in communicating the incredible burdens on companies attempting to go public — burdens that create difficulties even for companies as big as Facebook and almost insurmountable for smaller firms. On page 30 of the S-1 (page 37  if counting the total number of pages), Facebook specifically singles out the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act of 2010 as “risk factors” that will impose substantial costs to the company and its shareholders and divert resources from the firm’s core mission of innovation.

In bold lettering, Facebook announces, “The requirements of being a public company may strain our resources  and divert management’s attention.” The prospectus goes on to explain:

As a public company, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (Exchange Act), the Sarbanes-Oxley Act, the Dodd-Frank Act, … and other applicable securities rules and regulations. Compliance with these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming, or costly, and increase demand on our systems and resources.

Regarding Sarbox, Facebook registers a complaint similar to that of many entrepreneurs, investors, and scholars of the economy about the law’s burden. The filing notes that the company is “in the process of designing, implementing, and testing the internal control over financial reporting required to comply with” Sarbox’s infamous Section 404,”which process is time consuming, costly, and complicated.”

Facebook is far from the only firm — big or small — that has found Sarbox to be “time consuming, costly, and complicated.” According to John Battelle’s book The Search, considered a definitive history of Google, Sarbox was “hell for a company like Google, which made its money literally pennies at a time, from millions upon millions of micro-transactions.”

Battelle reports that Sarbox compliance significantly delayed Google’s 2004 IPO. “According to engineers involved in the work, Google had to significantly restructure its advertising report system from the ground up.”

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Buffett’s Secretary, Romney’s Return, and the Crushing Double Taxation on Investment Income

by John Berlau on January 27, 2012

in Economy, Employment, Features, Nanny State, Personal Liberty, Sanctimony

Post image for Buffett’s Secretary, Romney’s Return, and the Crushing Double Taxation on Investment Income

There has been much waxing in the last few days about how unfair it supposedly is that Mitt Romney was taxed at around 15 percent. And that Warren Buffett supposedly pays a lower tax rate than his beleaguered secretary does.

But as my colleague Trey Kovacs and I pointed out in a Wall Street Journal op-ed this week, these “low” tax rates are a charade. This is because “our tax code layers taxation of dividends and capital gains on top of a top corporate tax rate of 35%—which even President Obama acknowledges [he, in fact, did so in the State of the Union] is one of the highest in the world … The law taxes corporations as if they were separate beings from the shareholders who own them and then levies a separate tax on shareholder payouts and gains. This double taxation brings the effective tax rate on investment income to as much as 44.75%.” In fact if you factor in the estate tax or “death tax,” the rate goes to 64 percent on this income. And that doesn’t even include state and local taxation.

As we note in the op-ed, “The most popular tax reforms—from the “9-9-9 plan” of former candidate Herman Cain to flat tax proposals—all have in common the reduction or elimination of double taxation on investment.”

My friend and mentor the late Richard Nadler found a few years back that polling showed that middle-class investors had “internalized their new role as capitalists” and “display favorable attitudes toward programs that reduce taxes on savings and investment.” New research seems to confirm this middle-class savers still retain these views even after the financial crisis.

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WaPo Columnist Calls for Cordray’s Consumer Bureau to be “Big Brother”

by John Berlau on January 15, 2012 · 1 comment

in Economy, Nanny State, Personal Liberty, Precaution & Risk, Regulation

“Big Brother.” When commentators use that phrase to describe a government agency, it is most often not meant as a compliment.

Rather, it is wielded as the ultimate criticism of the government’s overreach. The pejorative use of this phrase, after all, dates back more than 60 years to George Orwell’s dystopian novel “1984,” in which “Big Brother” was the symbol of a totalitarian collectivist dictatorship.

Whenever a government agency is called “Big Brother” — whether by liberals regarding the NSA, by conservatives regarding the EPA, and regarding the TSA by just about everyone who doesn’t work there — most defenders of the entity push back against the use of the phrase. They angrily deny that the entity’s action can be described as anything close to that of “Big Brother.”

Yet amazingly, Michelle Singletary, The Washington Post‘s nationally syndicated personal finance columnist, has embraced the phrase in describing her desires for the new Consumer Financial Protection Bureau. “Watchdog Should Act Like a Big Brother,” reads the headline of her latest column in the Post.

After interviewing Richard Cordray, whom President Obama installed as director of the bureau in an unprecedented “recess” appointment when the Senate was not actually in recess, Singletary argues that the bureau has a mandate to be a “big brother” to American consumers. “The agency, under his lead, is supposed to be the big brother (or sister) consumers need to enforce federal consumer financial protection laws and, if necessary, create rules that will head off unfair, deceptive or abusive financial practices and products,” she writes.

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Cordray Recess Appointment is Travesty for Government Accountability

by John Berlau on January 4, 2012 · 7 comments

in Deregulate to Stimulate, Economy, Features, Politics as Usual, Zeitgeist

Post image for Cordray Recess Appointment is Travesty for Government Accountability

News is just breaking that President Obama will today make a “recess” appointment of Richard Cordray to head the Consumer Financial Protection Bureau, a powerful and largely unaccountable regulatory bureaucracy created by the Dodd-Frank financial “reform” law rammed through Congress in 2010.

Such a move would be a horrific precedent on many levels for government accountability. It would be an appointment made by broadly defining “recess” to an entity over which Congress has no effective oversight of a nominee with a checkered history as Ohio AG’s of directing state money to confrontational “community organizers” as well as his trial lawyer supporters.

Let’s take these one at a time. The Senate is now in “pro forma” session, in which a handful of senators meet in the Senate every three days, as part of the agreement with the Republican-controlled House to adjourn Congress. The Democrat-controlled House and Senate did the same thing during the last year of the George W. Bush administration. During the 2007-08 pro forma session, as noted by the nonpartisan Congressional Research Service and reported by Politico, President Bush “made no recess appointments between [Democrats’] initial pro forma sessions in November 2007 and the end of his presidency.”

President Obama arguably had a window yesterday in the few seconds between the first and second session of Congress, but didn’t exercise this opportunity. If he appoints Cordray now, he sets a precedent that Democrats and critics of the “Imperial Presidency” will likely regret the next time  there is a Republican president and Democrats control one or both houses of Congress. If any adjournment or break the Senate takes can be defined as “recess,” can the president make appointments when the Senate is in formal session and gavels out for the evening? Our long-held tradition of checks and balances advises strongly against going down this road.

And, in this case, the CFPB itself shatters precedents, as well as specific Constitutional provisions, on checks and balances in regulatory agencies. Once a director is appointed, Congress has no effective oversight of the bureau through the appropriations process, as it does with other agencies.

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Dick Durbin’s Hypocritical Quest for “Honest Information’ on Bank Fees

by John Berlau on December 20, 2011 · 3 comments

in Deregulate to Stimulate, Features, Regulation, Sanctimony, Transparency

Post image for Dick Durbin’s Hypocritical Quest for “Honest Information’ on Bank Fees

Senate Majority Whip Dick Durbin (D-Ill.) wants banks and credit unions to know that he’s all about transparency and “honesty” in consumer fees.

In his recent letter hectoring the Illinois Bankers Association and the Illinois Credit Union League, Durbin proclaimed that  ”consumers in Illinois and across America have made clear their desire for honest information about banking fees.” He urged the banks to “be transparent about fees” by adopting a checking account disclosure form he favors.

Yet when it comes to disclosing to consumers what’s causing these bank fees to rise, Durbin has told these same institutions to just shut up. That’s because honesty and transparency would require that banks and credit unions disclose to consumers the Durbin Amendment to the Dodd-Frank financial “reform.” That measure by Durbin puts price controls on the interchange fees banks can charge merchants for debit card purchases, shifting the costs of debit card processing to consumers.

The contrast is evident in two of Durbin’s interactions with financial firm JPMorgan Chase. Late last week Durbin and many others lauded the firm’s Chase bank unit for adopting a simplified checking account fee disclosure form based on a model developed by the Pew Charitable Trusts’ “Safe Checking” project. The new form contains an upfront three-page schedule of different types of fees. Though there are still lengthy disclosures of terms and conditions — which are effectively mandated by longstanding regulations from laws like the Truth in Lending Act and from excessive litigation — these will now be embedded in Internet links on online copies of the form, a Chase spokesman tells Reuters.

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Memo to Gingrich: Credit Unions are Not GSEs

by John Berlau on December 16, 2011

in Bailout Watch, Deregulate to Stimulate, Economy, Features

Post image for Memo to Gingrich: Credit Unions are <i>Not</i> GSEs

Let me begin this post with a disclaimer, of which many of our readers are already aware. The Competitive Enterprise Institute and OpenMarket.org do not advocate the election or defeat of any political candidate. What we do do is offer our perspective on many of the policies the candidates have to offer. Often a candidate will receive kudos from us for one idea, but strong criticism for another.

In the case of former Speaker of the House Newt Gingrich, I have applauded his and other candidates’ calls to repeal the burdensome accounting mandates from the Sarbanes-Oxley Act of 2002. A few days ago on OpenMarket, Rand Simberg gave qualified praise to Gingrich’s idea for a lunar colony, so long as involved lifting regulatory barriers and not government subsidies.

But in last night’s Fox News debate, Gingrich made an egregious factual error that needs to be corrected. This would be his outrageous assertion that the nation’s thousands of credit unions are “government-sponsored enterprises” akin to the disgraced Fannie Mae and Freddie Mac.

“Credit unions, co-ops, a lot of government-sponsored enterprises do a lot of good,” Gingrich said in response to a question from Chris Wallace about Gingrich’s $1.6 million in consulting fees from Freddie Mac in 2002 and his public praise around that time of the “GSE model”

But these entities Gingrich cited do not bear any resemblance to the “GSE model.” In fact, credit unions are some of the least subsidized financial institutions.

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On 10th Anniversary of Enron Collapse, Time for Sarbanes-Oxley to Go

by John Berlau on December 2, 2011

in Bailout Watch, Deregulate to Stimulate, Features, Politics as Usual, Precaution & Risk, Regulation, Sanctimony

Post image for On 10th Anniversary of Enron Collapse, Time for Sarbanes-Oxley to Go

Ten years ago today, Enron Corp. filed for bankruptcy. Today, with all of its dealings with banks, it would probably have been deemed “too big to fail.”

But luckily, this was before Hank Paulson and Tim Geithner occupied the Treasury Department. Enron was allowed to fail, and its executives were punished for fraud under decades-old securities laws.

While there was certainly damage to employees and, temporarily, to surrounding businesses in Houston, the bankruptcy barely caused a blip to the larger economy. The economy, already reeling because of the 9/11 attacks three months earlier, soon had a remarkable recovery.

Rather, the most damaging action of the Enron affair occurred in the aftermath of post-Enron reform. This would be the Sarbanes-Oxley Act of 2002. Ten years later, even the Obama administration agrees that Sarbox’s crushing burden of accounting mandates is holding back economic growth.

And Sarbox has little to show in results for investors, having failed to stop Lehman Brothers, Countrywide and now MF Global, which was run into the ground by a former politician who had championed the 2002 law. Jon Corzine’s bio on the website BigThink.com states glowingly, “As a member of the United States Senate, Corzine co-authored the Sarbanes-Oxley Act, a piece of legislation designed to crack down on corporate malfeasance crafted in the wake of accounting scandals surrounding Enron, Tyco, WorldCom, and other major corporations.”

Yes, it turns out Corzine may have been more of an expert than we thought on alleged “corporate malfeasance.”  And as noted  in the October report of President Obama’s Council on Jobs and Competitiveness,  Sarbox has crushed the dreams of thousands of honest entrepreneurs for every scandal it may have stopped (and I don’t know that it has stopped any.)

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