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  • Publication
    Law and Custom on the Federal Open Market Committee
    (2015-06-01) Zaring, David T
    The Federal Open Market Committee (FOMC), which controls the supply of money in the United States, may be the country’s most important agency.1 The chair of the committee is often dubbed the second most powerful person in Washington, only deferring to the President himself.2 Financial scholars and analysts obsess over the institution, leading to a rich tradition of FOMC Kremlinology, veneration, and second-guessing in business schools and economics departments. But legal scholars have been less entranced by the committee—put off, perhaps, by the fact that the institution has never been checked by the courts or by the Administrative Procedure Act (APA).4 As a result, there has been no effort to come to grips with the administrative law of the FOMC; this article seeks to redress that gap. The FOMC enjoys a legal mandate that shields its discretion to a remarkable degree. The principal claim here is that this shield, combined with the imperatives of bureaucratic organization in an institution whose raison d’etre is stability, has turned the FOMC into an agency governed by internally developed tradition in lieu of externally imposed constraints. The makeup of the committee, the materials that it consults before rendering monetary policy decisions, its voting mechanisms, and the way its decisions are promulgated are products of a mélange of evolving tradition and statutory permissiveness. One might argue that some combination of law and tradition explains what happens in most agencies. But the degree of reliance on tradition sets the FOMC apart. No one worries about the customs governing evidence presentation and voting order on multimember boards like the Securities and Exchange Commission (SEC) or the National Labor Relations Board (NLRB), but they are subjects of scrutiny at the FOMC. By the same token, APA law, rather than traditions such as that of the FOMC’s so-called “beige book,” governs what goes into the record before, say, the EPA or Commerce Department make their factual findings.5 And Supreme Court decisions like Motor Vehicle Manufacturers Ass’n v. State Farm Mutual Automobile Insurance Co. mean that the decisions rendered by most agencies are substantially lengthier, and strive for substantially less ambiguity, than those of the FOMC.6 It is possible that this sort of development of routinized custom might be expected for agencies with few legal constraints. If so, the FOMC is a fine example of an institutional tendency, one that might have particular application in other forms of financial regulation. A mix of tradition and legal constraint are a feature of administrative constraint in that field, where litigation providing definitive opinions on required process is rare, and informal—and often nontransparent—oversight a norm. An account of the FOMC that jibes with the way this sort of regulation works might serve as a prod or a comparator for other accounts of the administrative law of financial oversight. Given this theme, the article makes the following additional points: 1. The FOMC enjoys the sorts of broad delegations that other New Deal agencies benefit from, only more so; the orders issued by the committee at the conclusion of each of its eight annual meetings do not fit within the traditional paradigms of administrative rulemaking or adjudication, leading courts to eschew any effort to review those decisions as committed to the agency’s discretion.7 2. Given its free hand, the FOMC might be expected to be an empire builder. But in reality, it has only expanded its remit with regard to the sort of transactions it takes on, which have moved beyond the purchase and sale of federal government debt to include positions in a broader range of financial assets, as the financial crisis exemplified. 3. The modest problems that the FOMC has endured at the hands of the branches that monitor independent agencies like it—the courts and Congress—have reflected its extraordinary independence and relative opacity. The courts have turned away a series of plaintiffs, including two senators, concerned about the breath of the delegation of power over the economy to the committee and the mechanism of appointment of committee members. Congress has occasionally fretted about the black box within which the committee makes its economy-changing decisions. However, in 1990, Congress removed legislation passed in the 1970s designed to require more reporting from the committee, suggesting that it, too, is cowed by the idea of subjecting the agency to much legislative oversight.8 4. The committee makes decisions in a procedurally consistent but increasingly lengthy and elaborate way. Simple correlations between the transcripts of these meetings (length, size, mood, number of times the chair spoke), the ultimate decision made by the FOMC, and a number of leading economic indicators found one intriguing relationship between attendance and the direction of the federal funds rate.9 There may be some promising research directions available for this sort of analysis. If the above observations are meant to make a descriptive case about the way the FOMC makes decisions, the question arises whether we should regret its distance from traditional sorts of administrative procedure. The FOMC’s procedural uniqueness is a function of its independence; that independence isjustly celebrated. We can live with the irregularities and experiments offered by the idiosyncratic procedures of financial regulation in general, and with the FOMC in particular, though comfort with the independence of the committee does not excuse unfamiliarity with the way it operates. It is accordingly worth determining how the FOMC does its business, and no scholar has yet done so. This lack of coverage by legal scholars of the rules and culture surrounding open market operations is not, to be sure, a terrible dereliction of duty. Administrative lawyers often assume that the subjects they study closely—rulemaking and adjudication by agencies—are quite different from other services provided by the government, including block grants, the management of state-owned enterprises, and, indeed, the oversight of interest rates. These lawyers do not necessarily claim that administrative scholarship should cover the entire waterfront of government action. Moreover, from a disciplinary perspective, although lawyers are very much engaged in financial supervision—that is, the way that the Federal Reserve (the Fed) regulates banks—they have little to do with either the decisionmaking by the FOMC, which expands or shrinks the nation’s monetary supply, or the implementation of its open market orders, which is done by the traders who staff the New York Fed’s open market operations desk. Although these are all good reasons not to place the scrutiny of the government’s open market operations agency at the top of every scholar’s agenda, they do not justify ignorance of the committee. Any lawyer interested in institutional design ought to be interested in the design of one of the government’s signature institutions; by the same token, knowing how law constrains the least rule-bound or adjudicatory of agencies essays an outline of the reach of these legal constraints. In part III of this article, the legal constraints of the FOMC are considered in the classical administrative law vein. As this article discusses, those constraints have not limited the discretion of the FOMC, which enjoys a remarkable degree of independence from Congress, the executive, and the judiciary. Nonetheless, the limitations on the freedom of committee members to do as they wish are reviewed to give the reader a comprehensive sense of how the law, as expressed by the actual practice of the courts and Congress, have constrained the agency. But the analysis of how the FOMC operates begins in part II, where the way that the constraints that do exist have affected the agency’s decisionmaking process is considered. A brief conclusion ends the analysis.
  • Publication
    Law and the Entitlement to Coerce
    (2013-01-01) Hughes, Robert C
    A long tradition in political and legal philosophy regards coercion as central to the very idea of law. Some historical figures, such as Hobbes, Locke, and Austin took the position that there can be no law without a coercive sanction. Many philosophers of law, most famously H.L.A. Hart, have called this view into question.1 Nonetheless, many political and legal philosophers continue to believe that law is necessarily connected with coercion in a subtler way. Whenever government is entitled to make a law that imposes a direct requirement on conduct, it is entitled to use coercion to enforce this requirment. Some endorse this position explicitly.2 Others commit themselves to it when they argue against certain kinds of laws or legal arrangements by claiming that coercive enforcement of those laws would be law only if it has some sort of justification for enforcing law coercively. The view that the entitlement to make law necessarily comes with an entitlement to coerce is challenged rarely, if ever. Nonetheless, this view is mistaken.
  • Publication
    The Unemotional Corporation
    (2014-03-21) Sepinwall, Amy J; Sepinwall, Amy J
    Because corporations are not capable of experiencing emotions, we should stop thinking of them as persons. Corporations are monsters – not in the sense that they are hell-bent on evil but in the sense that they lack certain capacities that are the hallmarks of our humanity. In particular, and like most supernatural creatures populating both mythology and the movieplex, corporations lack the ability to appreciate what it might feel like to be the victim of a wrong and, not unrelatedly, the ability to feel bad when they do wrong. To put it in our folk terminology, the corporation lacks a heart.
  • Publication
    Barney Frank's Rules of Order
    (2015-01-01) Conti-Brown, Peter
  • Publication
    Theorizing the Firm: Organizational Ontology in the Supreme Court
    (2016-10-01) Orts, Eric W
    In two leading cases in the last several years, the U.S. Supreme Court revitalized interest in questions of “legal personality,” specifically with respect to business firms. Some legal theorists believe that the realist tradition, culminating in a seminal article by the philosopher John Dewey, disposed of the need to inquire very deeply into the “nature” of organizations, notwithstanding their legal attributes as “persons”—including various rights and duties, not least the ability to be represented in litigation.2 Writing during the legal realist period in American jurisprudence, Dewey believed that questions of legal personality should turn not on any inquiry “regarding the nature of things” (such as corporations) but rather on an examination “in terms of consequences” (such as determining what it would mean practically to recognize corporations as having rights or duties in particular circumstances). Given that the law designates organizations, such as corporations and other business firms, as having various attributes, including rights and duties, it then follows from Dewey’s pragmatic approach that the idea of a legal person “signifies what law makes it signify.”4 He advocates for an analysis based on the likely social consequences of recognizing one feature or another of an organization, such as a business corporation, and he declares that nothing much turns of the use of “person” in this context.5 For example, a “rightand-duty bearing unit” would be an adequate, though perhaps awkward, synonym for an organizational “person. As Gregory Mark has rightly observed, the realist critique of the legal personality of corporations and other business firms freed modern jurisprudence from long-standing debates among competing theories (e.g., firms as “real entities” or “fictions”), but it did so at a cost. The realists—and the contemporary scholars following them— “robbed corporation theory of its larger intellectual content” and “failed to replace the rhetorical tradition of personification because it had nothing to replace it with.”7 Citizens United v. Federal Election Commission8 and Burwell v. Hobby Lobby Stores, Inc.9 are two recent and iconic cases in which the U.S. Supreme Court follows in the realist tradition of leaving theories of the firm underpinning its decisions relatively unspoken and unexamined. As I argue in this Article, the opinions in these cases tend to follow pragmatic arguments to reach opposing points of view concerning whether business corporations should be permitted to hold and assert certain kinds of legal “rights” as organizational persons.10 Citizens United addresses the scope of the ability of corporations to assert political rights and claim the protection of freedom of speech under the First Amendment against campaign finance restrictions.11 Hobby Lobby concerns the question of whether business corporations can assert religious rights to claim exemptions from otherwise generally applicable laws regarding health care insurance coverage for certain methods of contraception. My main argument here is that in both cases—which may illustrate a more general contemporary analytical bias—the Supreme Court has undertheorized the nature of business firms and, therefore, missed some important implications that would have helped to clarify the legal analysis if not change the eventual results. Closer attention to a legal theory of the firm reveals the complexity surrounding the contemporary structures of business organizations and their interactions with other major institutions in modern society. A better appreciation of the theoretical canvas on which the Court is painting would help to guide, or at least better understand, future decisions that will inevitably follow in the areas of institutional crossover between the worlds of business and government (as in Citizens United) and business and religion (as in Hobby Lobby). Although Dewey was correct to point out that the legal personality of firms is highly flexible and variable, he emphasized that corporations and other organizational persons were created by law as “concrete facts and relations.”13 Recent philosophical works by John Searle, Philip Pettit, and others also suggest that the law contributes to the construction of a “social ontology,” which includes a world populated by various kinds of organizational persons.14 I suggest that it is useful—indeed “realistic” in the deepest sense of the word—to revisit the legal and social ontology of business firms. Better understanding what these business firms are in terms of their legal and social construction will put the Supreme Court, as well as legislators and other policy makers, in a better position to make decisions concerning them, rather than taking a view that organizational ontology doesn’t matter.15 To ignore organizational ontology is actually to adopt one or another ontological view unconsciously, ignorantly, or manipulatively. This Article proceeds as follows. Part II provides a brief philosophical account of a legal and social ontology of business firms, drawing in particular on arguments by Dewey. The main argument is to recognize that social constructions of “business persons” exist and have a legal ontology by which they can be described and understood.16 Some amendments and extensions of Dewey’s views are suggested in light of Searle’s, Pettit’s, and others’ recent scholarship in what has been called “social metaphysics.”1 Part III then reexamines the opinions in Citizens United and Hobby Lobby. I show how the majority and the principal dissenting opinions in these cases tend to undertheorize the legal nature of the firm and why this failure of theory matters.18 In particular, I suggest that the results in both cases might be called into question with a more robust theoretical grounding based on conceptions of the legal structure of business firms and their role in modern society. Closer attention to “the concrete facts and relations” that underlie the construction and existence of organizations such as business firms allows for a clearer view of legal and policy alternatives available for their governance.
  • Publication
    The Business Case for Complying With Bribery Laws
    (2012-07-01) Nichols, Philip M
    This article addresses a gap in the common understanding of corruption. The rules regarding corruption at both the macro- and the micro-level are well known, as are the consequences at the macro-level. The consequences at the micro-level, however, particularly for business firms, are not well understood. With respect to rules, at both the macro-and micro-levels the rules are very clear: do not pay bribes. At the macro-level the consequences are well known: corruption has devastating effects on societies and economies. Although not often referred to in most corruption literature, the consequences at the micro-level can be discussed. This article begins with the direct and indirect costs imposed on firms that pay bribes. Firms that pay bribes spend more time and money dealing with governments, and bear the costs of distortions of internal resources. The article then examines the negative effects of corruption on existing relationships within the firm and potential relationships with parties outside of the firm. Finally, the article examines potential criminal and civil liability that a firm exposes itself to when it pays bribes. The totality of these costs and liabilities strongly suggest that the consequences for any given firm of paying a bribe would burden rather than benefit the firm.
  • Publication
    State Bankruptcy from the Ground Up
    (2012-01-01) Skeel, David A
    The nineteenth-century English poet William Wordsworth famously defined poetry as the "spontaneous overflow of powerful feelings ... recollected in tranquility."1 By this definition, there is something a little poetic about the recent debate as to whether Congress should enact a bankruptcy law for states. In late 2010, as the extent of the fiscal crisis in many states became clear, a handful of commentators and politicians proposed that Congress enact a bankruptcy law for states.2 "If Congress does its part by enacting a new bankruptcy chapter for states," one advocate concluded with a somewaht hyperbolic flourish, California governor "Jerry Brown will be in a position to do his part by using it."3 These proposals met immediate, passionate resistance. One law professor denounced state bankruptcy as a "terrible idea."4 "[I]f we in fact create ... a state bankruptcy chapter," another critic testified to Congress, "I see all sorts of snakes coming out of that pit," as "[b]ankruptcy for states could — would cripple bond markets.'"5
  • Publication
    Citizen Responsibility and the Reactive Attitudes: Blaming Americans for War Crimes in Iraq
    (2012-01-01) Sepinwall, Amy
    This chapter takes seriously the notion that individuals may bear responsibility for the transgressions of their group even where they do not bear the hallmarks of individual culpability. More specifically, I shall contend that citizenship itself can ground responsibility for the crimes of one’s nation-state. I seek to locate and interrogate the grounds upon which we may, in the first instance, hold group members responsible for a transgression of their group. The focus here is then on responsibility assigned directly to members, and not derivative of the responsibility of the group. The account of citizen responsibility that I advance differs from an individualist account insofar as it severs moral and causal responsibility: I argue that the citizen may bear moral responsibility even though she did not participate in, facilitate, or even tolerate the abuses committed in her midst. The account also severs the notions of guilt and blameworthiness: I argue that the citizen may be an appropriate object of blame (and hence appropriately subject to resentment and indignation) even though she need not conceive of herself as guilty. Finally, I suggest that this fracturing of the traditional troika of guilt, resentment, and indignation has implications for the way we think about moral responsibility more generally. I begin by articulating an account of the relationship between the citizen and her nation-state that grounds the citizen’s responsibility for a transgression of her nation-state independent of the extent of her participation in that transgression. I do not anticipate, however, that that account will induce guilt in every American who encounters it. The resistance to guilt is itself interesting and, in the second Part of the paper, I seek to investigate its source. To that end, I undertake an exploration of the moral psychology of guilt and resentment, especially as these emotions pertain to understandings of responsibility for war crimes among members of the perpetrator and victim populations. I end by gesturing to the ways in which the account challenges accepted truths about moral responsibility and its relationship to the reactive attitudes.
  • Publication
    Burdening "Substantial Burdens"
    (2016-05-28) Sepinwall, Amy J; Sepinwall, Amy J
    In Hobby Lobby v. Burwell, the Supreme Court held that religious believers could establish that their free exercise was substantially burdened just so long as they—or the corporation they had formed—believed that it was. This highly deferential stance paved the way for yet another challenge to the contraceptive mandate. In Zubik, religious organizations (ROs) contend that it is not just subsidization of contraception that can make an employer complicit in contraception use. Instead, even filling out a form registering one’s objection to the mandate can do so. The government has responded by vigorously arguing that filling out a form cannot reasonably be construed as a substantial burden. One can read the Court’s per curiam opinion as an implicit endorsement of the RO’s claim that the accommodation process substantially burdens their free exercise. Nonetheless, without a decision on the merits, it is not clear just why the ROs should prevail on the substantial burden question. Nor do the parties’ submissions provide the needed clarity as the arguments on each side are irredeemably flawed. Or so at any rate I argue here. I nonetheless believe that there is good reason for ROs to contest the accommodation process, as it requires that the ROs ratify contraceptive use, in contravention of their religious beliefs. On these grounds, I find that the existing process imposes a substantial burden on religious exercise. But I also take seriously the rationale behind the contraceptive mandate and I conclude by seeking to vindicate women’s rights to free contraception in ways that the ROs should find congenial.