Poster by Emily May, Boston, MA
A MOST IMPORTANT RIGHT
The right to counsel is important for “it is through counsel that all other major rights of the accused are protected,” and “ [o]f all the rights that an accused person has, the right to be represented by counsel is by far the most pervasive, for it affects his ability to assert any other rights he may have.” Penson v. Ohio,1(1988), quoting Walter V. Schaefer, Federalism and State Criminal Procedure, 70 Harv. L. Rev. 1, 8 (1956).
Encompassed within the right to counsel is necessarily the “right to select counsel of ones choice,” which the Supreme Court has regarded as the “Root meaning of the [Sixth Amendment’s] Constitutional guarantee. United States v. Gonzalez-Lopez, 548 U.S. 140, 126 S.Ct. 2557, 165 L.Ed.2d 409 (2006); see also Wheat v. United States, 486 U.S. 153, 159 (1988), “The right to select and be represented by ones preferred attorney is comprehended by the Sixth Amendment,” see also; Powell v. Alabama, 287 U.S. 45, 53, (1932), a defendant should “be afforded a fair opportunity to secure counsel of their own choice.”2 3
The Supreme Court has repeatedly stated that only through defense counsel’s testing of the prosecution’s proof may the public and the Government gain comfort that a conviction, once attained, is just. “Our criminal justice is premised on the well tested principle that truth, as well as fairness, is best described by powerful statements on both sides.”4 “Law enforcement may be assisted by preventing the infiltration of taint in the prosecutions’ identification of evidence and [t]hat result . . . can only help assure that the right man has been brought to justice.”5 See also, In re Grand Jury Subpoena served upon John Doe, 781 F. 2d at 259, “Fair trial envisions defense counsel playing a critical role in the adversarial system thereby furthering a just result.” Indeed, “[t]he very premise of our adversary system of criminal justice is that partisan advocacy on both sides of a case will best promote the ultimate objective that the guilty be convicted and the innocent go free.” United States v. Cronic,6(1984); quoting Herring v. New York, (1975); 7 See also, Wilson v. Mintzes, 761 F. 2d 275, 279 (6th Circuit 1985), “[the accused’s right to retain counsel of his choice is necessary to maintaining a vigorous adversary system and the objective fairness is prosecuted].”
As the Supreme Court has poignantly, and repeatedly noted, an inscription on the walls of the Department of Justice states the proposition candidly for the federal domain. . .“The United States wins its case whenever justice is done one of its citizens in the courts.”8
“Society wins not only when the guilty are convicted but when criminal trials are fair; our system of the administration of justice suffers when any accused is treated unfairly,” Brady v. Maryland, 373 U.S. 83, 87 (1963)9.
“Due Process of law, as a historic and generative principle, precludes defining, and thereby confining, these standards of conduct more precisely that to say that convictions cannot be brought about by methods that offend a ‘sense of justice,’” Rochin v. California,10 (1952).
“There is an additional safeguard against miscarriages of justice in criminal cases. . .that safeguard is the right to effective assistance of counsel,” Murray v. Carrier,11 (1986).
This paper will trace the application of the Sixth and Fourteenth Amendment to a Criminal Defendants’ right to be represented by effective, conflict free counsel as his or her own choice, and in specific focus on Warren Court decisions beginning with Gideon v. Wainwright12 (1963), and its progeny and then extending the analysis through the Burger, Rehnquist, and Roberts Courts’ decisions, on the application of the Sixth Amendment to a criminal defendant’s right to conflict free counsel of his choice.
The forgoing introduction has demonstrated that federal law as defined in the decisions of the United States Supreme Court clearly establishes a Sixth Amendment derived right for a criminal Defendant to be represented by counsel. In Johnson v. Herbst,13 (1938), the Supreme Court ruled that indigent criminal Defendants charged with crimes in Federal Court have the right to counsel; however, at the time, Supreme Court holdings on the Sixth Amendment right to counsel were limited to the Federal Government, meaning that only those charged with federal crimes were entitled to legal representation14. The ensuing legal question was whether the Sixth Amendment right to counsel should be extended to the States through the Fourteenth Amendment’s due process clause, which provides that states “shall not deprive individuals of life, liberty or property without due process of law.”15
In its’ 1942 decision in Betts v. Brady,16 (1942), the court held “The appointment of counsel [to indigent persons] in a non-capital criminal case, is not a fundamental right essential to a fair trial.” This meant that criminal defendants not charged with crimes bearing the death penalty, who could not afford to pay a lawyer did not have the constitutional right to the appointment of counsel.
The Warren Court changed all this in its’ 1963 decision in Gideon v. Wainwright (1963); or did it?
The story of Clarence Gideon is a fabled one; the career criminal Florida convict sitting in his cell with a blunt pencil and a sheet of paper who reads the Sixth Amendment and achieves a curious clarity; if the Sixth Amendment says that a person accused of a crime is entitled to a trial where he can confront his accusers and have a lawyer represent him, then it should make no difference if he has the money to pay for one and that if he cannot, he should have one provided to him. He wrote a hand written letter to the Supreme Court of the United States which a law clerk read and brought to the Chief Justices’ attention.
Apparently, Gideon has postured his case squarely enough for the Court to accept it in the context of the long anticipated opportunity to strike down Betts v. Brady, supra, and it appointed the noted Washington D.C. attorney and constitutional scholar, Abe Fortas (a future LBJ nominee to the High Court), to represent Gideon in the certiorari proceedings before them. What followed was the Courts’ landmark decision requiring the states to appoint counsel to every criminal Defendant accused of a felony, regardless of their ability to pay an attorney. What resulted in ensuing Warren Court decisions was the fortification of those rights. However, the road from Gideon (1963) to Gonzalez-Lopez (2007), was not paved with constitutional gold. In fact, it has become very clear that the quality of legal defense for indigents is expected to be inferior to the services provided for those who can pay.
The Warren Court’s initial foray into criminal justice defendant jurisprudence came in
its’ 1961 decision in Mapp v. Ohio17 (1961), where Justice Tom Clark writing the majority vacated a criminal conviction based upon an unlawful search and seizure, for lack of probable cause and gave us his memorable reminder that when a wrongful conviction is overturned for a violation of a defendants constitutional rights, “it is the law that sets him free” and reminiscent of Justice Brandeis’ dissent in Olmstead v. United States18 277 U.S. 438 (1928), that “nothing will undermine a governments’ legitimacy than its’ willingness to violate its’ own laws, the very charter of its’ own existence.”19
In a majority opinion in Gideon, written by Justice Hugo Black, which was in essence a reassertion of his dissent in Betts v. Brady, an unanimous Supreme Court overturned Gideon’s conviction and held that the Fourteenth Amendment guarantee of Due Process must incorporate the right of indigent state court criminal defendants in all felony cases to have the Sixth Amendment’s right to counsel.20 That Gideon represented a major breakthrough on full application of the Sixth and Fourteenth Amendment guarantees on the right of the indigent criminal defendant to be represented by counsel, there can be no doubt.
The Warren Court fortified its ruling in Gideon through with its’ 1966 decision in Miranda v. Arizona,21 (1966) which require police officers to warn suspects of their right to counsel and against self-incrimination. 22
Gideon became the subject of a Hollywood movie starring Henry Fonda and Miranda has had numerous cameo appearances in Law and Order and other police television shows ever since. However, the Warren Court was not immune to public passions about crime and punishment and Richard Nixon’s appeals to the “silent majority23.” Chief Justice Warren himself would write for the majority in Terry v. Ohio24 (1968), where the court upheld a police “stop and frisk” without having probable cause. America began making its’ sharp turn to the right and the court began what would be a forty-four year decline; one decision; rule; exception; qualification and reversal at a time, in its jurisprudence concerning that the core constitutional rights of criminal defendants, including the right to counsel.
Today, federal law as decided by the Supreme Court of the United States is clear; an indigent criminal Defendant is not entitled to counsel of his choice; United States v. Gonzalez- Lopez25 (2006), supra.
In Wheat v. United States29 (1988), the Supreme Court held that a criminal Defendant’s right to counsel includes that right to conflict free counsel, but that an indigent Defendant is not entitled to a succession of court appointed lawyers if he is not satisfied with his court appointed counsel’s performance unless there is demonstrated actual conflict of interest, which would operate on the defense caused by a complete breakdown in the attorney-client relationship.30
In Wood v. Georgia (1981), the Court reiterated the rule it established for Holloway, supra, concerning the operation of actual conflicts in criminal defense attorneys, once again making the burden to establish the attorney conflict more burdensome in indigent criminal Defendants because the cost to the taxpayer in paying for successive court appointed counsel would be excessive.
In Caplin & Drysdale v. United States31 (1989) and United States v. Monsanto32 (1989), decided on the same day, the Supreme Court carefully crafted procedures for when cash contraband seized and frozen in the course of a drug prosecution may be unfrozen and made available to pay the Defendants legal fees in defending such a criminal action. The protections afforded to the cash-rich drug cartel dealer to use his ill-gotten gains to pay his lawyers in Caplin and Monsanto, are completely inapposite to the Courts’ holding, where an indigent Defendants’ right and need for a publicly appointed lawyer to defend his criminal case are at issue.
In United States v. Stein, 541 F. 3d. 130 (2d Cir. 2008), the United States Court of Appeals for the Second Circuit, dismissed an indictment against multiple KPMG, Peat, Marwick, Mitchell & Co. (criminal Defendants), in a derivative liability white collar fraud case, because the government interfered with their employer’s established corporate policy of paying it’s employees’ work related criminal counsel’s legal fees. The panel was steadfast in upholding the defendants’ rights to have third party benefactors pay for their criminal defense; once again keeping intact for criminal defendants with access to private funds the right to counsel of their choice.
This was very different from the Second Circuit’s handling of a 2001 Sixth Amendment counsel deprivation decision, in a case depicting the deprivation of counsel to an indigent state court defendant who had an altercation with his court appointed lawyer.33
The state of legal services for the poor in the United States has reached crisis proportions.
This case targets public defense systems in Onondaga, Ontario, Schuyler, Suffolk and Washington Counties, New York, for failing to provide adequate public defense services. The case was filed on behalf of defendants from these five counties. On August1, 2008, a State Supreme Court Justice denied the state’s motion to dismiss the case. In July 2009, the Appellate Division of New York State Supreme Court for the Third Judicial Department, in a split decision, reversed the lower court’s denial of the state’s motion to dismiss. In May 2010, the State Court of Appeals, New York’s highest court, overturned the Third Department in a historic 5-4 ruling, allowing the case to proceed. The case is now in the discovery phase and is making its way through the trial stages. The outcome could have an extraordinary effect on Defending Justice for the Poor in New York State and throughout the nation.35
In addition to the crisis in indigent representation in criminal cases, recent downturns in the economy and the fallout from the so called “subprime mortgage’ lending crisis and the associated predatory lending practices of institutions such as Bank of America, Countrywide Mortgage, Wells Fargo Bank and others, have exacerbated the hardships and injustices caused to indigent people who are made to proceed to litigation without adequate legal representation in civil cases. Mortgage foreclosure cases, evictions in Landlord-Tenant proceedings as well as consumer lending related matters can potentially be as threatening to the right to happiness and fairness that are bedrock to our democracy as cases which result in unconstitutional liberty deprivations.
New York State has recognized the grave proportions of this crisis and the State’s Chief Judge, Jonathan Lippman, has conducted hearings with Gillian Kirtland, Professor of Law and Economics at the University of Southern California, where extensive testimony was presented concerning the potential role of non-lawyer advocates in helping low income households in New York who are experiencing problems that are legal and civil in nature. Chief Judge Lippman has created a Task Force to address the urgent need for the judiciary to change the landscape of options available to those with legal needs. Authorizing intelligent, trained and well supported non-J.D. legal assistants to assist the poor in civil cases has been successfully undertaken in the United Kingdom where there is a long history of allowing a wide variety of differently trained individuals and organizations to provide legal assistance to the poor and the system there has been widely recognized as a success.
The United States on the other hand has little experience with non-J.D legal assistance. Washington State has made progress in this area and now has under consideration a plan to afford, “Limited License Legal Technicians” to perform carefully defined services for people, without direct supervision of an attorney. The new rule in Washington establishes a Limited License Legal Technical Board to oversee the implementation of new rules and to provide strict oversight of the non J.D. Practitioners.36
Within New York, federal and state law currently allow non-lawyer advocates to participate in administrative hearings and proceedings involving certain kinds of public benefits, including State public assistance benefits, Medicaid, food stamps and Medicare. The next logical step will be for the Chief Judge’s Task Force to promulgate rules to allow non-J.D. representatives to assist indigent persons in civil cases and stem the tide of economic injustices and waste which are running rampant in the existing adjudicative framework.
State and Federal prisoners in the United States are left little option but to obtain legal assistance in criminal and civil matters in prison law libraries where fellow inmates, with minimal education and training, are often the only source of legal assistance.37
The undeniably remarkable leadership and commitment to civil liberties demonstrated by Earl Warren has resonated with American Constitutional History since the late 1950s. Over time, The Supreme Court has significantly moderated its extension of sixth amendment protections and allowed its decisions to be effected by public outcries for increased law enforcement. It has been in the interest of the Supreme Court to rule with a coinciding sensitivity to American popular politics. Since the Warren court, we have seen the narrowing of the expansive civil liberties outlined in cases like Gideon and Miranda, as more conservative political eras have influenced the courts to chisel away at the Warren progeny; and, to some degree become and extension of law enforcement. Justice Scalia referenced that “Attorneys are not fungible” in Gonzalez-Lopez. I would challenge Justice Scalia with a reminder that Justice is also, intrinsically, not fungible; therefore, it is inherently unconstitutional to compromise the sixth amendment liberties for economic interests.
2 Profound consequences may flow from this choice, for “[l]awyers are not fungible, and often ‘the most important decision a defendant makes in shaping his defense is his selection of an attorney.’” Moreover, “[t]he selected attorney is the mechanism through which the Defendant will learn of the options which are available to him. It is from the attorney that he will learn of the particulars of the indictment brought against him, of the infirmities of the Government’s case and the range of alternative approaches to oppose or even cooperate with the Government’s efforts. United States v. Laura, 607 F 2d. 52, 56 (3rd. Circuit (1979)).
3 Horwitz, Morton J. The Warren Court and the Pursuit of Justice: A Critical Issue. New York: Hill and Wang, 1998. Print.
4 Penson v. Ohio, 488 U.S. 75, 84 (1988)
5 United States v. Wade, 388 U.S. 218, 238 (1967)
6 United States v. Cronic, 446 U.S. 648, 655 (1984)
7 Herring v. New York, 442 U.S. 853, 862 (1975)
8 Woodward, Bob, and Scott Armstrong. The Brethren: Inside the Supreme Court. New York: Simon and Schuster, 1979. Print.
9 Brady v. Maryland, 373 U.S. 83, 87 (1963)
10 Rochin v. California, 342 U.S. 165, 174 (1952).
11 Murray v. Carrier,1 477 U.S. 478, 496 (1986).
12 Gideon v. Wainwright, 372 U.S. 335 (1963)
13 Berger, Raoul. Government by Judiciary: The Transformation of the Fourteenth Amendment. Cambridge, MA: Harvard UP, 1977. Print.
14 Horwitz, Morton J. The Warren Court and the Pursuit of Justice: A Critical Issue. New York: Hill and Wang, 1998. Print.
15 Bernstein, R. B., comp. The Constitution of the United States with the Declaration of Independence and the Articles of Confederation. New York: Barnes & Noble, 2002. Print.
16 Betts v. Brady, 316 U.S. 455 (1942)
17 Mapp v. Ohio, 367 U.S. 643 (1961)
18 Olmstead v. United States, 277 U.S. 438 (1928)
19 Urofsky, Melvin I. Louis D. Brandeis: A Life. New York, NY: Pantheon, 2009. Print.
20 Lewis, Anthony. Gideon’s Trumpet. New York: Random House, 1964. Print.
21 Miranda v. Arizona, 384 U.S. 436 (1966).
22 Trachtman, Michael G. The Supremes’ Greatest Hits: The 37 Supreme Court Cases That Most Directly Affect Your Life. New York, NY: Sterling, 2009. Print.
23 Horwitz, Morton J. The Warren Court and the Pursuit of Justice: A Critical Issue. New York: Hill and Wang, 1998. Print.
24 Terry v. Ohio, 392 U.S. 1 (1968)
25 United States v. Gonzalez-Lopez, 548 U.S. 140, 126 S.Ct. 2557, 165 L.Ed.2d 409 (2006)
26 Holloway v. Arkansas, 435 U.S. 475 (1978)
John Adams once observed that the purpose of a true republican form of government was to provide as much happiness to as many people as possible. At the time of ratification of the Constitution, Benjamin Franklin said that the new document would be workable only until such time as when the people became so corrupt as to make way for a despot. Thomas Jefferson saw property rights as the life force of the democracy, and presciently announced that any gap between rich and poor, laborer and employer, the propertied and non-propertied would result in an intolerable diminishment of liberty. Certainly, these men and their colleagues at the Philadelphia Convention of 1776 had not defined or even contemplated such things as the post- reconstruction era passage of the Fourteenth Amendment and the ensuing doctrine of “substantive due process,” which would be used for centuries to come to ensure compliance by the several states with the Federal Bill of Rights, the expansions of the rights to privacy and free speech under the First Amendment or the vast array of regulatory and economic prescriptions and proscriptions to be advanced under the umbrella of the Commerce Clause.
What the Framers were attuned to was what they did not know; therefore, they drafted, some would say, an organic living document, the Constitution and the Bill of Rights, which were themselves based upon the principles enunciated in yet another organic document, the Declaration of Independence.
Supreme Court Justice Ruth Bader Ginsberg has championed the case for the organic Constitution, the “living organism” in a collegial rivalry with her fellow associate Justice Anton Scalia, who makes a compelling argument that the Constitution is not a living document at all, but just a document; a contract between the governed with the government to be read strictly and literally and limited to interpretation within its written boundaries. What would the founding fathers think or say if they were on the scene today? This paper will address that question in the context of some of the most significant opinions of the United States Supreme Court, with emphasis on the opinions of Justice Louis D. Brandeis, whose 1920s body of work has had a profound transformative effect on American Democracy.
Thomas Jefferson was cautious about the exercise of Judicial Power to the point of specifically equating judicial activism with Oligarchy.i He cautiously began the discussion of how contemporary America views the application of the Bill of Rights to principals of ordered liberty; this can be reduced to Jefferson’s fear of Judges, and the creation of a “government by Judiciary” through the transformation of the Fourteenth Amendment.ii
Some say that the Framers intended the Bill of Rights to apply to the National Government and not the States, a position affirmed by the Supreme Court in Barron v. Baltimore (1833).iii Judicial Activists as well as many Legal Scholars now believe that the Fourteenth Amendment prescriptions for due process and equal protection of law were intended to extend the Bill of Rights to the States. In Gilbert v. Minnesota (1920),iv the United States Supreme Court decided that the abridgment of speech by a state was not protected by the Federal Constitution. In his dissenting opinion, Justice Louis D. Brandeis expressed that such a state law infringement on basic rights “is not one merely of state concern, because such a state law affects. . . rights, privileges, and immunities of one who is a citizen of the United States; and it deprives him of an important part of his liberty. There are rights which are guaranteed protection by the Federal Constitution.” Justice Brandeis went on to say in his dissent in Gilbert v. Minnesota, supra, that the Fourteenth Amendment was not intended solely to protect acquisition and enjoyment of property, but also to protect core liberty interests.
￼Within a short time, other Supreme Court Justices would quote Justice Brandeis’ dissent on Gilbert for majority opinions expanding Fourteenth Amendment protections to core civil rights violations by States.
Justice Brandeis wrote many of his most important opinions in the 1920s, paving the way for an expansion of civil liberties, establishing a constitutional basis for privacy, and supplying a strong permanent foundation for the requirements of free speech in a democratic society as well as other fundamental rights. In his powerful and prescient dissent in Olmstead v. United States v, Justice Brandeis condemned government, prosecutors, police and informants for illegal wiretapping and for breaking the law in order to convict an accused. He used his dissent in Olmstead to emphasize to all government officials, from Police Investigator to President, that when any government official violates citizen’s constitutional rights as a means to prosecute alleged criminal conduct, it undermines the law and forfeits its legitimacy.
“Decency, security, and liberty alike demand that government officials shall be subjected to the same rules of conduct that are commands to the citizen. In a government of laws, existence of the government will be imperiled if it fails to observe the law scrupulously. If the Government becomes a lawbreaker, it breeds contempt for the law; it invites every man to become a law unto himself; it invites anarchy. To declare that in the administration of the criminal law, the ends justify the means. To declare that the Government may commit crimes in order to secure the conviction of a private criminal, would bring terrible retribution against this pernicious doctrine thus court should resolutely set its face.”vi,vii
In the majority opinion in Olmstead, Chief Justice Taft had emphasized that the Framers, in drafting the Fourth Amendment, had nothing more in mind than the general warrants used by ￼the British in the 1760s and 1770s, and that the Fourth Amendment thusly appealed to little else. In his recently published biography of Louis Brandeis, historian Melvin I. Urofsky captured the essence of the Justice’s philosophy on adhering to not merely the letter, but the spirit of 1776 and how the Framers drafted the Constitution with Government oppression in full view.
Justice Brandeis’ dissent in Olmstead, invoked Chief Justices Marshall’s reminder, “‘We must never forget that it is a Constitution we are expounding.’ Times had changed since 1791 and Justice Brandeis, in Olmstead, cited case after case to show that the Court had constantly read Constitutional provisions to take into to account, conditions never envisioned by the Framers. The technical nature of the entry did not matter as much as the intent of the Amendment [Fourth], to protect people in their homes and businesses. Time works changes, brings into existence new conditions and purposes. Subtle and more far-reaching means of invading privacy have become available to the government. Discovery and invention have made it possible for the Government, by means far more effective than stretching upon the rack, to attain disclosure in court of what is whispered in the closet.”viii
Further in his dissent in Olmstead, Justice Brandeis’ best juxtaposed the question of whether or not the Framers would agree or disagree with the proposition that the Constitutional safeguards they envisioned should be marginalized by government excess or minimized by restrictive judicial interpretations by the Supreme Court, as follows:
“The makers of our Constitution undertook to secure conditions favorable to the pursuit of happiness. They recognized the significance of man’s spiritual nature, of his feelings, and of his intellect. They knew that only a part of the pain, pleasure and satisfactions of life are to be found in material things. They sought to protect Americans in their beliefs, their thoughts, their ￼emotions and their sensations. They conferred, as against the Government, the right to be let alone—the most comprehensive of rights, and the right most valued by civilized men. To protect that right, every unjustifiable intrusion by the Government upon the privacy of the individual, whatever the means employed, must be deemed a violation of the Fourth Amendment. And the use, as evidence in a criminal proceeding, of facts ascertained by such intrusion must be deemed a violation of the Fifth”ix Olmstead, supra.
In the Olmstead dissent, Justice Brandeis not only wanted to call attention to the issues of privacy and respect for the law; but also about how the due process clause of the Fourteenth Amendment should be interpreted. Justice Brandeis would later remind his colleagues that in revisiting the opinion and dissents in Olmstead, “. . .reviews of the opinion would see that . . . in favor of property, the Constitution is liberally construed. . . in favor of liberty, strictly.”x Brandeis especially wanted to advance the idea he originally set forth in Gilbert v. Minnesota, supra, that the Fourteenth Amendment incorporated the Bill of Rights and applied it to the States. Court Justice McReynolds extended this judicial philosophy in two of his leading opinions following Gilbert, and soon thereafter, the Court would apply First Amendment free speech protections to the States, on the basis of the Fourteenth Amendment, Gitlow v. New York (1925).xi
Later on, in his concurring opinion in the Whitney v. California (1927)xii, Justice Brandeis again guided the court back to the Framers’ principles on liberty and government oppression. Whitney involved a 1919 California legislative act which targeted Communist Party activity and perceived Communist threats to violently overthrow society. The broad question presented by Whitney went far beyond free speech and Socialist activist Charlotte Whitney’s conviction under the California Criminal Syndication Act of 1919 for helping to organize the ￼Communist Labor Party in the State. The law made it a felony to organize or knowingly become a member of an organization founded to advocate the commission of crimes, sabotage or acts of violence. Whitney denied that her group ever intended to become an instrument of crime or violence and the State offered no evidence at her trial that the Party had ever engaged in violent acts. Nonetheless, the trial court found her guilty and on appeal her conviction was affirmed, essentially based upon the rationale that the Federal Due Process Clause did not protect ones liberty to destroy the social and political order. It was in this posture that the case came before the Supreme Court, and upon which Justice Brandeis rendered his landmark concurrence in Whitney. Whitney presented only Due process and equal protection grounds. Because the Court had not therefore determined when “present danger” became “clear” in the context of its’ prior First Amendment rulings, Justice Brandeis, joined by Justice Holmes, went on a rant against the Court’s restrictive interpretation of Free Speech.
Once again, Justice Brandeis, here in collaboration with Justice Holmes, posited that the Framers surely had in mind more than simply allowing people to engage in hearty debate. Justice Brandeis described in vivid detail the intention of the Framers in protecting Free Speech as republican “civil virtue” or “civil courage” virtues which go far beyond traditional notions of free speech and extend to the very nature of democratic society. In enunciating these principals, Justice Holmes stated, “Those who won our independence believed that the final end of the state was to make men free to develop their faculties, and that in its government the deliberative forces should prevail over the arbitrary. They valued liberty both as an end and as a means. They believed liberty to be the secret of happiness and courage to be the secret of liberty. They believed that freedom to think as you will and to speak as you think are means indispensable to the discovery and spread of political truth; that without free speech and assembly discussion would be futile; that with them, discussion affords ordinarily adequate protection against the dissemination of noxious doctrine; that the greatest menace to freedom is an inert people; that public discussion is a political duty; and that this should be a fundamental principle of the American government.” “…Fear of serious injury cannot alone justify suppression of free speech and assembly. Men feared witches and burnt women. It is the function of speech to free men from the bondage of irrational fears…Those who won our independence by revolution were not cowards. They did not fear political change. They did not exalt order at the cost of liberty. To courageous, self-reliant men, with confidence in the power of free and fearless reasoning applied through the processes of popular government, no danger flowing from speech can be deemed clear and present unless the incidence of the evil apprehended is so imminent that it may befall before there is opportunity for full discussion…Such, in my opinion, is the command of the Constitution. It is therefore always open to Americans to challenge a law abridging free speech and assembly by showing that there was no emergency justifying it,” Whitney v. California, supra, Brandeis, L., concurring.xiii
Obviously one could shed different Judicial light on the question of whether or not the Framers would be inclined to agree or disagree with current governmental and judicial abdications of practical rights in pursuit of ordered liberty. The Roberts Court has relied less and less on expansive Fourteenth Amendment Substantive Due Process analysis in securing rights, privileges, and immunities guaranteed by the first ten Amendments to the Constitution to the States. In his recent publication “Reading the Law”xiv, co-authored with constitutional scholar Bryan Gardner, Supreme Court Justice Anton Scalia has stated that devotees of Substantive Due Process have exceeded any reasonable interpretation of the intent of the Framers and have far exceeded that intent by inventing doctrine and ascribing motives never offered or intended by the men who wrote the Constitution.
No Justice of the twentieth century had a greater impact on American Democracy then did Justice Louis Brandeis. Historians and Legal Scholars now believe that the Reconstruction Congress intended for the Fourteenth Amendment to apply to the Bill of Rights to the States.
In the 1920s, when Justice Brandeis asserted the position that the Fourteenth Amendment operated on political as well as property rights, he stood nearly alone; his application of the idea of “incorporation” during his Supreme Court tenure set the stage for the great Judicial “rights revolution” of the 1950s and the 1960s.
Today, the vast majority of scholars and judges now agree with Justice Brandeis’ position that the Framers intended to protect the “right to be let alone,” and his warnings about violations of our rights to privacy and free speech become all the more critical in these times of technological intrusion and stifling national security policies.
The Framers understood that democracy is a work in progress; “a daily, a weekly, a monthly process,” as President Kennedy once described it.xv The Framers knew the difference between the vision and the view. Strict Constructionists see what is in front of them, not what lies ahead. They see a brown bag under the front passenger seat of a vehicle in a high drug use neighborhood, and the Framers view of the Fourth Amendment as limited to the Kings Writs of Assistance in pre-revolutionary America; They see the right to Free Speech as a vehicle to enable corporations to make unlimited contributions to political campaigns but stifle ordinary political, religious, and artistic expression on the basis of post September 11, 2001 national security ￼exigencies; they view the right to counsel of ones choice in a criminal trial as reserved for those who have money for lawyers, and regard the Great Writ of Habeas Corpus, once held with the esteem of a sacrament, now eviscerated by the Anti-Terrorism and Effective Death Penalty Act of 1996xvi, and essentially reduced to its nuisance value.
In what may be his two most significant Judicial opinions, his dissent in Olmstead and his concurring opinion in Whitney, Justice Brandeis made it powerfully clear that a democratic society must never sacrifice liberty for security or marginalize freedoms out of fear of the unknown. These principles were founded squarely on the writings of the Framers, and in particular, Benjamin Franklin, who wrote: “They, who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety.”
So what would the Framers have thought about the prospects of Article III Judges expanding judicial review from the narrow confines of supervision of procedure in the courts as a means of securing constitutional boundaries and imposing limitations on power to the outright control of legislative policy making?
The Framers never dreamed that Judicial power could be expanded to the point where courts substitute their own views of public policy for those of legislative bodies as they have done since the late nineteenth century.xvii The concept of Substantive Due Process would be expanded much further years later by Supreme Court Justice Hugo Black who would develop the doctrine of “natural law due process,” not directly derived from the Constitution by rather created by individual justices’ interpretations of “ordered liberty”xviii, dissenting opinion; but where do these judges derive the authority to apply such dogma? Or, put another way, whence ￼does the Court derive the power to free the American people from the “chains of the Constitution.” From the “tyranny of the dead,” that is, the Founders?”xix
Justice Anton Scalia, examined the effect of the Court’s expansion of its interpretive role as it specifically relates to the democracy and the political process. In his recent book, “Reading the Law,” Justice Scalia traced the expansion of judicial activism in the Burger, Rhinequist and Robert’s Courts.
In United States v. Nixon (1973),xx in a unanimous opinion authored by Chief Justice Warren Burger, the Court directly intervened in a dispute between the House Judiciary Committee and the Executive Office of the President and carefully circumscribed the long standing doctrine of Executive Privilege when it distinguished documents related to national security from materials related to suspected criminal wrongdoing in the White House.
The effects of United States v. Nixon on the political process and the democracy were and continue to be very significant and go to the core of the Framers concept of the doctrine of separation of powers. In the advent of U.S. v. Nixon, the American Presidency has been cut down to less than imperial size and made to bear some resemblance to its second cousin, the Prime Minister, in terms of the accountability of the office to the co- equal Legislative Branch.
In Bush v. Gore (2000)xxi, in a 5-4 decision, the Court imposed itself directly in the Presidential electoral process, side stepping further review by the state court and literally electing the next President of the United States.
In Citizens United v. Federal Election Committee, (2010)xxii the Roberts Court again imposed the Court on the national electoral process by ignoring the chief issue presented by the litigants at bar and carving out an issue which would enable them to radically alter McCain ￼Feingold, which had theretofore set the bar for campaign finance reform, and utilizing the free speech guarantees of the First Amendment, gave private corporations, domestic and foreign and Political Action Committees the unfettered right to make unlimited campaign contributions to political candidates of their choice in national elections.
In Skilling v. United States, (2010)xxiii the Court in a series of majority and concurring opinions invalidated certain provisions of the federal mail fraud statute. Justice Ruth Bader Ginsberg, writing for the majority, struck down the “honest services” provisions of the law for constitutional vagueness and in so doing nullified the Enron era convictions of Enron CFO Jeffrey Skilling, Health Com CEO Richard Scrushy, and Canadian Publishing magnate Conrad Black, thusly handing a major setback to the Administration in its efforts to prosecute epidemic corporate fraud.
And in National Federation of Independent Business v. Sebelius (2012)xxiv or “Obamacare,” Chief Justice Roberts, writing for the majority upheld the core provisions of the Administration’s controversial Health Care reform act, demonstration the Court’s reluctance to overturn an act of Congress.
Each of these decisions had major impacts on the American Democratic process and the society itself; they went beyond mere questions of the application of constitutional provisions to specific rights.
So it is that our delicate and imperfect balance of power, the checks and balances devised by the Framers to protect against the onset or recurrence of tyranny, comes and goes, rises and falls and invariably effects the democracy.
￼￼Would the framers be happy or even content with the current state of judicial primacy in American life and more importantly with the application of guaranteed constitutional protections to core rights? The answer is probably as elusive as the great experiment itself.
No reasonable view of the Federalist Papers or the Debates preceding the Ratification of the Constitution or reading, the political and philosophical views of the Framers of the Constitution could lead to any conclusion other than that, John Adams, Thomas Jefferson, Benjamin Franklin, and their contemporaries would differ in their answers to the question. There are too many variables at play to answer the question definitively and that indeed may have been the Framers greatest strength, the ability to deal with the uncertain; however, given the restraints of this papers’ prompt, I believe that the Framers would be essentially dissatisfied with the contemporary U.S. political system as outlined in this paper.
i Peterson, Merrill D. Thomas Jefferson and the New Nation; a Biography. New York: Oxford UP, 1970. Pgs. 37, 61, 102. Print.
ii Peterson, Merrill D. Thomas Jefferson and the New Nation; a Biography. New York: Oxford UP, 1970. Pgs. 284, 491-493. Print.
iii Barron v. Baltimore, 32 U.S. (7 Pet.) 243. 8L. Ed. 672. (1833)
iv Gilbert v. Minnesota, 254 U.S. 325, 41 S.Ct. 125 (1920)
v Olmstead v. United States, 277 U.S. 438 (1928)
vi Urofsky, Melvin I. Louis D. Brandeis: A Life. New York, NY: Pantheon, 2009. Print. vii Olmstead v. United States, 277 U.S. 438 (1928)
viii Urofsky, Melvin I. Louis D. Brandeis: A Life. New York, NY: Pantheon, 2009. Chapter 25: A New Agenda: The Court and Civil Liberties. Print.
ix Olmstead v. United States, 277 U.S. 438 (1928) x Olmstead v. United States, 277 U.S. 438 (1928) xi Gitlow v. New York, 268 U.S. 652 (1925)
xii Whitney v. California 274 U.S. 357 (1927)
xiii Whitney v. California 274 U.S. 357 (1927)
xiv Scalia, Antonin, and Bryan A. Garner. Reading Law: The Interpretation of Legal Texts. St. Paul, MN: Thomson/West, 2012. Print.
xv Address Before the 18th General Assembly of the United Nations, September 20, 1963. Series 3. United Nations General Assembly. Digital Identifier: JFKPOF-046-041.
xvi Full Title: An Act To deter terrorism, provide justice for victims, provide for an effective death penalty, and for other purposes. Antiterrorism and Effective Death Penalty Act of 1996, Pub. L. No. 104-132, 110 Stat. 1214.
xvii Berger, Raoul. Government by Judiciary: The Transformation of the Fourteenth Amendment. Cambridge, MA: Harvard UP, 1977. Pgs. 300-305, 307. Print.
xviii IN RE WINSHIP , 397 U.S. 358, 381-382 (1970)
xix Berger, Raoul. Government by Judiciary: The Transformation of the Fourteenth Amendment. Cambridge, MA: Harvard UP, 1977. Pg. 282. Print.
xx United States v. Nixon, 418 U.S. 683 (1974) xxi Bush v. Gore, 531 U.S. 98 (2000)
￼￼￼￼￼￼￼￼xxii Citizens United v. Federal Election Commission, 558 U.S. 310 (2010)
xxiii Skilling v. United States, 561 U.S. ___ (2010)
xxiv National Federation of Independent Business v. Sebelius, 567 U.S. ___ (2012)
There has been a consistent debate for the past thirty-two years concerning the issue of government regulation of business and finance and the effect it has on the national economy. In fact, this subject has been hotly contested since the days of Alexander Hamilton and Andrew Jackson and became the lightening rod issue during the 1932 presidential election and the centerpiece of Franklin Roosevelt’s “New Deal”.
As always, history is the great teacher. We pause to study the past as we assess the present and again debate the subject of government regulation of business and economic policy in the 2012 presidential election.
The Enron, World Com, Adelphia, Marsh and McClennan, AIG, Health South and other corporate investigations, administrative actions and prosecutions of the past decade created another swing in the regulatory and law enforcement pendulum, concerning the oversight, regulation and prosecution of business and financial conduct in the United States, and what would soon follow, the 2008 “sub-prime mortgage” crisis and near collapse of the global financial industry, which seemed to take everyone by surprise but the industry players who created the turmoil.
Once again, corruption in the marketplace and public outcries for government action led to the conclusion by many that self-regulation had failed and that federal prosecutors and regulators, should take dead aim at corporate and entrepreneurial America.
In mid-2006, the Senate Judiciary Committee began to consider legislation to stabilize business and entrepreneurial activity by striking a proper balance between criminal and civil enforcement practices. (N.Y. Times, National, Sunday October 29, 2006, “Businesses Are Seeking New Protection On Legal Fronts.”)
America has swung back and forth from the 1920’s laissez-faire approach to the redefinition of capitalism that was the “New Deal” to the growth of the national bureaucratic and regulatory framework of the 1960s and 1970s to the 1980s “Morning in America” Reagan era deregulation of business.
Franklin Roosevelt and the “New Deal”
Government regulation of business, as we have known it, began in earnest in 1932 with the onset of Franklin Roosevelt’s “New Deal”. F.D.R. had strong intellectual and ideological ties to the “trust busting” principles and policies of his cousin Teddy Roosevelt. T.R. ‘s steadfast efforts in regulating and controlling the corporate and business behavior of his day was indeed the foundation of “New Deal” regulatory philosophies and served as the paradigm for all government regulation to follow.
By 1929, it was starkly apparent that self-regulation had failed. Cloaked in the blanket of the free market system Wall Street had gone fully unregulated. Businessmen made fortunes by gaining full, unscrupulous advantage over a wide open, unaccountable financial system. Banks failed, mortgages defaulted in the thousands, threatening farms and homesteads alike. Jobs became scarce. Basic necessities of life were left wanting and bread winners were begging for jobs and food on the streets. Trust in the government was at an all-time low, and regard for the entrepreneur and businessman nonexistent. Families were broken and lives ruined. It became incumbent on the government to embark upon a course of action and establish core values in overseeing business conduct and ensuring proper business practices and behavior and a fair and equitable national economy.
The “Great Juggler”, as Franklin Roosevelt described himself, was elected to the American Presidency by a landslide in 1932. This was no cyclical aberration in the economy, as the incumbent Herbert Hoover had insisted. It was endemic international collapse of the capitalist system, which, unlike the financial crisis if 2008, had its underpinnings in the European arena. Franklin Roosevelt had two choices; preside over the collapse of American capitalism and the onset of socialism or modify capitalism in order that it could survive. Modify, he did, and the first hundred days of his administration would set the standard for accomplishments for new administrations for generations to come.
Roosevelt assembled a “brain trust” of legal, financial and political operatives largely from the east coast and academia. Faced with massive withdrawals of funds from banks and bank failures and an avalanche of mortgage foreclosures on homes and farms, he issued an executive order declaring a “bank holiday”, and another declaring a moratorium on bank foreclosures. These extraordinary steps were stop gap measures to give his administration the time it needed to propose the legislation to create the massive federal bureaucracy that would be required in order to implement legislative delegations of power to the new president to act on such problems.
The financial and business markets were directly impacted, but relieved that action was being taken. Wall Street was horrified, as were bankers who referred to the new president as “that man Roosevelt” and “a traitor to his class”. The President used his “fireside chats” to explain the bank holiday and moratorium to a frightened public on radio and, as humorist Will Rogers would later comment, did so with such clarity and simplicity that “even the bankers understood it”.
Undaunted, Roosevelt pressed on and lobbied in his weekly radio addresses and gave hope to a people starved for action. In short order, pure necessity and public opinion, as well as some well-placed judicial appointments by Roosevelt, saw to the development by the Supreme Court of practical constitutional standards for delegation of the legislative power to the Executive by the Congress. The Court initially began to uphold, in decision after decision, the creation of the New Deal bureaucracy by requiring Congress to include “standards and guidelines” as well as “intelligible principles” to be included in legislation delegating its authority to the Executive Branch and its departments and agencies. One of the first such agencies created was the Securities and Exchange Commission, under the Securities Act of 1933, to address and correct the excesses of Wall Street, which caused the crash of 1929.
Leaving no doubt about his resolve to enact and enforce serious regulation and control over the securities industry, Roosevelt appointed Wall Street financier Joseph P. Kennedy, who had a reputation as a hard-bitten and ruthless operator as Chairman of the S.E.C. Roosevelt nonchalantly commented that he indeed wanted “Briar Rabbit in charge of the cabbage patch”.
Kennedy did not disappoint Roosevelt. The SEC was organized, staffed and empowered to deliver practical substantive procedural and operational reform to the securities and financial industries, and by the time Kennedy resigned to make way for his successor, William O. Douglas, he had substantially succeeded in halting abuses, establishing strong mechanisms for accountability and control and had won the respect of industry operatives.
Roosevelt would soon accomplish similar results in the areas of banking, communications, trade, transportation, commerce, insurance, food and drugs, environment, labor and industry. Congress made progress in providing the oversight over the new agencies and businesses it had created, but could scarcely keep up with the mountains of rule-making and policy requirements, which were in constant creation and operation. With the help of mobilization for World War II, the Depression was subdued and a new regulatory framework was firmly set into place, often including industry players in the regulatory and oversight roles, which up to the 1980s had kept the economy in check and altered American capitalism forever.
Truman’s “Fair Deal” to LBJ’s “Great Society”
President Truman, who succeeded FDR after his death in April 1945, expanded federal authority over labor and production literally nationalizing the steel industry. Dwight Eisenhower, who campaigned on a platform of dismantling the New Deal bureaucracy, enlarged it while the economy expanded and Wall Street flourished. His main legacy was the creation of the nation’s Interstate Highway System. John Kennedy and Lyndon Johnson, continued to centralize power in the Federal Government, and like Roosevelt, used the Federal Government proactively to regulate the economy and provide a safety net for those left behind in the American post war expansion. Kennedy’s economic initiatives included a tax cut which stimulated economic growth. Johnson’s “Great Society” surpassed even New Deal social programs and Medicare, its center piece, to this day stands as perhaps one of the greatest government sponsored assistance programs in our history. Not even FDR would take on the American Medical Association. The masterful Johnson however, literally hoodwinked the doctors by initially coaxing them into agreeing to help provide medical care for third world senior citizens and then publicly extending the proposition to include the introduction of Medicare in the United States.
Richard Nixon And The “New Federalism”
Richard Nixon, known for his skill and attention to foreign policy, produced great domestic social achievements in the economy by furthering the federal bureaucratic role. He appointed a special domestic counsel and produced programs and reforms in the area of intergovernmental relations, revenue sharing and “the new federalism” which stand to this day as some of the most progressive federal economic and domestic initiatives in the nation’s history.
Ford and Carter, In The Short Term
Gerald Ford sought to utilize the federal bureaucracy to stop widespread inflation and to assist cities, such as New York, which were teetering on bankruptcy. Ford’s urban relief programs were grossly mischaracterized in the press, and his accomplishments understated. Jimmy Carter continued the policy of strong Federal involvement, especially in the field of energy. However, Carter’s grip on business and economic policy slipped considerably, with revelations of scandel surrounding his Budget Director, Bert Lance.
Post New Deal Policies
Every successor to Roosevelt, Republican or Democrat alike, up to Ronald Reagan, not only failed to reduce the size of the Federal Government and reverse the “New Deal”, but expanded it. For the most part, these policies acceded. While a bloated bureaucracy had indeed been created and Congress had blatantly and most likely unlawfully delegated much of its power to the chief executive, the economy grew in unprecedented fashion, and the defects in the regulatory system which resulted in the collapse of 1929 were rectified. Banks were now safe places to deposit money and obtain and maintain mortgages. Wall Street knew and adhered to the rules. Trade, communications, and labor were placed in a sound framework of accountability programs like the W.P.A. and C.C.C. created real work and self sustaining jobs and a system of financial support for the elderly, Social Security, was firmly established. Once and for all the principle was established that government could best enforce integrity and transparency in the market place and provide the social safety net that every moral society must secure for its people.
Critics came and went, but no one tampered with the new capitalism. Self-regulation had failed and this was underscored by the failure of anyone in the banking and finance industry, pre-New Deal, to admit and call attention to the fact that serious problems existed prior to the 1929 collapse. Our 2008 scenario was eerily similar.
With really two possible exceptions; presidents from F.D.R. to Barak Obama, have not only resisted pressure to reduce the federal regulatory apparatus, they have increased and heavily relied upon it.
Ronald Reagan, “Morning in America”
The first real attempt to follow through on a campaign promise to reduce the level, intensity and size of the Federal Regulatory System was advanced by the affable but doctrinaire Ronald Reagan in the 1980s. The Reagan economic “brain trust” was led by former Budget Director David Stockman. The Reagan Administration focused on banking, securities and insurance regulation. Under Reagan’s leadership, legislation was passed removing restrictions on federally insured banks to expand into the insurance business and allowing federally chartered banks and savings and loans to engage in direct investments and equity participations in the real estate collateral it extended credit on, and to also offer insurance industry products and services. Self-regulation was back it seemed.
The insurance industry was granted reciprocal latitude by the same legislation. The customary congressional oversight mechanisms to monitor these now lightly regulated industries was not utilized fully, and no study of the potential impact of the deregulation legislation on parallel Federal Deposit and Insurance Corporation claims was undertaken, nor were even the most fundamental provisions made for the eventual consequences. As in the pre-New Deal era, at no time did industry operatives call attention to the fact that problems existed which required immediate remedial action.
Impact of Reagan Era Deregulation on the Real Estate and S&L Industries
Commercial banks and savings and loans expanded rapidly into the real estate and insurance markets. This sacrifice of credit and collateral protection became a trade-off for the S & L’s receiving “equity kickers” or profit participations for commercial and real estate development loans. As a result, mortgages which would ordinarily require developers to maintain 20 – 40% cash, “hard equity” in projects, were approved and disbursed in excess of 100% loan to value. The same transactions, which had theretofore required extensive credit background checks and personal guarantees of principles and significant borrower net worth and equity contributions, were structured as purely asset based transactions with no credit personal guarantee enhancements or borrower equity stake requirements. The banks justified these transactions on the basis of the project equity it negotiated for with the developer and appraisals, which reflected not the existing fair market value of the properties on a “quick sale” basis, but value as if and when approved, improved, operated or sold. Vast amounts of savings and loan depositor moneys and life savings were advanced to developers on vacant land, prior to final approval of site plan and subdivision requirements having been obtained. “Hard and soft costs” of the project development were funded, leaving the developers and banks and their depositors at the mercy of the local planning and zoning authorities. Loans were booked in massive amounts in this fashion for office and retail projects based upon projected, not actual cash flow and developers routinely front ended their “development fees”. The savings and loans likewise extracted and booked fees at closing and entered on its books vast amounts of phantom income, based upon fees it had funded itself from its depositors’ money and projected “equity” in projects that were not even close to the point of completion, profit or even value.
The S & L’s took their paper gains and sold their banks for sums equal to percentages over “revenue”. Officers, employees, directors and shareholders participated richly in the resale profits, while uninformed depositors, received notices that their banks had been purchased or absorbed by new institutions.
The residential mortgage market was equally affected. Due to the deregulation and elimination of conventional credit and equity requirements, in the mid-1980s, savings and loans and commercial banks introduced the no income, no credit and “jumbo” loan. Prices of residential real estate during this period soared. Increases in appraisals of over 75 – 100% in a matter of a year or two were not uncommon. The flow of money from the new loan products heated up the market and inflated values. There seemed to be no end or limit in sight. Once again, banks sold their mortgage portfolios and stock at huge profits.
Relaxation of Securities Industry Regulation Under Reagan
On Wall Street, insatiable seekers of venture capital were swimming in cash raised by the invention and sale of “junk bonds” by individuals like Michael Milken. No rule, statue or regulatory custom existed which prohibited the formation and sale of this particular hybrid of security, and capital providers and recipients alike, took while the taking was good. New business and industries abounded. Wall Street players made fortunes overnight from the brilliant Milken to neophytes who barely had the experience to follow the paper flow. The trophy homes in Greenwich, Connecticut, luxury cars, boats and posh New York City condominiums were just some of the symbols of this accidental wealth. Investors collected the bonds and relied on the authenticity of the presumed equity that backed them. Little or no appraisal or due diligence was conducted on the prospect of success of the businesses or finance of some ventures nor was there any meaningful review or administrative oversight mechanisms of accountability put into place to monitor ongoing operations and performance of the securities. Hedge funds, a rapidly growing source of private equity placement, were essentially free from direct administrative regulation. Former Federal Reserve Chairman Greenspan cautioned Congress that these newly formed and capitalized companies lacked real basis in value.
The object of the game, as in the case of the commercial banks and S & L’s, was to generate fees and book phantom equity to support inflated stock or bond value. At the same time, budget deficits ran up at alarming rates, as did the national deficit. Supply side economics and deregulation created an aura of entrepreneurial invincibility that seemed to have no end. It was “Morning in America” and no one seemed concerned over the fallout of the economic nightfall that would soon follow.
Reagan Era, Savings & Loan And Insurance Industry Deregulation
By the late 1989, commercial real estate failures and foreclosures soared at alarming rates. Similarly, residential mortgage loan foreclosures rapidly rose. By 1991, budget deficits and rising interest rates gave way to increasing unemployment and recession. Foreclosures increased significantly. Borrowers who had little or no equity in the real estate they had just handsomely paid for with depositor’s money, abandoned properties. Commercial lenders likewise took back on account real estate they had permitted developers to “leverage out” on. Banks and savings and loans rapidly took in “REO” (“real estate on account”), in lieu of foreclosure. Bank inventories of commercial land developments, residential developments and office buildings as well as luxury and middle range residential properties accumulated dramatically. Markets were glutted with such properties placed on the market for resale by the banks. Real estate values declined. Properties valued at inflated prices at the time of loan origination were now routinely appraised and resold at values significantly below the amount of the principal of loans. Sound familiar?
For the first time since pre-New Deal days, the term “deficiency” had real meaning to lender and borrower. So foreign had this concept been, that banks such as Dime Savings Bank of Brooklyn, which pioneered the no income, no asset loan, became deluged with deficiency losses when their attorneys in Connecticut failed to observe applicable procedural requirements to preserve that bank’s residual rights against borrowers.
Banks such as the former Westchester Federal Savings and Loan in New Rochelle, New York, which sold its loans and stock to Marine Midland Bank of Rochester, New York, were later discovered to be for the most part, worthless depositories of bad paper.
Again for the first time since the New Deal and FDR’s declaration of the “Bank Holiday”, S & L’s began to fail at alarming rates. Commercial bank failures soon followed. The Federal Deposit Insurance Company was called upon to make good on substantial sums of depositor’s lost money up to the $100,000 limit on each institutional account. Attorneys who made it a practice to concentrate huge sums of client funds in the S & L’s lost vast sums of their funds, uninsured in excess of the $100,000 threshold, triggering personal hardship for clients and professional liability for lawyers.
The F.D.I.C. and Controller of Currency began to take control of Savings and Loans and Commercial Banks at a rapid rate and Congress created the Resolution Trust Corporation, under the Controller of the Currency to take possession and management and control of the “REO” (Real Estate Owned) properties, which were accumulating. The RTC, having little or no staff or expertise in the real estate development, marketing or management business, was staffed initially, with deposed officers of Texas S & L’s which were the first victims of the S & L debacle. The Resolution Trust Corporation grew in size and assets. It spent and wasted billions of dollars in public money. It overpaid for goods and services, mismanaged properties, mismarketed assets and made often corrupt and inefficient deals. As in the days of the New Deal, those who preserved their liquidity made fortunes. Properties were bought on the cheap. Non-recourse borrowers, in default on their own, now RTC owned properties, frequently repurchased them from the agency at huge discounts often reselling them for significant profits.
The F.D.I.C. began to the process of forced acquisitions of weaker banks by stronger ones, which themselves became weak and were in turn swallowed up by mega-banks like Citi Bank and Bank of America. With some exceptions, usually in the form of well managed privately owned state chartered community banks, small to mid-sized banks became extinct. This was the breeding ground for what would become the “too big to fail” banks, the public came to know in 2008.
From all this, minimal prosecutions such as involved Lincoln Savings and Loan and Silverado Bank followed. Indictments ensued for a period of time. The Silverado Bank defendants’ Michael R. Wise and Neil Bush were acquitted. Wise would later go to prison on another scheme. Lincoln Savings’ Keating was convicted only to have his verdict set aside by an appellate court some months later. Other sporadic prosecutions commenced, few convictions resulted, and prosecutorial interest in the banking, S & L and RTC scandals waned.
“Reaganomics” And Wall Street
In December 1987, Wall Street suffered its greatest setback since the crash of 1929. The new companies and ventures fueled with deregulated junk bond capital, crashed as well. Michael Milken and others, who just a year before were hailed as innovators and champions of venture capitalism, were prosecuted and convicted on what amounted to borderline criminal activity, which, a few years earlier, had been considered cutting edge legitimate venture capital tools.
George H.W. Bush And The Responsibilty of Power
The Reagan attempts at deregulation and dismantling the New Deal, resulted in serious economic reversals. The law enforcement and regulatory consequences of all of this were remarkably light, low profile and short lived. It fell to Reagan’s successor, George H.W. Bush, to preside over the effects of the financial libertarianism of the Reagan era. The deficits were growing exponentially, unemployment was on the rise and interest rates were escalating.
Not even “Desert Storm” could save his presidency from the effects of what he had so preciently labeled as “voodoo economics” in 1980. President Bush, seeing the handwriting on the wall, and compelled to deal with reality, supported the Revenue Act of 1991 sponsored jointly by some Republicans and then Democratic Ways and Means Committee Chairman Dan Rostenkowski.
The measure was passed and taxes were raised over a period of several years. Bush had flawlessly conducted and won a war, but broke his “read my lips” pledge, raised taxes, and increased the federal bureaucracy with the failed RTC and its successor administrative structures.
For all this, President Bush lost the presidency to Bill Clinton, having laid the foundation for the economic boom to follow by creating the tax revenue that would fuel the Clinton recovery and launch an extraordinary period of economic growth.
Bill Clinton And The “New Democrats”
Bill Clinton was a master of the development and understanding of the use of public policy. He used his appointments to the Treasury and Controller of the Currency posts as well as many other high and mid-level departmental and bureaucratic positions to relax the national regulatory apparatus. He expand the economy, eliminated debt, and promoted international and domestic entrepreneurial and business growth.
“Building The Bridge”
Clinton effectively used government to informally relax regulation and provide incentive for economic expansion. What is extremely noteworthy is that Clinton did not have a business background and by his own admission, “never had a quarter” until he left government. His skill was almost academic in nature but very shrewd in practice. His annual “Clinton Global Initative” confernce continues to this day. He left it to his Treasury Secretary, Robert Rubin and others, to design and implement a plan for economic recovery. Rubin himself set the tone of self-proclaimed quiet skill, and a disdain for the trappings of the massive wealth, he was so adept at helping to create. Clinton accomplished, with what seemed to be ease, the growth of the economy by promoting economic expansion and entrepreneurism and relaxing actual government regulation.
The results were by most account, successful: elimination of the deficit, balancing of the budget and expansion of the economy globally, in unprecedented fashion; indeed, “building a bridge to the 21st century”.
Clinton, “New Democrat” or “Pro-Choice” Republican
Like all progress, the great Clinton expansion period had its costs. The Welfare Reform Act of 1996, a political tradeoff, essentially eliminated substantial portions of social safety net created from as far back as the New Deal, the Great Society and even the Nixon Administration. Like no Republican before him, Clinton outsourced jobs, eliminated aid to families with dependent children, grants in aid, school breakfasts for inner city children and other traditional and innovative social welfare programs and literally eviscerated Federal Habeas Corpus and access to the federal courts on civil rights claims for the nation’s incarcerated, the majority of whom are poor, African-American and Hispanic. As difficult as it became for inner-city and rural poor, that is how easy Clinton made it for Wall Street, the investor and middle class to thrive.
Entrepreneurs and businessmen, especially in high technology fields and the emerging “dot.com” industry, which ultimately gave rise to enterprises such as Google and Facebook, made mega fortunes with minimal government regulation. Republican businessmen privately worried that Clinton would be impeached over the Starr investigation and that the “party would be over”. Clinton survived. As to his inner city base, the victims of welfare and federal litigation reform, he “apologized for slavery”, and now has an office in Harlem, where he pursues some very significant philanthropic endeavors.
George W. Bush, An Unlikely Destiny
George W. Bush had no trouble creating the single largest new Federal Bureaucratic structure since the New Deal, the Department of Homeland Security, a virtual “ministry of the interior”. Politics, policy and public passions, not party ideology, decree the use and extent of the government’s regulation of business, law and enforcement policies. Bush’s attempt to alter the prize of the New Deal, Social Security, by converting a portion of it, for some future retirees, into individual investment accounts, failed to even reach a vote in Congress in spite of his full use of the “bully pulpit” to generate public support.
As to the use of the regulatory process by the Bush Administration, the aftershock and government action following the tragic events of September 11, 2001, were compounded by startling revelations concerning the unraveling of Enron and other public companies and the unveiling of allegations of massive fraud in corporate accounting and reporting requirements. Eventually the investigations reached to the underlying transactions of the companies, in the form of limited partnership ventures and to excessive executive compensation.
Beyond this, the activities, relationships and compensation structures of the investment banking and service related industries came under scrutiny along with the mutual funds and insurance industries. Washington and Wall Street were taken by storm.
Bush’s tax cuts of 2001 and 2003, especially for those earning $250,000 or more, were calculated to increase savings and investment but people spent the money instead. Consumer debt reached an all-time high and the income gap continued to grow between the top one percent and the other ninety-nine percent of Americans.
The Bush Administration was busy at work attempting to protect and defend against terrorism and was caught fully by surprise by the enormity of the Enron and related scandals. Harvey Pitt, the Bush Chairman of the Securities and Exchange Commission, had little inkling as to the depth and magnitude of the issues and no suitable regulatory apparatus existed to deal with it at the time. Litigation, investigations and prosecutions multiplied. Demands for corporate accountability appeared in the press daily and great pressure was brought upon national law enforcement and regulatory officials to act.
The nature of the corporate wrongdoing or misdeeds can only be generalized here. Enron booked assets and profits, non-existing limited partnership interests, which were concocted by their management and executive teams or their operatives. The company’s accountants were found to be complicit, charged and made to pay civil penalties for their part in disguising and misstating corporate debt in order to exaggerate equity. Former Enron Chairman/CEO, the late Kenneth Lay and former President/CEO Jeffrey Skilling were convicted on charges stemming from accounting and mail fraud at Enron. Former CFO Andrew Fastow plead guilty and served a term of six years. Kenneth Lay died before his conviction became final and so it was expunged. Jeffrey Skilling’s conviction was reversed by the United States Supreme Court in 2010 and he awaits re-trial.
Enron executives drew large salaries and bonuses, options and fees in cash and stock. Stock was sold by the corporate insiders immediately before the filing of chapter 11 proceedings. Shareholders and employees alike were hyped on the value of the stock and general condition of the company and the truth about the company’s financial difficulties and distress was deliberately withheld. In the midst of it all, Enron’s executives and operatives cashed in to the tune of hundreds of millions of dollars, while shareholders and employees whose life savings were invested in the company, were misled and lied to. The company accountants directly participated in the wrongdoing and obstructed justice, by destroying evidence in the process.
The regulators were asleep: Harvey Pitt was accused of “not understanding his job” and for producing “structurally flawed analytical work” and the Bush Administration of “representing the interest of the ownership society”. These were harsh words but difficult to dispute under the circumstances.
Although Enron’s ties to the Bush Administration were well known, the origins of the Enron related activities in question dated back to the Clinton Administration and Enron’s executives were equally generous to both comps.
The WorldCom and other scandals were similar in nature and magnitude to Enron. Questionable accounting practices and failures to disclose the nature, extent and weight of corporate debt to investors and employees rocked the company and the corporate bankruptcy filing was equally contentious. Bernard Ebbers, the ex-CEO of WorldCom, was convicted of an $11 billion accounting fraud and lost his appeal. He is now serving a long prison term.
Officials of Health South Corporation were accused of bid rigging. Former Health South CEO Richard Scrushy was convicted in Federal Court in Birmingham, Alabama, and like Jeffrey Skilling, his conviction was vacated due to the vagueness of the federal mail fraud statute he was prosecuted under. A total of fifteen Health South employees, including five former CEOs, plead guilty to taking part in a $2.7 billion accounting fraud there.
The Adelphia Cable Company scandals were even more direct and concentrated. Senior directors and major shareholders, a father and two sons, advanced themselves hundreds of millions of dollars in the form of unauthorized loans and direct investments and purchases from third parties. Tyco, another case of excessive diversion of corporate funds to executives as loans or compensation, was another high profile prosecution. Former Tyco CEO Dennis Kozlowski and CFO Mark Swartz were prosecuted by the New York County District Attorney and convicted of stealing hundreds of millions of dollars from the company for their own account, and spent years in New York State prison before being approved for temporary release. Tyco itself continues to perform well. Richard Grasso, former chairman of the New York Stock Exchange, was also prosecuted for excessive compensation but his judgment was vacated when his attorneys, Williams and Connolly of Washington, D.C., proved that former New York State Attorney General Eliot Spitzer had acted without jurisdiction in the case.
The entire mechanism and process of stock option compensation to CEOs has now come under full scrutiny. “Change in control” provisions, monitoring CEOs when they trigger stock options, as well as a complete overhaul of ratios for CEO profit and compensation are now required. A New York Times’ report of February 13, 2007, gave another good indication that we have failed to learn from our past, reporting that the SEC sought to impose restrictions on investor suits concerning allegations of excess C.E.O pay.
In the face of all of this, 2006 compensation and bonuses to CEOs on Wall Street were reported to be in the billions of dollars and so disproportionate to employee compensation and other American wealth achievement levels, as to be unexplainable in moral or economic terms.
Investment Advisors and Profiteers
The investment banking and services related investigations involved other more subtle issues, which challenged the very nature of the transactions and the very care of the industries. The fundamental regulatory proposition is now that a firm engaged in the money management business cannot have an investment banking arm because of inherent conflicts of interest, real or potential.
Historically, investment-banking houses were part of a larger firm, activity engaged in the money market and securities business. Bankers and money managers found themselves under investigation and subject to severe criminal penalties. In order to avoid the prospects of the regulators transforming to the criminal law enforcement mode, companies settled, agreeing to pay huge fines and eliminating any conflicting activities or divisions. Citibank, Merrill Lynch and many others fell quickly into line. In some cases, offending executives and managers like Citigroup’s Sanford I. Weill, were banned from the industry by local regulators in their particular jurisdiction. Practices of predatory lending and overreaching had come under fire by regulators and investment bankers were cited for failure to adhere to notions of fiduciary duty. A complete severance of the investment banking and securities functions is now required. Hedge fund managers however continued to operate essentially without regulation.
Ex Post Facto Prosecutions?
Late trading became the next taboo. An industry standard practice, which existed for years, was criminalized, and enjoined. Once again, hefty fines and consensual cease and desist orders, avoided prosecution of the individuals involved.
The mutual funds industry was also affected. Marsh and McClennan agreed to pay enormous civil fines and enter into consensual cease-and-desist orders to avoid federal criminal prosecution. Regulators charged that insurance premiums were too high because insurance companies had formed illegal cartels, and that corruption was rife throughout the industry.
Practices such as timing of trades, late trading fees, and the over-charging of fees of $70 billion per year paid as fee income to mutual fund managers, were investigated and regulators brought an $850 million lawsuit against the company. Marsh and McClennan settled issues of civil and criminal liability with federal regulators for a $40 million sum (one year’s fee income) and entered into a cease- and-desist order. The company did not acknowledge criminal wrong doing but agreed to new management and leadership and to new transparent business policies. Contingent payments that had driven insurance fees way up have been eliminated. However, in 2010, the convictions of the Marsh and McClennan executives secured by the New York State Attorney General, who, notwithstanding the federal civil settlement, brought state criminal charges against them, were vacated by the convicting New York State court on grounds of unlawful disclosure violations by former New York State Attorney General Eliot Spitzer in prosecuting the case. The executives now have a multi-million dollar personal lawsuit pending against Mr. Spitzer.
In all of these instances, the majority of the enormous fines paid were not distributed to clients or investors but rather kept in government coffers.
As beneficial and necessary as these results were, in terms of stability and fairness, the means employed to effect them need to be examined. To accomplish these enforcement measures the rules were changed in the middle of the game.
When Horatio Alger Becomes Jesse James
Some have said, that white collar, post-Enron law enforcement policies, have now created an environment of selective prosecution, an insufficiently defined vague statutory and regulatory apparatus and an enforcement model which will gradually have the effect of criminalizing ordinary commerce.
CEOs are now called upon, under penalty of criminal prosecution, to guarantee the accuracy of financial reports. Accountants and attorneys are directly in the fray of derivative and direct criminal liability.
AIG’s former CEO Maurice Greenburg’s resignation was demanded and received after it was alleged that he had personally initiated a complex questionable transaction that regulators believed boosted AIG’s earnings. Greenburg and his successors invoked the Fifth Amendment in the face of investigation of the company concerning earnings manipulation. They were found liable, but again, a New York State court vacated the judgment secured by the former New York State’s Attorney General Eliot Spitzer, for lack of jurisdiction. Mr. Greenburg now has a multi-million dollar lawsuit pending against Mr. Spitzer.
New theories of criminal culpability now replace customary industry standard practices, while aggressive prosecutors promise investors retribution, reform and compensation. The slippery slope of post-Enron regulatory and law enforcement is in full swing. Indeed the Times report of October 29, 2006 noted earlier, explained that “Congress now recognized the need to strike a balance between civil and criminal sanctions imposed on business practices”.
Indentured America – the “Sub-Prime Mortgage” Crisis
Incredibly, with all of these cases, controversies and difficulties still underway, beginning in the late 90s, bankers and brokers, with the help the regulators, in an ambitious effort to expand home ownership and mortgage borrowing, developed the “sub-prime mortgage”, which went beyond the relaxed standards of the 80s and set the stage for the mass borrower defaults which followed. These new products utilized appraisals which were based on inflated property values which were in turn based on distorted valuations proffered by portfolio driven lenders. Because values kept rising with each distorted sale, lenders had no problem recovering properties from defaulting borrowers or avoiding foreclosure by reselling properties, making new distorted loans. Sub-prime lenders lured borrowers with variable rate mortgages which began with affordable payments which spiraled into impossible burdens. Quasi Federal entities such as “Fannie Mae” and “Freddie Mac” not only failed to ensure that these transactions were sound, they joined in the speculation and floated huge revenues, fees and profits in the process.
To make matters worse, as the Clinton recovery advanced, Wall Street bankers applied “new age” academic theories which they used to package or “securitize” millions of devalued sub-prime mortgages, into insured debt instruments to be sold and re-sold in the private and public equity markets. In the process, essential original loan origination documentation and transfer instruments went unaccounted for and in many cases were never placed on public records as required by statute. Again, inflated home values, fueled by made-to-order appraisals on questionable loans enabled the banks to sustain the momentum in the marketplace and satisfy the regulators by refinancing bad paper or strictly foreclosing on defaulted loans and reselling the properties for sums sufficient to satisfy the outstanding accumulated debt.
Barak Obama, “New, New Deal”, “American Gorbachev” or “New, New Democrat”
This all came to an abrupt end in the late 2008 when rapidly increasing oil prices and other economic factors created a spiral of mortgage defaults which trashed not only the underlying mortgage debt but also the securitized packages purchased by the investment bankers and guaranteed by the insurance companies. The entire financial system was at the brink of disaster and the late Bush Administration Troubled Asset Recovery Program (TARP), and ensuing Obama “Stimulus”, the American Recovery and Reinvestment Act, focused on providing immediate relief to the banking and insurance and other industries but did little or nothing to restructure or relieve the mortgage debt burden on homeowners, farmers and businesses. The results were that not only were the “sub-prime” mortgage borrowers losing their homes but so were the conventional borrowers who had responsibly acquired and serviced their debt. The reason for this is that the crisis caused a collapse in home values across the board. As a result, over 51% of American homeowners and farmers are now in foreclosure, pre-foreclosure or serious arrears, this compared to 33% of property owners in that category during the Great Depression of the thirties, when, far different from today’s federal policies “New Deal” home loan policies and regulations placed the priority on bailing out the homeowner before the banker. President George W. Bush’s “TARP” relief plan bailed out the banks because they were “too big to fail”, and to the surprise of many of his grass roots supporters, President Barack Obama’s policies essentially mirrored the Bush “too big to fail” philosophy. Liberals expecting the “New, New Deal”, and fiscal conservatives who feared that Obama would take on the dimensions of the “American Gorbachev” and “loosen the bolts”, as it were on our political and economic systems, were taken aback by the ease with which the Obama Administration fell in line with Clinton and Bush 43 regulatory and economic policies.
Financial Industry Regulation Under Obama
The Obama Consumer Financial Protection Bureau, expected to be headed by Elizabeth Warren, who was left at the alter by President Obama in 2011 when he named Richard Cordray to the position instead in the face of fierce congressional opposition to her appointment, has yet to be fully staffed and its full agenda awaits post-election implementation. There has not been a single prosecution of any of the bankers, investment bankers, hedge fund operators, attorneys or accountants responsible for the deliberate creation and distribution of the hybrid of mortgage, and security that became known as the “sub-prime mortgage”. President Obama himself has reasonably stated that it would not be proper to prosecute individuals for exercising “bad business judgment”. Bank of America, Countrywide, Citibank, and Wells Fargo, to name a few, have stonewalled Obama Administration programs encouraging loan modifications for affected borrowers and the federal government has left itself without the enforcement tools needed exact a reasonable quid pro quo from the banks to in turn bail out the homeowner and farmer. “Private Investor” funds have been encouraged by Treasury Secretary Timothy Geithner to participate in rehabilitating defaulted mortgage loans. Translated, that means that “vulture funds” buy defaulted paper at about seven cents on the dollar, feign attempts at loan restructure, foreclose on the homeowner and warehouse millions of properties until the market comes back, ten or more years from now and sell them at a profit. The Standard and Poor’s 500 index is up 65% under President Obama, the largest gain for any first term president since Dwight D. Eisenhower. Post-stimulus Banker and CEO bonuses and compensation exceed even 2006 levels and the Obama administration has now positioned the Treasury Department to infuse billions more in stimulus money into the banks.
The President’s historic health care reform law has begun to make badly needed changes in the area of national health care and the administration’s intervention in the automobile industry, while initially drawing great criticism, has in fact saved millions of jobs and repositioned American automakers to successfully and responsibly compete.
Achieving the Balance – The “Real Deal”
In order to stabilize the national regulatory apparatus, courses of government action, pursuing core values in the form of clear, well defined laws, rules and regulations, which are evenhandedly administered and enforced, are required. Free market advocates must recognize that more is at stake than free market survival and advocates of government primacy in ensuring integrity and transparency in the marketplace must accept the re-imposition of “standards, guidelines and intelligible principles” as well as fundamental fairness and uniformity in identifying, regulating and prosecuting companies and individuals suspected of departing from norms of acceptable business behavior. Both the regulated and the regulator must be made to periodically account to Congress as to their respective roles in the process and the predictability factor which is the mark of true due process must be ever present.
Each and every defaulted residential and farm loan in the country must be modified and “crammed down” so that homeownership can be once again stabilized. We must recognize that collectively, the American homeowner and farmer are “too big to fail”. Banks should not receive any further federal funds without an enforceable commitment to restructure defaulted loans, declare a moratorium on residential and farm foreclosures and use the funds to lend to homeowners and businesses.
Government must not be so aggressive or arbitrary in its application of legal and administrative enforcement policies, as to dampen and even criminalize the American entrepreneurial spirit and defeat economic growth.
Like F.D.R. we must strike the right balance, and temper free enterprise with prescriptions for transparency, oversight, predictable accountability, and social responsibility.
Like F.D.R. we must use the laws and the economic and regulatory apparatus at our disposal to humanize capitalism.
We must look to the past to create a clear path to the future in achieving competitive, fair and just economic and regulatory policies.
Plea Bargains, Bail & the Poor
By JIM REAGAN
It is not uncommon for a man who regularly eats on St. Joe’s soup-line or comes to us for clothing to seemingly vanish, someone we know on a first name basis and with whom we converse easily and in a friendly manner. Then, one day, he simply goes missing. Sometimes we hear good news: that he obtained housing, though usually far from his old neighborhood, maybe in Far Rockaway or the Bronx, as the city government tucks its poorest citizens out of view from wealthier New Yorkers and tourists. More often, the man returns a few weeks or years later, sometimes able to recount exactly how many days it’s been since we’ve last seen him. An almost standard joke is that he’s been “on vacation” but, in truth, he’s been in jail or prison.
Many of you, our readers, are aware that the US incarcerates approximately 2.5 million people, four times as many as we did just a few decades ago. Though the US comprises about 5% of the world’s population, we have 25% of the world’s prisoners. A ”tough on crime” philosophy, the war on drugs, three strikes laws, stop and frisk policies, and long and mandatory sentences even for first-time offenders are all offered as partial explanations. The privatization of prisons, which causes profit to be a greater value than care or rehabilitation, makes it desirable, at least from a corporate point of view, to detain or incarcerate ever-greater number of people. Last December, Congress debated and passed a budget that cut many socialprograms, but allocated a more than fifty million dollar increase to Homeland Security’s Immigration and Customs Enforcement. That included an allocation for 34,000 daily immigration detention beds, an increase of 600, most of which will likely end up in private facilities. Corporations like Corrections Corporation of Ame1ica and GEO Group spend millions lobbying Congress over issues like this. And our millions of undocumented brothers and sisters, who are constantly in danger of detention, offer a rich resource for these corporations.
Long-term solitary confinement (see CW, March-April, 2012) is another serious concern. Although there are still at least 25,000 people being held in solitary confinement in the US (prison experts and advocates estimate that the number is much higher, perhaps as many as 60,000 or even 80,000 people), there are glimmers of hope. In 2010, an easing of restrictions at Mississippi’s notorious prison, Parchman Farm, resulted in reduced prisoner violence and the eventual closing of that prison’s Segregated Housing Unit (SHU), saving the state more than five million dollars. Other states, including Colorado, Illinois, Maine, Ohio and Washington are following suit, albeit primarily for budgetary rather than humanitarian reasons, for it is far less expensive to house people in traditional prison cells than SHUs. In fact, at a national convention of prison chaplains last June, John E. Wetzel, Secretary of Pennsylvania’s Department of Corrections, said that there is hope for prison reform in the economic difficulties that states are facing. At California’s Pelican Bay Prison, where SHU conditions prompted two statewide prison hunger strikes, the long-standing policy of isolating suspected gang members unless they were “debriefed,” that is to say that they “snitched” on other gang members who would then be isolated in turn, was abandoned.
As much as we at The Catholic Worker would prefer to announce the good news, there is little good to say about prisons in the United States. Thinking about those friends of St. Joe’s who go missing, I found myself pondering a most basic question: how do so many people in the US wind up behind bars? Sadly, two answers lie in some of our criminal justice system’s most basic flaws and occur at the “justice” segment of the story, before anyone is subject to long-term incarceration.
Following a demonstration against solitary confinement last winter outside a Brooklyn jail, longtime friend, Catholic Worker and now law student, Matt D., offered me a ride back to St. Joseph House. He volunteered that the issue that most concerns him right now is the injustice of the bail system. His knowledge of the subject, passion and encouragement confirmed what I’d already glimpsed: that following arraignment, when someone is formally accused of a crime and supposedly presumed to be innocent until proven guilty, a great injustice often occurs that disproportionately affects poor people. At that time, the judge may release a person on his or her own recognizance until the trial. If there is a reason to believe that the person may not appear in court, the judge may require that an amount of money be put up as bail as a condition of release.
Here in New York City, according to a report issued in December 2010 by Human Rights Watch that relied on statistics provided by the NYC Criminal Justice Agency, just over three-quarters of those arraigned in non-felony cases were released on their own recognizance. Of those remaining, most had bail set at one thousand dollars or less. Tragically, however, 87% of the defendants arrested in 2008 who had bail set at that amount did not post bail, and were therefore jailed for an average of a little more than two weeks while awaiting trial.
Over 70% of those people were accused of nonviolent crimes. Fully 39% of our city’s jail population at any moment is comprised of people who did not post bail, and nationwide 62% of our jail population consists of detainees awaiting trial.
Judges supposedly set bail solely to ensure that the defendant will appear in court, but they are under no obligation to offer their reasons for decisions in this manner. Excessive bail is prohibited by the US and New York State constitutions and, theoretically, bail should be tailored to the defendant’s personal financial situation. In New York City’s assembly line justice system, however, where such decisions are often made in a matter of minutes, judges rarely have the time or information needed to make such a determination. Failures to appear in court are relatively rare, as only sixteen percent of accused persons miss a court appearance, and most of those people will return to court voluntarily within thirty days. Throughout the country, pretrial alternatives to jail that employ supervision, monitoring and notification of court dates have been shown to be effective and less expensive than detention.
Usually, for homeless and other poor people, posting bail is simply not an option. And, while in jail, they may lose their jobs or, at the very least, desperately needed income to provide for themselves and their families. They cannot attend school, mental health or substance abuse programs, or care for their children or elderly or ill relatives. Homeless people may lose their place in shelters. Then, of course, there is the humiliation, depersonalization and potential violence of jail. Lastly, the Human Rights Watch report states that “most people accused of low level offenses, when faced with a bail amount they cannot make will accept a guilty plea; if they do not plea at arraignment, they will do so after having been in detention a week or two. Guilty pleas account for 99.6% of all convictions of New York City misdemeanor defendants.”
As a high school student, I was taught that, according to the Bill of Rights, everyone in the United States has the right to a fair trial. The Sixth Amendment reads: “In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury of the state and district wherein the crime shall have been committed… and to be informed of the nature and cause of the accusation; to be confronted with the witnesses against him; to have compulsory process for obtaining witnesses in his favor, and to have the Assistance of Counsel for his defense.”
Although that technically remains true, over 90% of criminal cases in the US never go to trial (NY Times, 3/11/2012). Instead, most accused people plead guilty, thereby forfeiting their constitutional rights, and then plea bargain, hoping for a lesser sentence. As jails filled in recent decades, the criminal justice system would have bogged down had it not been “that government officials have deliberately engineered a system to assure that the jury trial system established by the Constitution is seldom used,” according to Timothy Lynch, director of the Project on Criminal Justice at the Cato Institute (NY Times, 3/11/2012). This system leans toward presuming guilt rather than innocence until proven guilty. The practice of plea bargaining has become so prevalent that in March of this year, the US Supreme Court decided in two cases, each by a five to four majority, that an accused person has the right to competent legal counsel during plea bargaining. “Criminal justice today is for the most part a system of pleas, not a system of trials. The right to adequate assistance of counsel cannot be defined or enforced without taking account of the central role plea bargaining takes in securing convictions and determining sentences,” Justice Anthony Kennedy wrote for the majority (NY Times, 3/21/2012).
This recent court decision acknowledges a very real shift in how people are convicted, placing greater power in the hands of prosecutors rather than in judges. The court decision is long overdue. In 1978, the Supreme Court ruled that it was not a violation of Sixth Amendment rights to threaten someone accused of a minor crime with life imprisonment. And in 1991, that a sentence of life imprisonment for a first-time drug offense did not contradict the Eighth Amendment’s prohibition of cruel and unusual punishment. Given the threat of such severe penalties, it is no surprise that so many people agree to plea bargains, regardless of their guilt or innocence. Despite the relief from longer prison sentences, however, many people, upon being released, are surprised to discover that they are subject to further humiliation and hardships such as being ineligible for public assistance, including food stamps or housing, and being denied the right to vote.
Some activists suggest that by simply having two or three times more people exercise their rights by demanding a trial, accused persons could overwhelm the system and force a complete overhaul of the process as the number of judges, lawyers and prisons cells would be woefully inadequate to deal with such a crisis. But those first individuals tried would have to be willing to risk the very real possibility of excruciatingly severe and long prison sentences. Their courage would have to rival that of those early civil rights activists who were met with violence, jailing and, some- times even death.
As I wrote this article, the daily Mass readings were from the Book of Amos, which cries out for justice, especially for poor people. That message, consistent both in Hebrew Scripture and the teachings of Jesus, calls us to work for a more just and compassionate sense and system of justice than that which is practiced in our society. It calls for fewer and shorter “vacations” for our friends on the soup-line.
Some years ago, as a graduate student, I read Murray Edelman’s book entitled, The Symbolic Uses of Politics, University of Illinois Press, 1964. This book is imaginative and interesting. One of those books you keep on the shelf and often find yourself re-reading.
Well, the last ten years have been filled with experiences that have brought to life Professor Edelman’s concepts about how politics, government and economics really work.
Images, illusions and self-sustaining momentum all directed at a single goal – to preserve systemic power over the economy, judicial and administrative process and the democracy itself.
If we were to create a “bell curve” to depict the allocation of economic security, due process and participatory democracy in contemporary American society, it might look something like this:
The top two percent get A’s. They are the generationally rich. Their wealth is deep and penetrative, almost institutional. They transcend economic variables and easily navigate even the most severe periods of economic reversal, like the depression of the 1930’s and the near collapse of 2008. They will always be with us. They get to control over 90% of the wealth and income. The “Occupy” movement would call them “the 1%” but it is probably closer to “the 2%”. They hire the best lawyers to navigate state and federal judicial and administrative processes, buy the best medical care and make the political campaign contributions which ensure that their interests will be protected by the people elected to high office. In fact, open-ended campaign finance laws are the primary source of their power.
The eighteen percent, doctors, lawyers, bankers, corporate executives and high government officials, get B’s, and pretty much achieve the same things the two percent do, but, in the proper pecking order. That is to say, if the lines below move up, the eighteen percent may be affected, but, never the two percent.
The sixty percent get C’s, and are comfortable. If they confront the criminal justice or judicial or administrative process they can pay a competent lawyer to get a fair outcome. They have good jobs and incomes, health care, nice homes, cars, family vacations, pensions and what they perceive as their share of the American dream. They belong to churches and synagogues and give to charity and view people in the top two percent as venerably entitled, and the eighteen percent as rightly enjoying the fruits of their labors. All true. Being wealthy and financially secure is no vice. So, if when they get up in the morning and the coffee pot works, the car starts and they get to their jobs, and back home at the day’s end, everything is good. The twenty percent below them are a burden. There will always be people who suffer from poverty. That’s life. After all, we know that nobody ever said the system was perfect, and that anyone who wants to succeed financially in America, need only to work hard and play by the rules. As to people who end up marginalized or in prison, well, the system does not pick names out of a hat, so, if you are there, you must have done something in your life to get there. Law abiding people do not have to worry about such things as due process and the rule of law. That is for radical, bleeding heart civil liberties activists and aging hippies to talk about. As for economic justice, that is for socialists and other failures to contemplate.
Now the bottom twenty percent is mostly African-American, Latino, rural and urban poor, elderly, and unemployed. They get D’s and F’s. They fill the nation’s prisons, welfare rolls, charity hospitals, mental institutions, orphanages and nursing homes, and do the menial jobs if they are lucky. They too will always be with us, and the best thing to do is look away and leave them to the institutional sub-culture. Too upsetting. Too distracting. Until the line ___________ moves up, then we start noticing, and it is moving up, not too gradually.
The evening news may begin with stories of joblessness and record home foreclosures, but, when the Wall Street reports play — … investor confidence up — Wall Street soared past the 12,000 mark, evidencing a strong recovery. So what are we worried about? We are worried about a dysfunctional economy and a weakening democracy. Lawyers and Bankers do not just become wealthy and run the government, they run the society – the culture – and the resources and rules are exclusively within their control. It is like playing a game of scrabble with a fellow who has squirreled away twenty letters from the board into his pocket. The playing field is not level. In fact, it is not a field at all; it is a very steep hill.
Don’t believe it?
Look at the numbers of criminal defendants in state judicial proceedings represented by court appointed lawyers, who plead guilty and go to prison, and compare the numbers to similar defendants with paid lawyers who go to trial or plead out and never do a day in prison.
Look at who is taking their family to a food pantry for Friday night dinner, rather than to their favorite fish fry.
Look at people living out of their cars in the driveways of the empty residences they once called home, and look at the number of people who worked their whole lives, paid their taxes and played by the rules who are bankrupt, broke, homeless, jobless, and even in prison because the momentum has slowed down and the bottom line ___________ has moved up, and continues to move up.
Look at the additional three million Americans who will lose their homes this year as a result of foreclosures by banks and vulture funds financed with their tax dollars, who refuse to restructure their loans or lend to them.
Look at the thousands of young men and women we send to war, who experience unspeakable violence and trauma, and look at the billions of dollars a month we spend on these wars, and the way we treat veterans when they return – no jobs, no care, no counseling, and when combat related post-traumatic stress leads them to drug abuse or violence, we lock them away in our state prisons and forget about them.
We are mostly all capitalists, some more than others, and most of us are moderates, and neither of those labels should prevent anyone from advocating for national policies that promote fiscal responsibility, public safety, national security, economic and social justice, and an uncompromising fidelity to the rule of law.
The deficit will never be eliminated until we come to grips as a society with the fact that we cannot afford to imprison or supervise 10% of our population. We simply can no longer afford to collect human beings. We should try going back to coins, stamps or hummels. People are too expensive and balancing budgets and eliminating the deficit on the backs of unions, the middle class, unemployed and the working poor is not the answer either.
Alternatives to prison must be studied and implemented. We need to build more schools and mental health and addiction recovery clinics, reconcile more offenders with their victims and close more prisons. We need to address the root causes of crime and violence and not ignore them. We should not keep prisons open in order to maintain a dysfunctional economy for residents of our rural communities where factories and mills have long ago been abandoned. We must recognize that while society has a legitimate duty to punish offenders, it does not have to destroy them in the process. There is a difference. Rehabilitation and drug and alcohol abuse treatment must also be a factor, and we should start trying to control the epidemic of sex crimes by restricting the availability of hard-core pornography in the media and on the internet and by providing psychiatric treatment and hospital confinement for sex offenders, instead of long prison terms, which only exacerbate the pathology.
We need to stop depleting our treasury with unnecessary wars conducted by a national security elite who approach war as if it were some intellectual exercise and who have stretched America’s military apparatus to the limits. The security of the nation can be strenuously ensured without overextending our military or wasting our money.
We need to re-examine the widespread immunity given to law enforcement officials.There are thousands of dedicated effective individuals serving in law enforcement in America. There are also too many marginal and emotionally unfit people attracted to these jobs, and we need to weed them out, and hold them accountable and not allow distorted perceptions of our need to be protected to prevent us from doing so.
We need effective financial and regulatory reform which protects the public without criminalizing ordinary commerce. We must hasten to acquire and restructure defaulted mortgages so homeowners and farmers are not displaced, and property values are not further depressed. Until this is done the residential real estate market will not fully recover and the jobs we need will not be created.
We have to start creating jobs by building things. Factories and mills, plants and laboratories, clean energy sources and revitalized infrastructure, and see to it that everyone who wants to work gets a job. We have to stop outsourcing our core employment opportunities.
We have to stop investing our wealth in phantom financial instruments too difficult to understand, except by the select few who cash in on them and explain them to us later.
We need to reduce our dependency on oil. It is pure folly to allow our addiction to oil to cause us to pay trillions to the same people who we say are dedicated to our destruction.
We have to harness the unbridled power and discretion that unelected administrative officials exert over every aspect of our lives and reduce the number of government agencies.
We have to stop worrying about labels and amend the new health care bill to provide the equivalent of single payer Medicare for every American. If people want to enhance their coverage with supplemental private insurance, they should be free to do so. We need to strengthen and maintain Social Security, Medicaid, unemployment insurance and programs which assist families, children and the elderly in their time of need.
We need to simplify the tax code, and work toward an equitable tax system that encourages the growth of small business and creates jobs, eliminates taxation altogether for people earning $25,000 or less and proportionately increases taxes on the highest income brackets. There is scarcely anything new about such a proposal. Thomas Jefferson advocated this concept at the early stages of the Republic.
We have to finish the job of guaranteeing every American their civil rights, not with symbols and images, but, to start with, by providing jobs to everyone who wants to work, and by working to keep fathers off the streets, out of prisons, and back at the kitchen table and by remembering that we started out as a “nation of immigrants”. This means creating a national environment where justice transcends race, religion, gender, sexual orientation, economic status and nationality.
We have to let go of our own insecurities and let law-abiding people be who they are, worship God as they choose and marry who they love.
We have to promote life, not death, and this means policies that stop the flow of drugs into this country, eliminate the death penalty, protect the environment, encourage adoption over abortion, control the use of guns, eliminate hunger and homelessness, especially for our children and the elderly, and make education the primary weapon we use to preserve our cherished American traditions. We have to treat our teachers as heroes and do everything possible to encourage young people to become educators.
We need to go back to schools that teach our young people about reading, history, government, art, music, science, math, literature, language, and writing to prepare them for college. We do not need schools which are glorified vocational centers. We need to educate our children to become whole human beings, and this means all of our children. We must promote civility in the classroom and protect our young people from bullies.
In his last published work, The Economics of Innocent Fraud: Truth for Our Time, Houghton Mifflin Company, 2004, the economist John Kenneth Galbraith said this: “… Let there be a coalition of the concerned. The affluent would still be affluent, the comfortable still comfortable, but the poor would be part of the political system …”.
Today we are surviving on images of prosperity, democracy and justice.
We live in a kind of conscious unreality, where the sheer momentum of everyday existence creates the illusion of prosperity, justice and liberty. We borrow frantically, mete out justice sparingly, neglect participatory democracy regularly, and rotely exclude millions of people from the mainstream of the good society, and the economic life of the nation. Sadly, what most Americans mistake for democracy and economic recovery these days is really just momentum.
We have created a prison sub-society which breeds violence, terror, and despair, destroys the family unit, and is bankrupting us. We spend our national treasury and our young people on unnecessary wars.
The solution to these problems is not to be found in fringe movements, or the ranting of extremists who want to cut back essential programs and services.
The answers are in the hearts of ordinary decent Americans who use common sense; do their duty every day, and strive to make sure that everyone has a place at the table.
That is democracy, and true capitalism and that is the kind of genuine patriotism that “the greatest generation” exhibited when they encountered their “rendezvous with destiny” in the 1940’s and conquered fear, poverty and tyranny and went on to ignite the greatest period of economic expansion the world has ever known.
No true progress on any of these fronts can be achieved until the imagery is taken out of the political process, and we return to this kind of genuine patriotism and to a true participatory democracy. This means that there must be mandatory public financing of every local, state and federal election as well as continued funding of public and alternative radio and television as a means of the open and free exchange of ideas.
Money is driving public policy as never before, and not just from corporations, but, from unions, political action committees, and known and unknown individuals and enterprises as well, who direct cash to political candidates from both parties, who wax elegant with imagery during political campaigns, but, once in power, do the bidding of their financial backers. This is not a Democratic or Republican issue; it is a matter of human nature. When you accept things from people, you obligate yourself to them.
We have allowed ourselves to be controlled by expensive radio and television political advertisements and a saturated internet which distorts the political process.
This corrupts us by convincing us to enter into covenants for governance with people whose primary purpose is to perpetuate power, not to serve the public interest, or the rule of law. There is a vast difference between the rule of the law and the rule of power.
And it does not stop after the campaign. Candidates continue to maintain and spend these funds well after they have assumed office on other like-minded candidates, and to further their own political and personal agendas. There can be no reasonable expectations of breaking loose from the hold of political imagery has on the political process until we enact into law legislation that requires 100% public financing of every political campaign from local alderman to President and impose reasonable term limits.
The results might surprise us. There are thousands of decent, competent, well-intentioned Americans with much to contribute to society who could run for political office if they had the means to do it, and did not have to contend with financial monoliths running against them.
This would open up the political process to include, young people, students, teachers, professors, farmers, retired and senior citizens, laborers, shopkeepers, pharmacists, doctors, scientists, homemakers and on and on. Indeed, this is the democracy our founders envisioned. The citizen public servant, who holds office, serves, leaves office and makes room for another citizen to serve; not a cabal of lawyers, financiers and career power brokers who take control of the government and never let go, and give us a good speech and saturate us with imagery every two, four or six years.
At the time of the ratification of the Constitution, Benjamin Franklin warned us that our new adventure with liberty would last only as long as the people keep it honest. When the people become “so corrupt” as to require a “despot” Franklin said, the experiment would surely fail.
We have allowed imagery to corrupt the political process and the economic underpinnings of our society. This did not happen because Americans are corrupt – far from this; we are a people rich in character, courage and generosity. What happened is that we all got caught up in the momentum, and then the stillness came, and now we are remembering, listening, asking the right questions and are ready to act.
If we treat our present financial, legal and political crisis as our own “rendezvous with destiny”, we will not lose our economy, our democracy or the law, we will restore them. After all, we are Americans.
Brendan J. Lyons wrote a telling report in the Sunday August 12, 2012 edition of the Times Union, “Politics swirl in bid for judges”.
The story describes how sitting New York State Supreme Court Justices have paid large fees to an Albany, New York consulting firm to broker cross-endorsements for their re-election in the fall.
Two such Justices of the Supreme Court in the Appellate Division, Third Judicial Department, cited in the report, Bernard J. Malone, Jr. of Albany and E. Michael Kavanagh of Ulster County, have collectively paid $40,000 to William D. Powers, former State Republican Chairman under former Governor Pataki, to arrange to eliminate the prospect of any opposition in their bids for re-election.
Justice Kavanagh was quoted in the article as saying that “the elected process does not serve the public very well” and that while he “strongly supports the people’s right to choose, but the election of judges and the restrictions that are imposed on us in terms of campaigning make it very difficult for voters to become informed.”
The Times Union report goes on to say;
“…over the years, the manner in which cross-endorsements unfold at the judicial convention – roughly 82 handpicked delegates often vote in line with their party leaders – make legal ethicists shudder”.
And quoting James Sample, a law professor at Hofstra University who is considered an expert on voting rights and judicial elections,
” … It’s Soviet-style democracy in the sense that we have all the appearances of an election: You go to the ballot box, except the choices have all been made for you”.
Jurists who believe that voters are perhaps not well enough informed about judges and justice to be trusted to vote in a judicial election and that the task is best accomplished by political compromise have identified the right issue, but come up with the wrong answer.
People need to become more informed about how our justice system works and more directly involved in assuring that only the best of the state bar be entitled to assume judicial office. Whether this means the election of our state’s judges and justices at the ballot box as part of an open and informed electoral process or through a constitutionally revamped merit based judicial selection process, is something to be studied and decided – by the people in a referendum.
One thing is for sure though; the selection of the men and women who are to serve justice in our names, should not be made by party bosses based upon scripts written by power brokers.
“Democracy is a very bad form of government. Unfortunately, all the others are so much worse”