Here is the court order blocking the Executive Order on immigration.
Author Archives: sdiamond
The common link between Steve Bannon and the alt-right – the “socialism of fools”
There is growing concern about the attention being given to far right organizations in the wake of the election of Donald Trump. But there is a good deal of confusion about how such groups are linked to the incoming Trump Administration.
One line of criticism bases itself on the fact that Steve Bannon, a top advisor to Trump who is set to join the new President in the West Wing upon inauguration, made the link clear when he said that his website, Breitbart.com, provided a platform for the “alt-right” (a euphemism for anti-semitic, fascist and white supremacist organizations and individuals). Bannon is now distancing himself from that remark and the focus on possible actual organizational links between Bannon and the fascist right is not likely to bear fruit.
Far more important are the ideological connections that are helping to foster a hostile environment since the election.
One key common ideological viewpoint shared by Bannon and the fascist right is their shared interest in and support for the ideas of Julius Evola, a leading intellectual of Italian fascism and an agent of Nazi Germany prior to and during World War II. Evola is not a widely familiar figure now but he deserves much closer attention. During the recent controversial conference sponsored by the National Policy Institute in Washington D.C. – complete with explicit Nazi salutes – the leader of the organization, Richard Spencer, referred to the attendees as “Children of the Sun.” This was an explicit reference to the youthful followers of Evola in fascist Italy. For Evola the sun evokes a notion of a pure culture that is superior to darker lunar cultures.
A more powerful idea of Evola’s intrigues much of the fascist right including Steve Bannon: that is Evola’s “traditionalism.” In comments that Bannon delivered via Skype to a conference held in the Vatican in 2014 he said the following:
“When Vladimir Putin, when you really look at some of the underpinnings of some of his beliefs today, a lot of those come from what I call Eurasianism; he’s got an adviser who harkens back to Julius Evola and different writers of the early 20th century who are really the supporters of what’s called the traditionalist movement, which really eventually metastasized into Italian fascism. A lot of people that are traditionalists are attracted to that.
“One of the reasons is that they believe that at least Putin is standing up for traditional institutions, and he’s trying to do it in a form of nationalism — and I think that people, particularly in certain countries, want to see the sovereignty for their country, they want to see nationalism for their country. They don’t believe in this kind of pan-European Union or they don’t believe in the centralized government in the United States. They’d rather see more of a states-based entity that the founders originally set up where freedoms were controlled at the local level.
“I’m not justifying Vladimir Putin and the kleptocracy that he represents, because he eventually is the state capitalist of kleptocracy. However, we the Judeo-Christian West really have to look at what he’s talking about as far as traditionalism goes — particularly the sense of where it supports the underpinnings of nationalism — and I happen to think that the individual sovereignty of a country is a good thing and a strong thing. I think strong countries and strong nationalist movements in countries make strong neighbors, and that is really the building blocks that built Western Europe and the United States, and I think it’s what can see us forward.”
In a single step Bannon artfully evokes via the concept of “traditionalism” both his support and interest in Evola as well as Vladimir Putin and also explains how he wants to “translate” that concept into the American context via nationalism. Thus, when Bannon now tries to distance himself from the explicitly racist and anti-semitic “alt-right” he does it via the concept of traditionalism-cum-nationalism. And there are no shortage of interviews or videos with Bannon where he goes on ad nauseam about his support for nationalism as against the alleged materialist globalism of Washington and New York elites.
That, in turn, leads to the only slightly more palatable rhetoric of Bannon’s new fuhrer – sorry – leader, Donald Trump. When Trump attacks the New York Times, Saturday Night Live or the cast of Hamilton he is invoking the anti-elitist, anti-cosmopolitan and, most importantly, anti-pluralist themes developed by Bannon since he himself abandoned his own “elitist” career as a Wall Street banker. As his remarks to the Vatican conference demonstrate, these themes are deeply rooted in the fascistic concepts of nationalism and traditionalism – an attempt to return the country to some mythical pre-globalist traditional America – an America that has never existed and cannot ever exist.
Unfortunately that approach struck a chord in the recent election with many unemployed and underemployed Americans who think that Trump can conjure up an economic miracle. Bannon himself has said the Trump era is as exciting as the 1930s – a period of massive industrial expansion in countries like the U.S., in part, but also, of course, in fascist Germany and stalinist Russia.
It is no wonder that the German socialist leader August Bebel referred to anti-semitism as the “socialism of fools.”
Trump to channel Nazi Economy Minister Hjalmar Schacht?
David Frum took a shot today on KRCW at predicting what Trump’s economic policy is likely to be. Frum says it will be a heavy dose of debt financed spending on arms and infrastructure which will help boost industrial employment for (largely) white male workers. That will, Frum insightfully suggests, buy him some popularity, perhaps enough to guarantee a second term.
To those who think recalling history is important this should remind people of the policies implemented by the Nazis under Minister of the Economy Hjalmar Schacht. Massive infrastructure spending (the autobahn, for example) was linked to autarkic trade policy as a way to deal with the collapse of the German economy. The financial hunger of the Nazi regime soon turned to the assets of its Jewish population with Schacht (who expressed some opposition to the more extreme anti-semitism of the Nazi party) suggesting that Jewish property be held in trust by the government rather than outright expropriation.
Schacht funded the industrial and military expansion of the Hitler regime in part by the issue of a new basically fraudulent form of government debt known as MeFo Bills. These were used to hide a massive government debt. Today on CNBC Trump advisor Larry Kudlow basically admitted Trump would be forced to inflate debt in order to cover his planned spending because planned tax cuts won’t generate sufficient growth in GDP.
Countries that try to inflate their way out of economic problems end up in deeper trouble. The signs point to a similar path in the new Trump era.
Remember: the securities laws cover unicorns just like every other species!
The big news in Silicon Valley this week was the Wall Street Journal report that “unicorn” medical testing startup Theranos is being investigated by both the Department of Justice and the Securities and Exchange Commission.
This follows the recent visit by SEC Chair Mary Jo White to the Valley where she made clear that the SEC was focused on potential securities law issues related to highly valued startup companies. As I made clear in a book chapter I wrote for a collection edited by UCLA’s Steve Bainbridge, the securities laws prohibit fraud at both public and private companies.
When the pipeline to an IPO slowed for the tech sector in the wake of the dotcom crash many companies opted to stay private longer. When the credit crisis hit that problem deepened. But as the recovery took hold money flooded into certain sectors in the Valley and valuations of many companies soared, giving rise to the “unicorn” label – entities with more than a billion dollar valuation but still privately or closely held.
But just because a company has not yet engaged in a public offering of its shares does not mean the prohibitions agains securities fraud do not apply. They do, even where there is an exemption available that allows a company to limit the disclosure it provides investors. In fact, this is a regulatory framework I am explaining to my securities law students this week.
Don’t blame Bernie – of course the banks can be broken up
In a recent interview, a very confused New York Daily News reporter continually mixed up the Treasury Department and the Federal Reserve in the face of a very straightforward statement of presidential candidate Bernie Sanders that Congress can give the President power to impose changes on the structure of the financial system “under Dodd Frank.”
Well, the Treasury is an agency of the executive branch while the Federal Reserve is an independent hybrid public-private entity. The former is an extension of the power of the President while the latter has autonomy that limits, understandably, Presidential influence. Apparently in the minds of financial journalists the two entities can be conflated without consequence.
Sure enough Secretary Clinton jumped on the bandwagon and slyly and indirectly suggested on Morning Joe that Bernie Sanders does not “seem” to know enough about how the economy works to be qualified as president.
Now that we have cleared up the fact that it was the Daily News reporter who was confused not Sanders, let’s focus on the agency that a President does control, the Treasury. When Sanders said he wanted to use Dodd-Frank to break up the big banks one could consider that from two angles. First, does the current language of that law enable the federal government to break up the banks; and second, could Dodd-Frank be amended to give the federal government the power it needs to break up the banks. Since Sanders talked about going to Congress to empower the government to break up the banks it seems reasonable to conclude he means the latter, second method.* But he is taking the view that any such amendment would be consistent with Dodd-Frank, a necessary extension consistent with the spirit of what Congress intended to do.
I think he is right about that – Dodd Frank cannot be viewed in isolation or as a static statement by Congress. In fact, many aspects of the statute are clearly aimed at collecting information and monitoring the ongoing behavior of the financial system so that Congress can decide if further change to the financial system is necessary. This summary of the key features of Dodd-Frank authored by a major corporate law firm that advises banks makes clear the role of the statute in enabling Congress and the President to maintain ongoing live and dynamic oversight that could and should lead to further changes in banking structure.
One key feature of the Act? A Financial Stability Oversight Council (FSOC) which has several key roles including (according to that law firm): “identifying risks to U.S. financial stability that may arise from ongoing activities of large, interconnected financial companies as well as from outside the financial services marketplace, promoting market discipline by eliminating expectations of government bailouts, responding to emerging threats to financial stability.”
No wonder the authors of this report tell their banking clients in summation: “There will be much more to come once the studies mandated by the Dodd-Frank Act are completed. There also is every reason to believe that the rule-making process will be a long and winding road.”
In fact, in part, Dodd Frank did restructure the banks by implementing the so-called Volcker Rule which forbids proprietary trading by banking entities.
Recent controversies, post Dodd-Frank, suggest that such active oversight is warranted. JPMorgan, for example, had no idea that it was building up a huge bet on synthetic credit INSIDE the very part of the bank that was supposed to be reducing risk! The London Whale scandal would likely have led to a break up of the bank in a rational world and certainly should have led to the dismissal of its CEO. Arguably this was a form of proprietary trading and thus in violation of Dodd Frank (although the Volcker Rule provisions were not finally passed until after this particular scandal – just good luck?) Can anyone not believe that Sanders and the Minneapolis Fed President Neil Kashkari are raising alarms about a serious ongoing problem in the financial system?
Please note I am not taking a position here on whether all the banks should be broken up. I do think that the repeal of Glass Steagall did unleash serious problems and enabled a hidden bubble to build up inside large banks that blew up in 2007-08. For a full discussion of the normative debate about whether to break up the banks consider the comments expressed at a Brookings Institution conference by Kashkari of the Minneapolis Fed recently here.
*Given the opportunity to expand on his earlier comments to the Daily News on the Morning Joe program today (April 8) Senator Sanders confirmed that he intends to use both existing Dodd-Frank provisions and additional legislation. He pointed specifically to Section 121 of Dodd-Frank which allows the Federal Reserve with the backing of FSOC to impose structural changes on banks including restricting product offerings or terminating activities.
Challenges ahead for proxy battle at Yahoo!
It will be a race at Yahoo – can the current board engineer a sale of assets sufficient to satisfy shareholders while under challenge by a competing slate of directors proposed by an activist investment fund?
I was interviewed about the emerging battle at Yahoo! by Bloomberg here.
Chinese state cracks down on Berkeley labor education effort
A major blow to the idea that there can be engagement with the Chinese state unions as described in the Wall Street Journal.
Another account here:
Chinese state cracks down, but workers keep fighting | REDFLAG.
Sadly, some in the law school world operate under the same illusions as some in our democratic labor movement. See my exchange with NYU professor Rick Hills here and here.
A Fall 2016 seminar on “global tectonics” – call for papers
The theme will be the application of law to the problems created by what I call “global tectonics.” I intend to consider problems like the Ukraine, Boko Haram, Mexican drug violence and more. Students will be reading the globalization and rule of law literature and then examining these trouble spots where global social, political and economic tectonic plates are clashing. They will be asked to consider how or whether legal solutions to these situations are feasible. If you have any ideas for papers or other material for the seminar or would like to present work of your own please let me know. My campus email address is sdiamond@scu.edu.
Henry Manne, 1928-2015
Steve Bainbridge writes here of the passing of Henry Manne, one of the most important legal thinkers of the late 20th century. I did not know Henry at all personally until one evening a few years ago I was very pleased, out of the blue, to receive an email from him commenting on a paper of mine that had been posted on SSRN. That led to a brief but fruitful exchange of ideas about law and capitalism that proved very helpful in my own thinking and apparently, while he was perhaps just being polite in saying so, in his own thinking as well. Henry was someone who I think, alongside the late Benoit Mandelbrot whom I also was privileged to get to know in a similarly random way, should have received a Nobel Prize. Henry’s work and ideas will be of significance for a very long period of time and deserve careful study.
Putin dances to the tune of fictitious capital
Today’s Financial Times has a front page story on the newest stage of the Russian crisis. Putin’s Russia is being hit by both western sanctions as a result of its invasion of its sovereign neighbor, Ukraine, as well as by a glut in the supply of global oil.
This chart indicates the significant downward move in oil prices:
As a result, the world market is marking down the value of the Russian economy and hence the ruble is tanking in value.
In response, Putin is now forced to pump large amounts of cash into the banking system to keep key financial institutions afloat. The latest infusion amounts to close to $8 billion for three major banks. While the regime is claiming the ruble crisis is over, the FT story includes the following: “This is only the beginning,” said a senior executive at a large Russian financial institution. “Everyone is bracing for what comes after new year.”
Indeed the news about the bank infusion sent the ruble down again Friday after a rally earlier in the week. The overall damage of recent months is clear in the chart below:
Meanwhile in a recent speech Putin continued to make noise about diversifying the Russian economy which is another way of admitting that a quarter century of post-Cold War political and economic development has largely been a waste for the majority of Russians (and for much of the former eastern bloc as a whole it might as well be said, Ukraine first and foremost).
Thus, the Cold War may be over but we are far from resolving the fundamental imbalances in the global economy. These have now become so severe that countries like China and Russia are increasingly willing to confront the West with provocative actions like the Ukraine invasion and the assertion of Chinese sovereignty in the south China sea area.
It is understandable that we sympathize with the victims of this kind of aggression but pushing counties like Ukraine to choose Nato membership over genuine autonomy, which has been US policy for years, only stokes the tensions with Russia and provides Putin with political capital that he uses to shore up his own domestic position. Sanctions, too, are a dual edged sword. It is true that Russia needs the world economy but authoritarian forms of capitalism have been very stable over time. As the crisis deepens inside Russia it is just as possible that it will lead to greater centralization of power by Putin and his military and bureaucracy.