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The Founding Fathers Reconsid- Bernstein takes a more precise view first being the procedure for electing ered of the founders than did President the President, which the election of Harding. He selects seven primary 1800 demonstrated to be unworkable By R.B. Bernstein founders, relying on Richard Morris’ and which was changed by the Twelfth Oxford University Press, New York, NY, 2009. book, Seven Who Shaped Our Des- Amendment. The second example is 256 pages, $17.95. tiny. The seven are Benjamin Frank- the right of the President to remove lin, George Washington, John Adams, executive branch officers—an issue Thomas Jefferson, John Jay, James that became significant at the time of Re v i e w e d b y He n r y S. Co h n Madison, and Alexander Hamilton. the impeachment of Andrew John- R.B. Bernstein, author of an ac- Except for Jay, who was the first Chief son. The third cigar almost exploded claimed biography of Thomas Jeffer- Justice, they were all among the sign- when the bribery prosecution of Spiro son, returns with The Founding Fathers ers of the Declaration of Independence Agnew was nearly derailed because Reconsidered. His goal is to reveal the or the framers of the Constitution (or Agnew argued that he had to be im- origin of the term “founding fathers,” both). Bernstein also places Burr and peached before he could be tried. It to test the term’s validity, to formulate Paine in a category of “secondary” is not clear what Agnew’s grounds for a list of founding fathers, and to de- fathers and even creates a class of this argument could be, but, if he had tail their accomplishments and weak- “founding mothers,” including Abigail made it persuasively, then Agnew was nesses. Adams and Mercy Otis Warren. prepared to argue that he would have The expression “founding fathers” Bernstein starts his discussion of the to preside over his own impeachment originated at the 1912 Republican con- founding fathers with a background of trial. The reasoning here is that Article vention, in an address by Sen. Warren their efforts, and much of this mate- I, section 3, of the Constitution pro- G. Harding, as he endorsed President rial is an update of Bernstein’s 1987 vides that the Senate shall have the Taft for re-election. (The Democratic book, Are We to Be a Nation? He de- sole power to try all impeachments candidate, Woodrow Wilson, won scribes how, in the late 1700s, partici- and that the Chief Justice shall preside that election and won again in 1916.) pation in government was limited to over impeachment trials of the Presi- Harding declared that the “founding white male property owners, and he dent. This provision seems to imply American fathers” had written “the recounts the calling of the First Conti- that the Vice President, as president covenant of a people’s rule into the nental Congress in 1775 and the Con- of the Senate, must preside over im- bond of national life, beyond all era- stitutional Convention in 1787. But peachment trials of anyone other than sure or abridgement.” At the 1916 Re- the heart of the book is an analysis the President—in other words, that publican convention, Harding used the of the achievements of Bernstein’s Agnew would have to preside over his term “founding fathers,” dropping the founding fathers. The author would own impeachment trial. “American.” concur with historian Gordon Wood Bernstein also has an excellent Bernstein notes the sloppiness of that the Constitution was remarkable chapter on the historical legacy of the Harding’s pet phrase. Harding did not for being a distinct document and not founding fathers. Several of them have name anyone in particular or speci- merely part of a collection of statutes, been held in esteem, only to have their fy whether he was referring to those as in England. The first three articles public regard wane. For example, from who drafted the Declaration of Inde- of the U.S. Constitution established the 1930s to the 1960s, the reputation pendence or the Constitution or both. three branches of government, with of Thomas Jefferson, as the champion Harding’s unnamed founding fathers checks and balances, as opposed to of liberty, was in ascent. Since then, are without flaw, and Harding ig- Great Britain’s parliamentary system. his reputation has declined because he nored the charges of sexism and rac- Article III spurred the development of owned slaves and had an affair with ism that had been leveled against some judicial review and also provided for Sally Hemings. Meanwhile, Alexander of them, even in his day. And, if he “actual representation” by legislators, Hamilton, whose aristocratic tenden- had given it a thought, would Hard- rather than “virtual representation,” as cies had lowered his standing during ing have included Aaron Burr, a sig- in Britain, where districts did not in the Depression, has risen in stature nificant participant in the 1800 presi- fact have representatives. Finally, the lately; today he is pictured as an eco- dential crisis and later the murderer of Constitution was ratified only after nomic genius. Alexander Hamilton, among the found- its proponents promised that the first The epilogue to The Founding Fa- ing fathers? Also, would Harding, an Congress would add a Bill of Rights to thers Reconsidered provides an impor- arch-conservative, have been revolted the document. tant perspective by summarizing the to see Thomas Paine on the list, even Bernstein offers an interesting dis- speeches of five famous African-Amer- though, as a contemporary saying went, cussion of what he calls “exploding icans. The first is an address Frederick “[W]ithout the pen of Paine, the sword cigars” in the Constitution—matters Douglass gave on July 5, 1852, in which of Washington would have been wield- that were not fully settled by the doc- ed in vain”? ument. He gives three examples, the reviews continued on page 66

September 2009 | The Federal Lawyer | 65 reviews continued from page 65

he questioned what the American The Prince of Darkness: 50 Years who had emigrated from Russia, was slave would take from Fourth of July of Reporting in Washington a passionate Democrat, a heavy drink- celebrations. To Douglass, the answer er, and an authoritarian father. One of was fraud and hypocrisy. The second By Robert D. Novak his sons, the author’s father, Maurice, speech was given by Martin Luther Crown Forum, New York, NY, 2007. 672 pages, worked his way through college and King during the march on Washington $29.95 (cloth), $18.95 (paper). was a nominally observant Jew who in 1963. King, according to Bernstein, had his only son, Robert, bar mitzva- “urged African Americans to invoke hed. Maurice was a Republican and the best aspirations of the founding Re v i e w e d b y Jo h n C. Ho l m e s thought that Franklin D. Roosevelt was fathers as authority to confront and meddling with the system that had per- overcome the failures of the American begins his autobiog- mitted him, the son of poor immigrants, experiment.” King also said that Amer- raphy with his most notorious jour- to achieve middle-class respectability as ica had defaulted on the words of the nalistic episode: the a low-level corporate executive and of- Declaration of Independence and had affair. Plame was a CIA agent whose ficer in local civic organizations. Robert given African-Americans a “bad check, husband, Joseph C. Wilson, was sent Novak attributes his own early political a check which has come back marked by the CIA to to investigate al- interests and Republican leanings to his ‘insufficient funds.’ But we refused legations that had agreed to buy father. to believe that the bank of justice is in the form of yellowcake Maurice Novak was also a news bankrupt.” from Niger. Wilson concluded that the junkie: he subscribed to several news- The third speech Bernstein cites is allegations were highly unlikely. Ac- papers and magazines and listened av- the one given by Rep. Barbara Jordan cording to Novak, President George idly to radio news broadcasters such as (D-Texas) during the 1974 impeach- W. Bush was unaware of Wilson’s H.V. Kaltenborn and Gabriel Heater. ment proceedings against President conclusion; in any case, in his 2003 This further whetted his son’s appetite Nixon. The Constitution eloquently address, Bush said, for politics and kindled Robert’s inter- commenced, she said, with “We the “The British government has learned est in journalism. People.” Yet, she went on to say, her that recently sought Although not an athlete, Robert No- ancestors were not included in “the significant quantities of uranium from vak became a sportswriter for his high people” until after the enactment of Africa.” In an op-ed piece in the New school newspaper. In his senior year, the Fourteenth Amendment. In 1987, York Times, Wilson asserted that he became a stringer for the Joliet Her- Justice Thurgood Marshall echoed this Bush’s claim was untrue, and, in retali- ald-News and a full-time staffer in sub- theme when he stated at a celebration ation, the Bush administration leaked sequent summers. This newspaper be- of the bicentennial of the Constitution his wife’s identity as a CIA operative came his journalism school, where he that, “[w]hen contemporary Americans to the press. Novak published the in- “learned the formula for writing obitu- cite ‘the Constitution,’ they invoke a formation and refused to divulge the aries, how to lay out a page and write concept that is vastly different from source for his story, who was later headlines, how to cover police news what the Framers barely began to con- revealed to be Deputy Secretary of without getting sued for libel ... [and struct two centuries ago.” According to State Richard Armitage. Novak claims how] to bluff when [he] didn’t know Justice Marshall, it was not the work of that the mainstream media unfairly at- much about the subject.” the founding fathers but the process tacked him and that the attacks caused In 1948, Novak entered the Uni- that they set in motion that should be him much anguish. versity of Illinois, where he received celebrated. Bernstein concludes with Novak’s journalistic coup-turned- high grades and reveled in liberal ’s victory speech on sour only slightly marred the other- arts studies, particularly of the great Nov. 4, 2008: “If there is anyone out wise distinguished career of perhaps English writers. He avidly continued there who still doubts that America is the most prolific and longest-serving his sports journalism, writing for the a place where all things are possible, member of the media in history. Crit- school newspaper, the Daily Illini, as who still wonders if the dream of our ics of Novak might contend that the well as covering sports events for the Founders is alive in our time, who still black mark from the Plame affair was Champaign-Urbana Courier. He was questions the power of our democracy, well-deserved, because, throughout devastated, however, to lose the pres- tonight is your answer.” a career that turned increasingly par- tigious honor of being named sports Bernstein’s discussion of these five tisan, Novak himself had given little editor for the Daily Illini to Morris Bes- speeches highlights that the founding quarter when pointing out the weak- chloss (father of historian Michael Bes- fathers’ great achievement also reveals nesses, foibles, and screwups of politi- chloss), who, according to Novak, was enormous gaps between ideals and re- cal figures. less deserving but a better campaigner ality. TFL for the honor. Novak spent his senior Novak’s Background year in college working long hours for Henry S. Cohn is a judge of the Con- Robert Novak was born in Joliet, Ill., the Courier, skipping many classes, necticut Superior Court. in 1931. His grandfather, a secular Jew and partying. One professor flunked

66 | The Federal Lawyer | September 2009 him for missing too many classes, and ing at the National Press Club, where Reagan. Novak’s modus operandi was a student-faculty disciplinary commit- he would consume still more scotch. to ingratiate himself with potential in- tee summoned him to face expulsion Only in his late 40s did he realize that formers—including political leaders— from school. Student members voted he had a serious drinking problem, and, after gaining their confidence, against him for his arrogance — a and it took contracting and almost dy- report their disclosures in his own crit- quality that would cause him frequent ing from spinal meningitis at age 56 ical manner, often angering them and difficulty throughout his career — but to cure him of his taste for scotch. He sometimes permanently losing their a faculty member persuaded the com- continued to consume gin and other allegiance and his access to these in- mittee to allow Novak to stay because liquor, but his days of heavy drinking dividuals. But Kennedy was different. of his exemplary performance during were over. Even when Novak’s columns were his first three years. Novak’s first marriage ended in di- harshly critical of Kennedy’s actions, Novak had joined the ROTC at the vorce after little more than a year. He Kennedy would nearly always respond University of Illinois, and was called remarried, and dedicates this book to with equanimity, realizing that Novak into service and sent to Korea after his second wife, Geraldine Williams was a hard-hitting reporter and hav- graduation. Fortunately for him, the Novak, “my intrepid and loving part- ing confidence in his own capabilities Korean war had just ended, so he ner.” Both Geraldine, who was an as President. Novak found President spent the final year of his military Episcopalian, and the author convert- Kennedy to be warm, gracious, and commitment reading voraciously and ed to Catholicism and were baptized in trusting, but found his brother Bobby drinking heavily. Just prior to being 1998; Novak devotes a chapter to why brash and arrogant. Overall, however, discharged and with no other likely he converted. Novak considered Kennedy’s a failed opportunities, he accepted an offer presidency in terms of both domestic from the bureau in Presidents (and Contenders) He Knew and foreign policy and expects it to Omaha as a 12-week vacation replace- Novak has met every President since lose its luster as history unfolds. By ment for another reporter. He parlayed Eisenhower. He reports unabashedly contrast, Novak believes that Reagan’s this assignment into an extended stay, on his meetings with these Presidents stature will continue to grow. Novak’s which eventually took him to Wash- and analyzes each of their presiden- appreciation of Reagan coincided with ington, D.C., at the age of 26, as a re- cies—usually critically. Novak’s least his own evolution from a Rockefeller porter for a national newspaper. From favorite of the Presidents he met was Republican to a hard-core conserva- there he moved on to a career that Jimmy Carter. Like nearly every other tive. Although Novak does not give would include, among other things, follower of politics at the time, Novak Reagan a pass and criticizes his mis- 26 years with Rowland Evans Jr. as co- did not take Carter seriously as a can- takes, he found little to dispute in Rea- writer of the “Evans-Novak Political didate for President in the crowded gan’s policies. Report,” author of his own columns field of Democrats vying to challenge Novak cites President Ford’s ap- after Evans retired, co-host of CNN’s incumbent President Gerald R. Ford. pointment of John Paul Stevens, rather “Crossfire,” and panelist on and exec- Novak unearthed nine untruths Carter than someone more conservative, to utive producer of the television show, had put forward, such as his claims of the Supreme Court as “a presidential “Capital Gang.” friendship with Sens. Henry “Scoop” decision that enhanced my view that The amount of work that Novak took Jackson and Richard Russell, Carter’s he [Ford] had no public purpose and on in writing his columns and prepar- membership in Common Cause, and that extended his negative impact de- ing for television shows was remark- his hard work on Atlanta’s school bus- cades beyond his presidency.” Novak’s able. Novak specialized in gathering ing plan. Carter, Novak concludes, blunt criticisms of Ford made a conge- inside information from government “was a habitual liar who modified the nial relationship with him difficult, and, officials, which required him to spend truth to suit his purposes.” But No- although he views Ford as the nicest of much time flattering and schmoozing vak acknowledges Carter’s shrewd the Presidents he has covered, he con- with these people, then attempting to political tactics and luck in grasping siders him to have been ill-equipped verify the information they gave him. the 1976 Democratic nomination and for the job. The intensity with which he pursued electoral victory over Ford, who was Novak’s wife Geraldine had been these efforts is evidenced by the fact burdened by his of Nixon. a secretary to Vice President Lyndon that he hardly knew his neighbors, al- Novak found Carter an unsuccessful Johnson, and Johnson insisted on host- though he lived in the same house for President, not only in failing to recog- ing the Novaks’ wedding reception. more than 30 years. nize the designs of the Soviet Union to Novak views this as both a gracious Novak’s prodigious production is acquire world domination, but also in gesture and an attempt to manipulate even more amazing when one consid- having an unhealthy trust in his own him to give Johnson good public- ers the humongous amount of hard capabilities to reform dictators such as ity. But Novak’s columns reflected his liquor he consumed when he was Fidel Castro. opinion that Johnson’s presidency was plumbing his resources and partying. Novak’s two favorite Presidents— a disaster, and Johnson retaliated by He engaged in noontime political for- as people—were Kennedy and Rea- embarrassing Novak publicly and de- ays greased by three or four glasses of gan. He was most fond of Kennedy, scotch, followed by evenings of party- but most philosophically attuned to reviews continued on page 68

September 2009 | The Federal Lawyer | 67 reviews continued from page 67

nying him journalistic access to the rick Moynihan, whom Novak saw as also clashed with that of the modera- . an effective public servant, inspired tor, the thin-skinned John McLaugh- Although Novak had high hopes innovator, and eloquent orator. De- lin. An original member of the “Capi- for a successful Nixon presidency, he spite drinking too much, Moynihan’s tal Gang” on CNN, Novak found that disliked the “den of vipers” that sur- problem in being nominated was that dealing with other high-powered ego- rounded him, especially Bob Halde- his sometimes conservative views and centric personalities could cause prob- man, John Erlichmann, and Chuck his service in the Nixon administration lems. One such personality was con- Colson. According to Novak, Nixon caused liberal Democrats to block ef- servative pundit Mona Charon, who, saw him as a kindred spirit who could forts on his behalf. though intelligent and articulate, often be manipulated by selective leaks. became hostile and personal in her Years after he resigned over the Wa- Novak’s Journalism confrontations with liberal panelists tergate nightmare, Nixon said, “One of Novak mastered the technique of such as Al Hunt. Novak suggested to the best ways to learn what’s going on scooping the rest of the pack in ob- her that she tone down her approach, in politics is reading Evans and No- taining inside information about po- and she went over his head to com- vak. One of the best things about be- litical events. Although he praised his plain to CNN management about his ing retired from politics is not having long-term partner, Rowland Evans, as treatment of her. to return their calls.” Of John Dean, a smooth operator with easy access to Prince of Darkness is chock full of the Nixon White House counsel who high-level politicians, and denigrated the names of people who fed Novak testified against Nixon during the Wa- himself as an offensive individual information in the hope that he would tergate hearings, Novak wrote, “I had from a nondescript background, No- publish a column that would promote disliked him from a distance and liked vak actually obtained the majority of their interests. David Stockman, for him even less as I now met him for their scoops through his aggressive example, who was the director of the the first time. He seemed to typify the schmoozing, pursuing his stories fear- Office of Management and Budget un- Nixon ‘Beaver Patrol’—not just short lessly and relentlessly. Novak rarely der President Reagan, had biweekly on principles, but smug and arrogant, published gossip or hatchet jobs; rath- breakfasts with Novak at the relatively odd for an informer who had turned er, he came up with information on private Hay Adams dining room (rath- against his own president and was on prospective high-level appointments er than Paul Young’s restaurant, where his way to prison.” and secret foreign affairs briefings politicians and celebrities generally Novak saw Clinton as “a man of the and conducted revealing interviews went to see and be seen). Stockman Left who disguised himself as a man with domestic and foreign politicians would divulge information on deci- of the center. His opening agenda was and diplomats. Novak was able to sions that the Reagan administration higher taxes, socialized medicine, and accomplish this because, despite his was about to make and expected a homosexual rights. Combining this reputation for being an arrogant and favorable column in exchange. Stock- with his personal misadventures meant pushy antagonist (hence the “Prince of man would also use the meetings to the nineties would be a dreadful de- Darkness” label), he also had an imp- leak unfavorable information about his cade for the Democrats.” ish “sweet” side that allowed him to rivals in Reagan’s cabinet, such as Sec- In addition to discussing the Presi- charm and, at least temporarily, gain retary of Transportation Drew Lewis. dents he knew, Novak offers revealing the confidence of his sources. More- Once, at a Gridiron dinner, Stockman comments on some of the losing con- over, Novak maintained the highest publicly accused Novak of being too tenders for the office. He details the journalistic standards in not quoting harsh on Lewis, and Novak recognized unlikely nomination, in 1964, of Sen. or revealing his sources—unless they that Stockman was using him just as Barry Goldwater over three liberal Re- authorized him to do so—and in con- he was using Stockman. publican governors: William Scranton firming leaked information with other Novak frequently refers to the in- of Pennsylvania, George Romney of sources. Prince of Darkness sheds a come he has earned (equating it to to- Michigan, and Nelson Rockefeller of blinding light on the symbiotic rela- day’s values), apparently not only as a New York. Of the 1968 Democratic tionship between journalists and pol- matter of information as well as pride vice-presidential nominee he writes, iticians—the attempts of the former to but also as a kind of scorecard reflect- “[Edmund] Muskie’s appeal was as a get information that will make a good ing his increasing presence and influ- cool New Englander, calm when all story and of the latter to manipulate ence in his chosen field. about him were in tumult. Nothing the facts to make the story favorable. Although Prince of Darkness is No- could have been further from the truth. Novak became instantly attached to vak’s personal story, it explains a great He was an erratic personality with an his role as a television panelist, and deal about the relationship between uncontrollable temper. ... He also was he was most successful at playing the journalism and politics. The book is dull and devoid of ideas.” One Demo- heavy. On “The McLaughlin Group,” well-written and covers an enormous crat whom Novak feels should have for example, he was the conservative amount of material, frequently quot- been considered more seriously for doing battle with liberal icon Eleanor ing Novak’s newspaper columns. The the presidency was Sen. Daniel Pat- Clift, although his prickly personality book’s subtitle—50 Years of Reporting

68 | The Federal Lawyer | September 2009 in Washington—aptly summarizes its analysis does not conflict with Woods’. The “thirst for speculation” and its content. TFL His analysis can easily accommodate the “sedulous stimulation” that Woods particular sort of greed she considers so quotes Leggett as abhorring are identi- John C. Holmes served as a U.S. admin- corrupting, and he, in effect, proposes cal in kind to the Wall Street greed in istrative law judge for 30 years, retir- hard-money policies as the key to rein- Tett’s subtitle. ing in 2004 as chief administrative law ing in that dysfunctional greed. Woods’ overriding point is that, over judge at the U.S. Department of the In- the centuries, governments have been terior. He currently works part time as The Underlying Dynamic tempted to push interest rates down an arbitrator and mediator and can be Woods does a very good job of tell- below the level at which the market reached at trvlnterry@.com. ing us what has gone wrong with the would set them. This temptation has U.S. economy in recent months and given rise in the fullness of time to sev- Endnote why. Perhaps more important, he tells eral developments: Robert Novak died on Aug. 18, us why there is nothing new about the 2009, at age 78, after this book review underlying dynamic. I was particularly • the prevalence of paper money (the was written. impressed by certain apt quotations he “wretched substitute for money” of draws from the 1830s newspaper edi- Leggett’s editorial); Meltdown: A Free-Market Look torials written by William Leggett, an • the delinking of this paper money at Why the Stock Market Col- admirer of Andrew Jackson. from precious metals—or indeed lapsed, the Economy Tanked, In the final years of the Second Bank from any nonarbitrary source of and Government Bailouts Will of the , the country expe- value; rienced a boom. Soon after Jackson • the ubiquity of central banks; Make Things Worse destroyed the bank, there was a bust— • an ideology of home ownership— By Thomas E. Woods Jr. which the Whigs, of course, blamed on the view that everyone ought to the dissolution of the central bank. But own a home, however much money Regnery Publishing, Washington, DC, 2009. they have to borrow to do so; 194 pages, $18.45. Leggett argued forcefully that the cause of the bust was the boom itself. The • an unwillingness on the part of the bubble burst only because it had been banks to say “no”; and Fool’s Gold: How the Bold blown—and bursting is what artificially • the growth of ever more exotic fi- Dream of a Small Tribe at J.P. blown bubbles do best. In December nancial instruments, the ostensible Morgan Was Corrupted by Wall 1837 Leggett wrote the following: purpose of which is to help lend- ing institutions manage their vulner- Street Greed and Unleashed a Any person who has soberly ob- ability to defaults by borrowers, but Catastrophe served the course of events for the secondary purpose of which is By Gillian Tett the last three years must have to enable and to hide the extent of foreseen the very state of things that vulnerability. Simon & Schuster, New York, NY, 2009. 304 pages, $26.00. that now exists. ... He will see that the banks … have been Woods nails the first five of those striving, with all their might, each points. For the details of the last point, Re v i e w e d b y Ch r i s t o p h e r C. Fa i l l e emulating the other, to force their one has to turn to other sources, em- issues into circulation, and flood phatically including Tett’s fine book. Judging just from their titles and sub- the land with their wretched sub- Together, the two books show the lat- titles, one would not necessarily expect stitute for money. He will see that est turn of the boom/bust cycle both as these books to make a complementary they have used every art of cajol- an iteration of a very old story (Woods’ pair. Don’t free market advocates (of ery and allurement to entice men emphasis) and as a sociologically novel whom Thomas E. Woods Jr. is one and to accept their proffered aid; that, twist to that story (Tett’s focus). your reviewer is another) generally be- in this way, they gradually excit- Tett’s sympathies are very much lieve, with Gordon Gekko, that greed is ed a thirst for speculation, which with the “small tribe” at the center of good? And that Wall Street greed is the they sedulously stimulated, until her narrative—the J.P. Morgan swaps best of all? Shouldn’t Gillian Tett’s view it increased to a delirious fever, department, a nerdy gang who thought that “Wall Street greed” unleashed the and men, in the epidemic frenzy they were doing something both his- ongoing financial catastrophe put her of the hour, wildly rushed upon toric and progressive by devising new at odds with Woods? all sorts of adventures. They financial instruments that could help After we remind ourselves that Gek- dug canals, where no commerce insure Morgan, other banks, and in ko was and is a creature of fiction (the asked for the means of transpor- time nonbank lenders against the risk movie “Wall Street”), we should answer tation; they opened roads, where of default. the question “yes and no.” Yes, Tett no travelers desired to penetrate; does seem friendly to a range of regu- and they built cities where there latory activity to which Woods is hos- were none to inhabit. ... tile. But no, in that the essence of Tett’s reviews continued on page 70

September 2009 | The Federal Lawyer | 69 reviews continued from page 69

Learning to Live with Ignorance risks of defaults on Bayerische Landes- final months of the Bush administration Out of this “bold dream” of Tett’s bank’s books. They eventually did the was a temporary prohibition on short title came the Broad Index Secured deal (and one more similar deal a few selling of the stock of 799 specific firms. Trust Offering (BISTRO). In 1997, tribe months later) but then dropped that line Short sellers sell stocks they don’t yet member Blythe Masters stated her view altogether. “We just could not get com- own, with a promise to deliver them of the importance of the department’s fortable” with the application of BIS- to the buyer at a specific time. For ex- work as follows: “Credit derivatives will TRO to mortgage loans, Masters said. ample, if shares of XYZ Company are fundamentally change the way banks But other banks had fewer scruples. selling on day D for $100, and Saman- price, manage, transact, originate, dis- “In subsequent months, Duhon heard tha Short believes that XYZ is due for tribute, and account for risk.” The BIS- on the grapevine that other banks were a price drop, she can sell the stock to TRO involved packaging together a starting to do [analogous] deals with Lazarus Long for $100, deliverable on lot of corporate loans, known as the mortgage debt, and she wondered how day D+14. She can pocket Long’s $100, “underlyings.” Just as it is unlikely that the other banks had coped with the then. if the price drops (to, say, $80) all the ships at sea will sink, it seemed data uncertainties that so worried her during the two-week interval before unlikely that borrowers would default and Varikooty. Had they found a better delivery is due, she can buy the stock on all the underlying loans—one or way to track the correlation issue? Did (thus “covering” her position) and de- two might, but, by packaging them to- they have more experience with deal- liver it to him as promised, pocketing gether, J.P. Morgan could create a new ing with mortgages? She had no way of the $20 difference in price. instrument that was much more secure finding out.” That’s a vastly oversimplified ac- than its individual parts. Then it could Actually, these banks hadn’t found count of the practice, but it will suffice create classes of notes (senior, mezza- any better way of coping with uncer- for now. Short selling is often blamed nine, and junior)—known in financial tainty. They had simply decided not to for the collapse of stock prices be- jargon as “tranches”—and stipulate by worry about it. It was just as, in the cause, after all, they benefit from that contract that the senior notes would be 1830s, an investor in a canal where collapse, and when there is trouble, as paid first. The issuer would have to of- there is no commerce might have told “The Dude” says in “The Big Lebows- fer a higher rate of interest to get the himself not to worry about the risks— ki,” “you look for the person who will riskier tranches off its books, of course, the trade would turn up. who benefit.” In Woods’ view, short but that was all done in the name of selling is unpopular with regulators financial engineering. What Is to Be Done? for another reason: “short sellers often It is important to note that, at the Tett is rather vague about prescrip- show up the failures of regulators. It time of these early BISTRO offerings, tions. She has a Ph.D. in social anthro- is regulators, after all, who are sup- J.P. Morgan had access to extensive pology from Cambridge University, posed to ferret out fraud, dubious ac- data about the commercial loans it was and she is more interested in “holis- counting practices, and whatever else packaging. Furthermore, the bank de- tic” cultural pronouncements than in might tend to make a firm’s profitabil- liberately listed for investors each of the a specific legal or regulatory agenda. ity seem greater than it really is.” Reg- companies whose loans were included. But she does give the following warn- ulators are supposed to do that sort (In the breakthrough deal there were ing: “Excessively loose monetary policy of thing guided by the public interest. 307 companies involved.) J.P. Morgan’s stoked the credit bubble. So did sav- But they don’t. Short sellers, though, own statisticians, as well as investors ings imbalances and poor regulatory often accomplish precisely those re- in its products, could have a great deal structures. Those tangible deficiencies sults, guided by the invisible hand. of confidence about the likelihood of must be addressed.” Cue Mr. Gekko. defaults. When offering solutions, Woods At any rate, Woods persuasively ex- We learn what Tett’s subtitle means isn’t vague at all. He has a program: In- plains why short sellers are an impor- by the “corruption” of this dream when solvent firms—including banks—must tant part of the marketplace, and thus her story reaches 1999. In that year, be allowed to go bankrupt. The gov- why we should all be happy that the German bank Bayerische Landesbank ernment should stop exposing itself to temporary ban was allowed to expire asked if Morgan could help it use such the real estate market through the gov- unextended. That a ban was declared a structure to remove the risk from the ernment-sponsored entities designed at all is to him a fine example of the $14 billion of U.S. mortgage loans on its to see that everyone becomes a home surreal character of economic policy in books. But team members soon became owner. Government spending must be the final months of 2008, as “govern- nervous. Data were in very short supply scaled back. And what is most impor- ment officials ran around like chickens in the mortgage market, because mort- tant is that the current system of fiat with their heads cut off, utterly in the gages were generally dumped into pools paper money must come to an end. dark.” of debt that were entirely anonymous. These two books both offer some The team’s quants, including no- A Word on Short Selling light to those who are willing to open tably Terri Duhon and Krishna Varik- One oddity in the federal govern- their eyes. TFL ooty, puzzled over how to model the ment’s response to the crisis during the

70 | The Federal Lawyer | September 2009 Christopher Faille, a member of the ing this conclusion was the inclusion Powe’s narrative is made colorful by Connecticut bar since 1982, writes on in Article III of a guaranteed salary as the occasional intrusion of dissension a variety of financial issues, and is the well as life tenure for federal judges among the justices on both ideological co-author, with David O’Connor, of a during “good Behaviour,” although and personal matters. John Marshall is user-friendly guide to Basic Economic these were not a feature of any of the given due credit for his role in estab- Principles (2000). In his review of Ma- state constitutions at the time. lishing the Court’s power of judicial re- doff in the June 2009 issue of The Fed- The Supreme Court and the Ameri- view, but Powe offers little comment eral Lawyer, Christopher Faille called can Elite, 1789–2008, takes us from on how Marshall was able to rule for Frank DiPascali the “mayor of [Mad- era to era, election to election, court three decades with only minimal dis- off’s] Potemkin village.” On Aug. 11, decision to court decision, seamlessly sent from his colleagues. Robert Jack- 2009, DiPascali pled guilty to being es- weaving together the relevant poli- son, whom Truman passed over when sentially that. tics and jurisprudence. The dominant appointing a chief justice, believed that theme of the volume, according to Franklin Roosevelt had promised to The Supreme Court and the Powe, is that the Court is a “majoritar- nominate him for the position. Jackson American Elite, 1789–2008 ian institution” in that “it identifies with feuded with Justice Black for years and and serves ruling coalitions.” seriously embarrassed the Court with By Lucas A. Powe Jr. Presidents have the power to his public complaints. Press, Cambridge, MA, change the composition of the Court Powe concludes by commenting on 2009. 421 pages, $29.95. only by appointing justices who reflect the Court’s willingness to take on what their views, and opportunities for such it considers tough issues, although not appointments are unevenly distributed. really tough ones, such as the financial Re v i e w e d b y Ch a r l e s S. Do s k o w Jimmy Carter had no appointments; crisis, health care, taxes, or Iraq. Ac- Richard Nixon was able to change the cording to Powe, the Court will con- If we judged a book by the words Court’s direction from its Warren era tinue to “harmonize the Constitution on its dust jacket, we might be inclined when two vacancies occurred in his with the demands of majoritarian poli- to believe that a certain cynicism had administration’s early days. tics.” That’s pretty good for an institu- motivated this fine volume. The dust Powe, who also wrote The Warren tion usually characterized as unelected, jacket quotes Mr. Dooley’s, “The Su- Court and American Politics, speaks and, by the terms of the Constitution, preme Court follows the election re- his mind without partisanship. He re- immune from retribution. TFL turns.” So what else is new? Politicos fers to Thurgood Marshall as “the twen- and lawyers have known this from the tieth century’s most important lawyer” Charles S. Doskow is professor of law beginning of the republic. and to John Roberts at his confirmation and dean emeritus at the University But there is nothing cynical about this hearings as having “absurdly” equated a of La Verne College of Law in Ontario, book. It is a straightforward chronolog- judge to an umpire. But the author also Calif., and a past president of the In- ical account of the U.S. Supreme Court characterizes Franklin D. Roosevelt’s land Empire Chapter of the Federal Bar from its earliest days through 2008. In statement, “The only thing we have to Association. highly readable prose that eschews fear is fear itself,” as “either vacuous or legalisms, The Supreme Court and the wrong.” The book’s bibliography calls American Elite, 1789–2008, describes one work on the early Court “worth- Life Without Lawyers: Liberating the Court’s cases and doctrines in both less” and finds that all biographies of Americans from Too Much Law Felix Frankfurter “suffer from their au- legal and political terms—always with By Philip K. Howard a view to the electoral climate in which thor’s either loving or loathing him.” they were handed down. Although appointments to the Su- W.W. Norton & Company, New York, NY, 2009. 221 pages, $24.95. What is most clear is that the Court preme Court are the key to the Presi- is, and always has been, a political in- dent’s influence on the Court, not all ap- stitution, both in the effect of electoral pointments accomplish their intended Re v i e w e d b y Ge o rg e W. Go w e n politics on it, and in its effect on na- result. Dwight D. Eisenhower told his tional politics. The dust jacket goes on attorney general to find a “conservative It’s been 14 years since Philip K. to use the words “disturbing” and “trou- Catholic Democratic judge.” The judge Howard evolved from an obscure pri- bling” in describing the Court’s role in selected was William J. Brennan, who vate practitioner into the best-selling our political system. But the book justi- was Catholic and Democratic but turned author of The Death of Common Sense: fies neither of these adjectives. out to be anything but conservative, How Law is Suffocating America (Ran- The Founders may not have envi- and remained the liberal icon on the dom House, 1995). Now comes his Life sioned judicial review in the form into Court long after Eisenhower had left of- Without Lawyers: Liberating Ameri- which it has evolved, but Professor Lu- fice. David Souter, of course, is another cans from Too Much Law, which is cas A. Powe Jr. makes it clear that the case in point. Earlier, Harry Truman was something akin to “son of The Death of idea was present at the creation, de- upset that two of the justices he had ap- Common Sense.” spite the fact that the record contains pointed did not support his seizure of precious few references to it. Fortify- the steel mills during the Korean War. reviews continued on page 72

September 2009 | The Federal Lawyer | 71 reviews continued from page 71

I will admit up front that I found on playgrounds, a school district waiving the regulations and giving the book’s cover disturbing and per- bans running at recess. people a place to live, the units were haps misleading. Large, heavy, bold • McDonald’s pays a hefty price for stored in a neighboring state, which black lettering on a white background serving hot coffee to a careless cus- then experienced a tornado. The units blares forth the main title: Life Without tomer. weren’t used there either because that Lawyers. Inexplicably, a small red bal- • A church is held liable for the traffic state hadn’t been designated as a fed- loon floats over the “i” in “Life.” This accident of a volunteer. eral disaster area. may be marketing directed at the im- • A teacher can’t take the class on a Howard spells out his theme as fol- pulse buyer, but it cheapens what is a nature walk because of a wheel- lows: “We will never fix our schools or serious book that deals with life with chair-bound student. make health care affordable, or reener- lawyers. • A school board goes through a 27- gize democracy, or revive the can-do On the back dust cover, the pub- month legal proceeding to fire a re- spirit that made America great, unless lisher has lined up an impressive—if calcitrant teacher. American law is rebuilt to protect free- aging—team of “blurbers”: Bill Bradlee, • A police officer is reinstated despite dom in our daily choices.” the former basketball star and senator; being drunk on duty, because alco- In a review of this book in its Jan. Newt Gingrich, the former speaker of holism is a disease. 5, 2009 issue, The Economist asked the House and co-author of the forgot- whether any of this will change under ten “Contract with America”; Michael Life Without Lawyers is thoughtful President Barack Obama. It concluded: Bloomberg, the current mayor of New and at times refreshingly original. Who “At first glace, the odds are poor,” but York City and a self-made billionaire; would expect a lawyer to espouse risk went on to say that “he no longer needs and Derek Bok, a lawyer, the former over safety? Howard reminds us that to outdo the other Democrats in cozy- president of Harvard University, and 50 years ago, in the name of fitness, ing up to the trial bar. And he seems to darling of the liberal establishment. a presidential commission had monkey understand how to weigh the benefits Three of the four endorsements speak bars installed in playgrounds; most of of new rules against their costs.” In ad- of “common sense.” the monkey bars have been removed dition—unstated in the The Economist’s Common sense is ingrained in the because someone might fall. Howard review—Obama may possess that com- American psyche. Common Sense was concludes that the child safety move- modity so long in short supply: com- the title of Thomas Paine’s 1776 best- ment is not prudence but paranoia and mon sense. TFL seller. Benjamin Franklin’s Poor Rich- results in dangerous rather than safe ard’s Almanack was a compendium of conditions. As a result of this fear of George W. Gowen is a partner with basic wisdom by that most American danger, children are not physically fit, the New York law firm of Dunnington, founding father. Mark Twain’s Tom their social development is arrested, Bartholow & Miller LLP. His areas of Sawyer and Huck Finn were simple and they lack a sense of self-reliance. practice are trust and estates, corpo- lads without cultural polish but rich The condition of our public schools rate law, and sports law. He has taught in pragmatism. Will Rogers personi- is summarized in the chapter “Bureau- at the New York University Graduate fied the basic common sense and the cracy Can’t Teach.” Howard quotes School of Business, has served on Unit- “Aw, shucks” truisms of the population Peter Drucker as saying that American ed Nations commissions, as counsel to at large. More recently, this appeal to schools are organized on the erroneous leading sports organizations, and has common sense echoed in the apho- assumption “that there is one right way been an officer of organizations in- risms of Ronald Reagan. to learn and it is the same way for ev- volved in environmental and human So what’s happening today? Howard eryone.” He takes issue with expanded rights issues. offers examples of why, as the subtitle concepts of due process by pointing suggests, Americans should be liber- out that “[d]isciplining a student is not ated from too much law: akin to criminal conviction—the prin- cipal is sending the student home, not • A dry cleaner is sued by a customer, to jail.” who happens to be a judge, for the Howard cites the Federal Emer- loss of his pants—sued for $54 mil- gency Management Agency response lion. Another judge finally throws to the housing needs resulting from the case out, and the dry cleaner Hurricane Katrina to illustrate how bu- closes shop and thinks of returning reaucracy is handcuffed by regulations. to Korea. According to Howard, the government • A teacher puts her hand on the back spent more than $400 million for 19,000 of a rowdy student to lead him out mobile homes and trailers, a majority of the room. The school settles for of which were not used because they $90,000. did not comply with rules against mo- • After nearly 200 lawsuits for injuries bile homes in flood plains. Rather than

72 | The Federal Lawyer | September 2009