April 26, 2012
December 22, 2011
UPDATE: Professor Coffee kindly sent me his paper and wrote:
I do not read the blogs (which is only evidence of my antique status and not a rejection of them), but several friends have told me that I am featured today (to my total surprise) in a column on your blog and others. Apparently, I am accused of name calling, to which charge I plead not guilty (and have a counterclaim). The unpublished paper given by me was delivered at a Cornell Law Review symposium here in New York last month. Professor Romano was also a speaker and received a copy. At her request, I emailed her another copy the next day. You can determine whether I engaged in any name calling. She is referred to in the text at page 5, and Professors Bainbridge and Ribstein are referred to at page 7. I summarized their position -- fairly and analytically, I believe -- at page 7. I think what most disturbs Professor Romano is my claim that she lacks any serious theory to undergird her contentions. Indeed, in my view, she has inexplicably ignored the work of Mancur Olson, who long ago explained why reform legislation can only be adopted when large (but impotent) "latent groups" are activated by a political entrepreneur. Otherwise, as he demonstrated in The Logic of Collective Action, smaller but better organized special interest groups will dominate the legislative process and succeed at rent-seeking. Professor Romano has repeatedly argued that securities reform legislation is always misguided and should be curbed by a sunset rule. If you read Olson, you would conclude that there is no need for a sunset rule because the special interests will again dominate the legislative process once the revolutionary euphoria has subsided. Most of this article is about how both Sarbanes-Oxley and Dodd-Frank are being gradually clipped, trimmed, and gutted by such lobbying and legislation. The three authors who feel offended are discussed only on a page and a half. I will in due course respond to Professor Romano's new critique, but have to submit a casebook to Foundation Press by the end of this month. In any event, I also disapprove of name calling and feel that my comments are substantive rather than rhetorical. Professor Bainbridge's reference to Sergeant Schultz was in an oral exchange at an AALS conference where he also was on the panel and could reply. I propose that you let others judge whether this is name calling (and I had not even submitted it to SSRN because I was still considering some of the comments). The article is attached.
Here is the "offending" passage in question, which I think vindicates Professor Coffee's "not guilty" plea:
Professor Romano has her loyal allies. Together, they comprise what might be called the “Tea Party Caucus” of corporate and securities law professors, and their key themes are: (1) Congress should not legislate after a market crash, because the result will be a “Bubble Law” that crudely overregulates, (2) state laws are superior to federal law in regulating corporate governance, because the states are restrained by the competitive pressure of the market for corporate charters; and (3) federal securities law should limit itself to disclosure (at most) and not attempt substantive regulation of corporate governance. The underlying theory here comes very close to asserting that democracy is bad for corporate efficiency, and thus legislative inertia should be encouraged.
 See Stephen M. Bainbridge, THE COMPLETE GUIDE TO SARBANES-OXLEY: UNDERSTANDING HOW SARBANES-OXLEY AFFECTS YOUR BUSINESS (2006); Henry N. Butler & Larry E. Ribstein, THE SARBANES-OXLEY DEBACLE: WHAT WE’VE LEARNED; HOW TO FIX IT (2006); Stephen N. Bainbridge, Sarbanes-Oxley: Legislating in Haste, Repenting in Leisure, 2 Corp. Governance L. Rev. 69 (2006); Larry E. Ribstein, Sarbox: The Road to Nirvana, 2004 Mich. St. L. Rev. 279 (2004); Larry E. Ribstein, Bubble Laws, 40 Hous. L. Rev. 77 (2003-2004); Larry E. Ribstein, International Implications of Sarbanes-Oxley: Raising the Rent on U.S. Law, 3 J. Corp. L. Stud. 299 (2003); Larry E. Ribstein, Markets v. Regulatory Responses to Corporate Fraud: A Critique of the Sarbanes-Oxley Act of 2002, 28 J. Corp. L. (2002-2003); Larry E. Ribstein, Sarbanes-Oxley After Three Years, 2005 N.Z.L. Rev. 365 (2005).
Although these authors do not tire of criticizing SOX, they have not convinced others. Reviewing the same economic evidence, Professor John C. Coates finds it harder to balance the costs and benefits of SOX and generally takes a more balanced position. John C. Coates, The Goals and Promises of the Sarbanes-Oxley Act, 21 J. Econ. Perspectives 91 (2007). Viewing SOX in a less economic light, Professor Donald Langevoort sees SOX as reflecting a shift by Congress from an exclusively contractarian perspective to a more trust-based conception of the corporation. See Donald Langevoort, The Social Construction of Sarbanes-Oxley, 105 Mich. L. Rev. 1817, 1828-1833 (2007).
 Both Professors Bainbridge and Ribstein regularly use the term “Bubble Law” to refer to federal legislation adopted in the wake of a crash that tends to displace state corporate law. See Ribstein, Bubble Laws, supra note 13, and Bainbridge, Dodd-Frank: Quack Corporate Governance Round II, 95 Minn. L. Rev. 1779 (2011).
 Professor Romano has argued that the federal securities laws had historically avoided substantive regulation of corporate behavior, staying safely “within a disclosure regime.” See Roberta Romano, Does the Sarbanes-Oxley Act Have a Future?, 26 Yale J. on Reg. 229, 231 (2009). The distinctive failure of SOX in her view “is its break with the historic federal regulatory approach of requiring disclosure and leaving substantive governance rules to the states’ corporation codes.” Id. at 232. This is a dubious historical generalization. Although the Securities Act of 1933 and the Securities Exchange Act of 1934 do utilize disclosure as their preferred tool, the federal securities laws have frequently regulated substantive corporate conduct and governance. At the time, the most controversial federal securities statute of the 1930s was the Public Utility Holding Company Act of 1935, which imposed a “death sentence” on public utility pyramids and holding company structures – clearly an example of aggressive substantive regulation. See J. Seligman, supra note 2, at 122-23 (describing the Public Utility Holding Company Act as “the most radical reform measure of the Roosevelt Administration”). Similarly, the Investment Company Act of 1940 regulates the board structure of investment companies; initially, it required a minimum 40% of each investment company’s board be composed of disinterested directors (Id. at 228-229), and it also compels them to hold a diversified portfolio and not sell securities “short” – again substantive regulation. More recently, the Foreign Corrupt Practices Act required stronger internal controls over financial reporting (as Professor Romano acknowledges). See Romano, supra, at 231. Thus, SOX was hardly a break with a past in which the federal securities laws only required full disclosure.
The paper argues against their position. "Tempest in a teapot" indeed!
November 19, 2011
November 02, 2011
October 11, 2011
October 08, 2011
Ian Ayres (former executive editor of The Hilltop and current Yale law prof) and his daughter Anna, spent lots of time writing songs this summer. He'd like a) for you to listen to some of them and b) to gather data. So he's created a contest in which you play three songs - two by Anna and one co-authored by the two of them - and guess which one he co-wrote. The winner gets an iTunes gift card, the value of which is determined by the number of people who view the YouTube clips.
While the contest is open until October 31, he's offering special prizes (i.e., autographed copies of his books) for talented contestants who enter before October 10. I am assuming that regulators will consider this particular challenge a test of skill - thus exempting it from various domestic and foreign regulations of sweepstakes. He must be worried about those pesky regulators since he explicitly notes:
This is not a legally enforceable offer or agreement. While I intend to give someone a gift card, you shouldn’t rely on this post to your detriment. Feel free to say bad things about me though if I don’t pay off.
If you're game to invest eight minutes listening to The Ayres Family Greatest Hits, you can try your luck...uhh, I mean skill... here.
August 31, 2011
A blog we often enjoy making fun of for its charming assortment of wacky and earnest ideologues of the far right is now featuring a political "scientist" selling his snake oil about "liberal bias" in the media, in, it appears, roughly the original formula: see here and here for earlier discussions.
UPDATE (SEPTEMBER 6): David Bernstein (George Mason), the legal academy's poster boy for the Dunning-Kruger Effect as well as our favorite mockable earnest ideologue, bizarrely surfaces in the comments of a rather timid commentary on this item to ask, "[W]hat does it mean to be accused of peddling pseudo-science by someone [meaning mild old me] who defends Freudian psychiatry?" As we know from recent discussion, this is not necessarily a fallacious ad hominem, but it is still a remarkable instance of the phenomenon to which Messrs. Dunning and Kruger have given their name. Bernstein remains in the dark as we have noted before, about the actual empirical literature on the Freudian theory of the mind, which both confirms some distinctively Freudian hypotheses and disconfirms other ones. This is not an esoteric literature, and someone who was a scholar and not an ideologue, might have bothered to investigate. But that someone is not, alas, David Bernstein. (In response to a reader query, a decent place to start is this literature survey, which is fairly non-technical.)
ANOTHER (SEPTEMBER 10): In a remarkable display of restraint, Professor Bernstein waited a full 24 hours before posting a "reply"to my September 6 update! As usual, he conflates my (obviously correct) point about the inefficacy of rational persuasion in political blogging with the value of discursiveness in academic discourse among actual scholars (a telling conflation, needless to say), but we can put that to one side. Among the new gems on offer: (1) this putative "expert" on "junk science" thinks there is a "scientific method" (hint: read any book in philosophy of science in the past 25 years--say Richard Miller's Fact and Method ); (2) he defines the alleged method in such a way that large parts of geology and evolutionary biology and astrophysics would turn out not to be sciences; (3) he is in the dark (what else is new) about the role that speculative hypotheses play in almost all major scientific advances; (4) he appears to believe that clinical evidence is not "scientific" evidence, apparently does not know what consilience and inference to the best explanation are, and apparently doesn't know what role they play in Freud's theory of the mind; and (5) he continues to conflate Freud's theory of the mind with psychoanalysis as a therapy. If there were any evidence that Bernstein is capable of rational belief revision with respect to subjects about which he is massively ignorant, it might be productive to expound on these points, but since there isn't....