Balkinization  

Tuesday, March 01, 2011

Paradoxical Notions of Liberty

Bernard E. Harcourt

As you know, I’ve been tracking the budget debates regarding incarceration recently and I’ve just started a thread over at Goodreads to discuss this puzzling relationship between punishment and economic logics. The major question on the table is how come laissez faire has gone hand-in-hand with mass incarceration? How can these paradoxical notions of liberty co-exist?

Another way to ask this is: What makes the prison budget seemingly impervious to deficit constraints? Although most of the cost of mass incarceration today is borne by states, the case of the federal budget is a perfect illustration. Think about it. We have a Democratic presidential administration that explicitly calls for reducing mass incarceration and has plans to release well-behaved convicts. We have continuing drops in violent crime at the national level. We are about to slash education programs because of our exponential federal deficit. And yet the Obama administration just proposed an 11 percent increase in spending on the federal prison system. What makes that particular budget line impervious?


Comments:

There is a general fear of crime in this country and the victims of overcriminalization and incarceration usually have less power than many other groups.

The inelastic nature of the budget underlines finding true leftes and libertarians is somewhat hard to come by. Obama surely doesn't fit in that category, nor each branch of the current Congress.

This is an issue that can arise above simple partisan labels, but unfortunately, it can also do so in a negative way.

My .02.
 

The major question on the table is how come laissez faire has gone hand-in-hand with mass incarceration? How can these paradoxical notions of liberty co-exist?

Putting aside for the moment that the United States has not enjoyed laissez faire free markets since the early 20th Century, I do not see the analogy if such were the case.

In the case of laissez faire, the law abiding freely trade in goods and services. These citizens do not harm anyone.

In the case of the justice system, those who criminally harm other citizens waive their right to liberty.

Thus, the relationship you are looking for is between liberty and public safety.

What makes that particular budget line impervious?

A tough one, that. Let's see... Voters don't much like the idea of releasing criminals onto their streets to prey on them?

The suggestion that you can restrict prison to the violent ignores the problem of reoffense in non-violent white collar and property crimes. If you want to sell prison release to the voters, you will need to offer a viable alternative to protect those voters from the folks you are releasing.

To deal with this problem, you would very likely need to replace a prison bureaucracy with a parole bureaucracy and an extensive electronic monitoring system. This may be a wise reform, but it needs to be sold on its own merits, not because incarcerating non-violent criminals unfairly abridges their liberty.
 

Is it ironic that this issue is a reaction to economic reality, especially the impacts of the 2008 Bush/Cheney Great Recession, and that very few of the villains in the financial community that brought about the Great Recession have not been, and apparently won't be, punished criminally? (I exclude Bernie Madoff from this group.)

I'm intrigued with this from our yodeler:

"The suggestion that you can restrict prison to the violent ignores the problem of reoffense in non-violent white collar and property crimes."

Over the years I've suggested castration as the due punishment of white collar criminals. But our yodeler seems to be suggesting that the usual light sentences received by white collar criminals result in their too early freedom to commit more white collar crimes. I appreciate that suggestion, but first you've got to convict them and provide stiff sentences. Alas, the Obama Administration through its Justice Department is avoiding seeking criminal charges against Wall Street minions who contributed to the 2008 Bush/Cheney Great Recession, as pointed out in a recent documentary that was Oscared.
 

Libertarians understand that the result of non-regulation of economic activities will lead to increased inequality.

They plan to be on the sweet side of that imbalance.

So they need a powerful police and punitive presence to enforce their enjoyment of the gains they have made.
 

Shag:

I would qualify my statement by noting that convicted white collar criminals are not much of a recidivism threat unless they are placed back into positions of authority and investors forget that they cannot be trusted. Neither occurs with significant frequency.
 

Query in applying the qualifier to Bernie Madoff? Surely he could not readily be placed back in a position of authority, especially at his age. And I doubt that investors would forget the equivalent of the Scarlet Letter - PONZI - associated with him. (I'm not suggesting Madoff be released.)

But what about the failure to charge and convict those perps involved with the 2008 Bush/Cheney Great Recession?

While I do not claim expertise in securities laws, I did have experience for quite a few years as general counsel to a publicly traded corporation. I was always amused by huge settlements with the SEC by financial firms, brokers and publicly traded corporations (including officers/directors) in which liability was not admitted, with those settling for the most part continuing in their roles. Yes, this was the civil side of the SEC, with no criminal action. Perhaps that's the problem, that neither Justice nor the SEC criminally pursues these white collar perps, who come up with the big fines to preserve their liberty. But isn't it amusing that a payment in the millions is made and the payor can say with a straight face "I admit to no wrongdoing"?

The qualifier seems more consistent with past commentary.
 

Shag:

I am similarly not calling for the release of Madoff or any other white collar criminal. Prison serves both punitive and public safety functions. Even if Madoff were guaranteed not to reoffend, he still has a punitive price to be paid.

As for prosecuting those at fault for the creation of the failed subprime mortgage market, I somehow have difficulty seeing the Obama Justice Department prosecuting former HUD secretaries Cisneros and Cuomo, former Boston Fed president and Freddie Mac president Richard Syron, former Fannie Mae heads Franklin Raines and Jamie Gorelick, etc. The damage wrought by these folks makes Madoff's accomplishments look like chump change.
 

While our yodeler seems to focus only on alleged subprime mortgage perps with government connections, he is silent about the bankers in the financial sector involved with subprimes. And he ignores completely the Wall Street crowd on various financial aspects other than subprimes that heavily contributed to the 2008 Bush/Cheney Great Recession.
 

There was no such thing as a subprime home mortgage market (apart from a subcategory of FHA mortgages) before the 1990s. The lenders would not touch them and Freddie and Fannie would not repurchase them. The lenders did not get into this business until the late 90s AFTER the Boston Fed told them to do so, they were repeatedly sued by the Clinton Justice Department and HUD, HUD enacted regulations forcing Freddie and Fannie to buy this garbage from the banks, and Clinton appointed Raines and Gorelick to create a secondary market at Fannie.

The fact that the lenders were following the explicit instructions and regulations of their government regulators is a pretty airtight legal defense, which is why prosecution of the lenders has generally gone nowhere.

This defense is what makes the progressive claim that the way to prevent future financial fiascos like the subprime mortgage meltdown is to grant the government even more regulatory power such unintentional black humor.
 

Our yodeler doesn't have enough kindling or breath in his attempt to ablaze Fannie and Freddie with the blame for the 2008 Bush/Cheney Great Recession, with his neglect of the antics of the regulation failures under Bush/Cheney for their 8 years that permitted Wall Street to do the doo-doo that it did that brought it about.
 

I love your balkinization blog. It has tons of useful information. I was wondering if you would want to exchange blog roll links with me. I have a page rank 3 blogspot page. Email me at cashforgold4[at]gmail[dot]com replace the brackets with the characters. Thank you in advance!
 

Shag:

To which Bush "regulatory failures" do you refer?

Apart from the regulatory failure of creating the subprime mortgage market, there has not been a significant change in home mortgage regulation since the New Deal.
 

Subprime mortgages were not the complete cause - far from it - of the 2008 Bush/Cheney Great Recession's financial, economic meltdowns. Wall Street was quite creative with its non (or poorly)-regulated financial products, including but not limited to subprime mortgages. And there was a real estate bubble separate and apart from subprime mortgages. Apparently lessons had not been learned from the1980s S & L failures in failing to regulate lending. Our yodeler demonstrates his subprime mind in his primary focus on Fannie and Freddie, who were Johnnies come lately to the subprime mortgage market. Fannie and Freddie are not to be excused but as the Oscar-winning documentary "Inside Job" demonstrated, Wall Street and banking provided most of the perps leading to the 2008 Bush/Cheney Great Recession. Let's give Dodd-Frank a chance to work.
 

Take a peek at James Ridgeway's 3/8/11 Mother Jones article "How to Put Wall Street CEOs in Prison" at:

http://motherjones.com/mojo/2011/03/how-put-wall-street-ceos-prison

But will the SEC and the Justice Department take action?
 

Shag:

The S&L Crisis was 4/5 inadequate capitalization and 1/5 fraud. It had no relationship in kind or character with the subprime mortgage crash.

Unsurprisingly, you cannot point out a single Bush "regulatory failure" which created the subprime mortgage market.

Fannie and Freddie are not mortgage originators. They created a secondary market of for subprime mortgages by purchasing them from the lenders and thus relieving the lenders of the risk of maintaining these mortgages. THIS was the key to getting the lenders to make these mortgages where FED pressure and Justice/HUD lawsuits had largely failed.

There is nothing wrong with investment based assets which bundle mortgages and high grade credit card debt together to form a AAA rated asset. The problem was mixing subprime mortgages into the mix. The bond rating agencies never should have allowed tis, but the government starting with the Fed maintained that these mortgages were safe, so the rating agencies went along.

Adjusted for inflation, the price of homes were level through from 1980 through about 1997. The home price bubble was caused by the artificial demand of the added subprime mortgages. In anticipation of your next evasion, the evidence indicates that the vast majority of 2006 & 2007 foreclosures popping the bubble were subprime.

Forget Oscar awarded propaganda. If you truly want a detailed and well sourced post mortem of this regulatory misfeasance, check out Peter Wallison's dissent in the Financial Commission report. Obama made a mistake putting a conservative scholar on this commission with full access to government evidence. Wallison shreds the Dem and GOP whitewashes and then drafts an 80+ page indictment of the government.

http://www.aei.org/paper/100190
 

You ask that we give Dodd-Frank a chance to work. This is more additional black humor as Dodd and Frank were key players defending Fannie and Freddie from reform during the Bush Administration.

Furthermore, the Elizabeth Warren - the unconfirmed head of the new consumer finance bureaucracy - is abusing her powers to support a handful of state AGs attempting to compel lenders to provide restructured sweet heart home mortgages to folks who cannot or will not make their payments.

http://www.nytimes.com/2011/03/05/business/05mortgage.html?partner=rss&emc=rss

This is Dodd-Frank at work. Meet the new regulator, same as the old regulator.
 

So it isn't only our yodeler who is out of step as he marches along with Peter Wallison as his "little sir echo." Yes, it takes "two to tango" but this duo will not have the same success as Bristol Palin and her partner.
 

Jack Balkin has a new book coming out, "Constitutional Redemption: Political Faith in an Unjust World."

Nice cover. Busy bee that he is, he has a second one too, as cited here:

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1779505
 

Is Blankshot actually trying to argue that banks like Goldman Sachs were forced by Freddie and Fannie to short sell CDOs they knew were going to fail?

If you believe that I've got some beach front property in Colorado that I'd like to sell you.
 

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