Wednesday, May 29, 2013

At Commencement, a Time to Consider your Personal Legal 'Brand'

By Patrick Kelly, Guest Alumni Blogger

This speech was originally delivered at Loyola Law School's 92nd-annual Commencement Ceremony held on Sunday, May 19, 2013 on the campus of Loyola Marymount University.

I want to start by giving two additional and very important acknowledgments:

First, I would like to recognize the parents and loved ones of today's graduates who have supported the graduates through this rigorous process. Indeed the honor they receive today belongs as much to you as it does the graduates of the class of 2013.

Second, I would like to recognize all of the professors who worked so hard to bestow on the graduating class, the learning and benefit of their skill and experience that made today possible.

I ask the graduates to now stand, turn around and recognize by your applause the members of your family, your friends, your significant others and your professors, who have played such an integral part in reaching this significant milestone in your career.

Today is a very exciting and up beat day. You have completed one of the most rigorous courses of instruction of any professional undertaking. You have sacrificed much to get here and may sometimes ask "Why did I do it". I would like to suggest an answer to that question.

We all come from different backgrounds and have different life experiences. In my case as Professor Poehls indicated, I was a professional musician and played with the Beach Boys and many other musical groups. I am often asked why I gave that career up to go to law school. I know some of you have asked yourself the same question.

Friday, May 24, 2013

European Parliament Approves Implementation of Basel III

By Professor Jeffery Atik

On April 16, the European Parliament approved the packet of legislation known as CRD IV, which largely implements the Basel III banking reforms. This completes the political phase of the European legislative process -- formal adoption of CRD IV by the Council of Ministers is expected to occur in June. Assuming the schedule is met, CRD IV will become law effective January 1, 2014. Consultations on the form of detailed regulations ('technical- standards') have now been launched.

CRD IV implements Basel III -- and does more. The term 'CRD IV' signals that this is the fourth generation of the EU's Capital Requirements Directive. The name is no longer precise: CRD IV is comprised of a Regulation (law that is uniformly applied throughout Europe) and a Directive (which requires national implementation and admits a certain degree of variation).

CRD IV increases the quantity and quality of regulatory capital a financial institution must hold. In most cases, transitioning to CRD IV requirements will place pressure on European banks to retain earnings, raise additional equity capital, dispose of assets or change their respective asset mixes. Under the existing version of the Capital Requirements Directive (which were adopted immediately prior to the onset of the 2007/2008 financial crisis), many European banks reduced their capital to extremely low levels. Reportedly some European banks had leverage ratios of over 40 to 1 -- that is, maintaining less than 2 percent of effective capital. Many of these same banks remain in crisis now -- a problem that in turn has infected the balance sheets of several EU Member States. CRD IV acknowledges the insufficiency of bank capital during the financial crisis. The new requirements are complex -- and involve a stack of charges and buffers. A minimum of 8 percent capital will now be mandated, computed with regard to a bank's risk-adjusted assets. Left undetermined for the time being is the overall leverage cap -- it is this simple metric that may prove to be the most meaningful limit on a bank's level of debt.

Wednesday, May 22, 2013

Challenges Present a Time to Reflect and Adapt

By Associate Dean Sean Scott

This column first appeared in the Daily Journal's "New Lawyer" supplement on May 21, 2013.

The law, whether in its study or its practice, is a social institution. As such, it influences and is influenced by other social forces such as politics, economics and social-policy movements. The force that has been the subject of commentary the past few years is the national economic recession and its impact on law practice and on legal education. Much of the commentary has been pessimistic and negative. The pessimism is not unwarranted. The job market for law graduates is weak and tuition at most law schools tops $40,000, resulting in students graduating with debt often in excess of $100,000. The poor job market makes repaying this amount of debt daunting. Rather than pointing fingers at who or what is to blame for these conditions, I encourage law schools and the profession generally to view this period as a time to reflect and then adapt. The revolution brought on by economic retrenchment, technology and globalization provides the academy with the opportunity, perhaps even the obligation, to innovate. Law schools should be open to innovations in the way they teach critical-thinking skills and provide experiential offerings.

It is the obligation of law schools to best prepare their students to adapt to the shifting landscape in which the law operates. I teach Contracts and Commercial Law. Prior to the Industrial Revolution, there was no coherent, cohesive body of commercial law. However, industrialization created a greater need for standard rules to govern commercial transactions. Legal practice and academia had to respond to this new need. Just as the growth of mechanization created a revolution, so too have technology and globalization created a revolution.

There are some skills that law schools must teach regardless of the era in which they find themselves: They must teach students analytical and critical-thinking skills. The law changes and evolves because law schools give lawyers the tools to assess the policies underlying current rules and to analyze the validity of those underlying policies and concerns. Legal educators teach students to assess with a critical eye, and to question and reveal underlying assumptions. Without these skills, and the ability to move the law forward, there is no justice.

Tuesday, May 21, 2013

What's Next for Medical Marijuana in California?

This post by Associate Clinical Professor Jessica Levinson originally appeared on KCET's website.

Here we go again. Yet another tale of the legal challenges that frequently follow the passage of ballot initiatives in California.

In a unanimous decision last week, the California Supreme Court ruled that cities and counties can prohibit medical marijuana dispensaries.. The state's highest court found that two state laws, the Compassionate Use Act and the Medical Marijuana Program, do not preempt the ability of localities to use zoning laws to ban pot shops. The Compassionate Use Act was enacted via the ballot initiative process in 1996. The Medical Marijuana Program is a companion piece of legislation passed by the legislature in 2003.

The court ruled that the California Constitution gives localities so-called "police powers" under which they can legislate for the health, safety, and welfare of their jurisdictions. The court found that under those powers, localities have the authority to prohibit pot shops because the state statutes did not explicitly or implicitly prevent localities from imposing those prohibitions.

If the instead Compassionate Use Act had included a specific statement providing that localities cannot use their police powers to ban marijuana dispensaries then the court's decision likely would have come out the other way. But, of course, the initiative did not include such language. Any such language would have been a gift to opponents of the initiative. Thus the court was able to read the state laws narrowly.

Now, the question seems to be, what's next? There is, of course, the possibility of a new law on the state level, either through the legislative process or the ballot process. The state legislature could follow the lead of other states and legalize the recreational use of marijuana. The legislature could try to explicitly preempt this area of the law by state that localities cannot use their police powers to ban marijuana dispensaries. Another option is for the people to propose yet another ballot initiative to the same effect.

Yet another possibility is that on the local level people in localities that banned medical marijuana dispensaries could circulate initiatives which essentially overturn those bans.

And with all that said, this is happening in nation where the federal government lists marijuana as a Schedule 1 substance. Doctor's note or not, it's illegal in their eyes.

Wednesday, May 15, 2013

The Alchemists: Three Central Bankers and a World on Fire by Neil Irwin

By Professor Jeffery Atik

Neil Irwin's The Alchemists delivers on its promise: the book is a central banker's view of the 2007/2008 Financial Crisis and the more recent (and related) Euro Crisis. Only the subtitle disappoints: The Alchemists isn't quite the story of the three central bankers depicted on its cover (Bernanke, Trichet and Mervyn King). Rather, The Alchemists offers a thorough treatment of Bernanke's crisis-plagued tenure at the Fed and insightful coverage of the ECB's Trichet - until Trichet morphs into Mario Draghi just in time for the worst of the Euro Crisis. Plus the odd bit of Bank of England's Mervyn King thrown in for comic relief. No doubt Irwin's project was inspired by Liaquat Ahamed's Lords of Finance, winner of the 2010 Pulitzer Prize, which treats four central bankers (their philosophies and their quirks) from the 1920s: the UK's Montague Norman, France's Emile Moreau, Germany's Hjalmar Schacht and the Fed's Benjamin Strong. Now these were central bankers: they dominated the monetary policies of their day.

Our contemporary central bankers lack some of the color of their predecessors (save Mervyn King, who is pretty darn colorful). Moreover, their field of action is much more circumscribed. They can be checked by other personalities within their respective institutions, by intimidating political leaders, and by uncooperative markets. These bankers do manage, at least in this account, to largely have their way in responding to the crises, through will and manipulation, and by playing on the palpable belief that no one else has any better idea of what to do.

Irwin's story begins with the shudders in the market in late 2007, when BNP is the first major institution to admit it had no real idea how much those tricky mortgage-backed securities were worth. The response by Trichet is immediate - and is the precursor of many more ECB interventions. Things get much much worse in the following year with the fall of Lehman Brothers. Lehman's collapse is marked by the surprising non-intervention of the Fed. Irwin's account of the abandonment of Lehman Brothers is thin - but he suggests that the Fed may have felt it had no clear legal basis to act. Bernanke no doubt learned many things from the Lehman Brothers fiasco, including (perhaps) the advantages of being a bit less scrupulous in respecting the limits of the Fed's authority.

Thursday, May 9, 2013

Welcome to the super PAC era

By Associate Clinical Professor Jessica Levinson

This post originally appeared on KCET's website.
Is candidate centered campaign fundraising a thing of the past?

Greetings, and welcome to the Super PAC era. Thanks in part to the Supreme Court's 2010 decision in Citizens United, we now have new entities called "Super PACs," which are organizations that can raise and spend unlimited political funds.

Contributions given directly to candidates are unlimited, but again, contributions to outside groups such as Super PACs are not. Therefore, as many predicted, individuals and entities who wish to support candidates but have given up to the legal limit, now have a new outlet for their campaign donations. This pattern, however, is nothing new. Before there were Super PACs big donors gave to political parties or other outside organizations like independent expenditure groups.

Campaign fundraising by candidates is increasingly being marginalized and fundraising by independent groups including Super PACs is coming to the forefront. We are seeing this phenomenon play out real time in the Los Angeles mayoral race where the contribution limit to candidates is $1,300 both in the primary and the runoff elections.

While fundraising by candidates is still outpacing fundraising by Super PACs in the mayoral race, at some point in the near future that could change. In this election both candidates have raised approximately $5.7 million and independent groups have raised roughly $4.7 million for Greuel and $1.3 million for Garcetti. That means about one-third of the money raised in the mayor campaign has been raised by outside organizations. Again, the lion's share has gone to groups supporting Greuel.

Of course those giving money to outside groups are generally those who have a financial interest in what happens in City Hall. For instance, donors include real estate developers, labor unions, members of the entertainment industry, and lawyers and law firms. This set up raises a host of problems including corruption, the appearance of corruption, undue access and preferential treatment.

Because of the Supreme Court's misguided interpretation of limits on campaign contributions and expenditures, there is little hope, at least in the short term, of limiting how much can be given to and spent by outside groups. The best way to regulate the influence of money in politics is to advocate for robust campaign disclosure.

Tuesday, May 7, 2013

Attraverso Commentary - Tarullo on Basel III and Short Term Wholesale Funding

Atik_new_SJ.jpgBy Professor Jeffery Atik

The Federal Reserve's Dan Tarullo has been a key player in post-Crisis U.S. bank reform and in the negotiation of Basel III, the set of international banking rules that guides regulation in major financial centers. In a speech made last Friday (May 3, 2013) Tarullo expressed some satisfaction with the U.S. and Basel III reforms -- and identified a risk needing further regulatory attention: runs on short-term wholesale funding.

Short-term funding has always constituted a vulnerability to the banking system. The traditional magic of banking involves the transformation of maturities -- banks borrow on a short-term basis and lend for the medium- or long-term. In ordinary times this works out splendidly -- as the short-term rates banks pay tend to be lower (over the long term) than the long-term rates they earn. And in ordinary times, short term funding is quite stable.

The dominant form of short-term funding was traditionally bank deposits. Deposits are essentially loans made to a bank by its depositors. Deposits are legally short-term, but practically rest in the hands of banks for substantial periods. Short-term funding becomes problematic, of course, when depositors systematically demand repayment: this is the old-style bank run. Post-Depression era deposit insurance has largely eliminated bank runs, at least in the United States, and so the ordinary insured bank deposit is (from the perspective of the bank) a trusty source of short-term funding.

The bank deposit no longer forms the core of short-term funding for many banks (particularly larger banks) -- and other systematically important financial institutions (hedge funds, money-market funds, broker-dealers) lack the ability to take insured deposits. The mix of short-term funding has changed -- and with this change, there are new vulnerabilities.

Friday, May 3, 2013

Attraverso Review: The Future as Cultural Fact: Essays on the Global Condition by Arjun Appadurai

By Professor Jeffery Atik

In this collection of essays, Arjun Appadurai links his role as leading globalization scholar to his practice as activist on behalf of the slum dwellers in his native city of Mumbai (or Bombay, the abandoned name Appadurai seems to prefer). Appadurai redeploys globalization theory (and more generally modernization theory, of which globalization is a part) as an ethical practice. He calls for cultivating the capacity to aspire among the world's poor -- an unabashedly cultural project with political and developmental implications. Appadurai argues that the poor must be enabled to aspire -- these aspirations will, in turn, define new and different trajectories from those promised by the passé globalist.
Globalization has failed in its predictions -- and so has failed as science. Globalization, it was thought, would lead to convergence and homogenization, more democracy and tolerance and less nationalism and violence. Yet the world we now see displays strong (and growing stronger) national states and continued developmental disparities. Those enabled by knowledge migrate; their home countries capture disappointing returns from their educational investments. New digital capacities have been harnessed by jealous ethnic groups to reinforce local identities; they can encourage aggression and conflict.

These phenomena play out in Mumbai, as elsewhere. In the central essays on Mumbai, one sees Appadurai's personal disappointments and hopes for the city he left many years ago. His portrait of Bombay -- the wonderfully cosmopolitan possibility of his youth -- is a new city, where peoples from many parts of India and elsewhere mix. The clearest example of Bombay's promise of co-existence is the presence of large and intermixed Hindu and Muslim communities -- but there are Parsis, Jews, Armenians, Syrian Christians and the ever-charming British colonialists adding flavor to the stew. Appadurai insists on the inherent capitalist foundation of the Bombay of his youth -- built on the production of textiles and other industrial goods for export markets. Bombay is thus twice cosmopolitan -- by the inner composition of its multi-ethnic population and by Bombay's full engagement with (and  dependence on) international trade and capital investment.

Appadurai captures this fading Bombay in three delightful depictions. The first is his portrait of Bombay as the City of Cash. Cash in Bombay is not a cold technical concept -- rather it is the species of sociability, displayed and celebrated. The value of cash lies in cash's flashy visibility. One of the functions of cash, of course, is forging social linkages -- and this it does spectacularly well in Bombay. His second Bombay sketch renders the strange linguistic brew spoken there: Marathi at base, but filled with exotic elements provided by the various sub-groups arriving from other parts of India. And the third image of Bombay is colored via the neverland of Bollywood (a name that still incorporates the discarded Bombay) where most of India's ethnicities are featured (though not the local Maharastrians as such), either denatured ("vaguely North Indian") or stereotyped. The music of Bollywood -- its defining element -- flows from the northwest and its traditional ghazal into the streets of Mumbai.

This Bombay exists no more. And so Appadurai asks "What killed Bombay?" The renaming of Bombay marked more than a rejection of a colonial style; Mumbai, the new name, is an artifact of the Shiva Sena, the ruling party that projects a Marathi primacy at odds with Bombay's cosmopolitan past and multicultural present. Mumbai has been scarred by the 1992-1993 Hindu-Muslim riots. One of the thematic challenges of raising the hopes of Mumbai's poor is overcoming these divides.

The View from Mumbai is the core of the book. It reflects the engaged nature of Appadurai's intellectual projects and many of his convictions. Appadurai recounts the actions and practices of a constellation of slum-based NGOs devoted to improving housing for the city's poorest residents. He sees housing as a primary social need, the key to citizenship. Yet Appadurai rejects elite-controlled planning in favor of spontaneous design by the poor themselves -- the model children's toilet celebrated by Kofi Annan being a prime example.

Appadurai notes the internal innovations of the Mumbai NGOs: their patience, their "bias against 'projects'", their nonhierarchical styles, their strategies of precedent. He sees these groups fostering improvement to the lives of Mumbai's slum-dwellers. The central contribution of these housing activists in Appadurai's estimation is increasing the poor's "capacity to aspire."

Improvements in the capacity to aspire can result from deliberate political and social action -- by and on behalf of Mumbai's poor (and by extension the world's poor). These hopeful possibilities result from modernization/globalization -- they depend on e-mail and cell-phones, and the formation of transnational networks of activists, which distribute notions and celebrate achievements. The Future as Cultural Fact is a hopeful book; it suggests that social science can indeed contribute, in a modest manner, to social progress.

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