Lawyers have had bad reptutations for generations. Shakespeare even made them famous by wishing they all be killed. They have been represented as having no scruples and willing to sell out anyone or anything for pay. Sadly there has been so truth to that allegation over the years. Much of it was created by the very folks who were so suspicious of the lawyers in the first place. In the US we had a very long history of being so suspicious of lawyers that we wouldn’t allow any exclusivity for the profession. For most of our history anyone was allowed to become a lawyer. The thinking was that if anyone could become one then the mystery of the law would be diminished and that the common man would have more of a say in the outcome of legal disputes. Accordingly, our legal profession was pock marked with many unscrupulous and unqualified “lawyers”. They didn’t have formal training for the most part and simply studied under another lawyer for a few years then were deemed qualified to be admitted to the bar. This naturally led to cronyism and pretty low standards. You could move from New Jersey to New Mexico in 1887 and hang out a shingle proclaiming your expertise in the law. Most of the states didn’t even require bar exams until well into the 20th century. Even then most states still allowed special exemptions and the legislatures could grant a law license to anyone it chose. One of the last ones granted in Texas was as late as the 1960’s.
However, even these unscrupulous fellows do have standards. One of the linchpins of legal ethics is the concept of avoiding conflicts of interest. A lawyer under virtually all ethical codes of the various states and DC is supposed to zealously represent his client and only the interest of that client in any matter whether in the court room or outside the court room in private legal transactions. There are standards. Lawyers around the country get disbarred every year for violating this requirement. It is considered one of the most grievious offenses by a lawyer. You can represent one side or the other but not both. There are a few exceptions when both parties waive that conflict but those situations are rare and even those do require complete disclosure.
It would be nice if Government, Inc. would adhere to the same standards as the lawyers. Let’s take a look at some of the current conflicts Government, Inc. has at the moment and is blithely ignoring or perhaps worse trying to cover up. With the TARP money we have given money to some banks to shore up their capital positions. Many of us opposed that when it occurred. So did some of those banks. The facts have become clear that several of the banks were forced to take the money even if they did not ask for it and indeed tried to refuse it. So the Government was the regulator of the bank and as the regulator demanded they take the money. That made Government, Inc. a creditor at that time. That immediately created a conflict for Government. As regulator its job is to protect the stability of the banks for the protection of depositors. That authority includes the right to go “tsk, tsk” for any debts that the regulator might deem imprudent. Government, Inc. approved its own loan. Next Government, Inc. took a position as a shareholder in several of the banks. Now they have an interest with the shareholders in the equity of the bank and and a concern for its profitability. The government has stuck its finger into the board of directors. Just check what happened with GM. It has unilaterally replaced its CEO and made clear that it is going to replace several members of the board. The hints from Washington are strong that the same action in removal of CEOs of banks and board replacement are on the agenda from the regulators–read Geithner. Boards of directors have a duty to shareholders to protect their investment and to try to maximize their return on that investment. It is a fiduciary duty. That is the highest duty under the law. You can’t fulfill your fiduciary duty if you have a conflict of interest. That is fundamental. Many lawsuits over the years have been brought on behalf of shareholders against boards of directors for not fulfilling their fiduciary duty or for gross mismanagement.
Government, Inc. in many of these situations are wearing a number of hats at the same time and it has conflicts of interest almost too numerous to count. They are creditors, equity owners, management, and regulators all at the same time and each position has a completely different duty to a different constitutiency. Several of the banks have made it know that they wish to repay the money received in the TARP program but have been told they cannot by Government, Inc. Why? Only so the governement can maintain complete dominance over them. If it wasn’t so serious it would be as laughable as a Marx Brothers farce. These actions are in conflict with the rights of the shareholders and make a mockery of the concept of corporate governance laws of the various states.
GM owes money to banks that received TARP funds. The government runs GM de facto now throught its bully tactics and is a major creditor and also regulates the banks that are owed the money. Govedrnment, Inc. is putting extreme pressure on the banks to take a substantial loss on their loans to GM. Not good of Government, Inc. as a creditor of the bank and shareholder and certainly not good for the bank shareholder. As regulator does government wish to see the banks take a loss? With the loss from GM will the government then take the position that the bank is even weaker and thus subject to even more control of Government, Inc.? The other conflicts of interest of the government go on and on. Those highlighted here are only the tip of the ice berg. Any lawyer trying to represent so many diverse and opposing interests at one time would be vilified and lose his license. The only justification we hear is that this is an emergency. History is replete with the rise of tyrants who started their careers during and “emergency”. Do your own reading. Caesar, Hitler, Napoleon and Pol Pot to name only a few over the centuries. We should hold the government at least to the same standards as the lawyers. They can wear only one hat at a time. Government, Inc. much also be held to the same legal standard as the citizens it represents. If the banks want to repay the money they have that legal right. It is only the bully boy threats of government as regulator that prevent this from happening. A government that can ignore the law for your “good” today can likewise ignore the law another day for any reason it deems good. Orwell taught that phrases can be warped. Hitler worked for good too so he said.
“It is assumed that labor is available only in connection with capital; taht nobody labors, unless somebody else, owning capital, somehow, by the use of it, induces him to labor” Abramham Lincoln. 1861