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When a court confronts an unconstitutional statute, its endeavor must be to conserve, not destroy, the legislation.
—Justice Roberts, National Federation of Independent Business v. Sebelius – the healthcare bill
David Brooks tells a nice story about oligarchy in his recent column – Why our Elites Stink. It’s hopeful to think about an ethical elite. I find it appealing – like we’ll be looked after by munificent masters. He paints the WASPy elite with the same brush, but he describes a false choice – one between an ethical and unethical oligarchy.
Oligarchy and ethics, however, are independent concepts. Oligarchy just reflects a leadership structure, and ethics reflects a mode of conduct. You can have an oligarchy with no consistent set of ethics. You can have ethical structures without an oligarchy.
Brooks confounds the two. He assumes that the choice is between an unethical or an ethical oligarchy. But it’s not. Oligarchy is not the only leadership structure that can be ethical or unethical. The real question is whether you want an oligarchy at all.
That Brooks’ oligarchy is ethical is moot. What matters is that he proposes an oligarchy, period. That’s a bold suggestion and one that begs an answer.
Why, in a modern society, do we have markets, and why do we have organizations, and what determines the boundary between these two mechanisms for social organization? These questions go to the heart of the roles of our diverse political and administrative institutions, public and private, in contemporary society.
—Herbert Simon, Last Public Lecture
BlackRock Solutions will operate the network for the benefit of it’s own managers and a network of forty-six external clients. BlackRock, alone, manages $3.5t in assets across ten thousand portfolios, but the Aladdin Trading Network –the network’s working title– will also include sovereign-wealth funds, insurance companies and other money managers. For a small fee, participants can cross trades for corporate bonds, mortgage securities and other assets through the platform.
Fixed income trading has been a profitable mainstay of investment banks. The prospect of electronic trading through a crossing network is simultaneously laughable and terrifying. Given the vast investable universe of fixed income instruments, trading these instruments presents a far more complex problem than equities. GE has only one ticker, but it may have a dozen or more credit instruments associated with it, each with its own maturities, rates, claims, etc. Nonetheless, BlackRock is not moving forward on the basis of charity. They want to cut costs, and that means cutting into investment banking profits.
BlackRock’s magical, mystery service has many miles to go before we see the disruption people have predicted. They currently cross 3% of trades internally, and they hope to raise that number to 6-8% with Aladdin. What’s exciting is that they’re bringing forty-six external clients along for the ride.
Ted’s growing up.
What is most curious about this doctrine is that neither the decisions that have applied it for nearly 300 years, nor its eventual statutory formulation, undertook to define or explain its contours or objectives….Curiously, judges generally have neither complained of the absence of guidance, nor made substantial efforts to fill the void.
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