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The facts do not owe their origin to an act of authorship.
Justice Sandra Day O’Connor (Feist v Rural Telephone, 1991)

But does the hunt, the research, the interviews? Or perhaps its organization into a story for the dissemination to a reading public? And can these be made exclusive? These questions have bubbled up as the newspaper industry wrestles with what the internet is doing to their business.

The Cleveland Plain Dealer’s Connie Schultz has argued fervently about the rights of authors and their newspapers to capitalize on their product. She came out against “the aggregators” as though they were a malfeasant band of marauders bent on destroying the institution of journalism and by extension democracy. Citing Daniel and David Marburger, she claimed, “parasitic aggregators reprint or rewrite newspaper stories, making the originator redundant and drawing ad revenue away from newspapers at rates the publishers can’t match.”

James Moroney, publisher and CEO of the Dallas Morning News takes a similar approach. He invokes the ‘hot news’ doctrine and asks congress to apply it to the internet. Says Moroney, “perhaps it is time for congress to establish a principle of ‘consent for content’ for breaking news–similar to the ‘hot news’ doctrine recognized by a few states.”

Copyright law sufficed to protect the written word, fixed in a medium, but these claims demand remedy for a larger issue. They aim to protect the investment required to collect the facts and write a story, when it might easily be re-written and distributed by another. But they ask for monopoly control of the story itself — indeed, ownership of the collection of facts and ideas that might make up a breaking story on government corruption, for example. Justice O’Connor, however, finishes with little support for these views: “The distinction is between one of creation and one of discovery.” And discovery is not subject to property rights.

The viewpoints of Moroney, Schultz and the Marburgers have their origin in the nature of print. Print leads to a confusion between controlling the medium and controlling the content – that is, the mistaken idea that breaking a story equates to owning it. The Supreme Court compounded the confusion in 1918 with its decision to augment copyright protection with “quasi-property rights” for the facts and events that make up a news story — the hot news doctrine. It was a legal solution for the disruptive impact of a new technology: newswires. News was paper, and these rights formalized the metaphor. They derived from the physical qualities of the paper, attached property rights to the news and would provide a legal basis from which to make, in this case, the AP’s news exclusive. Theoretically, the AP could then exclude people from learning of it or reprinting it without permission. They wouldn’t just report the news, they would own the news. Read the rest of this entry »

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it is pictures rather than propositions, metaphors rather than statements, which determine most of our philosophical convictions
–Richard Rorty, Philosophy and the Mirror of Nature

Metaphors in law are to be narrowly watched, for starting as devices to liberate thought, they end often by enslaving it.
Benjamin Cardozo

We exist in a free marketplace of ideas, or so we might say. The Supreme Court’s recent opinion on Citizens United v. the Federal Election Commission sought to protect that marketplace by curbing regulations on corporate spending on political speech. As the Court opined, these regulations constituted censorship, and “the censorship that we confront is vast in its reach.”

The majority opinion of Citizens United v. FEC has been framed in many ways. President Obama observed in his State of the Union, “the Supreme Court reversed a century of law that I believe will open the floodgates for special interests.” Lawrence Lessig characterizes it as indicative of the progressive and now explicit capture of our elected institutions by corporate interests. And perhaps more sinister, Ronald Dworkin, writing for the New York Review of Books, speculates that the majority repositioned the case, accelerated its consideration, and designed the decision to aid the Republican party in the 2010 election season.

The Supreme Court’s majority countered that these concerns are moot to hysterical. Instead, they asserted that the proper function of the free marketplace of ideas relies on liquidity, and what better way to increase liquidity than to throw out the McCain-Feingold bill, undermine longstanding bans on direct campaign contributions that date back to 1907, and otherwise tear down the restrictions that had kept corporate spending in check. The free marketplace for ideas, after all, would yield the fittest through rude competition. The question before the court was only whether that marketplace was free. From there, the Roberts Court could presumably “call balls and strikes.” Read the rest of this entry »

Each firm has lost business in, and has reduced investment in and output of United States equity research as a result of the free riding by Fly and other services. This is a bread-and-butter case of hot-news appropriation.

Benjamin Marks to US District Judge Denise Cote: via Bloomberg.

The case of Barclays v. Theflyonthewall.com provides a recent test of the hot news doctrine in the investment research industry. Claims that Fly on the Wall was just reporting the news from the free marketplace of ideas would not protect them. Instead, Judge Denise Cote’s findings of facts and conclusions of law following the March 8-11 bench trial would institute an injunction that embargoed recent headlines and materials from the plaintiffs from publication by Fly on the Wall. The news of her decision has lathered the industry into froth over whether Thomson/Reuters and Bloomberg may be next. But its application may be greater than that. Though the opinion ruled in an industry that is traditionally seen as different than the news industry – investment research – can its application in the broader news industry be far behind? Read the rest of this entry »

this push towards things becoming more open is probably the most powerful and transformative social change… We may be the company that really leads this movement….It’s not clear that anyone else is going to manage it correctly.

Mark Zuckerberg, outlining the steady erosion of the concept of privacy in our time: WSJ

Jessica Vascellaro’s cover-story in the WSJ seats Facebook in a tension between going public and Zuckerberg’s remarkable ability to “delay gratification” and take a seat in “a long queue of tech barons with grand ambitions.” The real story, however, may be in her subtle jibes at one who might become “world’s richest twenty-something.” More than a thinly veiled personal attack, Vascellaro may be hinting at something more substantial: that the question of privacy in the 21st century will be meaningfully shaped by an ambiguous and controlling figure. Read the rest of this entry »

Tomorrow, starting tomorrow, we are going to pick Trenton up and we are going to turn it upside down

Chris Christie

The same focus I put on the issues they were concerned about four years ago, I will put on property taxes and auto insurance because those things are too high and we need to get them under control.

Christine Todd Whitman, the last republican governor that focused on property taxes [NYT: JENNIFER PRESTON; Friday, October 24, 1997]

This link has led to the fear that the Whitman tax cut would simply result in a dollar-for-dollar rise in local property taxes, thus negating any savings that taxpayers might realize.

Tim Goodspeed, November 1997, Manhattan Institute Report, considering the link between state income tax, property tax, and school funding. Goodspeed remarks on the potential for Whitman’s income tax cuts to lead to a corresponding increase in property taxes. Because 80% of income tax revenue would go to school districts,  and 20% would go to municipal aid and the homestead rebate, a decline in income taxes could yield a corresponding increase in property taxes to maintain funding across each of these budget items: schools; municipalities; and homestead rebates.

Goodspeed goes on to suggest that the flypaper effect would mitigate increases in property taxes, and the early reports were great. Jim Saxton said, in a report to congress,

A recent study by two economists from the Manhattan Institute, Timothy Goodspeed and Peter Salins, shows that most New Jersey localities did not raise property taxes after the Whitman tax cuts. A few localities raised taxes. On average, for every dollar cut in state income taxes, local taxes rose by only twenty-two cents. A typical household saved over $200 per year in state taxes. Households still witnessed a net tax cut of $156 dollars. The well-being of the New Jersey family is that much better by controlling more of their own resources.

Nonetheless, Goodspeed’s report does assent that “higher income districts…tended to raise their property taxes by more than other districts after the Whitman tax cuts,” which would account for the few localities that raised taxes. As we now know, these were soon followed by increases across the board, belying the flypaper effect.

GOV. CHRISTINE TODD WHITMAN: Yes, property taxes are going up, but that’s a function of local spending. It is not inexorably linked to the income tax, which is what everybody wants to make it seem. When my predecessor raised taxes $2.8 billion and put $1.5 billion directly into the school districts, through the Quality Education Act, property taxes still went up.

MAN ON STREET: The fact is that income tax cut only lowered our income tax by a miniscule amount, and in order to make up for the difference for the school budgets and whatever the townships need, everybody had to get a raise in their property taxes. My property taxes in the township I live in went up 14 percent, which equated to about, uh, $475 this year, because of the fact that she cut our income tax or gave us a reduction.

PBS News Hour: Interview with Whitman and others, November 1996

Real reform is going to require really tough choices at the local level. Our citizens should be asking why New Jersey, the most densely populated state in the country, spends more than any other state to bus a child to school. Citizens should ask, ‘Does New Jersey really need 1,600 separate units of local government?’

Whitman, in a speech to lawmakers on January 26, 1999, intimates that the structural issue behind property taxes resides at the municipal level. Nonetheless, she outlined an aggressive spending plan that did little to lower property taxes aside from introducing rebates. Assembly Speaker Jack Collins, a republican from Salem County, called it “a Christmas budget…Everyone should be happy with it. I think that it touched on every segment of our society: education, crime, the elderly and tax relief. I think it should be getting bipartisan support.” Democrats, on the other hand, remained concerned, and the democratic assembly leader, Joseph Doria of Hudson County observed, “New Jersey residents will still be the most highly burdened taxpayers in the country.” Whitman, however, continued to push the property tax issue from the state to the local level, which meant asking 566 cities and towns, 21 counties, 188 fire districts, and 611 school districts to sit down and sort it out — good luck with that.

Taxes in New Jersey represent 1.74% of a home’s value, compared with the national median of 1 percent. Essex county carries the fifth highest tax burden per a person, nationally. Westchester comes in first, with Putnam County, NY [oddly] coming in at number 10.

Tax Foundation, 2009 report

Half the wrong conclusions at which mankind arrive are reached by the abuse of metaphors, and by mistaking general resemblance or imaginary similarity for real identity. Thus people compare an ancient monarchy with an old building, an old tree, or an old man, and because the building, tree, or man must from the nature of things crumble, or decay, or die, they imagine that the same thing holds good with a community…All that we hear every day of the week about the decay of the Turkish Empire, and its being a dead body or a sapless trunk, and so forth, is pure and unadulterated nonsense.

Lord Palmerston on Turkey, from his letters to Lord Granville and his brother.

Lord Palmerston recoils from the insistent caricature of the Turkish empire as in decay, a dead body or sapless trunk. Instead, he sees these for what they are, metaphor’s ability to mistake similarity or resemblance for identity.

Lord Palmerston’s letter continues with an overt shift in his language. He frames Turkey in terms of self-consciously technocratic considerations fitting a statesman. He continues: “if we can procure for it ten years of peace under the joint protection of the five Powers, and if those years are profitably employed in reorganizing the internal system of the empire, there is no reason whatever why it should not become again a respectable Power.” The problem of Turkey shifts from one of managing organic decay to a geo-political issue requiring the coordinated application of political resources.

Anthony Trollope would call these letters, in 1882, “sententious morsels of didactic wisdom, which would not have been put there in the hurry of private correspondence unless they had been intended for other eyes.” Nonetheless, the underlying wisdom around the nuance of metaphor persists. Metaphors are not merely rhetorical flourishes, but powerful tools that shape our understanding through the careful juggling of similarities. Benjamin Cardozo would later echo his caution in the context of the law. Cardozo warned in 1926, metaphors in law are “to be narrowly watched, for starting out as devices to liberate thought, they end often by enslaving it.

George Will rightly takes Yosi Sergant, the NEA, and an August 10th conference call to task for politicizing the NEA. It perhaps signals an exhaustion with the Bush Administration’s attempts to do the same throughout the judicial system and provides an example to be avoided. Will, however, hitches to his complaint one unlikely carriage – a plea for no state funding of art.

Will’s argument goes something like this. Because “art is whatever an artist says it is, and an artist is whoever produces art,” Will imagines the Obama Administration certifying individuals artists on the basis of their politics and, more important, their ability to convey a political message. The NEA would be the ultimate propaganda vehicle. Its directors could recruit an army of “taste-makers” and “artists” to advance Obama’s politics on American culture under the banner of art. Will’s solution: no more art.

Would it were so easy.

There are several problems with Will’s argument, starting with his definition of art. Will is right to point out the controversy around defining art, but does it therefore follow that “almost everything” is art, just as a matter of one saying so? No. I might say something is art, and it may be hard to change my mind, but that doesn’t mean I have changed the mind of anyone else. And so, an artist might say something is art, but they might suffer a similar inability to convince anyone. Likewise, does that mean the NEA can come forward and decree what art is and art is not? It certainly could, but would it matter? Not at all, and it doesn’t mean art is “a classification so capacious it does not classify.” It just means that art is sometimes hard to pin down.

The Justice Potter test provides a simple and more meaningful alternative to defining art. Potter was asked for the definition of pornography – not exactly art, but a concept faced with a similarly perplexing resistance to definition. Potter avoided a specific answer and responded, “I know it when I see it.” Applied to art, Potter’s test claims that in many cases there is a clear distinction between what is art and what is not, but one should expect to be surprised. Somethings that look like art are not, and somethings that look like they couldn’t be art are. In most cases, it’s clear, but on the margin, it can get pretty controversial. And by the way, this isn’t unique to art. We find this phenomenon throughout any subject of judgement, such as the application of law. Will mistakes these controversies on the margin for the whole enterprise.

Administering NEA grants, therefore, is necessarily controversial, but it’s not a vehicle for propaganda manned by lobbyists directed by a political class. The NEA awards grants for art. In many cases, it’s clear what qualifies as art, but in some, on the margin, it’s just plain surprising. And there’s nothing wrong, let alone political, with that. Sometimes they’ll get it wrong, and sometimes they’ll find they’ve gotten right. We have to accept that it will be, at times, controversial, but that doesn’t mean there’s a conspiracy.

Which leaves Will’s final point: why are we even subsidizing art? Our only rationale, according to Will, is “art is a Good Thing, therefore public spending on it is a Good Deed.” He goes on to suggest that one realize the absurdity by replacing the word art with “surfing” or “religion” and recognize that subsidizing art is not much different than subsidizing corn, but “at least we know what that is.”

But is this ad-libs approach to reasoning appropriate? We’re not talking about surfing or religion or corn. We’re talking about culture, civilization, and our enlightened ambition to advance humanity. We’re talking about art, though perhaps, on the margin, surfing and corn.

Is this when banks become glass boxes and retail spaces?

The early eighties saw dramatic changes in the banking regulatory environment. These changes fundamentally re-oriented the rules and competition within the banking system. Two bills started the process, which would continue throughout the eighties and into the nineties. As one would expect, they emerged out of a deepening crisis.

DIDMCA in 1980 and Garn-St Germain in 1982 responded to the high-interest rate environment that had exposed and exacerbated competitive disadvantages at the community bank and S&L level that stemmed from the existing regulatory framework. The legislative answer, in the form of DIDMCA and Garn-St. Germain shifted bank’s focus to financial products and opened the competition across state lines. The result was a shift in mind-set. Banks became two things. First, they became retail institutions designed to sell increasingly complicated financial services. Second, they also took on the ability to hold and manage increasingly risky assets. Both got them into trouble, but the shift to a retail mind-set is what changed the architecture of the bank.

Banks had been institutions defined by their place and designed to hold your money in a limited and regulated set of products. Banking institutions had been more like farms than those we regard today. Their business was tied to the fact that they were a physical part of the region. The McFadden Act of 1927 and the Douglas Amendment to the Bank Holding Company Act of 1956 intentionally obstructed the development of national banks. Their financial services were regulated, and they competed for customers based on the fact that they were close. These banks, coddled by a stable regulatory structure, remained largely unchallenged by competing institutions and cultivated the architecture of safety.

The high interest-rate environment of the early eighties strained the regional banks and forced legislators to respond. Banking regulations had put community banks and S&Ls at a competitive disadvantage. Interest rates were regulated and had not kept pace with the high interest-rate environment ushered in by Volcker’s Federal Reserve. As a result, they were losing deposits, and the banking system was in turmoil.

The DIDMCA focused on establishing equality among financial services institutions, so it would level the competitive field. It removed interest rate caps on deposits for community banks by phasing out Regulation Q, so they could compete with money market funds and provide market rates. Thrifts were allowed to enter the consumer loan and credit card business. The bill provided a consistent framework for reserve requirements that would be managed by the Federal Reserve as an instrument of monetary policy. It also raised the FDIC insurance levels to $100k, which William Isaac later claimed, with Fernand St Germain, was a mistake. Banks started on a trajectory from being a place to keep your money to a place for accessing money-services on the open market.

The crisis did not abate. The economy was in a major recession. Paul Volcker had raised interest rates to unimaginable levels. The thrift industry was in crisis, and congress came to the rescue in two ways. First, it accelerated the deregulation of banks and S&Ls, so they could improve their business. Second, it interceded with insolvent banks through direct funding and opening the possibility of non-regional and interstate acquisitions of banks.

The deregulation of the banking industry introduced a tectonic shift in banking. Banks would grow into financial supermarkets of services. Services, such as interest rates, which had been regulated, became competitive and subject to active management. These new abilities would enable banks to become aggressive producers and managers of capital. This was evident in many respects. The bill accelerated the abolition of remaining Regulation Q differentials between banks and thrifts, which governed maximum allowable rates on deposit accounts. S&Ls and savings banks gained the power to invest up to 5% of their assets in commercial loans. Up to 30% of an S&L’s assets could be invested in consumer loans, and they also could invest in state and local government bonds. In a high interest rate environment, this accrued to their benefit by making their deposits more competitive, improving the returns on their deposits, and perhaps improving net interest margins. Garn-St Germain also de-regulated real-estate loans, removing statutory restriction on real estate loans for national banks, and preempted state regulation that would adversely affect the activities of a national bank.

Garn-St Germain convened a spectrum of solutions for failing institutions. The Federal Savings and Loan insurance Corporation (FSLIC) introduced the concept of net worth certificates. These would be purchased by the FSLIC, counted as regulatory capital, and provide for the ongoing operation of the bank as a solvent entity. The legislation authorized the FDIC to bless interstate banking acquisitions of closed savings or commercial banks with assets over $500m, and similar powers were granted to the FSLIC. Both the McFadden Act of 1927 and the Douglas Amendment to the Bank Holding Company Act of 1956 had been designed to obstruct the development of an interstate banking system by devolving regulatory responsibility to the states, leaving no consistent national regulatory fabric. The FDIC’s new powers were a direct challenge to 50+ years of banking practices that defined banks and financial services in terms of place, not product. The Competitive Equality Banking Act of 1987 would later make these changes permanent and pervasive. DIDMCA and Garn-St Germain shifted banks’ focus to products, and place, though still important, was no longer integral of the bank’s identity. Later regulation, such as CEBA, would compound and expand these changes.

The rising metaphor for banking became the retail store. The architecture of safety was for institutions that were rooted in the region and frozen in the regulatory structures that came out of the market crash and depression. The emphasis was safety, the product mix was simple and regulated, and banks looked more like traditional, quasi-state institutions. The changes in the early eighties forced banks to expand the financial services they provided and provide them just like retail stores. These were new, highly variable, and very competitive. It’s not for nothing that Garn-St. Germain included the initial Truth in Lending provisions. The new services at the local bank level required marketing support and additional education. A teller didn’t have to give their client a toaster to stand out. With Regulation Q retired, they could offer a more competitive interest rate. These dynamics are more typically associated with consumer goods, and the architecture changed to suit them, promote them, and grow the business. Retail banking begins, and with it, glass boxes and retail spaces find themselves occupied by the former tenants of the traditional and staid – banks.

Out of region and out of state competitors begin to spring up. They’ve acquired failed banks or otherwise joined the market. The new branches are designed to sell financial services and projected into new markets. They’re designed to be retail stores for financial services. Banks find that they can quickly open “new doors,” as they might say in the retail industry, and these doors are the source of new deposits and sale of loans, accounts, et al.

One question that emerges is, if the front end of banks begins to shift into retail and change its relationships with its customers, how does the back end change? How do banks change their relationship to the supply of money? The legacy of the local bank had been deposits funded by a local depositor base and lent to the local depositor base according to strict capital requirements. What happens as the community banks and S&Ls gain direct exposure to the capital markets? One answer is Liar’s Poker.

The Speculations of Mr. Spectator

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