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OpenMarket: John Berlau

  • Thanks to Brad Beckstead, more entrepreneurs will have their day in court

    September 5, 2008
    As Open Market readers know, the Competitive Enterprise Institute recently helped achieve a very significant victory wrapped within a defeat at the DC Circuit Court of Appeals. Although in Free Enterprise Fund v. Public Company Accounting Oversight Board (PCAOB), a three-judge panel ruled ruled 2-1 against Brad Beckstead -- whose two-person accounting firm had been brought to a stand-still by the Sarbanes-Oxley-created accounting regulator PCAOB -- the dissent of Judge Brett Kavanaugh could not have been more powerful.

    Judge Kavanaugh called the lawsuit "the most important separation-of-powers case regarding the President's appointment and removal powers to...
  • Sarbanes-Oxley -- Loved By Countrywide and Mozilo, Albatross to Legit Investors and Entrepreneurs, Challenged in Court -- response to Jane Bryant Quinn-

    August 17, 2008
    For more than two years, the Competitive Enterprise Institute has been involved in a constitutional challenge to the Public Company Accounting Oversight Board, the giant agency set up by the Sarbanes-Oxley Act of 2002 to create auditing rules under the law. CEI attorneys Sam Kazman and Hans Bader are of counsel to the plaintiffs in Free Enterprise Fund (FEF) v. PCAOB, and they have worked with the lead attorneys at the Jones Day law firm on the case. Representing both the FEF and Beckstead & Watts, a small Nevada accounting firm burdened by the PCAOB's mandates, we have argued that the agency violates the Constitution's Appointments Clause because it wields enormous power (and the individuals on its its five-member board actually get paid more than the president), yet its leaders are not subject to the Presidential appointment and Senate confirmation that the Constitution requires...
  • It's the (mixed) economy, Stupid. Berlau in Economist.com debate

    August 7, 2008
    Ain't it something!

    Congress just got through with passing a multi-billion dollar bailout to the government-sponsored housing enterprises Fannie Mae and Freddie Mac, which own half of America's mortgage debt. Fannie was created as a government agency in 1937 as part of the New Deal, and despite it and Freddie's restructuring some 40 years ago, it still maintained government privileges and other implicit subsidies (which have now been made explicit.)

    Yet amazingly, despite these two government-created behemoths at the center of the housing storm, many are gaining traction arguing that the housing mess somehow shows the failure of the "free market." What "free market?" The fact is that despite the partial deregulation of past decades, financial services remained one of the sectors most controlled by the state. The politicians now pointing their fingers at lenders making high-risk loans...
  • Frank bill mandates credit rating agencies to repeat subprime mistakes

    July 30, 2008
    Due to their failures in the subprime mess, it has long been expected that Congress would take up regulation of the credit rating agencies to attempt to make the ratings stronger.

    But the first rating agency bill to move forward -- the Municipal Bond Fairness Act sponsored by House Financial Services Committee Chairman Barney Frank, D-Mass. -- has the almost explicit goal of making the rating weaker for a certain type of security. Scheduled to be marked up in the financial services committee today, the bill would limit the risks agencies can look at in examining municipal bonds. It very purpose, according to a press release from Frank, is to "increase demand for certain municipal bonds and therefore lower borrowing costs for issuers." It would limit municipal bond ratings to long-term default,...
  • The HSA Revolution That's Already Here

    July 26, 2008
    The new book America's Health Care Crisis Solved has been praised as providing a detailed, free-market solution for healthcare's future. This it does, but what's almost as fascinating about the book is its description of what is going on in the present, with consumer-driven health savings accounts (HSAs). Almost without notice, HSAs have grown dramatically and have solved for millions of Americans the problem of healthcare's lack of portability.

    First, some background. In the 2003 law that was rightly derided for massively expanding Medicare with a new prescription drug benefit was a separate section that let many more working-age people to take advantage of HSAs. This provision allowed any adult under 65 to open a savings account for...
  • 'Kelo' Property Rights Protections gutted from housing bill (revised and corrected)

    July 24, 2008
    Of all the unintended consequences of the housing bill that passed the House yesterday -- of which there will likely be many -- one of the most ironic and far-reaching may be this: that whatever security marginal homewoners have from foreclosures, their homes will be far less safe from being taken by a bureaucrat through eminent domain.

    That's because the bill unveiled this week -- as the result of negotiations between House Financial Services Committee Chairman Barney Frank and Treasury Secretary Hank Paulson -- takes specific language protecting property rights from the housing bill that most recently passed the Senate and renders it almost meaningless. As a result, the billions of dollar in new grants the bill provides for "the production, preservation and rehabilitation" of housing units, could stimulate a bonanza of state and local property confiscation of the type green-lighted...
  • GSE Bailout Contains Fingerprint Registry!!

    July 23, 2008
    While pretty steep, $25 billion of our tax dollars isn't the only thing many Americans could lose in the just-unveiled GSE bailout bill likely being voted on later today in the House of Representatives. They could lose valuable liberities as well. Despite opposition from a bipartisan coalition including the American Civil Liberties Union and the American Conservative Union, the bill just now being e-mailed around House offices includes the Senate bill's mandatory fingerprint registry. Legions of ordinary Americans working in the banking, mortgage and real estate industries would have to send their fingerprints to the feds for continuous "tracking."

    In language virtually indentical to that in the Senate bill that passed earlier this month, the House bill -- which...
  • Fingerprint registry in Senate housing bill -- Battle moves to House

    July 18, 2008
    It is in times of national emergencies that measures infringing on privacy and civil liberties are advocated -- and sometimes rushed through without even being discussed -- even if they turn out to do little to solve the problem at hand. Then, when the emergency is over, the liberty-stealing measures remain.

    The current crisis at Fannie Mae, Freddie Mac and banks is being characterized as a national emergency, and not surprisingly, political leaders are demanding that war-like financial measures be enacted. But we can't let the rationale of a financial crisis bring on unwarranted intrusion on our liberties any more than we can let the justification of national security do so.

    Last Friday, despite the best efforts a bipartisan coalition including the American Civil Liberties Union and the American Conservative Union, the Senate passed...
  • Fannie-Freddie warnings from Fred Smith in 2000 and beyond

    July 14, 2008
    The near-collapse of Fannie Mae and Freddie Mac may have taken the markets and the financial media by surprise, but is something that CEI schlolars have been warning about for more than a decade.

    In testimony in 2000 before the U.S. House of Representatives, CEI President Fred Smith issued this caution on the two government-sponsored enterprises: "Privatizing the profit side of the ledger while socializing the loss side is a sure-fire recipe for disaster. It was exactly that problem that so exacerbated the plight of the S&Ls in the '90s."

    Smith warned of the "moral hazard" of Fannie and Freddie's implicit and explicit government subisidies. In words that sound prescient today, he said: "These institutions hold a much larger portfolio of housing-related financial instruments (and a more concentrated form of assets) than did any S&Ls in...
  • Fingerprint Registry goes to Senate Floor -- likely today

    June 18, 2008
    In the past few days, the subprime mess has morphed into a Congressional ethics scandal. Portfolio magazine has revealed that Senate Banking Comittee Chairman Chris Dodd, D-Conn., and Sen. Kent Conrad- D-N.D., as well as former Bush administration Secretary of Housing and Urban Development Alphonso Jackson, received special "VIP" loans from embattled mortgage lender Countrywide Financial. Compared with loans for ordinary folk, these special mortgages may have allowed the "VIPs" to pocket thousands of dollars in savings. And they raise questions as to whether Countrywide was trying to influence these officials with improper and/or illegal gifts.

    Given all the housing troubles, you would think this would call for an investigation. But policing itself is not what Congress has in mind when...

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