The same could be said of the draft financial services bill that has started circulating. I have it, but haven't looked at it yet because a friend who has--and is a security lawyer--says that it's similarly impenetrable. His thoughts:
Did I mention it is 1136 pages?
I have noticed three things from a first look . . . :
1) The bill would create a separate "Agency for Financial Stability" rather than vesting everything in the Fed (no word on whether it will be brought to you by the same people who brought us the DHS...)
2) On the regulation of hedge fund advisers, I note that they have clarified something that was less clear in prior draft bills, which had caused some agita--namely, this bill would clarify and beef up the confidential nature of the sensitive information that hedge fund advisers would be required to file with the SEC on a regular basis
3) Those same hedge-fund regulation provisions include an exemption for venture capital advisers. The consensus is that such an exemption will be enacted, for one reason: "Nancy Pelosi's district."
You may want to focus on this as the most important part. Isn't the FDIC's current role in resolving failing banks the best-performing part of our current financial regulatory system?
This is the passage to which he referred:
Senator Christopher Dodd proposed creating a single U.S. bank regulator and stripping supervision from the Federal Reserve and Federal Deposit Insurance Corp. in legislation aimed at preventing a repeat of the credit crisis.This does indeed seem sort of crazy to me, and not just because the FDIC has indeed done a good job. The agency works so well because it can control its risk exposure--banks that want the safety net have to abide by its rules, mostly. Stripping that away introduces moral hazard to both the banking system, and the government--whoever this new central regulatory authority is, another agency will pay for its mistakes. It also seems like this would make the FDIC's tricky job even trickier.
Dodd, chairman of the Senate Banking Committee, would eliminate the Office of the Comptroller of the Currency and the Office of Thrift Supervision and fold the Treasury Department units into the Financial Institutions Regulatory Administration, according to draft legislation released today in Washington.
"Our proposal will replace the myriad government agencies that failed to rein in risky schemes with a single, accountable federal banking regulator," the Connecticut Democrat said at a news conference.
Also, on page 734 it states every American will be required to buy stocks and bonds every year or face up to $2500 in fines and up to 5 years in jail.
So the bills should not be read because they are written in a confusing manner.
Perhaps they should be written more clearly?
They are written clearly. For lawyers. Not sure if this is good, bad, or "it depends".
The language the rest of us use is not so precise as legalese. Using "plain English" (whose English?) would (I suspect) lead to more lawsuits over the application of various laws, until such time as the application was nailed down with precise enough language, i.e. in legalese.
Ok, assume that I buy the argument that the bills have to be written so precisely that the great unwashed masses will be unable to understand them. How does that excuse the people voting on them from reading them?
Aren't, like, a third of these people trained as lawyers?
Even lawyers don't claim they're written clearly. They just claim they can't be written more clearly, and they have a very strong incentive to lie about that
This is an old myth, blown out of the water in the professional "legal writing" literature but repeated by lawyers who were never taught to write and haven't read the literature. Legalese is routinely full of ambiguities and mistakes (unsurprisingly, given the way it's constructed).
For articles, books, and links see the specialist lawyers' own site www.clarity-international.net.
The swipe at venture capital firms is unfair and has nothing to do with Pelosi. VC firms don't create the same systemic risks that hedge funds can, since pure venture capital firms tie up both their own and investor money for extended periods of time. You can't have a "run" on a venture capital firm, and their leverage is unlikely to pose the same risks to the financial system as a hedge fund's leverage market bets.
Bruce Bartlett argues that reading the health care bill is a waste of time. Not only is it all written in legalese, but also, many of the provisions simply alter sections of other bills, so unless you have some sort of hyperlinked database, much of the language is meaningless.
Bruce Bartlett is a moron.
The only thing that Bartlett purports to show is that reading legislation is hard. Well, boo hoo. It is legislators' job to read legislation. I'm sorry if their job is hard, but that shouldn't excuse them from doing what their job is.
While it will not help with the "legalese" aspect, the software industry has developed and used sophisticated tools for highlighting proposed changes to source code base as well as the resulting final results.
Keep in mind that the code base for a piece of software can be comprised of thousands of modules containing millions of lines of code and a single software project may include many changes to a significant percentage of all modules - possibly not all that different in scope than these monster bills Congress keeps churning out.
Programmers are rather clever when it comes to making tools to make their jobs easier.
The idea of using some of the tools - change management ones for example - that coders use is laudable.
The more interesting thing is why code and laws are both complex. Code's complexity stems from a desire to get an idiot savant (the computer) to do complex things. You have to cover every possible permutation because the computer will do it at some point. When you add the user into the loop it gets even more hectic because then you've got the power of the idiot savant plus the idiotness of the pure idiot.
Laws are complex because you're trying to put a box around human desire. It makes the first task seem trivial in comparison.
"Laws are complex because you're trying to put a box around human desire. It makes the first task seem trivial in comparison."
100% totally agree.
As a former coder, something I always appreciated was the fact that at its base, software is really just the clever arrangement of zeros and ones.
I think the two systems are even more similar than coreilly says.
Law's complexity stems from a desire to get an idiot savant (the government system) to do complex things. You have to cover every possible permutation because the government will do it at some point. When you add the user into the loop it gets even more hectic because then you've got the power of the idiot savant plus the idiotness of the pure idiot AND the fact that there are smart users out there who will try to game any system set up.
A bureaucracy is very much like a computer. Every action is done according to the defined rules. This is NOT because the individual humans in the system are stupid, it is designed this way so they are unable to use their intelligence.
The idea that we could use programming tools to design these systems is a brilliant one.
No.
A computer does not drop urgent tasks on its desk and say it will get to them when it gets to them and go off to gossip about sports teams.
A computer does not invent new rules for itself.
A computer can't do the explicit opposite of what it's programmed to do.
Of course, as any rational person can easily see, it's a very, very good thing that the legislation being whipped through congress is written in ways that make it nearly impossible to determine the effects of all of the provisions.
First, this allows good legislation that would otherwise be opposed by the evil cabal that stymies all of our hopes & dreams from being made reality by our glorious progressive government to slip through. The evil cabal can't figure out that they're being side-stepped by Pelosi & her noble progressive warriors.
Second, having the law be well-nigh impenatrable gives lots more room to well-meaning bureaucrats, legislators & judges to insert wisdom as they see fit. Rather than being tied down to some drearily simple language that would clearly lay out the limits of their authority, they can play in a veritable wonderland of obscure clauses & unclear language. The combination of government power without clear accountability or limitation has been proven throughout history to be the best possible way of achieving positive progress for all of society.
Sure, there are those troglodyes who feel the rule of law is undermined once the law is intentionally created to be of such complexity that it is nearly impossible to know for sure that you are obeying it in organizing your life. And they are probably right.
But here's the thing: the rule of law was only necessary when we were trying to constrain government power wielded by imperfect men. It is atavistic to maintain it in an era of enlightened progressivism.
To the extent that creating uncertainty as to what is actually in the law serves the interests of our progressive leadership tirelessly working to usher in an eternal utopia, it is a good thing. Maybe the best of things.
You have done well, blighter. The electrodes will be removed tomorrow.
love from,
Your friends at Minitrue
This does indeed seem sort of crazy to me
Sorry, McArdle, let me get this straight: it seems "crazy" to you that the Senator for Savings 'n' Loan, Inc., would like to consolidate all power over the industry under a single consolidated Ministry of Nutmeg State Senatorial Job Security^H^H^H^H Financial Truth and Justice ,the head of which would, natch, be deeply respectful of a certain Congressional oversight committee chair?
I'm going to suggest you type Cui bono? into your Google search bar and hit the "I Feel Lucky" button.
What about the Sarbanes-Oxley Act. Why was it ineffective at prventing the Financial crisis? Its beginnings were in Senate Banking Committee hearings.
SOX isn't designed to prevent financial crises, just lessen the chances of financial fraud by public companies. It's a little like complaining that the burglary alarm system you installed was a waste of money because it didn't stop your basement from getting flooded.
As Carl Pham suggests, given what we've learned (and what's still being hidden from us) about Dodd's links to financial companies, Occam's Razor says that either this bill is meant to pay them back, or the companies are using threats to expose his actions to extort favorable laws.
Just to make sure that we're clear, Dodd's proposal, as I understand it, will not create a new super-agency that gets rid of the Fed and the FDIC. The Fed will still exist and do monetary policy. The FDIC will still exist and do resolutions. But there will be one super-agency regulator to do bank examinations and supervision. Right now, the OCC examines and supervises national banks, the OTS does thrifts, the Fed and states do member state banks, and the FDIC and states do non-member state banks.
A super-regulator would examine and supervise all banks. The point is to eliminate the race-to-the-bottom problem and forum shopping (which was particularly a big problem with (a) thrifts, because the OTS got really lax because it was bleeding to death for assets and and the agencies are financed by fees on assets; and (b) states, many of which also wanted lots and lots charters, see, e.g., Georgia). Also, note that most banks that have failed this year have been state banks. That would be the fault of the Fed, the FDIC, and state regulators. And, of course WaMu, IndyMac, etc, sort of drown them all in assets, and that was the fault of OTS. Then there's the OCC: can anyone say Bank of America, Citibank, and Wells Fargo?
I would say that while the FDIC has done a great job doing resolutions, it has the same spotty record as the other agencies when it comes to bank supervision, even with the incentive to protect its risk exposure. And since the largest assets are with the OCC (and, at least until last year, the OTS), I'm not sure that incentive did much for the system anyway.
I've just realised how you could slow the production of enormous, impenetrable bills. Pass a law requiring that they be written in Latin.
That's brilliant! Guaranteed to be shorter, and no one would argue that the result will be any more incomprehensible than what we've got now. I think the Vatican was on to something.
I think it would be better that the bills be read before voting. That is, read aloud, by the sponsoring member, in front of a quorum of the house.
Add in a mandatory 20 sunset clause and much shorter, clearer legislation would result.
Merging the federal banking regulators seems like a good idea, particularly given that they are currently funded by fees charged to the entities they regulate -- and given that these agencies currently don't hold a monopoly on regulation, this seems like a good way to guarantee regulatory capture (though some might argue that regulatory competition is a good thing in itself). But it will really depend on how independent the regulator finally is. The Comptroller of the Currency is currently part of the Treasury Dept., and directly accountable to the Executive Branch (as opposed to the Fed and FDIC, who aren't accountable to anyone, really.) Having your banking regulator directly under the Executive's thumb is a recipe for Italian-style banking oversight.
Regulatory capture is a term used to refer to situations in which a state regulatory agency created to act in the public interest instead acts in favor of the commercial or special interests that dominate in the industry or sector it is charged with regulating. Regulatory capture is a form of government failure, as it can act as an encouragement for large firms to produce negative externalities.
http://en.wikipedia.org/wiki/Regulatory_capture
I know. Did you think I meant something else?
"Merging the federal banking regulators seems like a good idea, particularly given that they are currently funded by fees charged to the entities they regulate -- and given that these agencies currently don't hold a monopoly on regulation, this seems like a good way to guarantee regulatory capture"
Perhaps i am misreading, but the above paragraph seems to say that X is a good idea because it guarantees regulatory capture. I was just pointing out that regulatory capture is a very bad thing, something we should avoid, not guarantee.
MDF = Chris Dodd.
So yes, regulatory capture is a good idea.
:-)
Sorry, my sloppy writing. I meant that because the bank regulators are now funded by fees they collect from industry, and there are multiple regulators, you increase the odds of regulatory capture because you have all these regulators competing to have banks "choose" to fall under their regulatory ambit. (The more banks you get to regulate, the more budget you have.) If you combined the bank regulators, the resulting single regulator would be a monopolist -- so even if the regulator is funded by fees collected from industry, there would be less incentive for the regulator to kowtow to the banks (because the regulator would be the only game in town). So merging the regulators seems like a good idea because you might get less capture (in addition to more regulatory consistency, etc.)
So regulator would be less susceptible to the more transparent form of corruption that you described, but more susceptible to the less transparent corruption of favor trading.
The OCC technically is in Treasury, but is an independent branch. If I understand correctly what you mean by being held accountable, the Comptroller is not directly accountable to the Executive Branch, e.g., Treasury (and the President) cannot issue orders to the OCC and the President cannot fire the Comptroller.
Legislation has been written with extensive use of cross-references for decades, if not longer.
There is a good reason, and one that I don't understand. The good reason is that the same word may be given different meanings in different places of the federal code, and even in different places within the same statute. This is why lawyers argue things like "For purposes of X, the word Y in section Z should be construed to mean . . . " So if Congress writes the same text in two different places, it opens up the argument that the text means different things in those places. The only way to ensure that this doesn't happen is cross-reference. Complain about this all you want. It's a legal practice that goes back dozens if not hundreds of years.
What I don't understand is when the statutes are written like "Section vii(a) is amended to strike the words 'owing to' and after the word 'condition' placing the text . . . " It would seem easier to write "section vii(a) is hereby amended to read. . . " and just state what the new text will be. But again, it's been this way for a generation at least.
If this passes, expect to see many financial services companies move overseas.
I just hope that the bill doesn't prevent citizens from investing in overseas funds.
Will they be buying villas next to Kim Bassinger or Alec Baldwin.
Please ignore this. I can't read, which tends to stupidify the snark.
I have worked for the FDIC. I have worked for KPMG as a bank auditor. I have worked for big international banks.
I find the whole argument absurd. No one can tell me why a Savings Bank is regulated by OTS and another is regulated by the FDIC. If you (anyone) can't tell me the difference then it is absurd to have different regulators.
It is a little easier to figure out why this bank is regulated by the FDIC and that bank is regulated by the OCC and this other bank is regulated by the Federal Reserve even though they are all insured by the FDIC.
What difference does it make to the safety and soundness of a bank if it is a state chartered bank or a national chartered bank?
What difference does it make if it is a Fed member or not? OK, there is a minor difference but how many people can tell me why it matters to John Q Public?
I have been arguing publicly and privately for the last 30 years that we should have a single regulator for banks, the FDIC, and a single regulator for holding companies, the Fed. We don't need the OCC or the OTS.
And probably the FDIC should report to the Fed. After all, Ben is in charge of keeping the country out of a depression. Few people even know who Sheila is. (I am not even sure I can spell her name.)
If the legislation is impenetrable, how the hell are effected companies supposed to interpret it? How can they predict the consequences of their own actions?
SEC regulations have the same problems. The new rulings are idiotic and poorly thought out at best and catch-22's at worst. Every time we ask for clarification, we get "clarification" that clarifies nothing but raises twenty more questions. Nobody can understand the rules, but god help you if you if you break any of them.
Tacitus summed it up long ago: The more corrupt the state the more numerous the laws.
If the legislation is impenetrable, how the hell are effected companies supposed to interpret it?
Bartlett was talking about the regular guy on the street reading it. The affected companies have dozens of lawyers on retainer(or staff) whose job it is to figure this shit out. Besides, I wouldn't be surprised if lobbyists wrote the damn bill. We know it happened under Republican control of Congress and given how a fair amount of Democrats are corporate whores as well. I'd bet even money on the bill being written by lobbyists.
No, he's talking about members of Congress reading it.
That's a couple intellectual steps down from the regular guy on the street.
This business about legalese being "more precise" is hogwash. I worked in R&D as an engineer for many years, and over that time wrote numerous patent applications, responses to patent examiner rejections, opinions on patent infringements, and similar documents. In every case, the attorneys would re-write my work into legalese, using an arcane set of vocabulary and syntax rules. Example: mixtures always "comprise" a set of ingredients, never "contain" or "consist of" those ingredients, even those these terms mean the same thing. I think this is because almost no one outside the legal community knows what the word "comprise" means.
Quite often, I would have to correct the attorney's work, explaining to them that they had completely changed the meaning of my original wording, or had opened loopholes in the claims. (Although, to be fair, my last attorney was very good at writing acceptable, but intelligible, patent applications.)
Maybe legalese gives the impression of being more precise because it involves such long, convoluted sentences and unfamiliar words. But, as any good writer knows, simple declarative sentences are actually the most precise.
Patent language is a different animal. There, the "legalese" is a vestige of a far earlier era. The language employed there is similar to that from 80 years ago. Most lawyers moved on; the patent bar did not. Whatever the reason, it is incredibly frustrating.
But remember, the goal of a patent application is not clarity, but the opposite. A good patent lawyer tries to make the patent application as unclear and ambiguous as possible. Just enough clarity to be approved by the examiner, and nothing more. Why? Because an easy-to-understand patent is an easy-to-design-around patent.
Even more important, a competitor can predict how a court will rule on a clearly-written patent. When the patent is confusing, a court might interpret it in really unpredictable fashion. This is bad news if you are RIMM or Microsoft and you have designed your multi-billion dollar business around a technology that *maybe* infringes a patent. Thus, the big company is more likely to license your patent or settle (as Microsoft did with Eolas), instead of duking it out to potentially catastrophic effect (RIMM).
So patent law is not representative of legal language.
In general, there is nothing special about "legalese" that makes it precise. The important thing is that a word be given a very particular meaning indicating it refers to A and not B. Often, this is accomplished in a definition section of a statute. It does not matter whether the statute uses ordinary language like "buy" or more complex language like "procure." What is important, though is that the definition be as exhaustive as possible, so as to create as few gray areas as possible. Sometimes, this requires lengthy definitions. That's just the nature of the world.
One more point. Sometimes, contracts or statutes are written to be intentionally ambiguous. This happens when both sides find value in the larger agreement, but are having trouble on one small point. So they might choose an intentionally ambiguous term on that point and sign the larger document. If that small point ever comes up, they'll let the courts decide. Sort of like putting the matter to a coin toss.
This type of intentional ambiguity is especially common in international legal documents, especially ones that lack enforcement mechanisms. It is one reason that so much international law is mush. Not all of it, but a lot of it.
Being myself both an engineer and someone who is familiar with parsing and investigating patent infringement claims, I can confirm that muzzybelly is spot on. You probably didn't "fix" your patent attorneys' efforts so much as frustrate them by, of all things, being very engineer-like about it. You were trying to explain a very particular device, substance, or application; they were trying to write that up into a landgrab.
Admittedly, some patent attorneys are obtuse to the point of idiodic, and I've read a few 40-page patents that should have been 15-page patents written in more concise langugage with fewer claims. However, most are written they way they are for a good reason. Unless you just invented the Universal Widget that is a critical component of many major systems and cannot be designed around, a high degree of specificity is a complete waste of application fees.
Except for that tiny financial crisis, the FDIC did a heck of a job.
We didn't really have a depository crisis.
The only real critique I've seen of the FDIC in the crisis was that it was borderline-overwhelmed in managing the shutdown of busted banks and the transfer of responsibility to sound institutions. Thing is, the scale of those problems increased dramatically while the FDIC's resources did not. They've really done a pretty good job, unlike (e.g.) the SEC regarding Madoff.
First, I guess Senator Dodd is not trying to set up an exemplary form of regulation for the rest of the world to copy. A pity. The world financial sector needs regulation, not just the part of that sector now in the USA. Us rest of the worlders need a US model we can relate to.
Second; this never fits successfully into legisaltion outside the preamble, but is Senator Dodd's text accompanied by an empirical or theoretic justification of the proposals? If the justification is merely declaratory, expect bad legislation.
Third, I have read more legislation, in draft and as enacted, than I care to remember. Good legislation always includes a section saying what it is aimed to achieve. (Bad legislation often has such a section; but it turns out to have little to do with what is proposed or enacted.) Does the Dodds Bill have that sort of section, and are the main proposals related to it?
Fourth, generalising from Muzzy and Mouse, I doubt if any significant number of complex agreements between humans have ever avoided intentional ambiguity. (Legislation that passes Congress is always a complex agreement.) Even that miracle of brevity and clarity, the US Constitution, has its share.
Fifth, legislation that refers to other legislation properly does so to avoid unintentional ambiguity, and to avoid legthening legislation by repetion of what is already law. Prima facie, a thousand page draft bill is likley to be also using refernce to other legislation for purposes of obfusacation.
Sixth, this post is infested with Dodd's disease. It is too damned long.