HOMESTEAD: Steve Dubb initial comments/thoughts on fair exchange paper

[Deborah Groban Olson <dgo@esoplaw.com>]

>X-Sender: sgdubb@pop.mail.yahoo.com
>Date: Thu, 5 May 2005 10:20:08 -0400
>To: Deborah Groban Olson <dgo@esoplaw.com>
>From: Steve Dubb <sgdubb@yahoo.com>
>Subject: iniitial comments/thoughts on fair exchange paper
>X-Spam: [F=0.0100000000; heur=0.500(-7300); stat=0.010; 
>spamtraq-heur=0.500(2005050411)]
>X-MAIL-FROM: <sgdubb@yahoo.com>
>X-SOURCE-IP: [66.163.169.226]
>X-Loop-Detect:1
>X-DistLoop-Detect:1
>
>Deb,
>
>I reviewed the draft document you sent out on the COG list.  I won't say 
>that I read it cover to cover thoroughly, but here are some initial 
>thoughts on it.
>
>First of all, I should start by saying that I am really impressed by the 
>work and that it is an important contribution to the field.  I also 
>learned a lot about the airline stabilization fund and the current 
>troubles of the Crocus fund in Manitoba, in particular.
>
>Anyhow, here are some initial thoughts on how to refine/revise:
>
>1)  Section 2 (Historical Precedents) should probably be limited to the 
>first two examples: the Homestead Act and the Tennessee Valley 
>Authority.  I would use these two cases to draw out the core principles of 
>the "fair exchange" framework. This will then allow you to focus more on 
>how these principles have been applied in more contemporary efforts.
>
>2)  The contemporary efforts (Conrail, Lockheed, Chrysler, Airlines, 
>Alaska/Alberta/labor funds) should be analyzed separately -- and I would 
>argue, organized thematically. In particular, I would organize three 
>separate chapters that bring out three key themes (which don't appear in 
>the text until pages 92-93):
>         a)  Fair exchange principles in acquisition (cash infusion)
>         b)  Fair exchange principles in distribution (cash distribution)
>         c)  Fair exchange principles in governance
>
>Using a thematic chapter approach would likely involve refering to your 
>cases multiple times, but this is OK.  I think the purely chronological 
>approach you are using tends to bury the key points you want to make -- a 
>thematic chapter appraoch will help bring these out more and more 
>carefully identify key issues.
>
>3)  The S&L Failure Case is an interesting counter-example, but the 
>section needs work.
>
>Organizational speaking, it would make sense for it to be a stand-alone 
>chapter with a title of something like: "The Price of Failing to Use Fair 
>Exchange Principles."
>
>But the S&L case is a complicated one.  Government helped create the 
>problem through regulation -- namely, interest rate ceilings that drove 
>deposits out and left S&Ls under-capitalized.  The "solution," of course, 
>proved far worse than the disease -- government essentially hoped that 
>S&Ls could close the capital gap through gambling, which, not 
>surprisingly, didn't work (and then there was corruption on top of that).
>
>But it's not quite clear to me what the "fair exchange" alternative would 
>have been.  As you point out, more rapid intervention (say in the early 
>1980s) would have reduced government losses many-fold.  But had the 
>government shut down the thrifts in a timely manner, other than saving 
>money, how would this involve "fair exchange" principles? (I can surmise 
>an answer, but you really don't spell it out).
>
>In other words, the S&L Case seems like an argument for sound government 
>regulation, but not necessarily for government investment in equity as a 
>way of stablizing business (fair exchange). The argument needs to be made 
>clearer here.
>
>One idea:  It might help to compare the S&L bail-out with the similar (but 
>far less disastrous) FDIC bail-out of the banking industry (Continental 
>Illinois, etc.).  What did FDIC regulators do right that the S&L 
>regulators did wrong?  Anyhow, that might be one approach to making the 
>argument clearer here.
>
>4)  Crocus Case:  I think it is good to mention the current travails, but 
>maybe this section can be cut back some.  Do you really want to emphasize 
>a failure case that employs "fair exchange" principles? You're kind of 
>arguing against yourself here and I'm not sure why. For sure, you don't 
>want to "cover up" the very public problems of the Crocus fund -- but a 
>little more balance would be helpful here.
>
>5)  Social Indicators:  I think you need to talk more about social 
>indicators, which do exist. You're right ... they are not as advanced as 
>economic indicators ... but job creation figures (albeit disputed numbers) 
>and other social indicators do exist -- it should be possible to get a 
>sense to which the claims made by the Labor Solidarity Funds or the 
>Alberta Fund regarding social returns are true and/or compensate for lower 
>economic returns.  Calvert, the Social Investment Forum (Co-op America), 
>Aspen, Coastal Enterprise, Self-Help, and various folks in Canada all have 
>data about this issue.
>
>6)  Alberta:  It is important to note that Alberta is the most 
>conservative province in Canada (It is often referred to as "the Texas of 
>Canada").  It is actually very surprising, for me at least, to read that 
>they adopted socialist-sounding principles in operating their fund.
>
>7)  One other thing about social returns:  It should be noted that, in the 
>United States, the argument has always been made that you can "have your 
>cake and eat it too."  In other words, the Calvert folks and others will 
>tell you that you can have the same economic returns while ALSO having 
>social returns. Your research seems to contradict this. If there are 
>examples (and I think there are, for instance, with economically-targeted 
>investments of state pension funds) of the successful pursuit of social 
>returns alongside high econnomic returns, you should highlight 
>these.  Tessa Hebb might be a good person to contact here.
>
>8) Graphs:  You need some of these.  One graph that is crying out load to 
>be created is a graph showing the percent of venture capital provided by 
>LSIFs in Canada -- the percentage is astonishingly high -- and a simple 
>graph would emphasize this point.
>
>9) Community Benefit Agreements:  I think these are highly important to 
>your "fair exchange" theme and probably merit their own chapter. If you 
>haven't already done so, you should check out Wayne State's Labor Studies 
>Center site, which has chapters on labor-community coalition efforts in 
>this direction in a number of U.S. cities.
>
>10)  FEESOP, FEEB, FECT:  Help!  Please get rid of these acronyms. I would 
>keep FEITPA (the legislation title), but having too many unfamiliar 
>acronyms makes your draft legislation almost unreadable.
>
>Instead of FEESOP, I would say: Fair Exchange ESOP (hereafter, referred to 
>as "The ESOP").
>Instead of FEEB, I would say: Fair Exchange Equity Board (hereafter, 
>referred to as "The Board").
>Instead of FECT, I would say: Fair Exchange Community Trust (hereafter, 
>referred to as "The Trust").
>
>The acronyms can be created by others at a later date (Don't worry, if 
>you're successful, in Washington the acronyms WILL be created at a later 
>date, whether you want them or not :-).
>
>I won't do the same thing with the state legislation ... but you get the 
>idea:  keep new acronyms to an absolute minimum to avoid reader confusion.
>
>11)  Implementation ideas (Currently this is your section 6):  I would 
>focus more on state-level pilots, rather than federal-level pilots because 
>-- at least in the short-run -- that's where the best opportunities 
>exist.  In fact, "Fair Exchange" sounds like the kind of idea that 
>Jennifer Granholm might run with ... so you might put a little more energy 
>into discussion of how experimentation could start at the state level (the 
>Ohio Employee Ownership Center, for instance, is a good example of this 
>kind of state initiative), which might then propel federal efforts.
>
>12)  One more organizational idea:  I would combine chapters 5 and 6 -- I 
>think they are similar enough (issues to resolve, potential allies to work 
>through those issues) that they could be handled in one chapter.
>
>OK.  Hope these comments are of some help. I don't know if you are going 
>to be in Baltimore for the Good Jobs First conference, but if you are and 
>would like to meet during the conference to discuss these comments, I will 
>be there and would be happy to do so.
>
>Good luck with revising and with your own confernce in October!
>
>Best,
>
>Steve
>
>P.S. I did not do a thorough proofing of the document, but I did discover 
>a few minor errata:
>
>Page 10:  I am pretty sure that "$12 billion" and $2.8 billion" should be 
>"$12 million and "$2.8 million".
>
>Page 11, first line after "A. Question Considered":  change "will, of 
>necessity, will" to "will, of necessity".
>
>Page 25, second paragraph, line 6:  Change "similarly period" to "similar 
>period"
>
>Page 74, last line before "E. Canadian Labor Sponsored Investment Funds":
>Change, "which is real if a hard to measure" to "which is real, although 
>hard to measure"
>
>Page 105, third paragraph, first line.  Change "crated" to "created"  --sd
>
>
>
>--
>Steve Dubb
>The Democracy Collaborative
>University of Maryland
>http://www.democracycollaborative.org
>(301) 237-2135


To subscribe to this or another of COG's discussion groups register at:
http://cog.kent.edu/register.html
To unsubscribe from this group send a message to majordomo@cog.kent.edu
with a single line in the body of the message that says:
unsubscribe homestead