Bulls & Bears Make Money; Corporations Get Free Speech?

Good Morning: I will briefly dispense with yesterday’s muted market activity before tackling a recent Supreme Court decision that could vastly extend corporate influence in political campaigns. I think we can use the very logic offered in the majority opinion to hoist those five Justices by the own petard.

Compared to the harrowing decline and sizzling rally after the unemployment figures were released on Friday, Monday’s market action was almost boring. With no economic data scheduled for release, and with stock markets overseas mixed (Asia down; Europe up), U.S. stock index futures correctly foretold a mixed opening in New York yesterday. The averages hovered just over and under the unchanged mark until the final hour of trading. Some fresh worries about Greece , courtesy of a rumor that had Deutsche Bank refusing to lend to Greek banks in the Repo market, seemed to weigh on stocks late in the session. The sell off that ensued left the averages with losses ranging from – 0.7% (NASDAQ) to -1.1% (Russell 2000). Bonds were little changed, as was the dollar. Only commodities could buck the dullness, and the CRB index rode the strength of the grain markets to a gain of 1.1% on Monday.

Amendment I
“Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.” (First Amendment to the Constitution of the United States)

This space is usually reserved for opinions that try to take the high road when discussing high finance, but today I ask for indulgence as I stroll down the low road of political finance. Let me say from the outset that I am a patriotic defender of our nation’s Constitution, as well as the first ten amendments to it that are more commonly known as “The Bill of Rights”. These documents are simple, elegant, and powerful. And, unlike almost every piece of legislation authored today, copies of them can comfortably fit in one’s pocket or purse. Embracing an enduring form of brevity, our Founding Fathers were green in a way that should make the modern lawmaker envious.

I am an ardent supporter of the rights bestowed by “We the People” to citizens of these United States by the First Amendment to the Constitution. I benefit from its protection every time I use this forum to convey my views and opinions. Because I have so much respect for our Constitution and the Bill of Rights, I am usually sympathetic to judges who hail from the “strict constructionist” wing of jurisprudence. As opposed to those judges who use modern interpretations of the Constitution to enable them to legislate from the bench, a strict constructionist tries to rule based on laws as they are written. Judges of this philosophical bent are usually fonder of precedent than are those who wish to give either older legislation or even the Constitution itself a face lift based on the “spirit” of said law. The make up of our sitting Supreme Court is said to contain more strict constructionists than not.

Corporate Campaign Spending Backed by U.S. High Court

Imagine, then, the shock with which lovers of either free speech or strict constructionism (or both) viewed this recent ruling by the Supreme Court in “Citizens United v. Federal Election Commission”. In a 5-4 decision, the Supreme Court ruled that corporations no longer are bound by decades of precedent that restricted their influence over elections to voluntary contributions made by individuals in said corporation to a Political Action Committee (or PAC). Now, says the Supreme Court, corporations will be able to spend whatever general corporate funds they deem necessary to take to the air waves and target an ad campaign for or against any issue about which they would like to persuade the voting populous. What were the folks on the High Court smoking?

The rationale, if one could call it that, seems to be one which very strictly interprets the First Amendment: “Congress shall make no law…abridging the freedom of speech…” From the majority opinion, penned by Justice Kennedy:

“The government may regulate corporate political speech through disclaimer and disclosure requirements, but it may not suppress that speech altogether,” Kennedy wrote.

Defenders of free speech were dumbstruck by the ruling, but I, for one, will not remain mute. After reading again our Constitution and its Amendments, I have one simple question: How can a corporation be granted the same rights under law that are expressly and only reserved for individual citizens?

The Constitution of the United States
The Bill of Rights

Corporations, though composed of individuals bearing rights, are not citizens. Ergo, their “speech” is not protected. From newspaper stands to members of the S&P 500, corporate entities do not have rights granted them by our Constitution. You don’t have to trust me on this issue; read for yourselves what our Founding Father proscribed for our democratic republic in the core documents that endure more than two centuries after their ratification in 1789. Rights are bestowed upon individuals, first and foremost, and the only entities conveyed any rights or roles in governing those individuals are the following: both houses of Congress (the legislative branch), the President (the executive branch), the Supreme Court (the judicial branch), and State governments. That’s it. Nowhere will you find the word “corporation”, nor will you find a reference to any entity even faintly resembling the eighteenth century equivalent of a Dow 30 constituent.

There are many other reasons why this ruling ranges from the puzzling (i.e. can money be considered speech?) to the dangerous (corporate PACs and lobbies already have undue political influence, so this ruling will only encourage citizens to believe — rightly or wrongly — that corporations “own” the political system). This ruling will be corrosive to the ties that bind us all. Many already suspect — again, rightly or wrongly — that the banks lobbied to have financial regulations stripped away in the decade prior to the financial crisis, only to come running for a taxpayer-funded bailout when the system their campaign donations helped design came apart at the seams in 2008. Giving corporations even more power and political influence will only cause this nascent mistrust to spread.

But rather than fight the corporations (though we, as shareholders, should at least try to stop them from spending our undistributed profits on politics), perhaps our best chance lies in using the strict constructionist argument against the Justices themselves. I hope someone like Charlie Rose can persuade Justice Kennedy or Chief Justice Roberts to be interviewed during their next break. If Mr. Rose can use the Socratic method to ask them about the Constitution, their adherence to strict constructionism, and just where in the document we can read about “corporate political speech”, then the silence that follows will be something to behold. If the Justices want to strictly interpret the Constitution, then they must – by their own logic — agree that only individuals are granted rights under it.

Unless these Justices can be shown the folly of their ways (and it’s an extreme long shot), then the only other avenue for reversing this ruling involves the drawn out process of passing a Constitutional Amendment. Despite the recent bluster you saw during the State of the Union address, don’t count on Congress for help. It would be easier to find a “man bites dog” story than to see our elected officials try to sew shut the pockets that finance their careers. Sadly, it just might be this newly legal form of corporate campaign finance that enables incumbents to survive during the fall elections. So unless voters decide to throw off their apathy and clamor for a Constitutional Amendment, perhaps throwing out the entrenched politicians on both sides of the aisle this autumn will suffice. Without action of some sort, there is a risk that a growing number of Americans will feel disenfranchised by corporate political influence. How such a group will some day seek to “redress their grievances” is anyone’s guess.

— Jack McHugh — on the lighter side of Constitutional matters, please read both the article below and the accompanying passage from our Constitution. I wonder if the Maestro ever received Congressional approval before he was knighted by Queen Elizabeth for his “contribution to global economic stability” in 2002? Not only was his Knighthood for “economic stability” a tad premature, it may have been — to a strict constructionist — unconstitutional.

Knighthood for Fed’s Greenspan

“No Title of Nobility shall be granted by the United States: And no Person holding any Office of Profit or Trust under them, shall, without the Consent of the Congress, accept of any present, Emolument, Office, or Title, of any kind whatever, from any King, Prince, or foreign State.” (Article I, Section 9, Paragraph 8 of the Constitution of the United States)

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