Government coercion in the financial blogosphere
I must be incredibly sleep-deprived because my last post overlooked a critical case in the financial blogosphere where the same issues of blogging and government coercion are at issue.
I completely forgot that the Implode-o-Meter sites are taking an enormous hit right now because of their coverage on the housing bubble. You may recall, back in July of 2008, the New York Times did a big spread in the article “Loan Pains Turned Site Into a Hit” on Implode-O-Meter founder Aaron Krowne. This article brought to everyone’s attention that, indeed, many saw this bubble and collapse coming and that some were writing about it in real time.
Unfortunately since then (and perhaps because of the notoriety from the article), Krowne’s team has been fighting off all manner of lawsuits. One case has already gone to the Supreme Court in New Hampshire, the self proclaimed “Live Free or Die” state of my college days. Another case is based right here in my home state of Maryland. So, I should have mentioned these cases in the prior article.
Below are just a few articles on the cases.
- Funny name aside, free press at stake – Nashua Telegraph
- Injunction Ordering Web Site To Remove Improperly Leaked Document – The Volokh Conspiracy
- New Hampshire Suit Challenges Mortgage Blogger’s Use of Anonymous Source – Poynter Online
- Fight Over Blog Comments Hits High Court – New Hampshire Public Radio
- New Hampshire Court Should Not Force Internet Site to Identify Anonymous Critic – Public Citizen
- Reporters Committee asks court to apply reporter’s privilege to Web site – Reporters Committee for Freedom of the Press
- Risky Mortgage Program Resurfaces in Congress – Washington Independent
Clearly, using the courts to force bloggers to reveal sources is a way of controlling the debate and suppressing information on what led to this crisis and who was involved. I am heartened that it is a private company filing suit here. In the TSA example, it was the government itself which was threatening to use the courts for its purposes.. However, the fact that there have been no successful major prosecutions related to the housing market’s collapse or related to the financial meltdown that came after should tell you something. Madoff is unrelated to the housing bubble and is merely example of the general laxity in regulation. Some would tell you that, because the financial meltdown was not foreseen, there were few criminal cases to be prosecuted. That is pure fantasy. John Kenneth Galbraith’s quote from the 1929 Crash is to the point:
"In many ways the effect of the crash on embezzlement was more significant than on suicide. To the economist embezzlement is the most interesting of crimes. Alone among the various forms of larceny it has a time parameter. Weeks, months, or years may elapse between the commission of the crime and its discovery. (This is a period, incidentally, when the embezzler has his gain and the man who has been embezzled, oddly enough, feels no loss. there is a net increase in psychic wealth.) At any given time there exists an inventory of undiscovered embezzlement in – or more precisely not in – the country’s business and banks. This inventory – it should be called the bezzle. It also varies in size with the business cycle. In good times people are relaxed, trusting, and money is plentiful. But even though money is plentiful, there are always many people who need more. Under these circumstances the rate of embezzlement grows, the rate of discovery falls off, and the bezzle increases rapidly. In depression all this is reversed. Money is watched with a narrow, suspicious eye. The man who handles it is assumed to be dishonest until he proves himself otherwise. Audits are penetrating and meticulous. Commercial morality is enormously improved. The bezzle shrinks."
It is no different today. If we want the bezzle to shrink, we need to take these issues of civil liberties and prosecuting fraud seriously. Otherwise, we will lose the very freedoms which we as a nation claim to champion here and abroad.