Coverture – The Word You May Not Know But Should.

Posted on | April 11, 2023 | 4 Comments

Mike Magee

All eyes were on Wisconsin – not last week, but in 1847. That’s when Wisconsin newspaperman and editor of the Racine Argus, Marshall Mason Strong, let loose in a speech on the disturbing trend to allow women the right to buy and sell property. It seems the state had caught the bug from their neighbor, Michigan, which was considering loosening coverture laws.

“Coverture” is a word you may not know, but should. It was a series of laws derived from British Common Law that “held that no female person had a legal identity.” As legal historian Lawrence Friedman explained, “Essentially husband and wife were one flesh; but the man was the owner of that flesh.” From birth to death, women were held in check economically. A female child was linked by law to father’s entitlements. If she was lucky enough to be married, she lived off the legal largesse of her husband. They were one by virtue of marriage, but that one was the husband, as signified by taking his last name.

The practice derived from British law. Women were held in matrimonial bondage in England with the aid of ecclesiastical courts and the officiating presence and oversight of an Episcopalian clergyman. This meant control over getting married as well as the capacity to escape a marriage marred by abuse or desertion. Not that there was much call for divorce. Britain was a divorceless society. The richy rich occasionally could be freed by a special act of Parliament. But this was exceedingly rare. Between 1800 and 1836, there were less than 10 divorces granted per year in England. For the unhappy rest, it was adultery or desertion.

The divorceless society held for the first half of the 19th century in most of the states below the Mason-Dixon line, with South Carolina being the most restrictive. But every New England state had a general divorce law before 1800, as did New York, New Jersey and Tennessee. “Grounds” (which varied from state to state) were presented in an ordinary lawsuit by the innocent party.

Demand for divorce grew as America grew in the first half of the 19th century. With mobility came hardship and “odious abuse’, and increasing recognition that “a divorceless state is not necessarily a state without adultery, prostitution and fornication. It is certainly not a place where there are no drunken, abusive husbands.” And then there was the issue of property rights and its ties to economic growth in this still young nation.

America was rich in land, which rapidly translated into a fast-expanding smallholder middle-class. Relationships could shift on a dime, resulting in property disputes and threats to the legitimacy of children and one’s heirs. The numbers of land owners, fueled by westward expansion were enormous, and each had a stake in society. When push came to shove, economics won out over Puritan instincts – but not without a fight.

There were plenty of voices like Yale’s President, Timothy Dwight, who in 1816, labeled ready divorces as “stalking, barefaced pollution…one vast Brothel; one great province of the World of Perdition.” But, in a male-dominated world that featured desertion, abuse, and confusion over children’s welfare and legitimacy, rights to property, and protection from a missing husband’s debt collectors, “married women’s property acts” began to appear.

The first surprisingly was in 1839 in Mississippi, that is until you learned that the liberalization involved a married women’s rights to “own and dispose of slaves.” In 1844, Michigan weighed in narrowly by protecting a women’s inherited or earned property from her husbands post-mortem debtors.

Three years later Marshall Strong couldn’t help himself, and from his perch in Racine, Wisconsin, editorialized that the “domestic sphere” is under attack, and the consequences will be dire. “Finer sensibilities” are on the chopping block and “every trait of loveliness blotted out.” Summing up a whole family collapse – men are being “degraded, the wife unsexed, and children uncared for.” These new married women’s property laws, he writes, already have played out elsewhere. “It exists in France, and … more than one-fourth of the children annually born in Paris are illegitimate.”

And yet, three years after Strong’s lament, seventeen states, including Wisconsin, had adopted their own versions of gender equalizing property laws. Why?

According to Friedman, “The real fulcrum of change was outside the family and outside the women’s movement…The number of women with a stake in the economy had increased dramatically.”

Nor was there a big uproar in this mid-century legal turnaround. As Friedman sees it, “Little agitation preceded them; great silence followed them. It was the silence of a fait accompli.” But in history, about faces are not uncommon, and “freedom walks” can flow in both directions.

Consider the past decade in Marshall Strong’s home state. In 2010, Scott Walker, the son of a Baptist preacher, assumed the governorship of the state and quickly rose to national prominence by aggressively opposing abortion rights and torching union rights to collective bargaining in the state. In 2016 he set his sites on the Presidency, but fizzled and withdrew within two months under withering attacks from Donald Trump.

One of Walker’s last actions however, before loosing a bid for a third term as governor, was to appoint conservative lawyer, Dan Kelly, to a seat on the Wisconsin Supreme Court being vacated by retiring Justice David Prosser. Kelly’s conservative radicalism on women’s autonomy and comparing affirmative action to slavery was apparently a “bridge too far”, and he lost his seat in the 2020 reelection bid to liberal Judge Jill Karofsky. This was only the second time an incumbent judge had lost reelection in Wisconsin in the last half century.

Not to be deterred, Kelly ran again last week, and once again went down by double digits, this time to liberal circuit court judge Janet Protasiewicz. Kelly had thus single-handedly (with an assist from Scott Walker) flipped control of the Court from 5-2 conservative to 4-3 liberal.

But Kelly did not go quietly. As he stated in his concession speech, “I think this does not end well.” He plans to return to his prior passion, providing legal cover to Republicans redrawing statewide electoral maps. As for Protaciewicz, she seemed well aware that the ghost of Marshall Strong lives on in Wisconsin, saying simply, “There is still work to be done.”

The Two Marks of “Repugnancy” – Trump and Dobbs.

Posted on | April 5, 2023 | Comments Off on The Two Marks of “Repugnancy” – Trump and Dobbs.

Mike Magee

This week’s very public indictment of former President Donald Trump was a substantial moment in American history, as much for what it wasn’t (a bloody spectacle as Trump had predicted) as for what it was (an opportunity for the likes of Senator Lindsey Graham to tearfully beg FOX viewers for donations, not for Trump, but for himself.)

But in such a politically charged environment, it would be easy to miss a major civics lesson that played out in broad daylight this week. This was the week that Judicial Review as a weaponized strategy of politics came back to bite its supporters.

Our American legal system is derived from British Common Law. It is based on “Case Law”, the gradual, continuous layering on of adjudicated resolutions to real-life disputes, which together constitute our nation’s “social development unfolding through time.” Our law and our culture are built in part on prior decisions or precedents.

The system to manage these cases has evolved over several hundred years. It is a shared responsibility of municipalities, states and our federal government, and possesses the power to bring citizens to heel. Though “no man is above the law”, various checks and balances including “presumed innocence”, “the right to legal council” and “due process” are embedded in our Constitution to counter-balance the heavy weight of government.

In courts across the land, crime and punishment are married in our system, and the weight of proven guilt varies greatly based on whether an offense is classified as a “misdemeanor” or a “felony”, and whether the judgement is part of a “civil” or “criminal” case.

Trump’s alleged criminal offenses – before, during, and after his Presidency – are of course historic and significant. But lost in the glare of this weeks legal circus was a more significant legal event that played out in Wisconsin on the very day of Trump’s arraignment.

It involves the process of Judicial Review. To set the stage, dating back to the early 1600’s, the British government took pains to reinforce that laws and ordinances should take care not to be “contrary and repugnant” so as to avoid loosing the faith and confidence of those governed.

By the late 1600’s, all laws generated by the 13 British colonies in America had to be sent to England for review, and if “repugnant” (as roughly 5% were) they would be disallowed. That same word – “repugnant” – was used six different times by Supreme Court Chief Justice John Marshall in the 1803 decision Marbury v. Madison, which codified for the first time Judicial Review in this country. The Court now had the power to, in effect, declare a law unconstitutional.

This week, “repugnancy” surfaced once again in fueling an historic defeat of Wisconsin’s conservative Judicial candidate, Dan Kelly. His 10 point defeat by liberal judge Janet Protasiewicz was largely the result of the Trump endorsement of his failed run in 2020 and the reinstatement of a Wisconsin “19th century-era ban on abortions” which took effect after the recent Dobbs decision overturned Roe v. Wade.

Judge Protasiewicz publicly opposed this law as “repugnant”. In winning, her 10-year term gives control of that state’s highest court to liberals for the first time in 15 years.

This is just the latest in a string of defeats tied to two markers of “repugnancy” – Trump support and Dobbs. The Dobbs decision turned on a Judicial Review dominated by conservative judges that were “stacked” into the Supreme Court, fulfilling a campaign promise by Donald Trump that he would only nominate judges that opposed Roe v. Wade.

Court packing on a federal level, and even more importantly by Republican leaders on the state level, has tipped the power of our nation toward minority rule, allowing repugnant leaders to seize control of our legal system. That power has been used over the past decade to allow passage of laws that attack existing rights such as women’s power and autonomy over their own bodies, or construct barriers that obstruct the popular will of the people. Examples include promoting extreme gerrymandering and voter suppression, dead ending the Dream Act, or allowing citizen access to weapons of war and a permitless gun-carry law in Florida.

The size of the defeat, especially in Wisconsin swing districts that Trump easily carried in 2020, is frightening to Republican party officials. Leaders like Charlie Kirk, CEO of conservative Turning Point USA acknowledged as much saying, “Trump arraigned . . . and Democrats flip Supreme Court in Wisconsin. Very bad day. No spin, no bs. Country is in collapse. We need God and dutiful action.”

But when our Founders created a tripartite government, carefully balancing the Legislative, Executive, and Judiciary branches as checks and balances against each other, they were not counting on divine intervention to finish the job. Their intent was to limit “repugnancy” tied to “tyranny of the minority” by leaders like Charlie Kirk.

What the Founders who supported federalism could not have imagined is that in a single week, 236 years after their signing of the U.S. Constitution, the nation would tack back toward majority rule and normalcy, by winning a local judicial election in one midwestern state only a few hours after indicting a former President for felony violations of New York’s state law.

In doing so, the Republican’s subversive strategy of Trump-enabled Judicial Review has misjudged the public. By going one step too far, they have inadvertently fueled a string of defeats, led by suburban women, that is fast becoming a death spiral for their political party.

Category: Uncategorized
Tags: american law > british common law > Dobbs > Don Kellt > janet protasiewicz > judicial review > Law History > Marbury v. Madison > repugnant > trump > trump imdictment > US Constitution > wisconsin judicial election

The Indictment of Donald Trump: Does It Signal A Course Correction For America’s Legal System?

Posted on | April 3, 2023 | 1 Comment

Mike Magee

Former President Donald Trump’s indictment this morning reinforces most Americans’ belief that “No man is above the law.” But few of us have taken the time to explore what that statement means when it comes to building a healthy nation, and why we believe it.

How do you create a healthy nation?

This is at once a very simple and a very complex question. It is at the heart of successful and failed nation building.

It applies equally to a self-assessment of our approach to rebuilding Germany and Japan as part of the Marshall Plan after WW II, and to our own struggles with autonomy and disparity in America where our very beginnings were (and continue to be) marred by a history of enslavement of blacks, forced migration and cultural destruction of Native Americans, and subjugation of women.

The law, a blend of agreed upon rules, regulations and boundaries, arose in layers over time, and reflected the communities where they emerged. Our own American legal system, on which we relied to launch this nation-building exercise in 1776, is dynamic and continues to evolve to this day.

As legal historian Lawrence Friedman wrote, “Despite a strong dash of history and idiosyncrasies, the strongest ingredient in American law at any given time is the present – current emotions, real economic interests, and concrete political groups.” It is then “a study of social development unfolding through time…”

When building a nation, some countries like France and Germany, relied on written codified rules, statutes or “rational instruments” on which they leaned to create order and to base decisions. But our laws, upon which this nation was built, if they have a basis, were descendant from British law.

Common Law in England was pluralistic, showing some variance in design and execution by geography. This is because Common Law was not “imagining the future” but “happening in the present” in response to real-life disputes that appeared as cases to be adjudicated and resolved by a judge.

Complexity of decision-making made the emergence of lawyers inevitable. They negotiated the space between citizens and rulers of the various communities. The “bar” (the lawyer collective) gave rise to the “bench” (the collective of judges) filled with local men of power and influence largely drawn from the bar. Together the bar and the bench formed a single guild that defined local justice by their rulings and kept the wheels of government moving.

Common Law became the law of the land in America by the Judiciary Act of 1789. Today it is sometimes referred to as “Case Law.” While Common Law derives from actual disputes and their decisions, it does not “make law.” A separate branch of our tripartite government, the Congress, is empowered to create a new law, which must be signed by the President for an Executive branch stamp of approval, to become official.

But what is the recourse for a decision or law that is deemed unjust? How is that challenged? That requires “litigation”, that is a challenge or “appeal” to a decision with request for a review and action by a higher “appellate” court. In America, the chain of appeal under our Constitution leads to the Supreme Court, the highest Court in the land. By action of the Supreme Court in Marbury v. Madison in 1803, the Supreme Court claimed the right to declare an existing law unconstitutional and so it has remained, last exercised in the recent Dobbs case.

When John Adams and his contemporaries were contemplating “nation building”, they were already aware that a range of legal practices, dating back to the British and Puritan derived customs of the early 17th century, were already wildly out of date, and that “one size fits all” might not work well for all 13 British colonies.

As legal historian Lawrence Friedman noted, “The legal needs of a small settlement run by clergyman clinging precariously to the coast of another known continent were fundamentally different from the needs of a bustling commercial state… Necessity was the supreme law maker for the colonies and niceties came later…”

Health was hardly a priority, or even an understood or workable concept, at the beginnings of this nation. Law on the other hand was “a utilitarian tool” to advance prosperity, enterprise and growth. After the signing of the Constitution in 1787, 11 of the 13 states rapidly drafted and approved their own state constitutions to replace their King’s charters. Not that these were in any way permanent or static. Louisiana for example is on its ninth constitution.

But what these actions did do in many of the states was to severely restrict the right to vote and “legalize” a solution to their labor needs on large plantations, legalizing a “slave code” already a century old. As early as 1662, in Partus Sequitur Ventrem (“offspring follows the womb”) the Virginia colony had affirmed that children of slave mothers were slaves themselves regardless whether their father was white and free. In 1671, Maryland courts declared that Christian conversion did not have the power to affirm “free status” on slaves…and so on down the line. The “slave code”, and the 3/5th of a person chattel status was there at, and before, and in some form ever since the birth of this nation.

Our culture defined our laws, and our laws reinforced our culture – with its residual racism, misogyny, gun violence, and cruelty (even to the point of separating immigrant children from their parents) – which continues to undermine our health as a nation.

So when we ask the question “How do we make a healthy America?” in these modern times, we are forced to retrace our beginnings, and especially our legal beginnings, to untangle how “our social development has unfolded over time.”

The British law, from which our’s was derived, took pain to reinforce that laws and ordinances should take care not to be “contrary or repugnant” so as to avoid loosing the faith and confidence of those governed. The over-turning of Roe v. Wade , extreme gerrymandering and voter suppression, legalizing citizen possession of weapons of war, and obstruction of sensible immigration reform like the Dream Act all take us in the wrong direction.

The indictment today of Donald Trump perhaps announces the beginning of a legal course correction.

Category: Uncategorized
Tags: Common Law > Dobbs > Dream Act > Gerrymandering > Judiciary Act of 1789 > Law History > Lawrence Friedmabn > Marbury v. Madison > Roe v. Wade > Slave Code > voter suppression > weapons of war

A Debt of Gratitude to Former President Trump. Here’s why…

Posted on | March 30, 2023 | 8 Comments

Mike Magee

No man is above the law! That is the screaming headline behind last evening’s indictment (first of many) of former President Donald Trump.

Donald Trump, for a time, sat himself in the middle of America’s triangle of power. From his seat as President, he installed himself as “a Golden Idol” and had a commanding view of the Executive branch of government. He then subverted the Justice Department and directed therm as a “strike force.” By aligning with the Federalist Society, the Christian Right and Mitch McConnell, he was able to stack the Judiciary and deliver a promised reversal of Roe v. Wade. But that federal overreach, which included rejecting 50 years of precedent and compromising women’s freedom and autonomy over their own bodies, fueled his undoing. It led to a resounding 2020 Trump defeat and Republican statewide under-performance in the 2022 Mid-term elections.

It also triggered a first ever President-led armed insurrection on January 6, 2021. But in a real-life “Democracy stress test,” this is the week when one of our three branches of government finally broke the spell and delivered a message to all Americans that no man is above the law.

Consider the record:

First, our citizenry pried the Executive branch free of Trump in 2020.

Second, our Judiciary, including state and federal courts, have rejected nearly 100 bogus cases led by unethical lawyers on Trump’s behalf, and have now indicted (for the first time in our nation’s history) a former President. Multiple indictments of a now, unprotected and disgraced Trump are certain to follow. Along the way, hundreds of violent and disgraced fringe followers have been secured behind bars.

Third, a Republican led Congress has been forced to cooperate on real issues in secrecy, while publicly feigning continued fealty to Trump and a small band of farcical Trump look-alike’s intent on driving their party over the cliff. With their hero now publicly indicted, expect this small band of most ardent Congressional supporters to suddenly lose their voices. And as Trump losses mount, expect these actors to evaporate and slink back into the cracks of our society.

James Madison, author of Federalist No. 51, predicted as much.

On February 8, 1788, he wrote: “If men were angels, no government would be necessary… the great difficulty lies in this: you must first enable government to control the governed; and in the next place oblige it to control itself.”

It has not been easy on any of us, and the job is not yet done. Our Judiciary has a complicated road ahead and must see it through. Our Congress must take lessons learned and advance legislation to curtail future Executive abuses and ensure that voting access is secure in all fifty states. And the election of 2024 must lay the groundwork for reasserting women’s freedom and autonomy, sensible gun policy, and sound immigration policy.

But in the meantime, thank you, Donald Trump! Your service, in stress testing the durability and resilience of our Democracy, has been invaluable. Thanks to you, we have uncovered a range of weaknesses in our design, which we will correct.

But as important, we have stood up to you, a Bully and a Golden Idol, and in so doing have proven to each and every one of our citizens that “No man is above the law.”

Our Democracy for certain is a work in progress, but your place in history is permanently secured– the only President ever to be indicted in the history of the United States of America.

Category: Uncategorized

“If Men Were Angels…” American Democracy Will Pass This Stress Test.

Posted on | March 27, 2023 | Comments Off on “If Men Were Angels…” American Democracy Will Pass This Stress Test.

Mike Magee

As we enter a new and potentially historic week, with a former President doing his best to reignite a Civil War in our nation, we do well to take a breath and reread James Madison’s words from Federalist No. 51. But first, a few words of history.

When it came to checks and balances in this new national experiment in self governance, the Founders, while establishing three co-equal branches, left one of those branches the task of defining by practice its own power and influence.

The new Constitution in 1787 awarded one branch, the elected Congress, the daunting power to impeach, convict and remove representatives or appointed federal officials for due cause up to the President himself. But it also empowered a second branch, the Executive, through its President, veto power to check legislative excesses and the privilege of initiating appointments to the federal judiciary. Only the third branch of the government, the Judiciary, was left deliberately “elastic,” destined to grow into “the triangle of power.”

Thirteen years later, on February 17, 1801, Congress was forced to break a tie in the Electoral College vote, resolving a Constitutional crisis and declaring a victor in one of “the most acrimonious presidential campaigns” in U.S. history. Thomas Jefferson was awarded the victory, and John Adams acquiesced and was sent packing a month later. But two days before he departed, Adams unloaded multiple appointments of circuit justices and justices of the peace which the U.S. Senate quickly confirmed on March 3rd. In the rush, Adam’s Secretary of State, John Marshall (soon to become Chief Justice Marshall of the Supreme Court under President Jefferson) didn’t have time to complete a final necessary step, delivering the commissions, to some of the appointees.

When Jefferson took office on March 4th, and saw the opportunity to block some judgeships on the technicality, he instructed his new Secretary of State, James Madison, to not deliver the commissions. One of those prospective new judges, a Maryland businessman, William Marbury, after trying to unlock his commission for several months, filed a lawsuit in December, 1801 demanding that his commission be delivered through a “writ of mandamus.” ( “an order from a court to an inferior government official ordering the government official to properly fulfill their official duties or correct an abuse of discretion.”)

Eventually the case came to the Supreme Court and John Marshall delivered the unanimous verdict on February 24, 1803 in Marbury v. Madison.

In short, William Marbury did not get his judgeship, but not because he didn’t deserve it. He did, and the decision said as much. But the Court also recognized that the authority that Section 13 of the Judiciary Act of 1789 had granted the Court to issue “writs of mandamus” (and effectively force Secretary of State Madison to deliver the appointment) was unconstitutional.

This was because Article III of the U.S. Constitution (signed September 17, 1787) made clear that the Supreme Court had “original jurisdiction over cases only where a U.S. state is party to the lawsuit.” As legal experts have explained: While the decision “limited federal court’s jurisdiction, it cemented the Court’s status as the ultimate interpreter of the Constitution.”

William Marbury’s loss became our nation’s gain. Our third branch of government, in finding its voice, defined its own powers. As Justice Marshall wrote “It is emphatically the province and duty of the Judicial Department to say what the law is…a Law repugnant to the Constitution is void.” As law historian Lawrence Friedman wrote, “Here for the first time John Marshall in the U.S. Supreme Court dared to declare an act of Congress to be unconstitutional.”

Donald Trump, for a time, sat himself in the middle of America’s triangle of power. From his seat as President, he installed himself as “a Golden Idol” and had a commanding view of the Executive branch of government. By aligning with the Federalist Society, the Christian Right and Mitch McConnell, he was able to stack the Judiciary and deliver a promised reversal of Roe v. Wade. But that federal overreach, which included rejecting 50 years of precedent and compromising women’s freedom and autonomy over their own bodies, fueled a resounding 2020 Trump defeat and Republican statewide under-performance in the 2022 Mid-term elections.

It also triggered a first ever President-led armed insurrection on January 6, 2021. But in a real-life “Democracy stress test,” this may be the week when our three branches of government finally deliver a message to all Americans that no man is above the law.

First, our citizenry pried the Executive branch free of Trump in 2020.

Second, our Judiciary, including state and federal courts, have rejected nearly 100 bogus cases led by unethical lawyers on Trump’s behalf, and are nearing multiple indictments of a now, unprotected and disgraced former President.

Third, a Republican led Congress has been forced to privately cooperate on real issues, while publicly feigning continued fealty to Trump and a small band of Trump look-alike’s intent on driving their party over the cliff.

So what did James Madison, author of Federalist No. 51, have to say about all this?

On February 8, 1788, he wrote: “If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In forming a government which is to be administered by men over men, the great difficulty lies in this: you must first enable government to control the governed; and in the next place oblige it to control itself.”

Trump is a stress test, and our nation is rising to the challenge. We are gradually, slowly and painfully, learning to “control ourselves” by enforcing our laws. Democracy is a work in progress.

Category: Uncategorized
Tags: Democracy > James Madison > Justice Marshall > Marbury v. Madison > stress test > U.S. legal history > writ of mandamus

Deregulation – The Beginning and End of Silicon Valley Bank (1983 to 2023)

Posted on | March 22, 2023 | 4 Comments

Mike Magee

To know Silicon Valley Bank – SVP (prior to its dramatic demise) is to understand the world of tech start-up’s – their needs, appetite for risk, human behaviors, and the rapidly changing and dramatic world of technologic breakthroughs.

The bank itself was four decades old created in 1983, in Silicon Valley, for Silicon Valley. Before its collapse a few weeks ago, it was the bank of choice for almost 50% of all life science oriented tech companies launched by venture capitalists in the US.

Life science and health start-up’s were a specialty of SVB, and cornered 12% of its $173 billion in deposits. But these are unusual and challenging customers. They are married to “reverse lending.” That is to say, a health tech entrepreneur might show up on your door step with a big dream in a field where only 1 in 10 succeed, and open an account with $25 million in venture capital dollars in hand, and ask you to be their bank of record. They then begin immediately to draw down the money to realize their dream, which, if successful in early stages, will require raising much more money.

The SVP bankers, venture capitalists, and start-up entrepreneurs lived together in this risky, high-flying ecosystem and were committed to mingling with each other. As one of their clients said, “If you’re trying to raise money and you want to go to a conference and meet 100 investors, not five investors, that’s the place to go.”

But the Harvard Business types say that this type of non-diversified hyper-specialization, with its super-fast digital banking infrastructure, is exactly what allowed SVB’s “loyal customers” to withdraw $42 billion in assets in a single day, leaving it $1 billion in arrears. As HBS professor Paul Gompers wrote, “the hyperconnected nature of SVB’s clients meant that a run on the bank could happen virtually instantaneously.”

Arguably, SVP bankers and their elite bench of health-tech analysts knew the start-up business in this discipline from start to finish. Their website featured a range of products and services, assessment tools and strategic visioning that, on their own, justified the customer fees. But in addition, the bank understood that these customers had special needs in cash management and wealth management, VC relationship building, and lucrative transitioning into IPO offerings if they got that far.

Yet, as 2022 arrived, there were clouds on the horizon. SVP laid it out, but with rosy bracketing. In their lead, they wrote: “Dramatic shifts over the past nine months indicate that a market rebalancing is underway, with investments and valuations lowering from 2021’s boom. However, the healthcare industry is more resilient during periods of downturn and remains ripe for innovation.”

Their three key takeaways were:

1) “Investments are down but rebalanced from 2021 with shifts to earlier stages.”

2) “IPO window shut, but M&A on the rise…After a record 19 IPOs in 2021, market conditions and poor returns brought healthtech IPOs to a halt in 2022.”

3) “Mental health valuations and deal sizes up despite broader downturn.”

Still as the new year approached, and inside the bank, warning signals had begun to flash, SVP analysts, seeing AI taking off everywhere, banner headlined that “Virtual and Hybrid Care Are Here To Stay.” As they saw it, “Now that virtual care is ubiquitous in 2022, investment is shifting to companies delivering quality outcomes. Mature alternative care companies must not only prove their profitability but also their ability to take on risk and accountability with buyers to deliver quality outcomes.”

Under the hood though, according to a Forbes report, issues dating back to Covid and 2019 had caught up with bank management. Forbes later reported that “From 2019 to the end of 2020, SVB’s assets, meaning loans, credit facilities, securities, and other investments grew 63%. And from 2020 to the end of 2021, total bank assets grew over 83%. This significant asset growth happened in years when Covid-19 caused death, illness, and lockdowns. Loans alone grew almost 114% from 2019 to 2020 and then almost 30% from 2020 to 2021…With a rise in assets comes more risk. What should have also caused eyebrows to raise was when risk weighted assets went up 13% at a time that asset size barely moved from 2021 to the end of 2022.”

What was missing here say experts wasn’t health sector chops but basic Banking 101: Gap Analysis – assessing a bank’s liabilities versus assets under various interest rate scenarios. Records now show that SVB losses in the fall of 2022 hit $100 million due to asset valuation decline. This triggered a bargain basement sale of $1 billion in securities on March 8, 2023, and the rest is history.

Not everyone was caught in the lurch. As Barron’s reported, SVP CEO Greg Becker unloaded 12,451 shares at $287.42 a share and pocketed $3.6 million. Adding insult to injury, the source of those shares were stock options exercised that day that were pegged at $105.18 a share. That was 2 weeks before the bank was shut down.

Adding to the irony, in a bipartisan move several years ago, Congress raised the monetary threshold for mandatory government stress testing in 2018 for medium size banks like SVP over the loud protests of Senate banking expert Elizabeth Warren. This type of predatory deregulation was (no doubt) applauded and all too familiar to many of SVP’s original health sector clients who remember as far back as 1980 (three years before SVP was launched) when Senators Bob Dole and Birch Bayh released government patents to NIH funded scientists triggering a new field – biotechnology. The full effect was captured 25 years later in a classic article in The Economist titled “Bayhing for blood or Doling out cash?”

But as Forbes analyst Mayra Rodriguez Valladares suggested, what goes around comes around. Her last word: “All those politicians and bank lobbyists who were successful at lowering liquidity stress requirements for banks under $250 billion assets must be very proud now. I sure hope that they go help all those depositors who cannot access their funds and those who will now be in the unemployment line, especially in California.”

Category: Uncategorized
Tags: Bayh-Dole Act > biotechnology > deregulation > Dodd Frank Deregulation > Elizabeth Warren > Gap Analysis > Health Tech > mayra rodriguez valladares > Paul Gompers > Risk Assessment

AMA/PhRMA v. Federalist Society – Let The Witch Trials Begin!

Posted on | March 15, 2023 | 2 Comments

Mike Magee

The law is a funny thing. When British settlers first arrived on our eastern shores in 1607, their clergy-led bosses struggled to establish the rules while “clinging precariously” to life itself. Where did the rules come from in the decades that followed? Some were derived from folk law. Others were indigenous (unique to the new land and circumstances.) And others still evolved from ever-changing belief systems.

The land these settlers came from had lawyers who bridged the gap between an aristocracy that created the laws and a citizenry subjected to the laws. As for judges, they were recruited from the lawyers guild, a literal “bench” team. Cynics say that purposeful complexity and inaccessible language and syntax provided lawyers an “excuse for existing.”

As societies grew in size and complexity, the need for fresh settlers reinforced that the laws and ordinances should not be needlessly bloodthirsty, or in British parlance, “contrary or repugnant to the laws and statutes of this our realm of England.” And while most all acknowledged England as the source point for the law, the stubbornly independent colonists molded a wide range of different systems as varied as the many colonies that had been granted charters to operate.

But “stubbornly jealous of self rule”, as one expert explained, “colonial law was more a child of English law than a subordinate.” Power and privilege, and maintenance of the status-quo, was reinforced by those who made the law. In the fertile land rich colony of Maryland, for example, slaves were confirmed a “capital asset” able to be sold, gifted, and used as collateral for loans as early as 1671.

Bad laws beget worse laws. Take for example the fallout of the 1896 decision of Plessy v. Ferguson that, in establishing the policy of “separate but equal” sent our nation down a trail to apartheid. Should we have been surprised then that some years later, as Berkeley historian Leon F. Litwak recounted, one Will Mathis, a white man convicted of a capital crime, demanded that he not be forced to use the same gallows rope as had just been sullied by the neck of a black victim – so thorough and penetrating was the stain of that prior decision as to spawn a demand for segregation by execution.

Presidents throughout our history have been frequently disappointed with the decisions made by the judges they themselves appointed. That is likely not the case with Donald Trump, whose appointees (Neil Gorsuch/2017, Brett Kavanaugh/2018, and Amy Coney Barrett/2020) all carried the seal of approval of uber-conservative Federalist Society – a vast political network with chapters at 200 law schools with 10,000 student members and 65,000 lawyer members in 90 U.S. cities. Few were surprised by their role in overturning Roe v. Wade as part of the recent Supreme Court Dobbs v. Jackson Women’s Health Organization decision. Nor was it surprising when Clarence Thomas signaled on the day of the decision that this was just the beginning.

As suggested above, bad law(yers) beget worse law(yers). And that has proven to be the case in 2023. Back in the middle of Trump’s Federalist Supreme Court takeover, another lesser Justice received Senate approval. His confirmation hearing revealed that he was a Conservative Christian, anti-abortion warrior and the co-founder of the Fort Worth, Texas chapter of the Federalist Society. His name is Matthew Kacsmaryk.

His back story includes his 17-year old sister’s traumatic teen pregnancy, birth and adoption of the child, followed by uber-conservatism ever since. The Amarillo Division of the US District of Northern Texas was chosen deliberately to argue a case sponsored by members of the Republican Governor’s Association for one reason, and one reason alone. Its only district superior court judge is Matthew Kacsmaryk. Judge shopping tactics have long to part of the Federalist Society’s playbook.

The case, which began this week asks the court to overrule the FDA which, in 2000, approved the safe and effective use of mifepristone as part of a two drug regimen to induce abortion. 53% of all US abortions were medication induced in 2022, up from 37% just five years earlier. The plaintiffs say the FDA should have never approved it and that they ignored serious side effects. The AMA and its Federation members, the Public Health community, and the FDA say that the drug, with two decades of use, has proven the regimen is safe up to 10 weeks gestation.

Pharma execs like Jeremy Levin point out that there is more at stake here than curtailing a small radical fringe element. In his words, “Here, you’re not just challenging the right for a woman to treat a pregnancy or to treat miscarriage; you’re also now challenging the primacy of the FDA to approve vast, important medicines that are critical to our society’s health, and that has a fundamental impact on the entire nation.”

Former FDA associate commissioner Marc Scheineson is a bit more blunt. He says, “This is probably round one of a 12-round heavyweight boxing match. You want the court to decide what drugs are safe and effective? Well, good luck to all of us.”

Legal historian, Lawrence Friedman, reminds us that “Life in the colonies was precarious at first…In the beginning, in tiny, starving, beleaguered settlements, there was nothing like a sophisticated notion of separation of powers. The same people made rules, enforced them, handled disputes, and ran the colony.”

The Federalist Society’s attempted coup, with its tiny Amarillo size outposts across the nation linked by the Internet and Puritan style passions, is looking to recreate a vertical network with exclusive, Jurist-directed control over rules and regulations for a resistant vast majority. That’s the kind of system that ultimately led to witches’ conflagrations in earlier times.

Wise law however is a “rational instrument” and “underlies all modern systems” We are on a slippery legal slope at the moment. We would do well to remember that “all modern societies are governed by and through laws.”