‘AFTER 34 YEARS, A PLAINSPOKEN JUSTICE GETS LOUDER,’ by Adam Liptak in the N.Y. Times. About Justice John Paul Stevens. The last sentence is powerful stuff!

After 34 Years, a Plainspoken Justice Gets Louder

By ADAM LIPTAK

Published: January 25, 2010

WASHINGTON

Justices, 5-4, Reject Corporate Spending Limit (January 22, 2010)

The Supreme Court announced its big campaign finance decision at 10 in the morning last Thursday. By 10:30 a.m., after Justice Anthony M. Kennedy had offered a brisk summary of the majority opinion and Justice John Paul Stevens labored through a 20-minute rebuttal, a sort of twilight had settled over the courtroom.

It seemed the Stevens era was ending.

Justice Stevens, who will turn 90 in April, joined the court in 1975 and is the longest-serving justice by more than a decade. He has given signals that he intends to retire at the end of this term, and his dissent on Thursday was shot through with disappointment, frustration and uncharacteristic sarcasm.

He seemed weary, and more than once he stumbled over and mispronounced ordinary words in the lawyer’s lexicon — corruption, corporation, allegation. Sometimes he would take a second or third run at the word, sometimes not.

But there was no mistaking his basic message. “The rule announced today — that Congress must treat corporations exactly like human speakers in the political realm — represents a radical change in the law,” he said from the bench. “The court’s decision is at war with the views of generations of Americans.”

That was the plainspoken style of the last years of Justice Stevens’s tenure. In cases involving prisoners held without charge at Guantánamo Bay and the mentally retarded on death row, his version of American justice was propelled by common sense and moral clarity, and it commanded a majority. He was on the short end of the 2008 decision finding that the Second Amendment protected an individual right to bear arms, and he had mixed success in fighting what he saw as illegitimate justifications for discrimination against African-Americans, women and homosexuals.

Justice Stevens is the leader of the court’s liberal wing, and its three other members — Justices Ruth Bader Ginsburg, Stephen G. Breyer and Sonia Sotomayor — all joined his 90-page dissent. They must have been tempted to write separately as well, as the case was bristling with issues of particular interest to all of them. Instead, they allowed the spotlight to shine solely on Justice Stevens.

There was no such solidarity among the conservatives. Though Chief Justice John G. Roberts Jr. and Justices Antonin Scalia, Clarence Thomas and Samuel A. Alito Jr. all joined Justice Anthony M. Kennedy’s majority opinion on its main point, three of them added separate concurrences.

In his dissent, Justice Stevens said no principle required overruling two major campaign finance precedents. “The only relevant thing that has changed since” those two decisions, he wrote, “is the composition of this court.”

In Justice Stevens’s early years on the court, his views often seemed idiosyncratic, and he would often write separate opinions joined by no other justice. Over the years, though, he has emerged as a master tactician, and he came to use his seniority to great advantage. The senior justice in the majority has the power to assign the majority opinion, and Justice Stevens used that power with patience and skill.

This term, though, Justice Stevens has been more of a loner. Thursday’s decision, Citizens United v. Federal Election Commission, was only the 10th signed decision of the term. In the previous nine, Justice Stevens wrote separately and only for himself three times. On a fourth occasion, he was joined only by Justice Kennedy.

A theme ran through these recent opinions: that the Supreme Court had lost touch with fundamental notions of fair play. In two of the cases, Justice Stevens lashed out at the court’s failure to condemn what he called shoddy work by defense lawyers in death penalty cases.

On Wednesday, in Wood v. Allen, Justice Stevens dissented from a majority decision that said that a lawyer fresh out of law school had made a reasonable strategic choice in not pursuing evidence that his client was mentally retarded.

“A decision cannot be fairly characterized as ‘strategic’ unless it is a conscious choice between two legitimate and rational alternatives,” Justice Stevens wrote. “It must be borne of deliberation and not happenstance, inattention, or neglect.”

He made a similar point this month in a second capital case, Smith v. Spisak.

“It is difficult to convey how thoroughly egregious counsel’s closing argument was,” Justice Stevens wrote of a defense lawyer’s work. “Suffice it to say that the argument shares far more in common with a prosecutor’s closing than with a criminal defense attorney’s. Indeed, the argument was so outrageous that it would have rightly subjected a prosecutor to charges of misconduct.”

In the second case, Justice Stevens did vote to uphold the death sentence, saying that even a closing argument worthy of Clarence Darrow would not have spared the defendant.

That carefully calibrated distinction was of a piece with the view he announced in 2008 in Baze v. Rees, when he said he had come to the conclusion that the death penalty violates the Eighth Amendment. But he went on to say that his conclusion did not justify “a refusal to respect precedents that remain a part of our law.”

Thursday’s decision in the Citizens United case was more full-throated.

“The majority blazes through our precedents,” he wrote, “overruling or disavowing a body of case law” that included seven decisions.

Justice Stevens, who served in the Navy during World War II, reached back to those days to show the depth of his outrage at the majority’s conclusion that the government may not make legal distinctions based on whether a corporation or a person was doing the speaking.

“Such an assumption,” he wrote, “would have accorded the propaganda broadcasts to our troops by ‘Tokyo Rose’ during World War II the same protection as speech by Allied commanders.”

The reference to Tokyo Rose was probably lost on many of Justice Steven’s readers. But the concluding sentence of what may be his last major dissent could not have been clearer.

“While American democracy is imperfect,” he wrote, “few outside the majority of this court would have thought its flaws included a dearth of corporate money in politics.”

‘TIME TO TRIM JUNK-BOND HOLDINGS,’ from Kiplinger’s Personal Finance via fidelity.com.

Time to trim junk-bond holdings

BY ELIZABETH ODY, KIPLINGER’S PERSONAL FINANCE — 01/19/10

The leading high-yield manager of 2009 says these bonds are getting expensive.

A fund manager wedded to one sector of the market will almost always have something sunny to say about his spouse. Ask a tech-fund manager for a prognostication on tech stocks and you’ll surely receive a rose-colored response, just as you would from managers of technology funds or health-stock funds about their chosen sectors.

Managers who are exceptions to that rule are often worth listening to. That’s why it’s notable that Mark Notkin, manager of 2009’s best-performing high-yield-bond fund, Fidelity Capital & Income (FAGIX | , has been selling some of his junk-bond holdings and redeploying cash to stocks. The reason for Notkin’s moves is plain: “Valuations in the high-yield market look full,” he says.

Notkin’s record adds weight to his words. From the time he took the fund’s helm in mid 2003 through January 14, it returned 9.6% annualized, beating more than 99% of its peers. Granted, Notkin tends to be more aggressive than the typical junk-fund manager, venturing into the lowest-rated bonds and into deeply subordinated debt (bonds whose holders, in a bankruptcy scenario, are last in line to be paid).

But he can also position the fund defensively and allow cash to build — as he did in 2008, when cash holdings peaked at 20% of assets by the end of the year. That helped to contain 2008 losses to 31.9% (although that was still much worse than the average junk-bond fund’s decline of 26.0%). That also meant he had dry powder to put to work in early 2009, allowing him to add to junk holdings when prices were near bottom. The fund gained 72.1% for the year, well ahead of the average junk-bond fund’s gain of 46.8%.

To be clear, Notkin isn’t predicting doom for the sector. “I think the economy will slowly heal itself over 2010 and will return to a slow-growth environment,” he says. Against such a backdrop, most junk bonds will continue to pay their coupons, with prices holding their ground. But given that the junk market is currently pricing in a lasting economic recovery, anything less — such as a double-dip recession — “would be a shock to any market that has risk in it,” including junk, Notkin says. “That’s why I think this is a time not to be greedy and to pare positions.”

In addition to the money he’s putting in stocks — which represented 12% of assets at last report but have at times climbed to 20% of assets — Notkin is buying bank loans. Bank loans are junk-rated debt securities that are senior to other debt instruments and typically secured by cash or other assets, providing investors with a decent safety net in a bankruptcy. But what makes bank loans particularly appealing are their “floating” interest rates, which reset every few months with changes in certain short-term interest-rate benchmarks. That means bank loans hold up unusually well when rates are rising.

Although Notkin is concerned about the prospect of an inflation-driven rise in interest rates eating away at his fund’s returns, he points out that high-yield bonds hold up much better in such a scenario than many other types of bonds. “The higher a bond’s quality, the more sensitive its price to interest-rate movements,” he says. So, for example, a one-percentage-point rise in ten-year Treasury rates over the next year would pull Treasury investors’ total return into the red. But for high-yield investors, “it would cost you maybe 4.5% to 5% of principal, but you would still end up with a low-single-digit return for the year,” he says.

Given his conservative outlook for the U.S. economy over the next year, Notkin likes high-yield bonds that benefit from global growth, such as technology- and commodity-sector bonds. Domestically, he likes industries in which production has fallen to such catastrophically low levels that it has nowhere to go but up. That’s leading him to bonds of homebuilders and automakers.

Still, considering the sector’s enormous run-up, investors should consider locking in gains in their junk-bond funds and taking some money off the table.

‘IS THE “VOLCKER RULE” MORE THAN A MARKETING SLOGAN ?,’ by Simon Johnson at baselinescenario .com.

Is The “Volcker Rule” More Than A Marketing Slogan?

Posted: 24 Jan 2010 05:22 AM PST

At the broadest level, Thursday’s announcement from the White House was encouraging – for the first time, the president endorsed potential new constraints on the scale and scope of our largest banks, and said he was ready for “a fight”.  After a long tough argument, Paul Volcker appeared to have finally persuaded President Obama that the unconditional bailouts of 2008-2009 planted the seeds for another major economic crisis.

But how deep does this conversion go?  On the “deep” side is the signal implicit in the fact that Volcker stood behind the president while Tim Geithner was further from the podium than any Treasury Secretary in living memory.  Where you stand at major White House announcements is never an accident.

Increasingly, however, there are very real indications that the conversion is either superficial (on the economic side of the White House) or entirely a marketing ploy (on the political side).  Here are the five top reasons to worry.

Secretary Geithner’s spin on the Volcker Rule, Thursday night on the Lehrer NewsHour, is in direct contradiction to what the president said.  At first, it seemed that Geithner was just off-message.  Now it is more likely that he is (still) the message.

The White House background briefing on Thursday morning gave listeners the strong impression that these new proposals would freeze the size of our largest banks “as is”.  Again, this is strongly at odds with what the president said and seemed – at the time – to indicate insufficient preparation and message drift.  But who is really drifting now, the aides or the president?

At the heart of the substance of the “Volcker Rule,” if the idea is literally to freeze the banks at or close to their current size, this makes no sense at all.  Why would anyone regard twenty years of reckless expansion, a massive global crisis, and the most generous bailout in recorded history as the recipe for creating “right” sized banks?   There is absolutely no evidence, for example, that the increase in bank scale since the mid-1990s has brought anything other than huge social costs – in terms of direct financial rescues, the fiscal stimulus needed to prevent another Great Depression, and millions of lost jobs.  On reflection, perhaps the president really still doesn’t get this.

Since Thursday, the White House has gone all out for the reconfirmation of Ben Bernanke, whereas gently backing away from him – or at least not being so enthusiastic – would have sent a clearer signal that the president is truly prepared to be tough on big banks and their supporters.  Unless Bernanke unexpectedly changes his stripes, his reappointment at this time gives up a major hostage to fortune – and to those Democrats and Republicans opposing serious financial reform.

As the White House begins to campaign for the November midterms, how will they answer the question: What exactly did they “change” relative to what any other potential administration would have done in the face of a financial crisis?  How will they counter anyone who claims, citing Rahm Emanuel, that: ”The crisis is over, and we wasted it.”  No answer is yet in sight.

The Geithner strategy of being overly nice to the mega-banks was not good economics and has proven impossible to sell politically – the popular hostility to his approach is just common sense prevailing over technical mumbo jumbo.

But selling incoherent mush with a mixed message and cross-eyed messengers could be even worse.

By Simon Johnson