- Introductory Remarks by Donal Boudreaux
- Presentation by Vern McKinley
- Presentation by Steven Halbrook
- Closing Remarks by Donald Boudreaux
Good morning everyone. Thanks for coming. My name is Donald Boudreaux, Im the moderator of the panel. Im a professor of economics at George Mason University which I'm happy to say is outside of the Beltway but just barely. The topic this morning is timely, obviously, and we have a great panel. I'm not sure how its listed in the program, but Vern McKinley will speak first. He has to rush out immediately after his talk because of some radio interviews that were scheduled, so well let Vern go. Ill introduce him and then our next speaker, and then Ill conclude at the end.
Vern McKinley is a research fellow at the Independent Institute, and author of the book Financing Failure: A Century of Bailouts. Thats discouraging. From 1985 to 1989, he worked with the Board of Governors at the Fed, the Federal Deposit Insurance Corporation, Resolution Trust Corporation, and the Department of Treasurys Office of Thrift Supervision. In 1995, Vern graduated with honors from George Washington University School of Law. Vern has been credited with predicting, in 1997, that the structure of Fannie Mae and Freddie Mac would one day lead to the meltdown of the two institutions. What a wacky prediction that turned out to be. He is a plaintiff of four Freedom of Information Act suits, against the FDIC, Board of Governors of the Fed, and the Federal Housing Finance Agency, to release details on the bailouts. He has testified for the U.S. Congressional Subcommittee on Commercial and Administrative Law on issues related to U.S. bankruptcy policy. I havent yet read his book, but Im eager to do so, particularly given what Ive just heard is in and what is not in it.
Thank you, Don. What I'm going to try to do to begin with is anticipate one of your first questions and that is, well, Vern, this is 2012, [and] all these bailouts happened back three, four years ago in 2008 and 2009. What took you so long? Whats the problem? Why couldnt you get this book out a little earlier? And my answer, which is up here, is: our government didnt cooperate with me. This is one of the documents I tried to get from the government, like everybody else in late 2008, as I was observing the whole mess with the financial crisis. I started thinking about it and started writing about it and as part of that, I asked for some documents from the government and in particularly this one is from the FDIC. Their excuse for bailing out this institution, Wachovia, was that there was systemic risk, which is a fancy way of saying a lot of crazy things were going to happen if they let Wachovia fail. They gave me about 10 to 12 pages of minutes from meetings and memos, and as you can see about 80 percent or 90 percent of it was whited out. Luckily, after about two years I finally did get the full memo, the full meeting minutes, or else this wouldnt have been a very interesting book if I wouldnt have gotten some of these details. So that was one example.
We got the Judicial Watch logo; the lawyer that helped me out is over here, Michael Bachicha, this was another interesting one. This is the regulator of Fannie Mae and Freddie Mac, which Don mentioned. They initially didnt give me anything, and after the district court in DC compelled them, they gave me some things; they were only about 75 percent or 70 percent whited out, which was an improvement over some of the other stuff, and actually I never did get anymore than this in the previous example there. We ended up getting the entire document and its amazing how pitiful the justification was for these bailouts. It was a lot of general language about how bad the economy was and a lot of speculation about what might happen, but there was really no connecting of the dots between what they said was going to happen, which was a lot of bank failuresand any evidence in any of the documents that they had.
So lets talk a little bit about the Depression. A lot of people mentioned the Depression and in particular, the information that was available back in the Depression in the initial decades right after the Depression. The narrative was, Well, capitalism failed. There were some bailouts back then, remember. Don said there was a century of these bailouts, and they helped things, but then as the decades passed that information became available, in particular Milton Friedman and Anna Schwartzs book and Murray Rothbards book. In the 1960s, we finally got the information that the Federal Reserve had not only caused the crisis, but it had made it worse. So with this crisis, I think were not going to have to wait three decades. Initially a lot of the information right back in 2008 and 2009, it was solely brought out by the bailout agencies, whether it was the Fed, the FDIC or the Federal Housing Finance Agency.
Another group that had their time on TV talking about the bailouts is what I call cafeteria capitalists. This is kind of like a cafeteria Catholic who picks and chooses what parts of Catholicism that they follow, and similarly these cafeteria capitalists pick and choose what parts of capitalism they like. They really like capitalism when its going well for them and they make a lot of money, but when things go badly, theyre the first ones to go running to the government and ask for help. And in my documents that I was able to get from the government, there were lot of emails from these types of people. Usually their names are redacted out for personal reasons, but theyre essentially giving a laundry list to either the Fed or the FDIC of the things that they want to have happen.
In this group of cafeteria capitalists, politicians and bailout agencies had a relatively consistent narrative. They said, Well, I know it looks like we just bailed out all these Wall Street banks, but really we were trying to help out Main Street. And a lot of this language has been used by Chairman Bernanke at the Fed. Another part of this narrative was that they saved us from another Great Depression, which I found no evidence in my research of that. And then also, the challenges that they faced were unprecedented, that we had never seen anything like it before, and of course there were couple of early books on the crisis, maybe youve read some of these: Too Big to Fail, Andrew Ross Sorkin, the New York Times wrote; In Fed We Trust, David Wessel of the Wall Street Journal. And these books essentially accept this whole narrative that the agencies and the cafeteria capitalists and the politicians were spreading around. It may not be their fault entirely that a lot of the information, as this slide shows, really didnt come out until 2010, and this is a lot of the source material that I used in my book. Secretary Paulson, I mean, you may disagree with a lot that he did, but he certainly was pretty honest and almost brutally so, in how difficult the time he had as all this crisis was unfolding. There were a lot government reportsthe Financial Crisis Inquiry Commission Report, which was pretty good in its detail, although the conclusions arent necessarily on point, but they released a lot of emails and other source material, internal documents that were useful. And then weve had our cases against the Fed and also the FDIC and the Federal Housing Finance Agency, where we were able to get a lot of new materials that hadnt really been released before.
So in the beginning of the book, I have three quotes, and these are really themes that you see throughout the history. So I not only looked at the most recent crisis but traced it back in history. The first ones something that a lot of histories will come up with: the fact that you have repeating history. I have a quote from the Bible about nothing new under the sun. The second theme that you see all throughout history is this process of telling Chicken Little stories about the sky is falling, how the worlds going to come to an end. And then the third theme isI have the definition of seat of the pants as one of my quotes up frontand again, this is how the agencies operated. President Obama actually took a jab at some of these financial agencies, saying that most of the major decisions during the financial crisis were made during the middle of night.
So lets start to look at some of these themes in a little more detail. This whole idea of a domino theory was floated: Its okay, we cant let Citigroup or Wachovia or Bank of America or AIG fail because there will be whats called a contagion, which you can describe it as a domino effect, where if one of the big ones fall, its going to take a number of institutions along with it. And again, they use this Main Street/Wall Street: Were really not helping Wall Street, were just trying to help Main Street when were doing this. And in the Bear Stearns case, they used this specific wording: contagion. And if you look back at the history, this has gone on at least about 110 years. back in the financial crisis in 1907, which was what led to the creation of the Federal Reserve. There was an institution called Knickerbocker Trust, and there were worries back then.
In 1930 in New York, Bank of United Statesthey were worried a bunch of the banks in New York would fail, and these first two banks actually did fail, and the Bank of United States, the banking commissioner said, Oh, ten banks are going to fail. But no banks ended up failing actually when they allowed it to fail.
And then Ive got a number of other cases here: Franklin International, First Pennsylvania, Continental, Long-Term Capital Management, all of thesethe argument was all these Chicken Little stories about how the failure will lead to further failures. Heres a few things that were said during the most recent crisis. Bear Sterns, obviously that was the first one, and the argument was again, We dont want to let Bear Sterns fail because all of these adverse consequences, severe consequences are going to occur. Fannie Mae and Freddie Mac, the same thing. Lehman Brothers and on and on. AIG. And what the documents that I have, either from my litigation or these other sources, show is absolutely no connection between the failure of Bear Sterns, Fannie, Freddie, Lehman, AIG, Wachovia, Citigroup. There was absolutely no evidence that anything bad would have happened. They throw around a lot of big numbers, they might throw trillions or hundreds of billions around, but there was no connection or analysis that showed any other institutions were going to fail if any of these institutions were to go down. So enough of the Chicken Little language.
The next thing is this seat-of-the-pants analysis, and these are actual quotes, these were all from emails that I was able to get from the Fed. If you recall, Bear Sterns was one that, about two or three days before it failed, the Fed kind of learned about it and finally figured out that it was a problem. And so Ill just read a couple of these.
Coryann Stefansson just called and said that this is the info (still preliminary and probably not super accurate but kind of in the ball park at least) that she has about the exposures of major banks to Bear. She also said [and then she named an institution] should be on the list but nobody could confirm it.
Next one: Sorry if my details are sketchy but will try to provide more substance as we get information.
And then on and on. And my favorite ones are the ones from AIG, which was a few months later. (You see Bear Stearns was in March; you think they would have learned how to react a little better by September, but Im afraid not.) Do you guys have an expert on AIG? What do you know about AIG? Have you produced memos on them any time recently? We dont have an expert on the company, but I do believe weve done some work on their credit exposures.
I think my favorite is, I found very little on the derivatives activity of AIG which is frustrating: they dont seem to say much in the 10-Ks and 10-Qs. These are the reports that are filed in the Securities Exchange Commission, and you can see a little bit of turf war as one of the people says, Can one of you guys give me a call so we can coordinate the work on AIG and hopefully reduce overlap? So you can see theres a little bit of a turf war going on.
And to kind of line things up here, where are we at with the documents? You probably heard about the Bloomberg case, and they did release a lot of details from a number of the Feds bailouts, and this is kind of an update. Weve got four cases against either the FDIC, the Fed, or the Federal Housing Finance Agency. Although we did get a lot of documents, theres still a lot of documents that we did not get. And so as far as any kind of follow up that you might want to do, Ive got about 5,000 pages of documents out on script, and theres the link, Judicial Watch, which I mentioned, my attorney. They have a lot of the details. They have a number of separate pieces of litigation. Or you can send me an email, and I can get you any of the documents or talk about any of the issues in the book. So anybody have any questions about the bailouts or any of the litigation? Some of the legal issues maybeMichael can chime in a little bit here, but we started them back in 2009, and were down to the last one thats against the Feds. So we may start one a few more as these wind down, but any question?
What do you think the role of the Federal Reserve should be going forward then? If you think it should be abolished, how do you think that should be set in motion?
Well its a good time to talk about this because next year is the 100th anniversary of the signing of the Federal Reserve Act, so I think its a good time to think through the role of the Federal Reserve. I personally think, on the financial stability side, that weve had more financial instability since the Federal Reserve was put in. We had severe downturns in the early 20s, in the 30s. The 70s and 80s were a complete mess. And then we had the most recent financial crisis. I think it was a lot better system back in the period like 1907. There was a panic in 1907, but what happened was JP Morgan who, he was a private banker, he played that role where he went around and assessed the quality of the banks, decided if maybe some of them should get some lendingthis institution Knickerbocker that I mentioned from the panic in 1907. He had a guy name Benjamin Strong who ended up being the first president of the Federal Reserve Bank in New York. He had Benjamin Strong take a look at the Knickerbocker Trust, and Benjamin Strong said, Let it go, let it fail. So I think thats a lot better system, as far as financial stability goes, to let the private banks make those decisions rather than having the government make those decisions. All right, thank you very much.
Vern mentioned that in his assessment that weve had more financial stability post-1913 then before. My colleague Larry White, at George Mason, and George Selgin down at the University of Georgia and Bill Lastrapes at the University of Georgia just published a paper entitled, I think, Has the Fed Been a Failure? And they document, pretty clearly in my view, that in fact thats correct, they look at financial instabilityboth the depth and the lengthbefore 1914 and at whats happened since 1914, and they conclude pretty strongly that the Fed in fact has not done its main job. Its not provided for financial stability. In fact its decreased financial stability.
Okay, our next speaker, changing gears a little bit, is Stephen Halbrook, who has taught legal and political philosophy at George Mason University, Howard University and the Tuskegee Institute. He received his J.D. from Georgetown and a Ph.D. in social philosophy from Florida State, down in Tallahassee. The winner of three cases before the U.S. Supreme Court, he has testified for the Subcommittee on the Constitution of the Senate Judiciary Committee, Senate Subcommittee on Governmental Affairs, and a committee on the District of Columbia. His work has been seen in USA Today, Washington Times and many other publications, and hes going to talk today, I believe, on his book, The Founders Second Amendment. Steve.
Thank you, Don. Its a real pleasure to be here, and Id like to say a little bit about my book, The Founders' Second Amendmentand I do have copies of that available for sale and for signing, if youre interested. Id like to turn the clock back, though, and tell you a little bit about how Second Amendment litigation and scholarship has evolved greatly over the decades.
Back when I went to law school you wouldnt even ask a question about the Second Amendment in a constitutional law class. It was a verboten topic. In 1984, I published a book called That Every Man Be Armed: The Evolution of a Constitutional Right, and that was at a time when polite society and judiciary and academic circles would have laughed at any mention of the Second Amendment being an individual right. I mean it only says, the right of the people to keep and bear arms shall not be infringed, and a doctrine was invented, the collective-rights doctrine, saying that that means that the states have the power to maintain militias.
And what was really interesting about that, basically the leftist intelligentsia that took that viewpoint. They were really interested in states rights, and they really were interested in the National Guard. I mean other than Kent State and a few transgressions like that, the shootings during the Vietnam War, they suddenly became champions of state powers and it was quite a farce, but it went on from about the 60s up until basically in the Supreme Court in 2008, in the Heller decision, where in a 5-4 decision the Supreme Court decided that the Second Amendments an individual right.
Back in 1987, the bicentennial of the Constitution, the Hirsch Report said that Americans really were mixed up on the Constitution, and they said that over 50 percent of the American public think that the Second Amendment guarantees them an individual right to possess a handgun. Ha, ha, ha. Look, stupid Americans. The ones who can read. So, as I say, in polite society you didnt go there.
The Supreme Court had not mentioned the Second Amendment since 1939 in the case called U.S. versus Miller; it was a really sketchy decision. In 1997, though, they had a case called Printz versus United States. That was Sheriff Jay Printz challenging the Brady Act, which basically tried to conscript local and state law enforcement authorities to conduct background checks on handgun purchasers, a clear usurpation of state powers. If the feds wanted to do that, they could have, of course, had federal bureaucracies to do background checks, and thats the way it is now, but at that time it was basically an order to the states that you had to do this, and we challenged it. I had the privilege of arguing the case at the Supreme Court and the courts below that. And basically its a federalism/Tenth Amendment issue. And during the course of oral argument, though, Justice Breyer asked the question to me: Why dont we do things the way they do in other countries, like in Germany, the EU and Switzerland? In other words, he said that the central authority should be able to give orders directly to local and state units. And I didnt want to go there because, first of all, Justice Breyer asks really long questions and uses up your whole argument time. And also how relevent could that be? We have our Constitution, we dont have a European constitution. And I mean the question didnt make sense anyway, because Switzerland really is a federalist kind of society, but the EU is not: its like Brussels dictates things that happened throughout the European Union.
But thats an example of whats going on very strongly today, isnt it? That you look to international experience to interpret our Constitution, that you changed our Constitution basically in terms of whether a judge likes something thats going on in some other Constitution or under another regimeand Ill say more about that in a few moments. But then moving on, we end up with the last day of the session in 1997 and an opinion is issued, written by Justice Scalia, basically saying that the feds dont have the power to tell the states what to do in areas where the feds dont have power, any more than the states can tell the feds what to do; and this was one of those. So the provision was held unconstitutional.
It led to a great anguish and gnashing of teeth in the Clinton administration. Janet Reno sent a letter out basically telling chief law enforcement officers that you still have to wait five dismays before you can transfer a handgun if no background check is done. Her proofreaders werent too good. I did not misspeak. She said five dismays instead of five days. They were very dismayed about the opinion.
In the Clinton White House there was woman named Elena Kagan, who wrote some internal memos, and said, Well, the Supreme Court said that the federal government, that the Congress, could not basically conscript the states to do these background checks. But could we just issue an executive order saying that we can, that the President can order the states to do this? I mean this is really going way beyond the outer limits, doesnt it? In other words, Congress cant do it, but maybe the executive branch could do it.
Kagan was no friend of the Second Amendment either when she worked for Justice Thurgood Marshall. She had written a memo against the Court hearing a case that came out of the District of Columbias handgun ban, case called D.C. versus Sandich, where she said in the memo that Oh, the petitioner says that he relies on the right of the people to keep and bear arms. Im not sympathetic. Well, folks, shes on the Court now. By the way, when the decision was issued in Printz versus US, Justice Scalia wrote the majority opinion. Justice Thomas wrote a concurring opinion, and he said, Well, the Second Amendment wasnt raised in this case. Its a Tenth Amendment issue that was raised, but theres a lot of new scholarship on the Second Amendment, and maybe at some point this Court will hear a case to decide whether its an individual right. And Justice Thomas cited my book That Every Man Be Armed.
Now that book basically over time worked into a couple of other books, one of which was called Freedmen, the Fourteenth Amendment, and the Right to Bear Arms, and that has to do with the intent of the Reconstruction Congress that the Fourteenth Amendment would make the right to keep and bear arms apply to statesstate and local infringement. And it morphed into another book called The Founders Second Amendment, which is the one that we have here today. But nothing more happened on the Second Amendment issue in the Court; that was just a concurring opinion where basically Justice Thomas was kind of challenging the Court to like, Maybe someday you folks will take up this issue. And finally the Court did take the issue up. I mean there had been a split in the circuits, the U.S. Court of Appeals, which is the Fifth Circuit, a case called Emerson had held as an individual right not a collective state-militia right. And then finally in 2008, the Court held in a 5-4 decision that the Second Amendment protects an individual right and that the District of Columbias handgun ban is unconstitutional.
Well, we had a change in the Court at that point: Justice OConner had left. We had a new Chief Justice, Roberts, and we ended up in that case with a 5-4 decision which Justice Scalia wrote, holding the Second Amendment to be an individual right. And we had the same debate again. Justice Breyer, who argues policy more than the Constitution, wanted to talk about international experiences and how we should emulate England or some other country that bans guns. And so there we have that same debate taking place.
If you turn the clock back to the U.S. Congress back in 1968, when the Gun Control Act was being debated, there were schemes to register all guns in the U.S. by the federal government, and that same line of thought was being enunciated. You know back then they said the Second Amendment doesnt mean anything and that we can pass any kind of ban we wish to pass, we can basically make you a criminal if your papers are not in order, which is what a registration scheme amounts to, that you dont have the right papers for your guns, so you go to prison. And the international experience was talked about then as well. In other words, we should emulate what they do in England or France or Germany. But in any case when we move on to the Heller decision, we have a clear cut decision by the Supreme Court: the Second Amendments an individual right.
Then the next issue becameeverybody knew it would come upwhether that right applies to the states and local governments through the Fourteenth Amendment. In the Heller decision, the Court discussed that issue somewhat, and they relied on my book called Freedmen, the Fourteenth Amendment, and the Right to Bear Arms, as one of the sources for the Reconstruction history on that issue, where it was clear cut. Basically the whole point of the Fourteenth Amendmentone of the points of itwas that freed slaves could have a right to keep and bear arms just like they had other rights. And the Southern states, they tried to reenact the slave codes and make it illegal for Black persons to possess a gun, would be invalidated based on the Fourteenth Amendment. So that was one of the primary considerations in the adoption. In the twentieth century, the Supreme Court had applied selected Bill of Rights provisions to the states to the selected incorporation process but never got around to applying the Second Amendment, even though there was really more legislative history back in 1866 to 1868 on that issue in favor of Second Amendment incorporation and even the First Amendment.
So right after the Heller decision came down several lawsuits were filed against the only basically local governments that ban handguns in the US, and that would be Chicago and some of the Chicagoland suburbs. There was one case, called McDonald,which the Supreme Court decided. The National Rifle Association had two cases, one against Chicago and one against Oak Park, and those cases were heard in the Supreme Court in the year 2010, and once again, we had a 5-4 razor-sharp, skin-of-your-teeth kind of decision in favor of incorporation. A plurality of four justices said that it was incorporated under the due process clause of the Fourteenth Amendment, and Justice Thomas would have said it should be incorporated under the privileges or immunities clause, but in any case, they were all in agreement, at least five justices, that Chicagoland handgun bans were illegal and that the Second Amendment does apply to these states and localities. Incidentally, that book Freedmen of mine was republished, before that decision, by the Independent Institute. It had originally been published by Praeger Publishers, and it was reissued a few months before the McDonald decision came down.
And the original book was cited in that opinion, as well as The Founders Second Amendment, which basically in terms of the content of the Founders Second Amendment begins in 1768, when the British were coming to occupy Boston and for the first time the colonists thought that they were going to be disarmed until basically the end of that founding era when John Adams and Thomas Jefferson died on the same day, on July 4 in 1826. But anyway, thats the most comprehensive book on that subject.
But then we move on. As soon as the Heller case was decided, the District of Columbia made it even harder to possess a gun of any kind in the district. And so theres ongoing litigation. They banned what they call assault weapons, and were litigating that case now. The Court of Appeals in a 2-1 decision said that basically if the district wants to demonize a gun and call it by a bad word, it can do that and ban it even though its a commonly possessed gun throughout the US. But the court didnt agree with all the districts registration requirements and the case is back in the district court, now remanded, as to whether you can require registration of guns. And thats something thats pretty universal in European countries, and all the countries that some Justices like to talk about as being the ideal. That debate continued, by the way, in the McDonald decision. The dissenting justices were saying that we should have a system of gun bans like they have in European countries, and the majority decision basically saying, you know we have a lot of things they dont have in our Bill or Rights. You know, England has abolished the rule against double jeopardy, they dont have the right to jury trial. So were looking at what rights are fundamental in our American scheme of justice historically, and this right is really one of those and we are going to apply it against states and localities.
Justice Ginsberg gave a speech where basically she said she was going to work hard to try to get Heller reversed, and I think that this week or last week I think you probably heard she made a speech telling the Egyptians that, Well, you dont really find anything useful in the American Constitution if youre drafting yours, but why dont you look to Canada or South Africa or some other country. And of course they dont have a Second Amendment. They dont have a lot of the procedural rights that we havedue process, and search and seizure, and so forth. So then the next elections going to be really critical. Weve got three Justices that are getting older now. and two of those are in the so-called conservative block. If we lose Scalia. If Obama gets elected, hes going to put another Justice on there thats going to be like Sotomayor or Kagan. Sotomayor had her name on opinions when she was a Second Circuit judge, saying that basically the Second Amendments not an individual right, in that its not fundamental, and in New York possession of gun is a crime and theres nothing contrary to the Constitution in that regard. New York bans handguns. Its only an affirmative defense that you have a license for it. So I think thats really, theres a lot of issues right in here in terms of the election. Obviously Obamacare. Those kinds of things that are going to continue to happen if this President is reelected, and most critically it will show in Supreme Court appointments, and its something that could be devastating to Second Amendment rights as well as other basic principles over the Constitution, whether in the Bill of Rights or in terms of federalism and other traditional doctrines. So I think I better stop there. Were a little short on time,
Okay, so if anybody has any questions or complaints?
My question: Im in law school right now, and I know that the Supreme Court has for the most part been very hesitant to sort of overturn itself in a short period of time, with the exception of maybe those flag-salute cases that happened back in 1940s, when there were Jehovahs Witnesses who had to salute flags or say the Pledge of Allegiance. But thats very rare for them to immediately overturn themselves. But what is your hunch, your suspicion in terms of the Second Amendment? If they get a different judge on there, do you think its something. How would it reversed: right away, or would that be 20 years down the road?
They could do it either way they want to do it. There are cases where they have reversed themselves pretty quickly, Lawrence versus Texas is one. But they could do it one way or the other. They could say, quickly or more over time, that we made a mistake, or they could just basically kill the Second Amendment with the death of a thousand cuts. Nothing would even violate it. If a jurisdiction wants to ban all rifles that will be okay, because theyre useful for sniper purposes and theyre for assaulting people. Ban handguns or ban all handguns except single shotguns or something like that. In fact thats going on right now. Theres basically a massive resistance or nullification by lower court judges to the Heller and McDonald decisions. Theyre saying theres no right to bear arms, for example, I mean its right there explicit in the text, but theres no right to carry a gun outside your home. In fact, we applied for a certain case called Williams versus Maryland this fall, and we were turned down. Basically the Maryland Court of Appeals said if the Supreme Court thinks theres a right to bear arms, theyre going to have to say that and were not going to say it. Its right there in the text, it doesnt matter. So how do you want to diminish this right? Its easy to do it if you have a majority of the Court, is what I'm getting at. Anything else? Yes, sir?
The Second Amendment starts out with a phrase of a well-regulated militia being necessary, so on and so forth, and apparently Al Gore interpreted that to mean a well-supplied militia, but if it actually is well-regulated militia, then there would be really three cases that would be of concern. One is the individual carrying a gun, another is the militia carrying guns, and the third is a band of armed individuals carrying guns. Now the state would have an interest in being able to disarm a banned and unregulated, a band of individuals who simply banded together for a common person carrying guns. So my question is, has that ever been argued? And the Founders, a lot of them were Virginians, they remember the Bacon Rebellion, and they remembered a whole range of other uprisings and so forth, and it would seem to me that maybe Madison was trying to create a situation, without being inflammatory, that you cant have people banding together carrying guns for a common purpose.
Right, excellent question, and the issue has a history to it. Just going back to 1774, George Mason (your university) and George Washington founded the Fairfax County Independent Militia Company, and it was independent of the kings official militia. And so during the revolutionary period, of course, there were not only those non-governmental militias, but non-criminal militias that were fighting against the established government, and thats when the well-regulated militia clauses find their way into Bills of Rights. The Virginia Declaration of Rights was the first one, and it said that a well-regulated the militia being composed of the people trained to arms as the best security for free state. And those morphed into what became the Second Amendment.
I think the framers of the Second Amendment basically had the idea that if you recognize the right to keep and bear arms, youll have a body of the populous who are used to arms, they have arms, they can supply their own arms, which was the first federal militia act requiring that. And so in the early republic, we continued that tradition where we continued to have independent militia companies, but they were basically allied with the local and state governments, they were not adverse to them, they were not insurrectionists of any kind. And over time, though, there came to be the remnants of now what is called the National Guard, and in Illinois, for example, you had labor strife and conflict labor capital, whatever you want to call it, there were a lot of, there were strikes, there was unionization, there were police attacks on unions, and so you had a movement in Chicago where workers tried to form their own militia. Illinois passed a law saying that you had to have a license to have an armed march in the city, which I think is a kind of what youre getting at, and that went to the Supreme Court, and Supreme Court said the Second Amendments not implicated by such a law because it doesnt basically prevent the people from keeping and bearing arms and even without the Second Amendment, the federal government could not pass, or rather a state couldnt pass, a law that would make it where there could be no federal militia.
At this point, people will have a right to assemble and they can be in groups that have arms and they practice with arms, but they cant be for subversive purposes. There are some laws that arose out of the 1960s on that point, where if you have an illegal purpose or a purpose that might involve conspiracy against the government, then thats illegal. But its not illegal to be in a gun club, which is a group of associated gun owners, but it is illegal to take actions that would be contrary to public security or the so-called militia movements from out west who basically like to posses machine guns illegally and things like that. So its another untapped forgotten phrase in the Constitution, by the way, the militia clause, and partly because I think the militia has been abandoned by the federal government. There really isnt much of a militia at this point. Theres a reserve militia, all males between, I think 18 and 40 something, are officially in it, but they dont do anything, you dont even register like you do if theres a draft. Anything else? I think probably that will do, and thank you very much.
Thanks Steve, I appreciate those remarks. Im not a Second Amendment expert by any means, but Ive read a good deal of Steves work and I recommend it to you. Its scholarly and compelling. When David Theroux, the president of the Independent Institute, asked me to moderate this panel, I said Sure, and then I was asked to give a few remarks. They were going to be opening remarks, but now theyre closing remarks, because of a change of schedule, on the state of the economy.
I want to do something thats a little bit different from what I normally do. I'm going to be optimistic. Its easy to be pessimistic, particularly if you're a libertarian or a free-market conservative, because we havent had a whole lot of good news since, I dont know, Grover Cleveland, maybe Ronald Regan a bit, but not a whole lot. But Im getting older, and as one gets older one reflects back on experiences and realizes how ones attitudes have changed. I just want to share just for a few moments with you some of those changes in the way I see the world.
Having studied and pondered the social sciences for literally all of my adult life, starting when I was 18, when I started studying economics and loved it ever since. Its 35 years ago. You can do the math and figure out how young I am. Over that time span I have become more convinced, and I am today more convinced than ever, that individual libertybased on a radical respect for private property, freedom of contract, and constitutional lawis key both to widespread material prosperity and widespread human dignity. The sort of dignity that comes from having responsibility and freedom at the individual level. So I greet all actual and even perspective threats to individual liberty with a mix of scorn and fear.
Higher tax rates, an expanded tax base, more government spending (whether its stimulating or not or alleged to be), higher tariffs and other protectionist measures, a government bureaucracy ostensively charged with protecting us from all manner of devils, both real and imaginarythese are not the results of our liberty and free markets. They do us no good at all, they make us poorer than we would be otherwise. They make us less free then we would be otherwise. They forcibly take from us dignity that we would otherwise posses.
Yet in the same 35 years, in which Ive come to appreciate evermore the merits of freedom and free markets. Ive come also to posses an ever greater appreciation for the creative power of markets and especially markets staying powers, the robustness of markets. So I dont want you to interpret what Im about to say as an endorsement of or even an expression of indifference toward the expanding, intrusive, busybody, irresponsible, obnoxious state. I would if I could roll it back to almost nothingness. The smallest of my ideal state would appall Grover Cleveland and it would certainly appall Ronald Regan. But facts are facts, and one of the facts that I believe now to be irrefutable is indeed the robustness of markets: markets can and certainly do, to paraphrase the late John Cameron Swayze. Most of you are too young to know who he was. He was an old TV spokesman who used to advertise Timex watches back in the 60s and 70s, and the watch would be subjected to all kinds of battering and he would pick up the watch and say, Timex, its takes a licking and keeps on ticking. Remember that?
You dont remember that really?
I dont want watch ads.
You're younger then me.
Thats was a long time ago. And so the size and reach of Uncle Sam today is exponentially larger than it was just a few generations ago. Just 80 years ago we had no national minimum wage. We had no Social Security, no Medicare or Medicaid. We had no occupy movement. We had only a handful of the alphabet-soup agencies that today infest the Potomac. The government was smaller and much less intrusive. Then of course it began growing madly. The back-road phrase since the presidency of Herbert Hoover is wax and wane. And during that time its never shifted into the ideal world, not even under Ronald Reagan. It continues and of course today its in one of its waxing modes. Its going full speed. Yet we continue to prosper. Markets continue to work, and I dare say markets continue to work very well. We remainall of usnot only well fed, well clothed and well sheltered, but better fit, better clothed and better sheltered than were our parents and grandparents. Our homes are filled each year with marvels that werent heard of the previous year, now theyre called apps.
We remain an astonishingly wealthy people and a people whose wealth continues to increase. Now I pause to remind you that I firmly believe that we would be even wealthier, Im sure a lot wealthier, had we not been afflicting with the countless burdens foisted upon us by Washington. But to deny that were a lot wealthier today than we were even just 20 years ago is I believe to deny reality.
So how it, how can markets continue to work despite being so prodded, hamstrung and abused by the state (which is really all the state does, the only talent they really has)? I dont pretend to have a full answer.
But there was a book published a couple of years ago by the University of Illinois, Chicago economic historian, Deirdre McCloskey, called Bourgeois Dignity. And Deirdre argues that societies prosper in so far as ordinary people, the bourgeois virtuous business peopleIm not talking about corporate CEOs necessarily, but they can be includedordinary business people, the kind with middle-class American virtues continue to exist and continue to be applauded and celebrated and respected publicly. Bourgeois dignity is widespread respect for those activities and mores that are generally so despised by contemporary intellectuals: business creativity, excellence and detailed attention to building a business enterprise, working hard, sobriety, product innovation for the sake of turning a profitthese sorts of things at a very individual level are what draw in our prosperity. So the widespread respect that entrepreneurs and the bourgeoisie, more generally, receive in America has proven sufficient to keep the capitalist engine fueled and well lubricated. That engine is so powerful and so robust that it can be banged on, kicked, even fed doses of really harsh poisons and it still chugs along.
Now you might be tempted to challenge my assertion that the bourgeois virtues remain well respected throughout America, but before doing so, do reflect on the fact that the class of folks who dominate the microphones and airwaves are intellectuals. They are indeed hostile to the bourgeois virtues. But fortunately they are a small minority of America. They seem like theyre larger than they are because they dominate the microphone, they dominate the airwaves, they dominate still the print media. But theyre not the majority of Americans.
I believe the typical American, regardless of political party, and really regardless of whatever specific nutty economic idea that he or she holds, tolerates creative structure, respects private-property rights in his or her daily activities, admires hard-working people, and would rejectwere they translated into Englishmost of the philosophy that emanates today from university departments of philosophy, law, and even, Im embarrassed to say, economics, my own discipline.
So this fact, this continuing celebration and reinforcement of the nobility of bourgeois virtues is one reason why events like this, this session and CPAC generally, why these are especially important. These sessions, these kinds of conferences, the getting together of people of like minds, they keep the conversation going. These are forums for sensible people to remind the general public why capitalism and freedom, bourgeois virtues that underlie capitalism and freedom and our prosperity are indeed dignified and important. Activities such as these events add to the social fabric, strands of thought and attitudes that make that fabric more resistant to the destructive degenerative ingredients that are tossed on daily from the people in this really god-awful city. Thank you.
Any final questions? I live in this god-awful cityor live near itso I'm free to criticize it. Its a pretty city.
You just live across the river though, dont you?
I live just barely outside of the Beltway. Its got a lot of traffic, a lot of disruptiveness emanates out from this place. Okay, well, thank you all for coming. I encourage you to purchase or otherwise acquire and read both of these wonderful books and enjoy the rest of the conference if youre staying. Thanks to you all.