Big Men On Campus

>> Troy Senik: Who in America needs to eat that swiss crap? Welcome back to the Law Talk podcast from the Hoover Institution, coming to you, as we always do, from the faculty lounge of the Epstein NYU School of Law, the one law school in America where there probably aren't enough speakers being shouted down.

I'm your host, Troy Senik, former White House speechwriter, cofounder of Kite and Key Media, and this month's guest editor of Cat Fancy. And I am joined, as always, by the Cheech and Chong of the conservative legal movement. They are Richard Epstein, the Peter and Kirsten Bedford Senior Fellow at the Hoover Institution, the Laurence A Tisch Professor of Law at NYU and Senior Lecturer at the University of Chicago.

And John Yoo, visiting fellow at the Hoover Institution, the Emanuel S Heller Professor of Law at the University of California Berkeley, and former Deputy Assistant Attorney General in the Bush Administration. Fellas, good to be back with you. Here's where I have to start. John, in particular, I think will come loaded for bear on this.

I am on the road these days more than I used to be. And since our last show, one of the places I was in was Milwaukee, which I think is, in general, kind of a slightly underrated city. I like it there. I like Wisconsin. And the first night that I was there, and I absolutely gorged myself on local fare.

There was a brat sampler. There were fried cheese curds. There was a soft pretzel the size of a car engine. So you guys both travel a lot, going around giving a lot of speeches. My opening question for you, best regional cuisine in America. Place you're most excited to go because of the food.

 

>> John Yoo: I can't say Philadelphia, right?

>> Troy Senik: No, it cannot be the place you hail from. And also John-

>> John Yoo: Cuz you can't say Philly cheesesteaks and soft pretzels?

>> Troy Senik: Okay, I was going to ask you what there was beyond the cheesesteaks, but soft pretzels, okay.

>> John Yoo: Pretzels and Italian water ice, you cretin.

 

>> Troy Senik: Okay, bracket Philadelphia.

>> John Yoo: I got an answer. So I got an answer.

>> Troy Senik: Okay.

>> John Yoo: Los Angeles, where I think they have. Yeah, in Los Angeles they have amazing Korean and Japanese food, maybe even better than in Korea and Japan. And they have great vietnamese food, too.

So I'd say you want to go in Orange County, Little Saigon, where they have the finest Vietnamese style egg rolls, which are called. They're awesome. They're really awesome.

>> Richard Epstein: I am just utterly overwhelmed and outclassed on this topic. I mean, I do travel from time-

>> Troy Senik: You have a slightly simpler palate than John.

 

>> Richard Epstein: A simpler palate.

>> Troy Senik: I think that's fair.

>> Richard Epstein: Well, I mean, any kind of hamburger is fine, yes. But more than that, it turns out when I tend to travel, the only places I tend to see are the hotels in which I tend to speak and to stay, and otherwise I'm hustling off to the next city one way or another.

So all I can tell you is that the great equalizer in America, in life, is hotel foods run by chain, because they are playing exactly the opposite strategy that these small shops are playing in Los Angeles. They are trying to attract a very broad customer base. The brand is what brings people in.

It's not the city or anything else. And so the food that they tend to do is aim for the median customer at those places. And so when I was in San Diego, one of the fancy hotels, that Marriott, I think it was, perfectly respectable food, utterly undistinguished in terms of what it is, go up to Los Angeles, exactly the same kind of thing.

So I am utterly unequipped to do this. But I will say the following thing. I distrust John on many issues, but on cuisine, it seems to me that he is actually fair minded and balanced in a way that means that I will throw my lot to him. I do like those foods.

I like Thai food. You didn't mention Thai food, did you?

>> Troy Senik: No, no.

>> Richard Epstein: But I mean, that's also a pretty good food. Yes, in general, I am partial to Asian ethnic foods, whether or not kosher.

>> John Yoo: Can I point something out that for the listeners, this just shows?

You will not see Richard Epstein wandering the streets of New York, Chicago or LA, searching for the latest in culinary delights. But once Richard and I were on a panel together in New York City, and we did wander the streets together looking. And, yeah, you don't remember this, but we stopped.

 

>> Richard Epstein: There was a delicatessen.

>> John Yoo: Here's a great, yeah, this is it, you ruined it. I was like, we stopped at an Italian place, you said, no. We stopped at an Asian place, you said no. So when we end up going to the Carnegie deli, your idea of searching out great ethnic food in a major city?

 

>> Richard Epstein: It is. But they went out of business because they didn't have enough people like you and me to keep them alive, or at least I think they did. Delicatessen.

>> Troy Senik: Let me take you instead to your areas of specialty, Richard, because I guess best practice would be for me to start with the newsiest topic.

So for the past week or so, the run on Silicon Valley bank and the subsequent efforts by the federal government to prop it up have been leading the news. And just let me start on this. Standard policy, of course, is that the FDIC insures deposits up to $250,000.

Beyond that, caveat emptor, except now in this case, where there's actual danger and the federal government's line becomes, no, no, no, every dollar is insured. Don't worry about it. We're backstopping everything. Which means that, in a weird way, Silicon Valley bank has now become the safest bank in America in which to park your money.

And, Richard, let me frame this for you this way. I am right on the cusp of turning 40, which I mention here only as a means of getting to the point that for my entire adult life, I was 24, 25 when we in the Bush administration were trying to figure out how to respond to the zero eight meltdown.

For my entire adult life, it has been unclear what the rules are when a major financial institution goes down. So I turned to Richard Epstein, the author of Simple Rules for a Complex World, and I ask, is this any way to run an economy?

>> Richard Epstein: Well, the answer is, of course, it's not.

But in order to run a sensible economy, whenever you take a condition and draw a line in the sand, you have to keep to the line, otherwise, essentially, everything will be implicit. And so you start going back to all the Fannie and Freddie stuff and so forth. There are a lot of very bad loans out there.

And then it turned out that everybody said that the United States was an implicit guarantor of the loans, even though it had received no consideration for it. And so what happens is there is a kind of an inexorable dilemma, and it always plays out at the same way.

You start at the beginning, and as you mentioned, we said, we want people to take active steps to ensure the fact that their deposits are going to be well taken care of. And the only way we can do that is to have them do examinations. We cannot leave it to the government guarantee, which will create an enormous moral hazard.

And that's why you cap, to protect small people $250,000 and not above that. And so you really want to stick with all of that stuff, and you announce that it's true, then what happens when the thing goes down? You have the following ugly situation. It's not just that you're going to have the company whose deposits were not insured go down, but they're going to take everybody else down with them.

So if you can't make your payroll, if you can't make your payments to your supplier, you can't do anything like that. All the credit is going to start to dry up, people are going to be left off, and the contagion will spread. And so what makes people change their position in the ex post world is the fear that these spreading externalities involving people who are not the depositors, people who are thoroughly innocent, are going to have to bear the things.

And so what you start. Start to do is to come in, and then you try to figure out how it is that you could hedge it. There is a lot of sense that people have in this stuff, saying, if in fact, these banks could put up adequate securities, what you always want to do is to bail them out.

This goes back to Walter Bagehot and a book called Lombard Street, written in the 1870s, indicating that that's the way in which it happened. So it's going to be a dilemma, because the next time through, we're going to say exactly the same thing. Second half of the dilemma is, how do you do the reserve on all these kinds of situations?

This is all fractional reserve banking, and the question is, just how much of your money do you have to keep in safe assets? And it turns out the more money that you keep in safe assets, it turns out the lower the rate of return that you have. And so in good times, what happens is you try to get the government regulators or your own banks to let you pour money into high yield assets, even if they create some form of systematic risk.

And this is, again, something which is very difficult to stop, because when the good times roll, you do make money, and when the bad times come, the government is gonna bail you out, its an asymmetrical situation. And here the error that was made was shockingly simple mind. In order to stoke up the yield, what they tried to do is they put their money into long term bonds, which had higher interest rates than shorter paper, which you would expect.

But they underestimated the force of inflation, and all these long term bonds essentially went south, but they had no hedging device so sort of to stop it. And then when they had to kind of liquidate this stuff, they had to do it in a hurry, and they managed to lose close to $2 billion because they couldn't recover the face value or what they paid for these things in question.

And so at that point, the government starts to come in. Now other banks are going to start to go down as well. I mean, you start looking at the history of First Republic. I mean, it shocks its stock has been down by three quarters, and it seems to have a pretty solid balance sheet and everything else going on about that.

And so, the second problem that you get by way of externalities, and I'll stop with this, is you start looking at Silicon Valley bank and say, whoa, well, there are some banks that are like that, and then banks that aren't quite like that are treated in exactly the same way.

So there's a contagion that takes place in which runs are made on banks that would otherwise be safe if, in fact, normal practices apply. And now they become difficult in hedging. And so we've seen the entire american economy go through these tremors. I think it's probably likely to survive it, but it's going to be close.

And then you take the Swiss banks, right, and credit Swiss, they're in trouble, and their government's gonna have to prop them out. So, I don't think there is a solution to the bank problem, because the need for the fortitude to make the thing work at the beginning cannot be done, given the political costs that are paid when the failures start to take place ex post.

 

>> Troy Senik: John, one of the big criticisms of this has been that this bank came in for special treatment precisely because it was in Silicon Valley, precisely because it was holding a lot of tech money. If this was the farmers bank of Wichita, we wouldn't have seen the same reaction.

Ad that is part of this broader critique, of which there are flavors on both the left and the right, that the tech world operates with this cavalier attitude that they are simply so big and so powerful that they don't have to play by the same rules as everybody else.

You live there in the Bay area, you're proximate to all of this, how well founded do you think that criticism is?

>> John Yoo: So first, let me disclose, I have my money not in Silicon Valley bank, but its competitor, First Republic. Actually, my crypto coins, I keep hitting them when I walk around the bedroom.

No, I actually have them, I have my money in a first Republic Bank, which is actually the bank that's under pressure today. And I even own stock in First Republic bank because I think it's a great bank. But that aside, I agree. I think that this is another case of the Biden administration bailing out middle class and wealthy people at the expense of the poor and the nation as a whole.

I mean, this is the guy who also wants to forgive student debt, which primarily benefits middle and upper class people. Maybe there is some justification that you're stopping this bank run, that this bank is systemically important. Although I would point out in response to Richard, that after 2008 and 2009, when all these laws were put into effect, and we got these legions, legions of new regulators who claimed they could protect against the systemic failure of the banking system in the future, that's all in the books.

And Silicon Valley Bank and First Republic Bank, they dont qualify as systemic banks. They're not big enough, they're not like Wells Fargo or Bank of America or Citibank. So, I don't see why the wealthy who have more than $250,000 in cash sitting in Silicon Valley Bank have to be bailed out at all.

Was there going to be a bank run? Who knows? I would think we would want to wait and see a little bit longer before we start bailing out people who have the luxury of having more than a quarter million dollars in cash sitting in one account. That's the other thing I don't get.

Richard knows this better than I, but I always thought all you have to do, if you're like Mister Rich Silicon Valley banker and you've got $10 million, yeah, it's just put 250,000 each in lots of little accounts. That's all you had to do, but they were too lazy.

 

>> Richard Epstein: No, look, it's not just laziness, John. You start putting money in little accounts and then you have lots of bills coming in. It's a major effort to try to figure out when you're running cash flows each day of several hundred thousand dollars to make sure that you're not gonna overdraw these particular kinds of accounts.

And so, there's a tendency to start to consolidate, and then there's a tendency to get lazy on all this stuff. But John, I mean, what you are doing is taking a very credible side in a perpetual debate, and this is my reaction to it, is you always win the intellectual argument and it always turns out to go the other way when things get bad.

And sometimes you do it right. I mean, you know, there are many things I've said about Franklin D Roosevelt where I think, in fact, he's been seriously misguided and stuff. But closing the banks when he first took office in order to give the thing a little bit of time to heal and then opening them with various kinds of guarantees, was generally regarded by most people who study banking to be one of the master strokes of his administration.

Which means that it's very difficult to come up with an ad hoc rule. And the externality stuff is very serious because so many of these businesses live from paycheck to paycheck. I mean, we, I'm sure you do, too, you have work done on your roof, you have a contract to come out to do this stuff.

And almost invariably, if they don't get paid within 30 days, it's going to be something that's going to really upset this sort of local balance sheet, because they're always living on the edge. And I think that's the situation that we had in Silicon Valley, in good times, it pays off, and in bad times, somebody else does it.

So what you can be sure, John, is you're going to win this argument. I concede that. And then going to win it the next time. We'll basically follow John's advice, the thing will break because of some stupid reason, and then we'll go the other way. Now, I happen to have several things that I read about the SVC Bank, which actually really scare me about this.

I mean, this is a bank which trumpets its diversity. I don't want diversity in my bank. I want bankers running my particular bank. But that's the way in which they start putting themselves. And so, it turns out when you look at their board of directors, they have, so it is reported, at least in the Spectator magazine, that they had only one seasoned banker on the entire board, and everybody else was representative of something else.

This is just another version of how dangerous it is when we start to say that merit is an illusion. Expertise really doesn't count in these businesses. And what we have to do is to get a broad representation of people, many of whom don't know what's doing. The single most important thing to understand about this general debate is that the differences in competence that you can bring in different people to a given job are, generally speaking, enormous.

And what happens to the diversity situation is they flatten these differences, make it appear as though they're not really very, very, important, and then they could get the preferred ethnic distribution and so forth. That is the most dangerous thinking in the world. And that's why one of the things that started to happen, there's a lot of pushback.

 

>> John Yoo: What you're saying, it's a good reason why you let them go bankrupt and don't bail them out because their management, they're the worst of all possible worlds in a bank. They were stupid and they were do gooders. Maybe actually that's one follows the other. Maybe that's an insurable combination.

 

>> Richard Epstein: You let the bank go bankrupt and they're going to be hundreds of suppliers who do business with this particular firm, who doesn't know where they bank. And all of those firms are gonna go under as well. It turns out it's just a very painful thing. Look, my view is you certainly could have done this better.

I'm not exactly how, I'm not an insider, and I agree with John for another reason. I'm tying both sides against each other is there's no more an F man in the United States when it comes to government management than our current president. I mean, talking about adverse selection, bringing the worst cream to the top.

So I have no confidence in anything that is going to be done through the federal government, what might have been done quietly, what should have been done publicly. I'm not in a position to make these judgments, but I do know that we have to have zero confidence in the presidential team and zero confidence in the bank team.

And so the question is how we protect everybody from all the people who have all the power. And that makes me sound like John, you newfound populist.

>> Troy Senik: Well, let me toggle you over then to another issue where I'm sure you have zero confidence in the presidential team.

So the biggest story from the Supreme Court since last we convened was that we had oral arguments in the student loan forgiveness case. And I actually wanna start a conversation there on the standing issues, which actually seem a little more of a jump ball than the substantive argument.

So there are two lawsuits here, one brought by a coalition of states. One brought by a couple of people who say they have been personally harmed by the debt relief program. So in the case of the states, they are relying on this loan servicing organization out of Missouri, which is a nonprofit, kind of a quasi state entity.

It returns money from the loans it services to the state to support higher ed funding. So that's where the argument of an injury comes in. The state is being denied that money as a consequence of the administration's plan here. But there was some debate in oral argument as to whether the state could actually bring that suit on the loan servicers behalf, which is what they've done here, rather than the loan servicer suing themselves.

And then with the two individuals who brought suit, you've got a woman who can't get debt relief because she took out commercial loans rather than government loans. And then a man who's only eligible for $10,000 in relief rather than the 20k cuz he didn't get a Pell grant.

Pell grants are eligible for the higher amounts. But the counter argument to each of those is, hey, shutting down the program wouldn't relieve you of a harm. You'd still be in exactly the same position you're in now. John, I'll start with you. What's your judgment on the standing argument for each of these parties?

And I guess, more consequentially, do you think at least one of them will pass muster with the court?

>> John Yoo: It's interesting. I think people who want to challenge the program, the Biden program, are worried because it sounded like Amy Coney Barrett was sympathetic to the standing arguments of the United States against hearing the case.

I'm not troubled as much because in order to find there's no standing, it seems to me the court would have to make a judgment about what Missouri law requires or not, because they would have to say, essentially, well, this Missouri state created company, which is engaged in the student loan business, decided not to sue.

If they decided not to sue, and the state of Missouri sues on their behalf, there's no standing because this entity in Missouri, they clearly didn't sue theirselves. But that is a determination of state law about who gets to sue on behalf of a state agency. And my sense of Supreme Court doctrine is that it's not up to the federal courts to decide what state law means.

It's up to the highest legal authorities in the state. This is commonly done in many other areas of constitutional law where the Supreme Court will say, you know, we're not, it's not our job. We are not interpreters of state law. That's the function of the states. Our job is just interpret federal law.

And so if our ability to hear something or make a decision depends on state law, we'll wait to see what the state thinks. And so in this case, it seems to me the highest authorities in Missouri, right? The Missouri executive branch, decides that they have the right to sue under Missouri law, then I think the Supreme Court has to accept that, as it would in all these other areas.

So if that's true, I think then you get five votes to get over the standing hurdle. In fact, it sounds like, I think I thought I read something, I'm not just sure factually whether it's true, but I thought I read that the state claimed that some revenues of this Missouri state loan agency would drop something like 40% if this Biden plan goes into effect.

Well, that sounds like injury. In fact, to me, that sounds like you got enough for standing there. And then I think from the rest of the oral argument, once you're over standing, it didn't sound like the Biden administration made much headway in defending this program. And I think that we've discussed before, this seems to me like an executive transgression on the Congress's power of the purse.

And that the statute they're relying on, the Heroes Act, was only a temporary suspension of loan payments for soldiers and civilians sent over to Iraq and Afghanistan. And to claim that the whole country is at war and that all people who hold student loans are somehow soldiers in that war, and then not to suspend their loan payments, but to cancel them outright flies flatly in the face of the statute.

So I think that the Biden administration, I listened to the oral arguments. I mean, I read the oral arguments. I don't think that the court's gonna kick this out on standing, and I think they're gonna strike the Biden plan down.

>> Richard Epstein: I have a slightly different reaction, which is here you have a major program to appropriate through indirection and forgiveness, $4 billion, $400 billion or more.

It turns out that the substantive violations seem to be pretty clear. It is a travesty of the highest order to say that in a system of limited government and of judicial review, the standing requirement could be introduced so as to say that nobody can challenge the Biden administration.

What we would then do is we would have a bifurcated constitution. Everybody who claims to get a benefit from the government can certainly sue to get that benefit, cuz if they don't get it, they're hurt. But nobody has standing as a discrete, particular individual, special harm to stop the payments from being made.

This ridiculous arrangement has been applied nowhere else in the history of the world. If you're a charitable organization and you make an illegal gift to somebody who's not an object of the charity, Any member of that organization can sue to enjoin the situation and return it to the body.

If you are a municipal government and you engage in ultra vires activities, it turns out that any citizen or taxpayer of that institution can sue in order to void the transaction and bring it back. The same thing is true with respect to state governments, corporations, and so forth.

The standing requirement as a discrete and special injury is nowhere to be found in the Constitution. It was made up in two cases 100 years ago, two of the worst decisions ever made, Frothingham and Mellon and Massachusetts against Mellon. Where there was a program called the Maternity Act, designed to supply, under the spending power of the United States, money to mothers and their offspring in a whole variety of ways.

And this is not spending which is designed to deal with the general welfare of the United States as a particular grant to a particular person. I think the Spending Clause challenge would win, but they didn't allow them to make it, because it was only the state that was suing and only an individual citizen taxpayer who was suing.

So what's happened is now we have people like John who make the most incredibly ingenious argument to explain why somebody has got to be hurt. And the reason why John is going to win is not because of the intrinsic merit of that argument. Whether or not a collection agency loses money or gains money, it is always going to be the case.

Every time there's a change in policy or a change in loan frequency, the amount of money is going to come or go up and down. But the reason is that the ultra vires nature of these things makes this peculiarly subject to judicial review. And it turns out, given traditional doctrine, nobody can do it.

The Supreme Court, if they had any sense, would say the following thing. There are two kinds of issues on standing. One is the issue of ultimate power, may you or may you not do that. And for that, any citizen or taxpayer should challenge it to make sure that we don't get illegal behavior.

Then there are lots of decisions that are made by agencies which people disagree with. But everybody concedes that they're within the power of the agency to approve this or that siding for a nuclear plant for so forth. And in those cases, we do give people standing. And so what happens is the absolute dissenters and the outliers in the administrative process go off the court and they can sue to mess everything up.

So what we do is we have to stop the individual standing case. When you're dealing with administrative decisions that are made within legitimate scopes of authority, and to really enforce it when it's the other way around. And given the way in which American law has worked, we get this distinction exactly backwards.

So I hope John is right. Frankly, I don't care whether John is right. I think that John should be treated as right, even if he were 100% wrong. Because otherwise what you're going to see is a completely lawless administrative state. In which every principle of separation of powers and statutory construction will be violated by what has, I think, become clearly the most lawless administration in the history of the United States, the Biden administration.

 

>> John Yoo: Okay, I hate to disappoint Richard and his fulsome praise for me, which is, I have to say, is well deserved.

>> Troy Senik: I agree as well.

>> John Yoo: It could be repeated more often than is not. But I do have to say, and I agree with Richard's criticism of standing doctrine, but I do think there has to be some limit on the court's ability to hear issues where people think the government has done something illegally.

And this was the concerns that Justice Scalia raised in his standing in the main standing case, which is called Lujan. Which he said, look, if anyone could come in and sue based on taxpayer standing, on which, basically, all of us are taxpayers, so we could all sue. Then what happens is the Supreme Court of the courts just become like another house of the legislature reviewing every single thing the government does cuz everybody's gonna challenge something.

So that's the policy rationale. I actually think the better rationale is that Article III limits the federal courts to hearing cases and controversies. And so you have to give some meaning to what's a real case or controversy. Maybe standing doctrine is not the best way to do it.

But, right, the federal courts are not sort of a roving ombudsman over what the the government's doing, whether it's legal or not. They have to hear real disputes between parties. Standing is just the way the courts today try to figure out, is this a real case? Or it's just to sue who doesn't like what the government's doing.

 

>> Richard Epstein: Somebody who wants to enjoin the distribution of $400 billion is bringing a real case, seeking an injunction. This is not an advisory opinion, those sorts of things that court not to give. And this is not an area in which what you're trying to do is to attack the discretion that an administrator has to be given in running a kind of a program.

And so I'm just applying the rule which is applied everywhere else on the face of the civilized earth, except the United States Supreme Court, if you're-

>> John Yoo: Thank God, I don't wanna be like the rest of the world.

>> Richard Epstein: No, no, you do want on this issue.

>> John Yoo: No, you don't.

 

>> Richard Epstein: You don't want to make sure that charities can, if the charity gives away all of its funds to an illegal person and no shareholder has stand, you don't want to do that. You don't want to do this-

>> John Yoo: It's just a contract claim.

>> Richard Epstein: No, it's a derivative action brought by a member of an organization against it.

And what we're saying is the only, in order to get there, you have to make an argument that this thing is beyond the power of the organization to do it. And most standing claims are not like that.

>> John Yoo: Can I point out that Richard is, as always, making a really interesting effort to carry over principles from private law, which I completely agree with, like the idea of a derivative suit, which is, can the shareholders sue the management of a company when they do something outside their charter?

And then he wants to transplant it. Very reasonable, sensible public, very sensible private law mechanisms to control things and transplant them into the government. And where he's saying, taxpayers, we're like shareholders in the government, which is like the corporation. And so we should be able to sue them when they act outside their charter, too, because we all kind of.

It sounds very sensible. But if you think about how it would be carried out, that means everybody would be the government all the time for everything. It would be like the Oscars, Richard, I mean, it'd be like the Oscars. It would be lawsuits everywhere for everyone all the time.

 

>> Richard Epstein: No, they would not, John. I mean, because, look, right now we have lawsuits by everybody every time. People who want to stop the development of a new nuclear power plant, every time the agency says it's okay, they could go to court and to challenge it because they're given statutory standing.

This is a situation where either you allow somebody to challenge it or nobody's gonna be able to challenge it. And if you get three or four people challenging it, there are rules for multiparty litigation which would allow for sensible consolidation and so forth. The word standing, as you define it, is nowhere in the constitution.

What it says is the judicial power shall extend to all cases in law and equity stress. The last two words, cases of equity, often involve complicated institutional reorganizations and so forth. And generally speaking, in bankruptcy reorganization, any shareholder or bondholder is allowed to trigger the particular process. And the thing doesn't explode, it's perfectly sensible.

The reason you want to use the private analogies is in the private areas these analogies work. And they've been done very effectively for a very long period of time. And so what happens is now we're finding standing on totally ridiculous ground. And the point about this is, John is right, then what will happen is we will constantly see fictionalized accounts of what is standing.

They will not, basically, turn this case down. It's too big for them to say, Biden administration, we think you're terrible, this is an impeachable offense. But by the way, nobody can challenge the greatest heist in the history of American law. And I don't think that they will do that, I certainly hope.

On the merits, the case is not even close. Now, you wanna read a really terrible memo? Read the Schroeder memo that was used to support the decision that was made by the Biden administration. They are the worst, every time these guys put forward legal opinion-

>> John Yoo: Richard, you're totally right about that, that OLC memo.

 

>> Richard Epstein: It was just incredible.

>> John Yoo: You can tell they didn't even consider it legal.

>> Richard Epstein: They didn't believe it.

>> John Yoo: Yeah, they didn't have their hearts in it.

>> Richard Epstein: But, I mean, I've come to the point now where what happens is, if you need to make fundamental changes in American law, then you ought to make them.

And you ought not to hide behind a standing doctrine to allow widespread judicial and financial mayhem to take place in the United States. So I think what they will do is they will decide it on John's ground, and then you will start making the realist prediction. That no matter what the facts, they'll always dream up somebody in a large scale program who has the requisite kind of interest.

Even though the interests of these people, as opposed to political groups that are deeply opposed to this on principle, are very, very different. We know that what's happening is, they're not worried about the money that's coming into the program, they're worried about the $400 billion that's going out.

And so, I'm just frustrated beyond belief, and I wish I could get John Yu to become more bold, more compassionate about these issues.

>> Richard Epstein: And understand that judicial restraint is not a constitutional virtue when it's inconsistent with constitutional document. So I hear about-

>> John Yoo: Richard, you have finally revealed your true nature, you are a bleeding heart conservative.

 

>> Richard Epstein: No, I'm not.

>> Richard Epstein: Look, I mean, I've spent so much time-

>> John Yoo: What's all this compassion business? Come on, give me a break.

>> Richard Epstein: But I spent all my time dealing with NEPA cases and so forth, where you shut down process after process, claiming standing by people on the most preposterous sorts of grounds.

Having nothing whatsoever to do with the legitimacy of the agency. There's nobody who thinks on environmental matters that the federal government does not have the power to clean up various forms of pollution and to license various kinds of projects. And so when you start allowing the one person in the hearing who dissents from everything that's going on to go to court, find somebody like Skelly Wright to rule in their particular favor.

What happens is the exact wrong thing takes place in American politics, that these complicated judgments should encourage a spirit of compromise which an agency can foster. The moment you go to court, it's the outlier who brings the whole thing in there and everybody else really doesn't matter. And so I'm in favor of a radical contraction of the standing doctrine, in those areas, what we're trying to do is upset administrative consensus, but trying to keep it very sharply on the jurisdictional issues.

And that's a distinction which will have some tricky cases, everything does. But it's basically one that is deeply embedded in the entire structure of American law, starting with Marbury v Madison.

>> Troy Senik: Let me move you guys on to another aspect of this case, or the social effects of this case anyway.

There is a notable, and one might say cynical rhetorical shift that's going on in the press, with some support from the bench. It is very clear from the oral arguments in this case that, especially where the conservative majority on the court is concerned, that this is going to turn on the major questions doctrine that we saw articulated in the West Virginia EPA case.

The idea that the executive branch can't create these vast, consequential programs without pretty explicit instructions to that in from the legislative branch. And the latest fashion in the press, you're seeing this in opinion pieces, but also in what purports to be straight reporting. Is to suggest that this is itself a kind of conservative judicial activism, that this doctrine is something that the right has just recently invented out of whole cloth.

So let me give you a few representative examples. This was the New Republic earlier this week, unlike most legal doctrines frequently cited by the court, this one does not have a long and distinguished history. One of the sources they cite for that, Adam Liptak, famous Supreme Court reporter for the New York Times, recently wrote a piece in which he suggests that the genesis of all of this, the doctrine, is in 2017.

When then appellate Judge Brett Kavanaugh uses the term major questions doctrine in a dissent. And Lip Tac, in turn, also cites Justice Kagan in the dissent from the West Virginia case. When ordinary legal principles failed to thwart disfavored programs, she wrote, special canons like the major questions doctrine magically appear.

So the implication is pretty explicit here, this is a judicial fiction conjured up to solve a political problem for conservatives. John, is that a fair intellectual history of the major questions doctrine?

>> John Yoo: No, not at all, actually, because what the critics don't realize, seems to me, is that the major questions doctrine is, like a lot of other things the court does when it interprets statutes.

Notice, first of all, major question doctrine is not a finding that the statute's constitutional or unconstitutional. All it's saying is, this thing that the executive branch is trying to do, for example create an entire economy-wide climate change policy, is nowhere authorized in the statute that Congress wrote. And we're not going to assume Congress, as Justice Scalia once put it, is hiding elephants in mouse holes.

And here's why this is a more important doctrine that has a long history to it, is that all this really does is that it protects a more important constitutional principle called the non-delegation doctrine. And the non-delegation doctrine idea, which is constitutional in scope, is that Congress can't give away all of its legislative power to the agencies.

So you can see how this major questions doctrine, what it is. It's kind of like, I hate to use this word in front of Troy, it gets him excited, it's a prophylactic rule.

>> Troy Senik: Okay, easy.

>> John Yoo: It's a prophylactic rule that sort of protects the constitutional principle. Now, the non-delegation doctrine has been around since Chief Justice Marshall first mentioned it back in the early 19th century, and it's been a principle that the court has had trouble figuring out how to enforce.

Everyone recognizes that Congress couldn't pass a law saying, we hand over the power over the entire economy to the executive branch. I think most people say that's not, that's Congress giving away too much constitutional power. But the hard thing is, what's the test for giving away too much power?

And so the court in the last five years is, Hammed and Hawes suggested they wanted to revive the non-delegation doctrine. Justice Gorsuch and Justice Thomas have been the leaders in this. It would be quite a blow to the administrative state for the court to revive the doctrine, but this is kind of like a halfway house.

The major questions doctrine is a halfway house to fully revitalizing it. So what I think what the court's really doing is they're testing to see if they can figure out a way to make the non-delegation doctrine work, and they're just calling it major questions. But the principle goes back 200 years.

 

>> Richard Epstein: I have a slightly different take on this, not inconsistent with John's, but there is a rogue decision of the United States Supreme Court passed without any statutory authorization whatsoever. A case called Chevron, having to deal with the issue of the level of deference that you're supposed to give to an administrative agency when a statute is, quote unquote, not clear.

So the first question in this particular doctrine is, what is it to be a statute to be ambiguous? How do you read it? Do you find it clear or not clear? And you could take the same statute and say it's clear. You could say it's not clear. There is no authorization whatsoever in Chevron in the Administrative Procedure Act.

Most particularly the major grant of power in section 706, which says that basically all questions of law should be reserved to the court on a de novo basis. So essentially the proper understanding of the institution of the administrative state as reformed in 1946 when the APA was passed after a wideset consensus.

This was unanimous that the administrative state has simply run riot over the previous years. And the simple argument is that all questions of law should be decided de novo. Now, what that means is that you don't give any deference to an administrative agency or to anybody else. What you do is you look at the statute and come up with the best possible reading.

If you start looking at this particular statute having to do with the best systems of admissions reduction, which was at stake there, the two choices were as follows. You have lots of equipment which could turn wobbly, and you could say they have to put filters and buffers of one kind or other on it or in the immediate environment.

Or they can say, as they were arguing there, the administration can say that the best system of emissions reduction is to shift from fossil fuels in particular facilities in order to do either global warming stuff, solar energy, wind power, and so forth. And I regard, if you look at the rest of the statute, that's simply crazy.

Supposed to talk about demonstrable technologies that work on these things. That means that you can't require somebody to put a baffle on a machine that doesn't work. The entire program of solar and wind energy is completely speculative because nobody has figured out how yet to solve the storage problem.

You look at the lower court decisions and they're saying, this is just a matter of discretion. It can't be a chevron discretion to decide that a statute, relatively obscure, which has a natural meaning, which covers, say, 1% of the territory, is going to be read to be a thousand times more powerful than it otherwise would be.

And so I think the correct thing to say is that the major questions doctrine is an effort to overturn Chevron. In those cases in which they're the most egregious disadvantages, I would simply overturn the doctrine entirely. But the thought that somehow or other, the administrative agency, when you look at the factual record and the statutory text was correct in its mandate to try to shift everybody away from fossil fuels under a generalized statute.

That is simply irresponsible in what's taking place. And so I think what one has to do is to basically put this in context, look at the statute, look at the particular terms of it all. And it turns out that this was a no brainer in the way in which it came out.

The Biden administration, the Obama administration, have been absolutely the worst that comes to whenever they're dealing with anything having to do with energy. And so the idea that you would want to somehow or the bend over backwards to the gang that literally can shoot straight is, to me, a terrible mistake.

So I think that Adam Liptak is way off base on this particular issue. And that what we really need to do is to understand that administrative agencies, when they make final determination, do not have the expertise on questions of law that the chevron doctrine supposes that they indeed enjoy.

 

>> Troy Senik: Okay, I'm gonna shift you guys over. We're running short on time, so we probably won't have time to get to either Israel or grier. I'm probably the first person who's ever said that sentence. The last thing that I'll put in front of you today, a couple of questions on this, the free speech environment on campus.

And I want to talk about this from a couple of pretty different angles. The first, you know, there's this big incident last week at Stanford where the Federalist Society had invited in Kyle Duncan, judge on the Fifth Circuit, to give a speech. He shouted down by hecklers, wasn't able to give the talk.

This is not the first we've seen of this. You've had some variation on this at Yale, at UNC. You had this at UC Hastings with Ilya Shapiro. You guys, I'm sure, have dealt with flavors of this on your own campus, particularly John, who is not only at Berkeley but also had at least a solid five year window of being the most protested man in America.

So don't sell Richard short like that. So here's my question for you guys, just the conversation starter on this. As people who spend your lives on college campuses, when you think about these kinds of issues, what kind of problem is this? Is this cultural problem? This is the argument that you've got this uniquely brittle generation coming up that can't bear to hear a contrary point of view.

Is this an administrative problem that universities don't actually deter or punish this kind of behavior sufficiently? Is it a public policy problem that schools aren't empowered to do enough to stop this kind of behavior? How do you think about it? John, I'll start with you. Go ahead, Richard.

 

>> Richard Epstein: Yeah, no, I wanna say one thing. The fatal institutional structural weakness in this particular case comes not in the articulation of doctrine. Every major campus says, we always want to talk about harmony, harassment, and so forth, but we protect the principles of freedom of speech. It turns out you have a brigade of administrators a thousand miles long that deal with all the equity and so forth.

I can't even remember influence and belonging kind of issues.

>> Troy Senik: Inclusion.

>> Richard Epstein: Inclusion and all the rest of that stuff. There is no independent body on campus that has to deal with the enforcement of First Amendment claims. So it's the same associate dean at Stanford who berates this poor Judge Duncan, right, who's in charge of the free speech element of this thing.

She's not going to do that. We know where her loyalties ride. And so the entire administration gives lip service to free speech and institutional mocking to an inordinate amount. And so what they really have to do to a place like Stanford ideally is to fire everybody in the DEI department whatsoever and put somebody in a free speech department where they mean it.

It turns out this was hundreds of students that were involved in the protest. They continued the protest this morning in one form or another, saying they were only engaged in proper counter speech. I think there has to be very serious sanctions against these students who understand that if this were done by a conservative group to one of their people, they'd be screaming blue murder.

They are simply so utterly self-indulgent that they need to face serious disciplinary situations. Reports to the boss, suspension from classes, and so forth, in some cases, expulsion. The letter that was written by the president and by the dean was a very weak letter. They said, we will try to do better next time, and we apologize for doing badly this time.

And that provoked an enormous response. The Stanford student body, a very large fraction of it, is completely delusional, and the administration is willing to do nothing to stem it.

>> John Yoo: I think this is a failure of schools, primarily. I think it's easy to blame culture, but blaming overall culture just makes you think you can't do anything about it.

But I think this is a failure of universities, and also particularly law schools. I mean, we're not educating people who should be practicing law if they are unable to hear arguments, however unpleasant, that they disagree with. So, I mean, I don't know about you guys, but I don't want to be represented by attorney, who, if they're not addressed by the right pronoun, by a judge or opposing counsel, starts screaming and crying and.

Or stalks out of the courtroom or says, I can't stand to practice here. You have to be, as a practicing attorney, tough. You have to, I mean, this is not a profession for, you know, the weak willed. So I think this is a problem of law schools, primarily, who are not teaching students how to be lawyers, not teaching students how to argue both sides of a case, how to understand the other side's argument, and to even make the best arguments for your own client if you disagree with them.

And instead, our administrators and faculty and deans are cuddling students into thinking that everything's about belonging and inclusion and marshmallows and flowers and happy feelings and I don't know what else. Rainbows and free money and no student loans or whatever. So that's the main thing. The second thing is, Richard puts his finger on it, quite clear, I think, is we have administrator, we have this huge class of administrators at universities, and you would think the job of administrator is to enforce free speech protections on campus.

But when you look at the video of what happened to Judge Duncan, who, by the way, I've met him, I've been at conferences with him on things which have nothing to do with this. I was at a conference about the original understanding of the free exercise clause for anyone who's interested at AEI.

It was a really interesting guy, very soft spoken, thoughtful judge. And I mean, for administrators to get up whose job it is to enforce the free speech principles at Stanford, to berate and attack the guy, I encourage everybody to look at the video. I mean, the DEI administrator gets up, pretends she's there to protect free speech, and then just berates and attacks.

Judge Duncan is incredible. I mean, I agree. I think now I don't know whether such a person could be fired. She ought to be fired, I will point out, when I looked up who she was, it should be no surprise that she was also an administrator at Berkeley for many years, and so was a fine export from Berkeley to our competitor, Stanford, of such an administrator.

I hope we've exported other such administrators to Stanford from Berkeley, but I think there's a disaster. I think the university president here and I think the dean, I don't think, I'm not sure whether the dean is doing well since the apology letter, but that was a good start.

But what they've got to do now is they've got to clean house and fire administrators who not just allowed this, there are other administrators in the room you can see in the video who allow this to go on, but then other administrators who are fomenting it. I mean, this is, they are acting against the free speech principles of Stanford University.

And I would hope our top universities treat other administrators who act this way with firing as well let me make one philosophical point.

>> Richard Epstein: No, John, this is one that you will agree with. One of the things that we understand is there's the famous million principle, which says that the sole duty of any individual is to avoid inflicting harm on other individuals.

Now, the question is, what does that mean? If you're a good common lawyer or a good Roman lawyer, you start with force and fraud as the illustrations of what's going on. And then you have to figure out what is the kind of thing that doesn't count as harm.

And the answer that has always been given is that if you take offense at what other people happen to say, and it is not defamatory and it's not coercive and so forth, you just have to learn to adjust with it and to respond to it. Her definition of harm is she has a protected group of individuals, and if they feel upset about it, that harm is every bit as serious and everybody is worthy of legal protection as against the kind of harm that you get, against sticks and stones and defamation and so forth.

That definition of harm is so broad that it necessarily would lead to the following situation. If somebody on her side said something that was offended to the federal society, they could then heckle her down and shout it out. And so the basic rule has always been that people who believe in this very broad definition of harm, taking offense and unpleasant thoughts, only do it with respect to preferred classes.

So it always becomes viewpoint discriminatory, which is the one thing you cannot tolerate under the First Amendment. And you listen to the way in which she talks. She's so utterly uninformed and so utterly un, shall, we say, aware of the way in which proper First Amendment principles work, that it becomes almost ridiculous to think that somebody who doesn't understand the basic architecture of the First Amendment should be put into a position of having to enforce First Amendment values within a university consequence.

And so I think that in the larger debates, it becomes extremely important, extremely important to get clear what it is that we mean by harm, which harms are actionable and which ones are not.

>> Troy Senik: Final question for you guys today, a different kind of campus controversy, the one that maybe has a tenuous relationship to at least these kind of atmospheres.

You have a number of states now with various flavors of proposals to rethink tenure. There was a bill moving in North Dakota. It looks like it stalled out now that would allow university presidents rather than faculty to handle the post tenure review. In Florida, there's a proposal that would allow colleges boards of trustees to play that role.

In Iowa, and Texas, there have been proposals to do away with tenure altogether. So I wonder from each of your perches how you guys think about this, whether it is, in fact, to whatever degree time to rethink how tenure operates. John, I'll start with you.

>> John Yoo: I have two minds of this.

I do think it's up to the state whether to have tenure. I think you can have a successful university system without having tenure. I want to think harder about that. There have been proposals to replace tenure with longer term contracts so that maybe you're reviewed every five years or ten years to make sure you're productive.

At the Berkeley campus, for example, we undergo review every three years where we're evaluated on our scholarship and teaching and public service. And if you, and this is done by a committee of university faculty from the top departments, and if you're not good enough, you don't get a salary increase.

So, you could have a system like that, I guess, without having the guarantee of lifetime employment. But the funny thing is, I think tenure today protects conservatives, because if you think about it, tenure is only going to be valuable to people who are speaking, speaking or publishing and researching on views that are not popular, that are not in the mainstream.

And I don't mean popular mainstream for the country or population whole, I mean popular in the mainstream for universities. Because those are the ones who could be retaliated against because of their views by administrators, college presidents, trustees, and that kind of thing. So, I think right now the people who hold minority views on college campuses are people who believe in free markets, or people who are skeptical of the government, people who aren't woke, people who might agree on traditional educational values and curricula.

So the funny thing is you could get rid of tenure. I don't think there's anything wrong with it, I think a university could. But I think the more immediate consequence of it would actually be to make universities even more woke than they already are.

>> Richard Epstein: Look, I agree with John on that, but I'm gonna make another point.

John said about me and my misbegotten intellectual orientation, is that when I don't understand how public institutions ought to work, what I sought to think of as the closest private analog. And if you go back to universities from the time they became great universities. Tenure was regarded as an essential feature of the way in which you kept the intellectual control over the discourse in the hands of the faculty and not in the hands of the board of trustees, which generally was thought to be a very good thing.

What has happened is the faculty side of this thing has completely collapsed in terms of what's going on, and the hiring has been completely biased. You start bringing in people who don't belong on a faculty with very strong views. They then get promoted, they then become administrators, and they will take people who are exactly like them.

So that in these liberal organizations, in a place like Yale or Columbia, you can get social science departments, which essentially have sort of like 80 to 1 ratios of people who are committed liberals, completed conservatives. And then there are 19% of the people who cower as silence for fear that they'd be found out one way or another.

And you really have to try to do something about that. What John says is you try to do it through incremental adjustments at the administrative level, is, I think, the best possible situation. But what I really think that the universities have to do, and I think it's appropriate for the board of trustees to do this, is to try to set a standard in which this sort of gross partiality is not allowed.

So you take something in the California schools where you have to make a declaration of fealty with respect to the various principles of the equity and inclusion kind of movement and so forth. That is absolutely out of boundary. I mean, the last thing you want to do is to require the new people to come to agree with the people who are already there.

And I think administrators should strike that down. I think courts should strike that down. I think everybody should strike it down. But what happens is, it's the same frame of mind that you see in these reckless Stanford students that really take over entire boards of directors, administrators, and everybody.

The great tragedy in a place like Davis, where they have some of these rules, is there was one lone member of the physics department, of the mathematics department who proposed it, and everybody else has seemed to be voting in its favor. It may well be that the correct answer with respect to public institutions, to shut them down and start over if they continue to work in this particular state.

I mean, it has become simply too much of a political situation, and it's a tragedy, because most of the scientific research that's done in great universities like Berkeley and Davis and so forth is really very good and very important stuff that can't be duplicated in the private center.

So we need to have these universities, but it may well be that the current ones are bad beyond repair in terms of the way they put together to listen to arguments on both sides of that particular question. But having seen these isolated incidents and seen these general manifestations of policy, and understanding how difficult and near impossible it is for people of centrist or conservative inclinations to get academic appointments today, it means that there's something very rotten in our particular system, and everybody who's in charge of the oversight has failed to date.

 

>> Troy Senik: All right, fellas, that's all the time we have for this installment. My thanks to you both, as always, to our producer, Scott Immergutt, and to all our wonderful listeners. Remember to do us a favor and rank the show wherever you get your podcast. We'll be back with you soon.

Until then, the faculty lounge is officially closed.

>> Hoover Representative: This podcast is a production of the Hoover Institution, where we advance ideas that define a free society and improve the human condition. For more information about our work, or to listen to more of our podcasts or watch our videos, please visit hoover.org.

 

>> Richard Epstein: Good, I'm glad we're closed. I like being closed.