My counsel to the House: Do the deal, don't bet the country's economy

My Thursday wee-small hours guest-post on HughHewitt.com was an essay in favor of House passage of the revised economic stabilization bill, even though it is a crap sandwich.

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[Copied here for archival purposes on November 5, 2008, from the post linked above at HughHewitt.com.]

(Guest Post by Bill Dyer a/k/a Beldar)

This is a long-winded and lawyerly essay arguing in favor of House passage of the economic stabilization bill passed on Wednesday by the U.S. Senate. I'm speaking just for me, and I don't know if Hugh agrees or not. Take it for what you think it's worth, if you're inclined to invest the time to read it.

When I'm feeling puckish, sometimes when new acquaintances ask me what I do for a living, I reply: "I'm a corporate assassin." Or sometimes I give a single-word answer: "Gladiator." Either answer, and especially the latter, prompts looks of extreme skepticism that usually encompass my waistline, which bears no resemblance to Russell Crowe's. "I fight other people's fights for them, mostly fights over money," I go on to explain, "in courts before juries, or at least with the threat of that." Then they nod with understanding, and I try to fish up a lawyer joke or two to confirm that I don't take myself all that seriously.

But in fact, I do take my clients' cases seriously. It's my duty to do so, and I enjoy being an advocate. It's the glamorous part of my day job. (I'm due in court later this morning, in fact.)

Equally important, though, is the part of my job in which I'm not an advocate, but a counselor. That includes assessing the risks — risks that my side, despite my best gladiatorial efforts in the courtroom, will lose; risks that my clients' testimony, though heartfelt, may be disbelieved; risks that our system of justice, though it's the best in the history of the world, will misfire. My duty includes giving harsh or bad news to my client. And part of my job is as a negotiator, to explore the alternatives for settlement, to find ways to mitigate the risks, to beat swords into plowshares. Two truisms of my business are that most settlements leave both sides somewhat unhappy, and that most cases settle before trial. The truth is that personally, I enjoy going to trial more than I enjoy negotiating settlements, but my clients usually can't afford to take the risks involved, and their best interests usually mean settling at some point along the way if a reasonable settlement can be had.

When I read this op-ed by my blogospheric friend Quin Hillyer at the American Spectator, I could not help but admire his capable advocacy. Quin is a policy gladiator, and he believes in what he's advocating, which is that the financial stabilization bill defeated by the House on Monday ought to have been defeated, and the revised bill passed by the Senate on Wednesday and to be voted on by the House on Thursday or Friday ought to be defeated too.

In addition to being principled, he might be right — although I think he may have let the fire in his belly lure him into a few over-harsh assessments. (One example is his description of the Senate bill as "the work of bullyboys, of two-bit legislative gangsters, not of statesmen." Can he possibly think Mitch McConnell is a "bullyboy," or did he only mean the Democratic Senate leadership?) But when I'm in gladiator mode, I tend to lose my own objectivity by the time I'm engaging in my closing argument too. It's easy to go a little over the top.

But I'm not in gladiator mode over the financial stabilization bill, at least not yet anyway. My side doesn't have the votes anymore to control what happens in either chamber of Congress. It hasn't since 2006. The best my side can hope for is to make changes at the margins in what the Democrats are willing to pass, assuming they can deliver most of their membership (which, as Monday showed, is an iffy proposition at best). Unless and until the GOP makes huge gains in both the House and the Senate — and not many observers credit that as being likely even by January 2009, just based on who's retiring and who's running in "safe" seats from each party — my side isn't going to have majorities who can pass the kind of bill that would be preferred by Quin and the very fine, very principled conservatives who are likely to agree with his advocacy.

As a settlement scenario, getting what Quin or the dissenting House Republicans want is, therefore, a fantasy. I'm sorry; I wish that weren't so. But that's my best judgment of the facts on the ground, which include counting the number of Democratic noses to whom Quin's principles are absolute anathema. I don't think there's a materially better deal to be made — not given the current electoral realities. That would be my advice as a counselor, even if my gladiator instinct was to go in swinging my sword and figuring I could at least hack of few of those bullyboys and two-bit legislative gangsters down with me.

And the problem with that scenario is that we're not just talking about me, or Quin, or the dissenting House Republicans, going down in a blaze of glory. This isn't "The 300," in which our side will rally next month to fight off the evil empire and avenge our sacrifice. This is the American economy, the cratering of which will also crater the world economy.

"The stock market dropped like a rock — and then it recovered five eighths of its ground the very next day," points out Quin. Well, yeah. That means only a half trillion dollars or so in shareholder equity evaporated in a two-day period, instead of over a trillion. And that recovery was based on a perception that even though the House had voted "no" on Monday, some substitute bill would be passed by week's end. If it's not, there's every reason to think we'll see Monday's Dow drop repeated without the bounce-back, and with more, possibly worse, to come. As comfort goes, that's awfully cold. That's getting into territory measured on the Kelvin scale.

Twice in my career, I've tried "Bet the Company" cases for publicly traded corporations. One was a company already in Chapter 11 proceedings, where losing would have scuttled the planned reorganization and put the company into liquidation (with thousands of consequent job losses). The other was a technology company that, while solvent, was extremely illiquid, and it simply couldn't pay the lowest pretrial settlement demand even if it had self-liquidated at fire-sale rates. I've had other bet-the-company cases for much smaller, privately held companies in which they, too, had no real option under which they could avoid the inherent risks of fighting it out on the floor of our modern-day arenas known as "courtrooms." But no matter how much one enjoys the fight, and no matter how much one thinks one's own principles are the sound ones, it's irresponsible to bet the company when there's a reasonable settlement there which will eliminate that risk.

This situation is, unfortunately, the political parallel to a "Bet the Company" case, only it's "Bet the National Economy." "Reasonable," in this context, unfortunately includes what House Minority Leader John Boehner aptly described as a "crap sandwich."

My counsel to members of the House, including House Republicans — with due and genuine respect for my firebreathing friends like Quin — is therefore this: "Do the deal."

Then get busy fighting like hell for November 4th.

— Beldar