Nexus: Chapman's Journal of Law and Public Policy

Decisions brought on this recession; will decisions get us out?

Bailout, layoff, unemployment rate, vacancy rate, bad loans, default, foreclosure, unlawful detainer, repossession, bankruptcy, loan modification—these are all words we hear far too often.

The recession, which began in December 2007, shifted into high gear in late 2008. The market fell—hard and fast. By March 2009 the market was down 50 percent from late 2008. Some of us were saved by stop loss orders, others awoke to find their fortunes and savings shriveled overnight.

The economy is horrific. Unemployment rate was at 9.8 percent in September, the highest since 1983. Labor markets are weak. People are still losing jobs. 263,000 jobs were lost in September, bringing total job reductions since the recession began in December 2007 to 7.2 million, the biggest decline since the great depression. US apartment vacancy rates are also at a 23 year high, 7.8 percent. Rent is decreasing. Homes are foreclosing. Banks only give money to those who don’t seem to need it. So what is being done to save us from this? Decisions, decisions.

Decisions, just to list a few, include governmental bailouts of the banks and auto manufacturers, student loan forgiveness laws, the Obama Tenant Protection Act, cash for clunkers, scholarships, healthcare reform. These are a few examples of recent, good faith decisions by government made to help save money, build confidence and ultimately aid our escape from this recession.

Companies are making these decisions as well. Amid this recession they are reporting positive earnings, generating capital, and developing new products—all things that increase our confidence in this economy, a key ingredient to escaping this recession.

We’ll call these “good” decisions. By “good,” I mean decisions which further confidence in our economy an essential ingredient to escape this recession. If we have confidence, these decisions must be working, right? The market is up close to 40 percent since March 2009. If the market is up 40 percent we there must be confidence right? These decisions must be “good” if we have confidence and the market is up right?

Will these “good” decisions turn our economy around for good? That is something no one can answer with certainty. What is certain is that bad decisions will only harm us.

The U.S. Securities and Exchange commission has filed a notice with the US district court, appealing a judge’s recent decision to throw out the SEC’s insider trading case against Dallas Mavericks Owner Mark Cuban. Cuban faced insider trading charges for selling shares of Mamma.com based on information that had not been made public about an impending stock offering. A judge ruled in Cuban’s favor earlier this year, stating that the SEC did not state a claim against Cuban.

So not only does the SEC waste taxpayer and judicial resources bringing a suit which will get thrown out for failure to state a claim, which in itself means they either disregarded the fact that they were wasting these resources and proceeded to do so anyway without sufficient facts; or they simply did not do their job properly and neglected to properly plead their case, BUT they have the audacity to appeal the decision.

What will this appeal accomplish? It does not appear that they have sufficient evidence to prove their case against Cuban, they can’t even properly state a claim, so Cuban will most likely walk away untouched. There is something to be said for its deterrent effect on Insider trading, this argument I can buy, but has that not been accomplished already? This was a highly publicized case and the deterrent message was conveyed. Sure, if Cuban goes to jail this effect will be greater, but do we really want to put our time, money, and focus into prosecuting the Dallas Mavericks owner (who is valuable to this economy) by appealing a fair decision of our own judicial system when we have much bigger problems on our table (like the biggest recession since the great depression)? Is this another waste of taxpayer money?, another wrong decision?

The "good" or right decisions can rescue our economy, the wrong decisions are the economic hitmen.