Monday, April 19, 2010

PA: School district snapped thousands of student images

The suburban Philadelphia school district accused of spying on students using school-issued laptops snapped thousands of images of teenagers in their homes, including shots of a boy asleep in his bed, documents filed in a lawsuit claimed Thursday.

In a motion filed April 15 by Michael and Holly Robbins, and their teenage son Blake, the family's attorney said Lower Merion School District personnel remotely activated Blake's MacBook over 400 times in a 15-day stretch last fall, taking photos using the notebook's camera and snapping images of the computer's screen.

"There were numerous webcam pictures of Blake and other members of his family, including pictures of Blake partially undressed and of Blake sleeping," alleged the motion. Screenshots of Blake's conversations with friends using instant messaging were also taken, said his lawyer.

The motion claimed that the LANRev software Lower Merion used to track stolen, lost or missing MacBooks took "thousands of webcam and screen shots ... of numerous other students in their homes, many of which never reported their laptops lost of missing." Among the photographs were some of a student who had a name similar to another student's who had reported a missing notebook.

Lower Merion, of Ardmore, Pa., was first sued by the Robbins family in mid-February, when they alleged that the district spied on Blake Robbins using his laptop. Later, Robbins said, a Harriton High School assistant principal accused him of selling drugs and taking pills, and used a snapshot taken by the computer as evidence. Robbins claimed the pictures showed him eating candy.

The motion filed on Thursday asked U.S. District Court Judge Jan DuBois to grant the Robbins' attorney access to the home of Carol Cafiero, information systems coordinator for the district, to seize any computers found in her home. Cafiero is one of two district employees who were put on paid administrative leave by Lower Merion in late February pending the ongoing investigation. According to her attorney, Cafiero only triggered the remote monitoring feature on school officials' orders.

Cafiero's computers' hard drives will be imaged, and the machines returned to her within 48 hours, the motion said. "There is reason to believe that evidence may be found on her personal home computer of the downloading of the pictures obtained from the LANRev 'peeping tom' technology," the Robbins' attorney argued.

The motion noted that Cafiero cited her right under the Fifth Amendment to not answer questions during a recent deposition, which she had earlier contested. "Unlike any of the witnesses asked to testify, [Cafiero] invokes the Fifth Amendment to every question asked of her, including a question asked as to whether she had ever downloading [sic] pictures to her personal computer, including pictures of students who were naked while in their home."


“The Federal Takeover of Higher Education Financing: Why Obama’s Boost Could Bust Taxpayers”

America’s colleges and universities might not qualify as bailout material, but the nation should get ready for what amounts to a federal takeover of higher education financing. Legislation signed March 30 by President Barack Obama practically seals the deal. And despite the administration’s claims to the contrary, taxpayers may find the transition exceedingly expensive.

The measure, tacked onto the massive health care overhaul, requires that campuses using the prevailing system – federally-guaranteed private-sector lending – must move to federal direct lending. The latter program has been in place for more than 15 years. President Obama wants to make it the only game in town. Banks, credit unions and other private lenders would still be allowed to operate, but without backing from Washington. With an Obama-style ‘let’s-get-it-done’ clap of the hands, the law mandates that all colleges and universities switch by July 1. The legislation also relaxes loan repayment terms; provides massive funding for Pell Grants; and boosts aid to historically black institutions.

The president is trumpeting the switch to direct lending as a victory for the American people and a blow to avaricious lenders and servicing firms. “For almost two decades,” Obama announced at the signing ceremony on the Alexandria campus of Northern Virginia Community College (where Vice-President Joe Biden’s wife, Jill, teaches English), “we’ve been trying to fix a sweetheart deal in federal law that essentially gave billions of dollars to banks. Those were billions of dollars that could have been spent helping more of our students attend and complete college.” Those “unnecessary middlemen,” as Obama described them, now would be virtually obsolete.

The White House estimates elimination of government fees payable to private-sector intermediaries would save taxpayers $68 billion through 2020, a savings that presumably will pay for other programs. Yet experience suggests that the savings will not materialize and that more taxes will be needed.

Before casting doubt on the new system, it’s essential to understand what it replaces. That would be the Federal Family Education Loan Program, or FFELP. Created by Congress in 1965 as part of the Higher Education Act, FFELP is an elaborate public-private partnership in which participating for-profit, nonprofit and state lenders underwrite and/or service loans to borrowers with a limited income or credit history.

The program now serves in excess of six million participants, underwriting more than $55 billion a year in new loans, or more than 75 percent of the federal total. FFELP consists primarily of Stafford and PLUS components. Stafford loans, which run from 10 to 30 years, can be interest-subsidized or unsubsidized based on financial necessity. PLUS loans are available to parents of dependent undergraduate and graduate students, and cover the full cost of attendance minus outside aid.(The means-tested Perkins loan program may be part of either FFELP or direct lending).

Fueling much of the FFELP’s rapid growth over the last couple decades has been SLM Corp., better known as ‘Sallie Mae.’ Chartered by Congress in 1972 as a Government-Sponsored Enterprise, Student Loan Marketing Association, the Reston, Va.-based Fortune 500 company has an active loan portfolio of nearly $190 billion covering some 10 million students and parents. Having phased in a full privatization plan during 1997-2004, Sallie Mae engages in a wide range of lending, servicing and counseling activities.

It soon will scale them back. Sallie Mae, unlike the residential mortgage industry’s roughly equivalent Fannie Mae and Freddie Mac (which thus far have received a combined more than $125 billion in federal bailout money), can be seen as the inverse of “too big to fail.” Call it “too big to succeed.” That is, Obama administration officials and allied Democrats in Congress, seeing a huge, solvent and privatized company, recognized an obstacle to a full conversion to direct lending, and decided to crowd it out.

During the signing ceremony, the president singled out Sallie Mae as the prime culprit in an “army of lobbyists.” That the company had been named one of America’s “100 Best Corporate Citizens” at least five times by Corporate Responsibility Officer scored no points. And its contribution of the $250,000 legal maximum to George W. Bush’s second inauguration no doubt cost it a few.

Now that its services suddenly have become dispensable, Sallie Mae is figuring out how to downsize. Almost as soon as Obama signed the Health Care and Education Reconciliation Act, corporate management announced plans to lay off 2,500 employees from its 8,600-person work force at dozens of offices across the nation. This likely isn’t the only college loan-related employer who will distribute pink slips. Sen. Lamar Alexander, R-Tenn., who served as Education Secretary nearly 20 years ago under President George H. W. Bush, estimates 31,000 private-sector employees will lose their jobs. “The Obama administration’s motto is turning out to be: ‘If we can find it in the Yellow Pages, the government ought to try to do it,’” he said.

Supporters of direct lending argue that it is more efficient than the public-private partnership model, since it eliminates unnecessary layers of bureaucracy. Now there’s little question that the FFELP has had its share of problems. In 1991, U.S. Senate investigators concluded that the program is “plagued with fraud and abuse at every level.” Accusing the Department of Education of “gross mismanagement, ineptitude and neglect,” the Senate put cumulative losses during 1983-90 at $13 billion. In 1994, the Education Department (ED) admitted that waste, fraud and defaults in its higher education loan and grant programs amounted to at least $3 billion annually.

And in May 2005, ED Inspector General John Higgins told a House committee that “the department’s student loan programs are large, complex and inherently risky…the loan programs rely upon over 6,000 postsecondary institutions [and] more than 3,000 lenders.”

Direct lending offers pretty much the same terms, benefits, interest rates and loan ceilings as its FFELP counterpart. And a sizable number of schools, such as Penn State University, already have made a transition to direct lending on their own. But would mandatory full conversion be an improvement? The evidence suggests not.

In 1993, Congress enacted and President Clinton signed into law the first-ever direct loan program. The main argument, then as now, was that cutting out middlemen would deliver more education for the dollar. Then-Education Secretary Richard Riley remarked:

So, who opposes direct lending? The financial middlemen who benefit from the old loan program, earning billions each year while assuming virtually no financial risk. That’s because the guaranteed loan system gives them a federal guarantee to replace their money if a borrower defaults, as well as hefty federal subsidies for participating in the guaranteed loan program. The bottom line is that the special interests’ profits are threatened, and their lobbyists have made clear to Congress that they expect to be protected. They do not want competition from a new system that works better.

Those words could have come straight from President Obama. Yet evidence indicates that direct lending, formally known as the William D. Ford Direct Loan Program, isn’t the bargain it’s cracked up to be. For one thing, the projected $68 billion in long-term savings is an exaggeration. Congressional Budget Office Director Doug Elmendorf estimates the true figure at $40 billion. Writing in his blog this past March 15, he explained:

CBO estimates that replacing new guarantees of student loans with direct lending would yield savings in mandatory spending of about $68 billion over the 11 years through 2020. That figure represents the estimated savings in mandatory costs that would be shown in a CBO cost estimate for legislation under consideration by Congress. However, adjusting for the projected increase in annual discretionary administrative costs in the direct program, the net reduction in federal costs from the proposal would be about $62 billion. On a fair value basis, incorporating administrative costs and the cost of risk, CBO estimates that replacing new guarantees of student loans with direct lending would yield savings of about $40 billion over the 2010-2020 period. The primary reason for that $22 billion difference is that payments from the government to lenders are risky – they terminate when a borrower defaults on or prepays a loan.

On top of this, when the federal government becomes the bank, it is unlikely to assess risk as thoroughly as banks and other private lenders. A paper prepared by Deborah Lucas (Northwestern University) and Damien Moore (Congressional Budget Office) for the National Bureau of Economic Research concluded that as of January 2006, the direct loan portfolio had incurred a composite 11 percent default rate, whereas the rate for guaranteed loans was only 8 percent. And the Government Accountability Office several years ago found that the direct lending program spent more than it collected in interest and fees in each year since 1997.

Additionally, direct lending severely diminishes consumer choice. The federal government, not the student or his family, chooses the lender with whom to do business. Bill Spiers, director financial aid at Tallahassee Community College explains: “One of the great benefits of the FFELP is the ability of the student, and where it is appropriate, their parent(s) to decide with whom they want to do business. Students in direct lending are not given this choice.”

Perhaps the most onerous consequence of a full conversion to direct lending is the possibility of financial aid used as political leverage. We all know the old saying about the Golden Rule: “He who has the gold makes the rules.” Well, it applies here. Nominally, these are ‘student loans.’ But in fact the federal government disburses them to institutions. When a student takes out a loan, he effectively is promising to his respective college or university to pay back all debt with interest following completion of studies. Without recourse to switch back to the FFELP system, campus administrators may be at the mercy of the federal government. Peter Wood, president of the Princeton, N.J.-based National Association of Scholars, recently outlined the dilemma:

The federally subsidized student loan system surely stands in need of reform. But “Direct Lending” may well be a cure that is worse than the disease. The main problem is not financial but political. It will make American higher education extraordinarily vulnerable to political interference. Will Congress, presidential administrations, and the Department of Education resist the temptation to misuse their new power? Direct Lending will give the federal government decisive if not quite total control of higher education finance.

Then there is a paradox common to direct and indirect lending: tuition ‘cost-push.’ An individual loan defrays a student’s tuition, but loans a whole raise it because participating institutions have fewer incentives to constrain costs. Taxpayers, after all, are liable for losses. “More and more Americans have sought a college education,” wrote Neal McCluskey and Chris Edwards in a Cato Institute paper last year, “which has pushed prices higher. Ordinarily, such upward pressure would be restrained by consumers’ willingness and ability to pay, but as government subsidies have helped absorb tuition increases, the public’s budget constraint has been lifted.”

The new legislation exacerbates this problem by loosening repayment requirements on direct loans. Students who meet income and other eligibility requirements and who borrow after July 1, 2014 would be allowed to cap their repayments at 10 percent above basic living requirements rather than the current 15 percent. Moreover, if borrowers remain on schedule in their payments, any debt remaining after 20 (instead of 25) years would be forgiven. Loan forgiveness would kick in after only 10 years if the student finds employment in a designated public service such as teaching, nursing or the military. It’s a backdoor way to expand government and raise tuition in one movement.

The switch to direct lending has major implications for a planned expansion of the Pell Grant program, the main source of federal aid to postsecondary students from low- and moderate-income families. Enacted in 1972 and named after its prime sponsor, Sen. Claiborne Pell, D-R.I., the program serves more than 10 percent of all college students, costing $16.3 billion in fiscal year 2009. That figure may seem quaint in the near future. Under the new law, the federal government would provide about $36 billion worth of new financing for Pell Grants over the next decade. The maximum annual grant would rise from $5,350 to $5,975 by 2017. If anything, these figures undershoot the mark. The CBO projects annual outlays to rise by $27 billion during fiscal years 2010-19 – in other words, to exceed $40 billion – thanks to Consumer Price Index indexing and increased participation. The Department of Education likewise projects Pell Grant spending to increase to $35.4 billion during fiscal 2009-13. Other beneficiaries of the new law are the more than 100 ‘Historically Black Colleges and Universities’ (HBCUs) and their students.

The new legislation provides $2.55 billion to black four-year institutions (e.g., Howard, Florida A&M) and another $2 billion to black two-year community colleges. That’s a hefty sum to maintain and promote racial separatism. That students at HBCUs typically exhibit high default rates makes this giveaway all the more inexcusable. President Obama puts it differently: “We’re not only doing this because these schools are a gateway to a better future to African-Americans; we’re doing it because their success is vital to a better future for all Americans.” Got that? We’re all better off.

Americans are overextended to their creditors, and the new legislation will push the situation further into the danger zone. During 2000-09, total outstanding federal student loans more than quadrupled from $149 billion to $630 billion. President Obama says he wants to double higher education enrollment from 18 million to 36 million by the year 2020. If this comes to pass, can anyone deny the possibility that debt will explode even faster? There are practical ways of getting around the high cost of a four-year college: attend a community college for the first two years; live at home and attend a commuter four-year school; choose an in-state public institution; apply for a partial or full scholarship; contribute to a ‘529’ state-sponsored prepaid tuition plan; contribute up to $2,000 annually to a tax-free Coverdell Education Savings Account; and enroll in college after accumulating full-time work force experience (or take evening courses during such experience). Yet the ultimate cost-reduction strategy is to avail ourselves of the notion that college is a basic right.

It’s understandable why an entitlement view is taking root. A special Census Bureau study early last decade, for example, concluded that adults with a four-year college degree receive around 75 percent higher lifetime earnings than adults with only a high school diploma. Yet the blunt truth is this: College is not for everyone. The very term ‘higher education’ assumes a mastery of basic reading, math, history, science and other skills. It’s not ‘elitist’ to say that colleges and universities shouldn’t be providing remedial high school education. Yet so long as the line of applicants gets longer and the pot of federal aid gets larger, more institutions may find themselves filling that role. Taxpayers, less than cheerfully, will provide support.


When experts lack expertise

Jeffrey Tucker, discussing the decline of apprenticeships last week, noted the modern state-controlled schooling system is based on “the completely la-la-land view, emerging sometime after World War II, that a student can sit at a desk listening for 16 to 20 years and thereby be prepared to call down immediately a substantial salary from a firm by virtue of the great value he or she provides.” This view is preposterous, Tucker said, as businesses are often flooded with college graduates who have little practical knowledge. Of course, that’s only a problem for the private sector; when it comes to the government sector, schooling credentials have always been more valuable then practical ability.

Bureaucracy is a credential-based system. A PhD or Juris Doctor is the modern equivalent of an earldom or a knighthood. Mere possession of a credential is sufficient to establish one’s credibility on a subject — even if the subject isn’t directly related to the credential.

Educational credentials are generally a stepping-stone towards government commissions; these pieces of paper confer authority upon the possessor, which in the eyes of the state and its supporters equal expertise. Some government commissions are election-based: the president, members of Congress, etc.; the overwhelming majority of commissions are beholden to the bureaucracy itself, technically originating from the president in communion with the Senate, but in practice arising from self-selected interest groups. These groups function much like medieval guilds in that they are effectively mini-states that rely on credentialism to restrict competition or challenges to their so-called expertise over a given trade.

Let’s consider my favorite agency, the Federal Trade Commission. Although the FTC is billed as a “consumer protection agency,” in reality it is simply the research-and-development arm of the antitrust guild. The law specifies no particular qualifications for FTC members — unlike, say, the solicitor general, who must be a lawyer — but in modern practice virtually all commissioners are antitrust professionals.* It’s a closed system, and the FTC’s primary job is to ensure it remains closed to “unqualified” outsiders.

Consider the words of former FTC member Thomas B. Leary. In a 2005 interview, Leary bemoaned the fact that so many physician groups had run afoul of the FTC’s “guidelines” about how medical providers were expected to organize and conduct their businesses. Leary said he was sympathetic to the physicians themselves; he blamed a lack of competent antitrust advice:
The Guidelines are very helpful to practitioners who are willing to pay attention to them and deal with them. I think they’re very fulsome. It may be, quite frankly, that collectively they’re too big a mouthful for outside-the-beltway practitioners. And I am not saying that in a patronizing way.

I get the impression there are an awful lot of lawyers giving antitrust advice on the Health Care Guidelines who are not really antitrust lawyers, and I think that it might be desirable to consider amplifying on those Guidelines through speeches and things of that kind to make them more focused for the edification of outsiders. As you know we’ve got a case under consideration right now involving possible application of the Guidelines. When that opinion comes out, it may provide some guidance for people — regardless of the outcome. (Italics added)

It’s important to understand that Leary is not talking about the law — that is, a statute enacted by Congress — but merely the opinions of unelected antitrust lawyers at the FTC and Department of Justice. The “guidelines” exist solely in their minds; even if a physician group followed the guidelines to the letter, the FTC can turn around and say, “Oh, that’s not what we meant.” Indeed, that’s exactly what’s happened in the majority of FTC cases (about three dozen since 2001) against physician groups.

Now, Leary is no healthcare expert. He’s never run a medical practice or a hospital. His knowledge of healthcare management is no greater than mine. He is, however, an antitrust lawyer with “50 years of experience” in that field, according to Hogan & Hartson, the law firm he was a partner at before and after his six-year FTC tenure. And that’s what’s important. He’s master of a field with no real market value, but thanks to the state’s antitrust patent, he’s instantly a valuable commodity for firms — such as physician groups — looking for “expertise” in dealing with the FTC.

The damage such false expertise can reek on the market is incredible. The man who succeeded Leary as a commissioner, John Thomas Rosch, proved as much. Like Leary, Rosch spent his career as an antitrust litigator for a prominent law firm. When he was invested with the powers of the FTC, Rosch suddenly became an expert in hospital management, which he put to use in a handful of cases involving hospital mergers. One of his victims was a small nonprofit hospital that nearly suffered financial ruin at Rosch’s hand.

Prince William Hospital in Manassas, Virginia, spent over a year seeking a larger nonprofit partner to provide badly needed capital. PWH was a one-hospital operation, and many of its facilities had not been upgraded since the 1960s. After a lengthy review, the hospital’s board chose to merge with Inova Hospital System, a larger group also based in northern Virginia. Inova promised approximately $250 million in new investment. PWH physicians and local politicians seemed agreeable to the deal; it was a win-win for everyone.

Everyone except Commissioner Rosch. The FTC was in the midst of a losing streak when it came to stopping hospital mergers. Rosch, a Republican, joined the FTC during the Bush years and quickly asserted control over the agency’s litigation bureaucracy. Rosch needed a hospital merger he could torpedo as a show-of-strength. PWH and Inova presented themselves as victims of opportunity.

What ensued was one of the longest merger “reviews” in antitrust history — nearly two years of FTC demands for documents about every aspect of PWH and Inova’s operations. The review wasn’t limited to “competitive” issues. During one meeting with over two dozen FTC lawyers, the staff questioned PWH’s architectural decisions regarding future construction plans; one lawyer scoffed at the hospital’s plans to include only private rooms in a new patient wing, as opposed to semi-private rooms. On another occasion, FTC lawyers demanded PWH’s confidential personnel files, a move the hospital balked at.

All of this took place at Rosch’s command. In December 2007, he issued a ten-page memorandum to the FTC’s chief litigator. The FTC refused to release the contents of this memorandum, but an FTC official later confirmed to me that “[Rosch] was very active in the investigation.” This same official said that at that time, “Rosch views the litigation strategy of the staff as his unique domain among the Commissioners given his litigation experience.” [This may no longer be the case since Democrat Jon Leibowitz became chairman; Rosch publicly chided the staff for its actions in a recent physician case.]

After two years, over $15 million in legal bills, and a downgrading of PWH’s credit rating, the hospitals’ merger collapsed. The final straw came when the FTC finally announced it would challenge the deal under Section 5 of the Federal Trade Commission Act. The FTC Act requires complaints be tried before an administrative law judge. The FTC, however, bypassed their two sitting judges — neither of whom was hearing a case at the time — and appointed Rosch himself to serve as judge! The hospitals saw the writing on the wall.

The FTC’s only stated reason for its unprecedented decision to name a sitting commissioner as trial judge was Rosch’s “40 years of experience as a trial lawyer, predominantly in the context of complex competition cases, making him the best available candidate to sit as the trier of fact in this case.” This doesn’t pass the smell test. Experience as a litigator is not equivalent to experience as a judge. More importantly, the FTC’s two administrative law judges at the time both had substantial experience both as judges and as triers of “complex competition cases.” Indeed, then-Chief Administrative Law Judge Stephen J. McGuire had just presided over the most complex antitrust case in FTC history, the Commission’s seven-year pursuit of Rambus Incorporated (more on that in a moment).

The real reason that Rosch orchestrated his own appointment as trial judge – and an FTC official told me, “I’m sure the idea came out of his office, not at anybody else’s request” — was that McGuire and his fellow judge had ruled against the FTC staff in four major antitrust cases. Rosch wanted to avoid any independent review of the antitrust investigation that he had directly supervised.

Shortly after PWH and Inova abandoned their merger, Rosch spoke to an antitrust industry audience, where he again emphasized his “expertise” as the primary justification for his appointment as trial judge:
I haven’t discussed the specific reasons for the assignment with my colleagues. But I hope the assignment helped address concerns about both the antitrust expertise of the judges conducting plenary trials at the Commission and the time it takes to prepare for and conduct such a trial.

Rosch’s outright lie about not speaking to his colleagues aside, it’s not clear who had “concerns” about the “antitrust expertise of judges” — aside from Rosch and his fellow commissioners, that is. In two cases where the FTC disagreed with its administrative law judge about the disposition of an antitrust case, the appellate courts broke the deadlock in favor of the judges. (Of course, Rosch has also chastised the appellate courts for lacking sufficient antitrust expertise.)

Rosch’s claim that judges lack sufficient “antitrust expertise” mirrors Thomas Leary’s statement about lawyers “who are not really antitrust lawyers” advising physicians. Both place enormous weight on their own credentials as antitrust lawyers; which, in reality, means they have law degrees and chose to network with other people who call themselves antitrust lawyers, nothing more. Whether they possess relevant knowledge and experience is, apparently, irrelevant.

Such thinking permeates the FTC’s trial of cases. In the Rambus litigation, Judge McGuire rejected the Commission’s two principal “expert” witnesses as unreliable. The Rambus case arose from the FTC’s belief — heavily influenced by industry lobbyists — that the computer memory industry had adopted the “wrong” technical standards, because they included inventions that were under patent to Rambus. (Please, spare me the anti-IP comments here; this isn’t the forum.) The FTC paid over $1.1 million to expert witnesses to help prove this theory.

One expert, Dr. Bruce Jacob of the University of Maryland, received $208,900 to testify about alternative technologies the memory industry — specifically manufacturers of DRAM — should have adopted in the 1990s instead of the Rambus designs. Judge McGuire said Jacob was “not persuasive,” because he, um, lacked expertise in memory design:
Professor Jacob had never done DRAM circuit design. Indeed, Professor Jacob had never designed any circuits for computer chips (even apart from DRAMs) that were to be fabricated prior to 2002. Aside from reviewing some DRAM data sheets, Professor Jacob, who was a student at the time, had no particular DRAM-related experience in the mid-1990s. Professor Jacob did not obtain his graduate degree and begin to teach electrical engineering until 1997

A second expert, economist R. Preston McAfee, received $573,000 to detail the alternate universe that would have existed if the DRAM industry had adopted non-Rambus technologies. Like most “expert” economics testimony, McAfee was compelled to work backwards from the FTC’s conclusions. As with Dr. Jacob, Judge McGuire found McAfee’s testimony “not persuasive.” Among the problems was Dr. McAfee’s conclusion that there were “equal or superior technologies” that the DRAM industry should have adopted; Judge McGuire said this analysis was “flawed,” because Dr. McAfee “did not quantify” any cost, performance, or future flexibility differences between Rambus and non-Rambus technologies.

Overall, the FTC’s attempt to retroactively create an alternate DRAM universe demonstrated an appalling mix of arrogance and ignorance. Judge McGuire issued his initial decision dismissing the case in February 2004. The FTC then took three years to review, reverse, and rewrite the decision in favor of the Commission’s position; this was followed by another two years of review by the federal appellate courts, which ultimately reversed the Commission and reinstated McGuire’s original decision. The FTC, however, never wavered from its view that it knew best, even after conceding defeat in the courts.

You can condemn the FTC’s petulance, but it’s more important to understand where it comes from. These people sat at their desks for 20 years, obtained that all-important schooling credential, “worked” as lawyers (or academics) in a field where they could fabricate any theory they wanted without any regard for economics or empirical data, and ultimately found themselves rewarded with a government title, salary, benefits, and staff. What do you think the consequences of such a system are?

*The current five commissioners include two career government attorneys, two career antitrust litigators, and a law professor who consulted foreign governments on antitrust policy.


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