Filing public comments does not mean you are setting the narrative….

Twenty years ago, while serving on the staff of a local government consumer service regulatory agency, the director at the time called me into his office to discuss a consumer survey the agency was crafting.  He said to me, “Alton, we are putting together a survey that will have an impact on our future careers.  The consumers do not know what to think. We are going to make them think what we think.”

He shared with me a regulatory reality that through his words he was able to yank forward from my mental backburner.  I was shocked at the brazenness but in no way shocked by its truth.  As a consumer or a trader for that matter, if you expect to have any impact on the decision making of a policy maker, you will have to be more aggressive in your actions.  Voting or writing comments on a proposed rulemaking won’t get you very far in terms of impact.

As a communications tool, public comments serve as a barometer or temperature gauge for an elected official.  They may at best incorporate into the announcements that accompany their rulings some of the energy they glean from public comments, but a policy maker’s decision on a rule has already been made before your shouting is heard. 

Regulatory agencies are mostly reactionary and a significant portion of the rules they make are in reaction to an event or to the needs of the industry they regulate.  Industry takes a 24/7 interest in the actions of government and participate in active narrative making through direct lobbying and comments in the media.  They leverage these tools and advantages every day.

But even industry’s influence has its limits.  Industry exists to do the bidding of government.  The government grants industry charters and licenses to serve a public convenience and necessity.  We tend to think “public convenience and necessity” as meaning doing beautiful things for society.  This is not necessarily the case.

Providing services that make society look and feel better are tactics that support government’s primary goal: the validation of its existence and expansion. This is the box that industry is in and its attempts to influence government via lobbying are merely ways of giving itself a little more elbow room. 

In the end, industry works for government, carrying out government’s philosophy, narrative, policies, and laws.

Allowing public comments is merely a tactic that nurtures the façade of democracy.  By allowing the public to file comments, government provides a release valve for the public through which to vent.  It is a small upfront price to head off the potential loss of political power. 

In my years serving on the staffs of two regulatory agencies and as a board member of another, I can say that public comments never swayed any recommendations or decisions that I made.  If you want to sway a decision maker’s thinking, you will have to learn the political pressure points and lobby to the decision maker’s interests.  

Alton Drew

9 May 2022

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Securing the new Twitter to spread political narrative …

Today, the board of Twitter, Inc. (NYSE: TWTR) accepted a bid from Elon Musk, chief executive officer of Tesla, Inc. (NASDAQ:TSLA) to purchase the social media platform for a reported $44 billion.  The two competing political narratives emerging in the aftermath of the purchase are, from the right, that free speech will now return to the nation’s “public square; and from the left, that one man, particularly Elon Musk, should not have so much control over the social medium. 

For example, according to Yahoo News!, U.S. Senator Elizabeth Warren, Democrat of Massachusetts, reportedly lamented that the purchase is “dangerous for democracy.”  She hinted that big tech companies should be held accountable by stronger rules.  Other senators such as Senator Debbie Stabenow, Democrat of Michigan, are concerned that a Musk-run Twitter would reactivate former president Donald Trump’s Twitter account.

Mr Trump put a sock in the assertion that he would return to posting content on the platform, stating that he was going to stay focused on his new social platform, Truth Social.

I find criticisms of Musk’s ownership a bit disingenuous, especially inside the Washington, DC beltway.  Jeff Bezos, another billionaire, dipped his toe into the media space when he purchased The Washington Post back in 2013. Unlike Mr Musk who apparently faced a hesitant Twitter board, company employees, and left media backlash, Mr Bezos had the blessing of The Post former owner, Katherine Graham, who believed Mr Bezos’ internet savvy was crucial to The Post’s survival.

At first, I thought Mr Musk’s intent for the purchase was neither here or there, but on further reflection having some insights into the new owner’s vision could guide how members of the political class approach Twitter as a medium for messaging.  The political class has two options.

Under the first option, the political class could go on a regulation rampage.  Mr Musk has already taken a preemptive measure by planning to take the company private, thus avoiding unnecessary regulatory scrutiny.  Private or not, the political class could pursue yanking protections from liability currently afforded social media companies under Section 230 of the Communications Act. 

The Act excuses social media platforms like Twitter from the liabilities brought on from the content posted by its users.  If Twitter plays the role of a publisher or editor, it would lose the liability protection.  However, under the law, Twitter is allowed to take editorial action against content considered lewd, lascivious, obscene, excessively violent, harassing, or otherwise objectionable.

If the political class decides that Twitter is a publisher, Twitter could find itself doing exactly what Musk wants to avoid: restricting free speech for the sake of avoiding liability.

Under the second option, the political class could focus on its continuous use of Twitter as a communications channel to its constituents.  For example, most members of Congress and the Executive branch maintain Twitter accounts.  Federal, state, and local government agencies also use the platform to share information. 

Adding to Mr Musk’s vision for a freer public square versus creating the cognitive dissonance associated with using the platform while trying to regulate it to death may provide the political class with better political optics.  The political class primary role is maintaining the image of an open society, distinguishing American society from an increasingly autocratic world.  The political class is supposed to keep its hand on the narrative that influences the electorate to follow public policy. 

By whittling down a medium that the public uses to express itself, the political class runs the chance of looking autocratic itself and hindering the spread of its own narrative.

Alton Drew

25 April 2022

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The DeSantis-Disney puts political power into entertainment mode.

On 1 July 2022, SB 4-C, an amendment to Section 189.0311 that eliminates Disney’s special district status, will go into effect. According to the bill, the special district status terminates on 1 June 2023.

A special district status is where “a unit of local government is created for a special purpose, as opposed to a general purpose, which has jurisdiction to operate within a limited geographic boundary and is created by general law, special act, local ordinance, or by rule of the Governor and Cabinet.”

Why does Governor DeSantis support SB 4-C? Mr DeSantis reportedly has an issue with Disney’s alleged agenda to indoctrinate kids about sexuality via the media company’s programming.

SB 4-C states in part that “any independent special district established by a special act prior to the date of ratification of the Florida Constitution on November 5, 1968, and which was not reestablished, re-ratified, or otherwise reconstituted by a special act or general law after November 5, 1968, is dissolved effective June 1, 2023. An independent special district affected by this subsection may be reestablished on or after June 1, 2023, pursuant to the requirements and limitations of this chapter.”

The bill does something that Joe Biden and NATO have proved inept at in their prosecution of a response to Vladimir Putin’s invasion of Ukraine. The bill gives the State of Florida and Disney a way out, a backdoor. On the way to the back door, Disney can petition to reestablish its special district status. I suspect that reapplying versus relocating its resorts and parks would be a less expensive option. Meanwhile, as Covid-19 abates, Disney can use the box office success (it hopes) of its upcoming theatrical releases as a goodwill ambassador for the media firm and leverage those successes in reestablishing its special district status.

For DeSantis, the signing of the bill not only shores up his bona fides with his conservative base, but demonstrates the limit of corporate political power. There is an adage increasingly abandoned that corporations prefer avoid politics. More progressive perspectives are receiving voice in C-suites and boardrooms and that voice is supporting more progressive legislation. What Mr DeSantis and the conservatives in the Florida Legislature are doing is reminding corporations that they exist because public policy has turned economic management over to the private sector and that government can yank from corporations those charters and the privileges that come along with them.

Whether learning to manage political power from the private sector or the public sector perspective, always push the electorate’s emotional buttons and give each other an out. The private and public sector relationship is symbiotic and dependent on this give and take.

Alton Drew

24 April 2022

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How the regulator’s mindset may impact cryptocurrency …

An article today in Bloomberg discussing how a Biden administration would address the regulation of cryptocurrency has me putting myself in the place of the regulator. What is the U.S. Securities and Exchange Commission’s world view of digital assets? How will the Commodity Futures Trading Commission’s view toward regulation of exchanges evolve? Will the Board of Governors of the Federal Reserve System view the payment system aspect of cryptocurrency as a threat to the current national and global payment system regime or as a welcome supplement that brings more efficiency and transparency?

Clarity on what may happen on the regulatory side of cryptocurrency requires that the trader first take a top-down view of how governments view the world and especially how they view markets. You will never hear a regulator utter the term “free markets.” That phrase is best suited for the rhetoric of politicians who inherit worn out campaign slogans and reboot them for the latest run for office. I doubt they themselves, a significant number of whom are not trained in economics, truly understand what a market is or can likely identify threats to it. Compound markets for digital assets with the mechanics of payment systems and the politician’s eyes glaze over and she falls back to what she knows best: sloganeering tainted with tropes that appeal to individualism, consumerism, collectivism, or whatever narrative they believe their constituency will buy into.

The professional regulator, on the other hand, uses law and regulatory code as a front or an excuse. Statutes and codes give the professional regulator cover for their underlying philosophy and narrative. Unlike the elected official who only spends minutes on issues of markets and their regulation, the professional regulator is the expert spending years developing her own philosophy and transitive narrative and reconciling that philosophy and narrative with at times archaic statutes that the elected official has dumped on her to interpret. With archaic statutes and codes as cover for the regulator, it is the trader’s task not only to generate returns from holding a digital asset but to best understand what that regulator’s philosophy is.

There are two types of regulator. One I term as the myopic regulator. This regulator focuses on the black letter of the law and the code. Their focus is primarily on whether the market participants are following the rules on the books. He does not take into consideration any wider view of the philosophy behind markets and regulation. If the rules are skewed more to trader protection, his interest will be in outcomes that favor trader protection. If the rules skew more toward brokerage or platform protection, the regulator’s interest will be in outcomes favoring platform protection.

On the other side is what I term the universal regulator. They have managed to synthesize the role of government, traders, and platforms. They have an interest in maintaining the viability of the market system. Government’s role, in their view, is to provide for an efficient and productive trading post where there is sufficient transparency between traders and where the exchange platform ensures speed, efficiency, and clarity of trade because without these characteristics, the American markets as a whole become less viable, less reliable. Government will expand or contract in order to meet its universal role.

The trader should be mindful of this regulatory environment, particularly the tug-of-war between more or less regulation of exchanges. Eventually the trader pays the price in terms of transparency, price fairness, and the level of fees, especially where trade is her primary means of livelihood and income. After all, trade boils down to an information game and staying informed on government actions as well as on how government itself can disrupt information flow is important to the trader’s success.