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A divided panel of the DC Circuit this morning, in Free Enterprise Fund v. Public Company Accounting Oversight Board, No. 07-5127 (D.C. Cir. Aug. 22, 2008), rejected a challenge to the Public Company Accounting Oversight Board's appointment on separation of powers grounds; because of the lack of a severability clause in Sarbanes-Oxley, the challenge presented the possibility that the court would have had to declare the entire statute unconstitutional. Judge Judith Rogers, joined by Judge Janice Rogers Brown, found that the statute did not unduly dilute the executive branch's control over the PCAOB:

We hold, first, that the Act does not encroach upon the Appointment power because, in view of the [SEC]'s comprehensive control of the Board, Board members are subject to direction and supervision of the Commission and thus are inferior officers not required to be appointed by the President. Second, we hold that the for-cause limitations on the Commission's power to remove Board members and the President's power to remove Commissioners do not strip the President of sufficient power to influence the Board and thus do not contravene separation of powers, as that principle embraces independent agencies like the Commission and their exercise of broad authority over their subordinates.

Slip op. at 3 (emphasis added). In short, the court found "no instance in which the Board can make policy that the Commission cannot override." Id. at 33. The court did, however, find that the constitutional challenge was properly presented and did not require exhaustion of administrative review procedures. Id. at 7-8. Judge Brett Kavanaugh dissented, on essentially similar grounds to Justice Scalia's masterful (but lone) dissent in the 1988 independent counsel case, Morrison v. Olson, although he also argued that the constitutional problems here go beyond those in Morrison:

The President's power to remove is critical to the President's power to control the Executive Branch and perform his Article II responsibilities. Yet under this statute, the President is two levels of for-cause removal away from Board members, a previously unheard-of restriction on and attenuation of the President's authority over executive officers. This structure effectively eliminates any Presidential power to control the PCAOB, notwithstanding that the Board performs numerous regulatory and lawenforcement functions at the core of the executive power. So far as the parties, including the United States as intervenor, have been able to determine in the research reflected in their exhaustive and excellent briefs, never before in American history has there been an independent agency whose heads are appointed by and removable only for cause by another independent agency, rather than by the President or his alter ego. But that is the case with PCAOB members, who are removable for cause only by the SEC - and it is undisputed that the SEC as an independent agency is not the President's alter ego.

Presumably, the plaintiffs will petition the Supreme Court for cert; it remains to be seen if the Court takes the case.

UPDATE: The plaintiffs say they will either petition for cert or for rehearing en banc by the full DC Circuit.

Beldar notes that ExxonMobil in the second quarter of 2008 paid three times as much in taxes as its after-tax profits.

You know, if there is one thing - one thing - that will encourage the development of alternative fuels, it's the same thing that led to the mad scramble of capital into internet and telecom in the 1990s: the belief by investors that whoever got ahead in the race to market would reap fabulous profits.

The best possible way to blunt that belief is to slap additional taxes on today's energy producers for being too profitable. Especially when they aren't even all that profitable on a returns-on-investment basis; those humongous profit figures are just due to massive market share:

Exxon's profit margin stood at 10% for 2007, which is hardly out of line with the oil and gas industry average of 8.3%, or the 8.9% for U.S. manufacturing (excluding the sputtering auto makers).

If that's what constitutes windfall profits, most of corporate America would qualify. Take aerospace or machinery -- both 8.2% in 2007. Chemicals had an average margin of 12.7%. Computers: 13.7%. Electronics and appliances: 14.5%. Pharmaceuticals (18.4%) and beverages and tobacco (19.1%) round out the Census Bureau's industry rankings.

(That WSJ editorial also notes that Google had a 25.3% profit margin).

Anyway, I'll probably get into this further when I have time for a longer post on energy, but I laid out the case in 2006 for some ideas on how government can do more to strengthen the confidence of investors that the winners of any alternate-fuel gold rush actually get to enjoy the spoils of their investment and labor.

Is the U.S. economy in a recession? The Democrats and the media have been saying so for a while, but the funny thing is, "recession" is a word and it has a meaning, and the fact that the economy is throwing off a lot of scary indicators and people in particular businesses or jurisdictions are losing jobs may mean the economy has problems, but it doesn't mean we're in a recession - at least not yet - any more than clouds in the sky mean that it's raining. A recession requires multiple quarters in which the GDP declines - that's what it means, no more and no less. It's true that you have to already be in a recession before the data comes in to prove it...so how many consecutive quarters of negative growth in the economy are we working on right now?

Well, the data is in this morning, and in the most recently concluded quarter - the 2d quarter of this year - the economy grew, at a 1.9% annualized rate, the best since the 3d quarter of 2007.

Great news? No. 1.9% isn't the kind of robust growth we'd been used to since 2003, and the underlying structural worries are still there, and some reports are crediting short-term stimulus checks and weak-dollar-driven drops in imports, neither of which is cause for long-term celebration. But as usual, the bad news has been overstated by efforts to paint this as 1933 or 1979 all over again. If we elect a president who wants to jack up taxes, close off trade and hold the line against domestic energy production, though, it might be.

PS - If you want a gander at how much worse things could be, check out the Detroit housing market (Democratic mayor, City Council, Governor and state legislature for years now).

Megan McArdle has an excellent list of points, all of which I basically agree with.

CBS, besides defending a $70 million lawsuit over the dismissal of its last Evening News anchor, is now pondering dumping Katie Couric, who has failed to earn her own $75 million paycheck.

For Couric, this turned out to be a bad case of hubris: she assumed that, having been a commercial success in morning TV, she could switch to the different format and audience of evening news and not only succeed but turn around a floundering, scandal-tarred news division. It didn't happen; not only did she lose one of her principal assets along the way (Couric's chipper demeanor always went over well with the morning-TV crowd), but once CBS made the decision to stay a nominally straight news outlet rather than becoming an openly left-leaning news source, Couric was always the worst possible person to try to correct CBS News' decades-long reputation as the most liberal news source on TV.

Clearly, CBS should have listened to me when I suggested back in December 2004 that they hire CNN's Erica Hill instead. Hill's career has only headed up since then; Headline News ended up rebranding her prime-time shift as "Prime News with Erica Hill," and more recently she moved to the mother network to pair with Anderson Cooper on one of CNN's two most prominent news shows (the other being The Lou Dobbs Really Hates Foreigners Hour). Hill probably wouldn't have singlehandedly turned around CBS overnight either, but hiring a younger, lower-key and undoubtedly less expensive anchor would have kept costs and expectations lower, and signalled a commitment to rebuilding the brand from scratch rather than trying to poach from NBC. Instead, CBS is now reduced to denying reports that it's going to outsource newsgathering to ... CNN.

*This analysis of major league managers' tendencies illustrated as cartoon faces is...well, you have to click on the graphic to get the full effect. It's bizarre. H/T Rays Index.

*Today is the 97th anniversary of the introduction of baseball's MVP Award by automaker Hugh Chalmers. The first-ever MVPs? In the AL, 24-year-old Ty Cobb for his first and best .400 season, batting .420/.467/.621 with 47 doubles, 24 triples and 83 steals, scoring 147 runs and driving in 127. In the NL, 28-year-old veteran Cubs rightfielder Frank "Wildfire" Schulte, narrowly over Christy Mathewson, for batting .300/.384/.534 with 21 triples and 21 homers (only the third 20-HR season ever if you exclude the fluky 1884 Cubs), 105 Runs, and 107 RBI.

*Our old friend Dr. Manhattan is back blogging! While I was tied up doing my baseball previews, he had a fine column taking John McCain to task for his knee-jerk ignorance on the connection between vaccines and autism. As a general rule, the more science is involved in an issue, the worse McCain is. He seems sometimes to have a superstitious faith in junk science.

*Former equipment manager Yosh Kawano is leaving the Cubs clubhouse after 65 years. That's a very long time to work for one baseball team and not get a World Series ring. I think Kawano's name is familiar to me from one of Joe Garagiola's books...as in, he was there when Garagiola played for the Cubs.

*Via Pinto, Travis Nelson at Boy of Summer has a lengthy attack on Melky Cabrera. I'm more optimistic about Cabrera's potential for across-the-board growth as a hitter, but I'd generally agree that his prospects are much dimmer if you don't regard him as a competent defensive center fielder.

*There's no such thing as an innocent non-Muslim? This may go a ways to explaining what this means. I can't buy into Hawkins' notion, which has been pushed for some time by my RedState colleague Paul Cella, that the U.S. should bar immigration by Muslims, but when you consider Hawkins' logic, I have to admit that that's more an emotional reaction than a reasoned position on my part.

*While I don't agree with all the analysis, David Frum and Bill Kristol have some useful points about the perlious passivity of the Bush Administration in responding to criticism, most particularly the conviction that there's no point in fighting over the past. The Administration's enemies have nourished a number of myths about the past 7 years that have proven terribly corrosive of its credibility, goodwill and, ultimately, ability to get anything done. (On a related note, consider how little press went to the Army Corps of Engineers' ultimate admission that its design defects caused the flooding of New Orleans).

*Yes, Glenn Greenwald is still a fool who has trouble with elementary logical reasoning.

*The Nineties economy in a nutshell. This, too.

*Guns don't kill people, guns kill movie scripts.

*24 is coming back! Maybe that means Jack Bauer will stay out of trouble.

This is totally true.

One of yesterday's biggest stock losers was Build A Bear Workshop, which saw its stock price plunge 20% on a disappointing earnings report. Motley Fool looks at the roadblocks the company has faced, mainly escalating costs and a general sense that the novelty of bear-building has worn off. The suggestion that someone like Disney snap up the company makes some sense, and probably a lot more sense if the price continues to drop.* When we took the kids to Citizens Bank Park last summer, they had a Build-a-Phanatic store; I would think that Disneyworld could do something similar. The good news for a brand like this is that if kids get bored with it, there's always another generation of little ones for whom everything is new.

One thing that isn't mentioned here but should be, though, is the rising threat of Webkinz. If you're not familiar, Webkinz sells stuffed animals, much like a slightly larger version of Beanie Babies, but the hook is that each Webkinz can be registered on a website so that kids can then play online games with an online avatar of their stuffed character, buy things for the character (e.g., furniture for its room). The site is engaging and it's kid-safe, in that while kids can interact with others over the site, such as by playing games with them and exchanging some canned forms of communication, there's no way for them to actually talk to other kids on the site - and thus no way for them to talk to people pretending to be kids, either. It's enormously addictive, and the Webkinz site has definitely drawn my kids away from Build a Bears to Webkinz.

That said, we were back at Build a Bear this weekend (much to the particular joy and amazement of my youngest, who is almost two). Why? Because Build a Bear has opened its own website, and in addition to registering all new stuffed animals on the site they are having a limited time offer to register previously purchased stuffed animals. While "Build a Bearville" doesn't seem to be on a par with "Webkinz World," it at least got my kids back to wanting to go to the store and check out the site.

So that's the real story from the trenches. It remains to be seen which of the two prevails in the long run (Webkinz has the advantage of lower margins, since they don't operate retail stores), or whether perhaps there is even an opportunity for the two companies to merge their operations (less likely). But it's proof that even so prosaic a company as Build a Bear needs to adapt to the internet to stay competitive.

* - I should note that (a) I'm not giving investment advice, nor would anyone in their right minds take investment advice from me and (b) I haven't checked on whether Build a Bear is one of my law firm's many clients and I don't personally have any non-public information about the company or any of the other companies mentioned here or in the Fool.com article.

*Michael Lewis is a wonderful writer and a guy who understands and loves markets. You have to read (here and here) his take on the subprime lending crisis. (Not everyone is amused). Lewis himself was a bond trader for a few years in the 1980s, leading to his smash hit book "Liar's Poker," and he poses here as a Gordon Gekko-type hedge-fund manager who blames poor people for evertything. The great thing about these pieces is that they are double-edged satire, containing enough cold-hearted economic truth to effectively skewer subprime borrowers and Capitol Hill demagogues, but at the same time mocking the misanthropic (at best) attitudes he parrots.

*Speaking of which, Gekko himself is apparently coming back as a hedge-fund manager (improbable given his insider-trading conviction, but that's Hollywood - it wouldn't be as much fun if he was running a car insurance company). I wonder how he reacts when he finds out Martin Sheen ended up President.

*Medieval scholastics would have been awed by the effort exerted by the Third Circuit to determine that putting on a hair net is "work". Of course, I am thankful not to work in a place of employment that has an "evisceration" department.

*The Constitution stops at the frat house door, as the Second Circuit upholds a college's right to use anti-discrimination policies to deny recognition to a fraternity on grounds of not admitting women. There's a case to be made for greater autonomy of educational institutions and a case to be made for the fundamental ambiguity of right-to-association law, but the reasoning used in this opinion is almost as flimsy as the public policy at issue is blinkered.

*An ex-parrot who was impressively intelligent.

*Of course, Michael Moore's new movie is loaded with untruths. (H/T). That's like going to a Jackie Chan movie and seeing a lot of kicking.

*Seems like a whole lot of nothing to me.

You can't convince me that McDonald's and Dunkin Donuts don't already do something like this. The smell from their restaurants is always stronger than you would expect solely from the cooking process.

ESPN's Howard Bryant pens an uncommonly silly but revealing column arguing that the NFL Players Union should have put up a major fight to defend Michael Vick precisely because his conduct was, in Bryant's word, "indefensible."

Leaving aside for the moment the question of how serious Vick's conduct was and whether it ought to be a federal crime, Bryant's attitude is precisely what is wrong with many unions:

In the coming years, that will prove to be a colossal mistake. Vick deserves to go to prison, but the union's job is to defend every player's right to work.

The Major League Baseball Players Association, built and sustained by Marvin Miller, Donald Fehr and three generations of resolute players, long ago answered the question of defending the indefensible. The multiple drug abuse cases of Steve Howe, the spitting incident of Roberto Alomar and most recently the way the players association has handled much of the steroids era have served as examples of a union not finding itself on the right or popular side of an issue and at risk of damaging its public image. The rationale was this: How you fight today sets the parameters for the battles of tomorrow.

+++

The responsibility of a union is to defend its membership -- every time, all the time, if for no other reasons than to send a dissenting vote to management that its membership always will be protected by a strong union and to alert the commissioner that his powers always will be checked by an advocate for the players. The union's message should be that a commissioner cannot simply do whatever he wants.

+++

So the union has an understanding that it won't be blindsided by a runaway commissioner, adopting a position closer to equity shareholder than skeptical watchdog. It has labor peace and can take comfort in not worrying about losing public goodwill during contract years or losing face should its membership crack during pressurized labor negotiations. The union seems comforted that it is treated as an inside player instead of a hostile entity. But what good is maintaining the peace if it is not accompanied by power?

There are many fair arguments to be had for the pros and cons of unionizing for the purpose of better wages, benefits and working conditions. But those are general benefits, obtained by the whole union to benefit the whole union.

By contrast, when a union goes to bat for an accused or proven miscreant, or for that matter for its most incompetent or insubordinate employees or to otherwise block management's efforts to reward the better performers and weed out those who don't do the job, it is using the strength of the many to benefit the few - and indeed, to benefit those few who least deserve it. That's antithetical to the entire idea of unions as a collective effort to benefit everyone, and perversely rewards wrongdoers. And of course, it harms the business from which the union's members derive their livelihoods.

A union may think, as Don Fehr does, that you never give in to management on something management wants unless you get something in return. But that is a misunderstanding born of hubris. In fact, a union, like any other contestant in an ongoing power struggle, has only limited resources: only so much money, only so much time and attention from its leaders, lawyers and members, only so many battles it can fight without triggering an irrational response from management or draining the resources ofthe business as a whole (and thus shrinking the pie), only so many concessions it can extract. A union that prioritizes fighting for the protection of members who are criminals is expending resources that could be used to benefit members who actually stay out of trouble and do their jobs. A union that extracts concessions of that nature is failing to extract others that may be more evenly enjoyed.

Unions, especially private sector unions, have been in trouble for a while in this country, losing footholds in organizing and seeing the industries they dominate weaken. There are many reasons for this, but if there's a single characteristic of unions that is most unattractive and most gratuitously damaging to the businesses that employ them, it is the determination to go to the mat for members of the union who misbehave or don't perform at their jobs.

Posted by Dr. Manhattan

In light of today's surprise reduction in the Federal discount rate, it is worth re-watching (or watching, if you haven't seen it yet) Jim Cramer's famous meltdown on CNBC demanding this action:

Personally, I have always enjoyed watching Cramer on TV. While watching his show for investing guidance is like reading Playboy for the articles, there is something charming about watching someone so unconventionally (read: "not") telegenic succeed on TV by acting like (by all accounts) himself.

Um, yeah. Riiiiiight.

There may be a lot more oil in Iraq than previously thought. (Via Drudge). That could be very bad news for severely oil-dependent economies like Iran and Venezuela, and good news for the free government and people of Iraq:

Iraq could hold almost twice as much oil in its reserves as had been thought, according to the most comprehensive independent study of its resources since the US-led invasion in 2003.

The potential presence of a further 100bn barrels in the western desert highlights the opportunity for Iraq to be one of the world’s biggest oil suppliers, and its attractions for international oil companies – if the conflict in the country can be resolved.

If confirmed, it would raise Iraq from the world’s third largest source of oil reserves with 116bn barrels to second place, behind Saudi Arabia and overtaking Iran.

The US District Court for the District of Columbia has rejected the Free Enterprise Fund's lawsuit seeking to have Sarbanes-Oxley declared unconstitutional (the FEF argues that the Public Company Accounting Oversight Board violates the Appointments Clause and the Non-Delegation doctrine).

The opinion is not yet online.

Authorized corporate blogs are rarely interesting, but the blog by Mike Dillon, General Counsel of Sun Microsystems, is occasionally candid enough to be worth reading; his description from last month of the challenges of trying to actually do business in Hugo Chavez's Venezuela is illuminating:

The current congress in Venezuela has given their president broad powers to unilaterally enact laws for a period of 18 months in a wide range of areas. The result is that new laws and changes to existing laws are issued almost weekly. Last month, Venezuela's president announced plans to nationalize the country's oil, telecommunication and electricity companies. There are concerns that he may go further.

I spent over an hour meeting with a group of eight local attorneys in Caracas to discuss this fluid political situation and how it impacts their work. They represented a cross-section of the local legal profession - lawyers from firms and in-house with IT, energy and telecommunications companies. They very openly described the challenges of trying to advise their clients about laws that appear first in the morning newspaper with no prior legislative debate or announcement. Many of these new enactments were described as inconsistent or ambiguously drafted. This forces citizens to seek prior approval from the government before taking any action. And, there is no stare decisis to be relied upon for guidance.

It's a very anxious environment in which uncertainty pervades most aspects of life.

Viacom is putting the value of Google's billion-dollar acquisition of YouTube to the test:

Viacom Inc. on Friday demanded that Google Inc.'s online video service YouTube remove more than 100,000 video clips after they failed to reach a distribution agreement.

Viacom said it sent a notice to YouTube on Friday morning, asking the popular video-sharing site to remove clips from Viacom-owned properties including MTV Networks and BET.

Viacom's specific grievance against the user-driven video platform sure sounds like the dress rehearsal for a lawsuit:

"Filtering tools promised repeatedly by YouTube and Google have not been put in place, and they continue to host and stream vast amounts of unauthorized video," Viacom said in a statement.

The article notes that YouTube has reached deals with other media providers and quotes a stock analyst saying this is probably just hardball negotiations; we shall see. Obviously the risk to YouTube is, once it has a legal ruling against it on behalf of one media company its position will be that much weaker in negotiations with others.

A random thought about two stories about Apple. Yesterday's much-ballyhooed introduction of the iPhone made me think back to the recent stories about Apple's board (including Al Gore) deciding to give Steve Jobs a pass on allegations that he was involved in improper awards of backdated stock options, a hot topic du jour in the high-tech business. Now, I haven't followed the Apple investigation that closely, so I have no idea if there was anything worth complaining about in Jobs' management or in his own compensation. But it makes all the business sense in the world for Apple's Board to decide not to throw the founder, guiding spirit and public face of the company under the bus on the eve of rolling out a major new product.

A random thought about two stories about Apple. Yesterday's much-ballyhooed introduction of the iPhone made me think back to the recent stories about Apple's board (including Al Gore) deciding to give Steve Jobs a pass on allegations that he was involved in improper awards of backdated stock options, a hot topic du jour in the high-tech business. Now, I haven't followed the Apple investigation that closely, so I have no idea if there was anything worth complaining about in Jobs' management or in his own compensation. But it makes all the business sense in the world for Apple's Board to decide not to throw the founder, guiding spirit and public face of the company under the bus on the eve of rolling out a major new product.

Advising laid-off employees to not be too proud to pick through the trash.

I don't blog much abo