Better Call Saul
The same photo of the Constitution’s Preamble in my last Musing also appears behind the desk of the irredeemably unprincipled,[1]yet oddly likeable Better Call Saul lawyer, Saul Goodman, in the Netflix series Breaking Bad[2]. Despite the fact that both series[3]are spectacular, I apologize to anyone offended or confused by that totally unintended association of the US Constitution with a sleazy lawyer character. Still, even zero credibility[4]folks like Jimmy McGill[5]and his clients are entitled to all “blessings of liberty” granted by the Constitution.
Show your work
Do you remember being frustrated in math classes where you would not get full credit for a right answer unless you also showed how you got there? Math teachers would write, “Show your work” in red ink over the top of a correct answer which only earned half credit. What’s the difference if dumb luck got you to the right answer? Well, Saul Goodman never wants to show his work either-he only wants his result. If his con works, he just moves on to the next problem.
Unlike mathematics where there is only one right answer[6], in law and persuasion if all you do is offer a conclusion, you depend solely on your own credibility to persuade others. People might believe you or do what you say just because they are gullible “suckers” (as Jimmy would say), or because they think you’re powerful, smart and/or have expertise about what you are talking about, but that’s not really persuasion. Persuasion requires that you’ve got a well-considered process and reasoned opinion behind a conclusion-not just a credible opinion. That is, show your work if you want to persuade rather than command[7]to create durable and truly just resolutions of debatable questions.
Identity isn’t credibility
Lately, I’ve been observing many instances of poorly reasoned thought and lack of process getting too much credibility throughout society. People are emphasizing identity, authority and personal credibility over reason, data, logic, and unbiased researched expertise. Despite what Jimmy McGill thinks, it offers zero weight to my legal guidance to preface my comments by saying, “As a Jewish person,…”.
Elon Musk, SBF and Twitter
Likewise, this can be seen when people give credence to experts in one area who think that makes them experts in everything. For example, consider Tesla and Space-X founder Elon Musk telling Putin and Zelensky how to end Russia’s invasion in a now deleted Tweet. He’s a billionaire inventor genius who makes incredible electric cars and rockets no doubt, but stay in your lane bro’ or show your work on your foreign policy advice and expertise. Likewise, we’ll see how Musk’s out-of-lane Twitter purchase works out since, by most accounts, that is a wild monkey fecal festival right now.
Sam Bankman-Fried and the billions lost (misappropriated?) on his FTX crypto currency is a similar story. Billionaire Bankman-Fried and his FTX cronies might have been geniuses at trading and coding, but despite also being the second largest single donor this election cycle to the Democratic Party behind George Soros, clearly they had no clue about how to run a business.[8]
Speaking of Twitter, since you are limited in the number of characters to make your point, that forum is particularly ill-suited as a form of communication to show your work and provide logic and reason. So, we just get people’s conclusions and appeals to emotion on Twitter. Maybe their conclusion is right, and the outrage or empathy generated is valid, but all you really have to go on is the credibility of the person tweeting.[9] Musk will have his hands full on that one.
Judging credibility
In court, however, credibility (trust) is famously left to the judge and jury to decide whatever they believe is credible. In fact, there is no law on judging credibility.[10] This may be a feature or a bug in our jurisprudence,[11]but, regardless, the right to a jury is enshrined in the Constitution.
Also in court, lawyers must bolster and challenge credibility with evidence and force the other side to “show their work” too. Outside of court, when I represent a client in an acquisition or other transaction, whether my client is buying mortgage company assets, a summer camp or anything else, we get written representations in the agreement about the purchased business, but there is usually an opportunity to “kick the tires” as well (due diligence). This requires the seller/vendor to show its work.
Trust, but verify
So, what’s all this “show your work” vs. individual credibility stuff got to do with the usual Levy’s Mortgage Musings topics? Well, one of the blessings of liberty is that critics are free (and some are duty-bound) to seek to confirm that the commands and claims of government or anyone else are valid. As a result, the pages of these Musings are rife with my questions for financial regulators, Presidents, public health officials, politicians, credit bureaus, and other parties who failed to “show their work” (or failed to do any work).
Consider (again) the issues with regulation by enforcement (RBE). Setting aside the Constitutional and administrative law due process requirements of (i) notice and (ii) opportunity to be heard, RBE allows an agency to simply avoid showing its work. Instead, with RBE it can just strong-arm its interpretations by fiat without explanation. A regulated company can only force an agency to show its work on RBE if a company has the temerity to challenge the agency in court, such as is happening in the Townstone fair lending case (having a legal defense fund dedicated to defending against government overreach on your team is very helpful in that regard).
Even when an agency seemingly offers transparent due process,[12]the work may not be fully shown. Government officials are often frustrated that affording due process is too difficult or time consuming to achieve desired results (which is why they like RBE). But what they are really saying is they can skip the process because they already “know” the right answer. They trust agency staff to get it right, so why should they have to show their work.[13] My red ink response to that is, as Ronald Reagan famously said about relations with the Soviet Union at the end of the Cold War, “Trust, but verify.”.
Update on CFPB Appropriations issue
My last Musing reported on a bunch of wild monkeys that had been released by the 5th Circuit Court of Appeals from the administrative law zoo upon the CFPB. Specifically, the 5th Circuit said the CFPB was unconstitutionally funded because Congress didn’t properly appropriate the agency’s funding. As a result, the 5th Circuit vacated the CFPB’s small dollar loan rule and called into question everything the CFPB had done since its inception. Now, CFPB is playing whack-a-mole on this issue in most of its enforcement actions. Eschewing an unlikely-to-be-successful appeal before the en banc panel of the entire 5th Circuit, the CFPB has filed a petition directly with the US Supreme Court to hear its appeal to put these monkeys back in their cages.
The question of whether the CFPB’s funding violates the Constitution’s Appropriations Clause is debatable and the CFPB did a great job of showing its work in its SCOTUS petition.[14] The 5th Circuit’s opinion, however, went to great lengths to show its own work in that regard. Nevertheless, as I noted previously, in fashioning the remedy of vacating the CFPB’s small loan rule, the 5th Circuit’s work and consideration of the implications of releasing those monkeys from the zoo was, at least for me, unpersuasive. As a result, I believe the remedy piece of that 5th Circuit decision is much more open challenge. I anticipate SCOTUS will accept the CFPB’s petition for hearing and feel obligated to find a way (or to make Congress find a way) to get the monkeys back in a zoo. A similar severability remedy[15]as SCOTUS used two years ago in the Seila Law case seems a reasonably possible result, but I wouldn’t bet your nest egg on just my “opinion” on that.[16]
Lisa Klika
On a much more somber note, as many readers already know, Lisa Klika, Senior Vice President, Chief Compliance Officer and Secretary of Guild Mortgage suddenly passed away a few weeks ago at age 45. This sad and shocking news took my breath away. I had sat right next to Lisa for several hours just a couple days prior at the annual Garrett McAuley dinner and meeting in San Francisco on November 3. We joked about being the only compliance folks at the meeting and being on the front lines of the tough regulatory issues Mitch Kider was explaining to the mortgage company CEOs, warehouse lenders and other industry leaders assembled in the room. I have gotten to know Lisa a bit at industry events and was always impressed with her knowledge, drive and sense of humor. No doubt Guild thought very highly of her too to send her as its representative to that meeting.
My heart goes out to Lisa’s husband, daughter, family, friends, and colleagues at Guild and throughout the industry.
[1] It has been pointed out to me that I have misspelled principle as principal (and vice-versa). I regret the error(s).
[2] In Breaking Bad and Better Call Saul, the character Jimmy McGill (a/k/a Saul Goodman), is played by former SNL writer Bob Odenkirk. Back in the early 1990’s in Chicago, Odenkirk used to appear in open mic stand-up comedy venues where one of my high school buddies, Peter Moor, also used to appear. Odenkirk had an opening bit involving shouting “Islamic Jihad!” with his fist in the air to the audience to get a reaction. Keep in mind, this was ten or so years before 9/11/01 when Islamic terrorism had not hit our shores yet, so that was awkwardly funny at the time (it would be all kinds of wrong now). Still, it gives you some insight into Odenkirk’s odd sense of humor.
[3] Better Call Saul is the prequel to Breaking Bad.
[4] I wanted to say” incredible” here, because the word “incredible” used to mean “not credible”, but now it means “really good”. There a bank in Wisconsin named “Incredible Bank”. Despite the current meaning of the word, I think they would have to seriously consider changing their name if the “Credible Bank” opened across the street.
[5]Say out loud, “It’s all good, man” quickly to hear Jimmy’s professional nom de guerre. On the show, Jimmy also liked that the name made him sound sort of Jewish for added “credibility” with his prospective clients. That kind of positive prejudice for Jewish lawyers is not ok because it offers a permission structure for negative prejudices.
[6]In a mostly forgotten college calculus class I had in 1984, the teaching assistance posited a mathematical proof proving that the number 1 equals the number 2, so all numbers are equal. Yeah, ok, math people. I like my numbers just the way they are, and they are not the same. My readers can Google that proof themselves if they find that stuff interesting.
[7] If you’re commanding troops or have similar plenary authority, you don’t need to show your work to issue an order, but persuasion is an entirely different thing. Judges too can issue orders, but they need to show their work lest they get overruled by a higher judicial authority.
[8] As quoted in the bankruptcy court filing by the guy appointed to be FTX’s new CEO (who also unwound Enron), “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here. From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.” I suspect they are all “calling Saul” now.
[9]I’ve pretty much abandoned my Twitter feed for that and other reasons.
[10] Hence, this line of “questioning” by a local Boston attorney before a mostly blue-collar Boston jury “impeaching” the credibility of an expert witness physician, “So Doctah, ya’ went to Ha-vid, did-ya’? You’re pretty proud of that, aren’t ya’? … No further questions.”
[11] For an excellent discussion about related issues of how we know what is true, check out https://www.brookings.edu/book/the-constitution-of-knowledge/
[12]Such as appears to be the case with this CFPB Request for Information. But see footnote 8 about that in this recent Musing.
[13]See e.g., Dissenting Statement of Commissioner Wilson – July 1 Open Commission Meeting (ftc.gov)
[14] See also, Dual Insulation? The Fifth Circuit’s Factual Misunderstanding of CFPB Funding – Credit Slips
[15]In other words, if the funding violates separation of powers (a tougher question) rather than invalidating the small dollar rule and calling into question everything the CFPB has ever done, SCOTUS is likely to simply sever the CFPB’s funding mechanism and force Congress to fund CFPB another way. See fn. #16 below.
[16]In Seila Law, SCOTUS justices ruled 5-4 on the separation of powers question but ruled 7-2 on the severability remedy. (BTW, that’s me, showing my work)