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Bloomberg is reporting that SEC Commission Chair Mary Jo White is pushing to have the SEC's proposed rule, lifting the ban on general solicitation in Regulation D offerings, adopted in its present state.

The ban on general solicitation is the rule, dating from the Securities Act of 1933, that prevents public advertising relating to most private securities offerings. Lifting the ban was an important element of the JOBS Act and the JOBS Act required the SEC to implement regulations lifting the ban. The SEC's staff drafted a proposed rule in late 2012 but some Democratic members of the Commission (such as Luis Aguilar) opposed its adoption, claiming that it did not do enough to protect investors.

While lifting the ban would not immediately allow interstate crowdfunded offerings to commence, lifting the ban is a prerequisite. This is so because most crowdfunding portals would rely on their general availability to the public to draw sufficient traffic to make their crowdfunded offerings possible. (See prior post on crowdfunding).

In a front-page story in yesterday's New York Times, Nicholas Confessore reports on the pending rulemaking petition at the Securities and Exchange Commission on corporate political spending, which was submitted in August 2011 by a group of professors led by Harvard's Lucian Bebchuk and Columbia's Robert Jackson. There's nothing really new in the report that hasn't been known to those following these issues for months; it could be the case that the SEC acts on this rather soon, now that former U.S. Attorney for the Southern District Mary Jo White has been confirmed as the Commission's Chairman.

A couple of points in Confessore's piece call for clarification/correction:

1. Professor Jackson states, "Shareholders have been demanding this information for some time." Well, some shareholders have, to be sure, but Jackson's statement, without qualification, has a Bizarro-world-type character. Dating back to 2006, not a single shareholder proposal related to political spending has received majority shareholder support among the 250 largest companies in the Manhattan Institute's Proxy Monitor database, excepting a 2006 proposal at Amgen that management backed. As I noted in my winter report, in 2012, such proposals won "on average the support of 18.3 percent of shareholders, down from 24.3 percent in 2011." And "the seven largest such investors--Vanguard, BlackRock, State Street, Fidelity, Capital World Investors, Capital Research Global Investors, and T. Rowe Price--supported only 3.6 percent of all proposals calling for increased disclosure of corporate political spending."
2. The article states that "advocates" for the proposal analogize corporate political spending to executive compensation. While that's true, their analogy is strained. Executive compensation and related-party transactions are both directly pertinent to the classic agency-cost case for management monitoring, whereas Bebchuk and Jackson's political-spending-as-management-misappropriation hypothesis simply lacks the theoretical rigor and empirical foundation underlying management-pay and self-dealing disclosures.
   

The late Sen. Daniel Patrick Moynihan (D-N.Y.) famously remarked, "Everyone is entitled to his own opinion, but not to his own facts." Tell that to the leaders of the social-investing funds Domini Social Investments and Green Century Capital Management, who along with Public Citizen's Lisa Gilbert, made the following claim in Politico: "The five largest U.S. mutual fund families supported [shareholder proposals seeking corporate political transparency] more than 80 percent of the time during the 2012 proxy season."

Whatever one's thoughts about corporate disclosure of political spending--about which I have written elsewhere--this claim is wildly inaccurate. In 2012, the seven largest mutual fund families--Vanguard, BlackRock, State Street, Fidelity, Capital World Investors, Capital Research Global Investors, and T. Rowe Price--supported only 3.6 percent of proposals calling for increased disclosure of corporate political spending, as is evident from a review of Form N-PX proxy filings publicly available from the Securities and Exchange Commission.

How could Public Citizen and the social-investing funds be so far off? Well, I don't know for sure--and Public Citizen has a long track record of playing fast and loose with the facts--but the claim probably originated with a February 3 Financial Times piece by Sarah Murray, which stated, "The five largest US mutual fund families supported corporate political disclosure more than 80 per cent of the time in 2012, according to the Center for Political Accountability (CPA), a Washington-based advocacy organisation."

The problem is, the CPA makes no such claim. To the contrary, in its December 2012 analysis of last year's proxy season, CPA states, "As in previous years, the three largest mutual fund families in the United States failed to support a single political spending disclosure resolution." Figure 2 on page 3 of that report does show five U.S. mutual fund families that supported more than 80 percent of such proposals--MFS, Alliance Bernstein, Morgan Stanley, Wells Fargo, and DWS--but those are hardly the five largest mutual fund families. (In terms of equity assets under management, MFS and Alliance Bernstein aren't in the top 10, Morgan Stanley isn't in the top 20, Wells Fargo isn't in the top 40, and DWS isn't in the top 50.)

One would think such an obvious error--in which FT's attributed fact is contradicted by a published account from its own purported source--would warrant a quick and clear correction. But when I brought the matter to the attention of Politico's editor-at-large, Bill Nichols, he replied, "The writers of the response have provided documentation which, while I'm sure arguable in your view, does not allow me to put my thumb on the scale one way or the other."

As Moynihan notes, opinions are arguable, but facts are facts. Given the inability of press "fact checkers" to tell the difference between the two, I understand Nichols' decision not to "put his thumb on the scale," but this is really cut and dried, and his choice is disappointing.

(The Financial Times has yet to respond to my request for a correction.)

The Manhattan Institute's Margaret M. O'Keefe, manager of the ProxyMonitor.org database, contributed to the above discussion.

POL readers saw me scoff at this suit in August. Adler @ Volokh reports that the suit has been dismissed.

In what appears to be an attempt to scare wavering voters into supporting the president, New York Times columnist Paul Krugman argues that if Hurricane Sandy had arrived under a Romney administration, the victims would have been left without any government assistance. And by "government," Krugman means the federal government because, of course, only the federal government can respond to emergencies.

After discussing past Republican attempts to devolve disaster relief to the states, Krugman concludes "if Mr. Romney had been president these past four years the federal response to disasters of all kinds would have been far weaker than it was." And to prove the virtue of federal intervention, Krugman evokes "the scene in flooded Hoboken, with the National Guard moving in the day after the storm struck to deliver food and water and rescue stranded residents."

There's just one problem: the National Guard is a unit of state government, not the federal government. Indeed, it is the successor to the state militias. Krugman might have taken a moment to consult the Pentagon's own website discussing post-Sandy relief: "The National Guard takes its missions from the governor, and they're supporting the first responders," reports the DoD, quoting Army General Frank Grass.

Governor Christie called up the New Jersey Guard; Governor Cuomo, the New York Guard. It appears that FEMA played a role in getting other states to contribute guardsmen to the relief effort, but it is preposterous to think that such cooperation would not have occurred without Uncle Sam.

The Constitution empowers the president to summon the state militias "to execute the laws of the union, suppress insurrections, and repel invasions." But none of those conditions applies at present and (to my knowledge) President Obama has not asserted the power to call up the National Guard for post-Sandy relief. But when there are cheap political points to be scored, Krugman is not one to be distracted by the Constitution -- or the facts.

I'm a fan of Nate Silver, if an envious one. I was a statistical geek with the Baseball Prospectus crew years before Silver was, before giving up baseball sabermetrics for the more lucrative and seemingly practical path of focusing on my legal career. As a kid, I knew the electoral college counts by heart dating back decades, and voraciously consumed board- and computer games simulating presidential elections. The week before I left for law school, I got a job offer at a ridiculous salary for a college graduate to do spreadsheet modeling the place where I worked that summer. There's surely an alternate universe where I passed up law school, stuck with baseball, and had the idea to turn my spreadsheets to doing what Silver does in 2000 or 2004.

Silver recently complained about the degree to which he is criticized for his support for Obama in attacking his model, comparing it to baseball, where "You weren't getting in huge personal fights like, 'Oh, you're a White Sox fan, so you're biased in how you're interpreting the data." I agree that a lot of the criticism of Silver is unfair; the Unskewed Polls website is particularly silly. But Silver is possibly being overconfident in how objective he is.

Silver admittedly massages his data. The massage in 2012 provides bonuses to Obama in the predictions. That could be a coincidence from sound modeling, or it could reflect conscious or unconscious decisions on how to model, for example, how undecided voters will break against an incumbent—where Silver, rightly or wrongly, differs substantially from the conventional wisdom that a president who is polling at 48% is going to end up at 48% because the undecideds will decide to vote for the challenger at the last minute.

There is one particular case where Silver's model ignores facts that favor Republicans, and I think it potentially makes a big difference in his results. Silver points to 2000 as a counterexample to the proposition that polls consistently overweight Democrats or that undecideds break against the incumbent. In 2000, Gore outperformed the last polls by 3.2 points. Silver averages this in, and says that there's no partisan bias in polling or no evidence that undecideds break against the incumbent. But the last polls in 2000 didn't capture the last-minute November surprise of the revelation of Bush's drunk driving charge. (We forget this, because of the much greater drama that immediately followed.)

Silver lets the fact that Gore outperformed his polls by so much influence his model of how to predict undecided predilections for the incumbent and how to calculate house effects, rather than tossing it out as a case where polls didn't capture Election Day sentiments. That's a subjective decision to choose a particular objective rule, not an inherently objective decision. Silver might be right to do so, but reasonable minds can differ. The choice whether to include 2000 as a data point, rather than a sui generis outlier has effects on his model. For example, if we average 1992, 1996, 2004, and 2008, Republicans outperform the last polls by a mean of 1.8 points with a median of 1.0, with 2008 a rare occasion where the polls were on the money. Silver instead starts with polls in 1972 (though there were fewer than ten polls a year prior to 1992), and includes 2000, and gets a Democratic bias of 0.9 points with a median of 0.3—and it's not even clear that Silver includes that 0.3 to 0.9 percent lean in his model instead of treating it as random chance. 1972 is just as arbitrary a starting point as 1992; I have arguments for excluding 2000 from the sample, and I haven't seen Silver defend keeping 2000 in.

Moreover, even if you go back to 1972, you see that polls are breaking not just against Democrats, but against incumbents. The polls get it generally right for Republican incumbents, where the poll bias for Democrats and for incumbents appears to about cancel each other out; the two worst poll performances involve Democrat incumbents, who dropped 7.2 points (1980) and 5.0 points (1996). The only time in the last 40 years that a candidate from an incumbent party outperformed his polls by more than 1 point is 2000—the year of the November surprise. Excluding 2000, we see polls break 1.4 points on average for incumbents; including 2000, we see polls break 0.9 points on average for incumbents—but 0.3 points for Republican incumbents and 3.0 points for Democratic incumbents, though of course, we're only talking three data points in the last 40 years there, so that could just be random chance. If we exclude 2000, and assume homoskedasticity, the difference between the Republican and Democratic results is statistically significant, and suggests that polls are biased for both Democrats and incumbents, and that the conventional wisdom is correct that Obama is in trouble because he's continuing to poll below 50 percent. (Certainly, Obama acted as if he thinks he's behind in the most recent, and last, debate.)

Of course, one could equally arbitrarily go the other way, and say that everything before 2008 is wrong because older polls weren't as sophisticated as modern models. The subjective choice of assumptions in both my arguments above and in Silver's model gives the veneer of objectivity, but can have dramatic effects in the results. There's a reasonable argument against treating 2000 as an outlier, because it introduces subjectivity—if we decide to exclude 10% to 20% of our data points because of exceptional circumstances, why not subjectively exclude still other elections over smaller last-minute issues? That's Silver's most likely counterargument, and he's fairly applied it as a reason to include ludicrously bad polls favoring Romney in the model rather than picking and choosing which polls make the cut. Still, as Silver's model goes, a ludicrously bad Florida state poll doesn't have a big effect in the results, there are dozens of other, better, polls to give a more complete picture; including 2000 in deciding whether to model for whether polls are systematically biased for Democrats or whether undecideds break against the incumbent at the last minute has a much bigger effect if, as I suspect, 2000 is an outlier without predictive value on those two questions.

Silver includes the "house effect" in his models in weighing polls; PPP tends to be overoptimistic about Democrats, Rasmussen about Republicans. But because of his treatment of 2000 as a typical election, Silver's model might be underestimating the house effect of polling in general and thus have its own house effect. A house effect of as little as 0.5% would be enough, even assuming Silver is right in every other way in his model, to turn Silver's 70-30 odds into Obama being barely favored; a house effect of the full 0.9% to 3% I suggest above would flip Silver's results to Romney being favored by at least as much as Obama is now. And there might be yet other judgment calls Silver is making similar to the decision to include 2000 polling in the model that favor Democrats that I haven't noticed.

We'll have a better sense in two weeks whether Silver's model has such a house effect. Silver was successful in 2008, but there were only five states with a spread of less than 2.5% in 2008, so correctly predicting the 45 states where results were pretty clear plus flipping a coin in the true swing states would give someone a 6-in-32 chance of getting at least 49 out of 50 states correct. (Still, give Silver credit for recognizing that Pennsylvania wasn't a swing state.) Silver provides much more analytical rigor than nearly all of the reporting on the subject; 538 is my go-to website for reporting on the polls. Silver could even be entirely right on the issues I discuss above; perhaps I'm guilty of unconscious data mining in favor of Republicans. But we can't yet exclude the null hypothesis that he's lucky, and that he's making mistakes that shade his results toward Democrats and/or toward incumbents.

The chief executive of Illinois's Cook County, which includes Chicago, has come up with a nifty idea to curb gun violence: tax guns and ammunition in amounts that would equal a 200% tax on .22 caliber ammunition. There's just one catch, as I explain over at National Review Online: fundamental rights cannot be unduly burdened by taxation. As I argue, the holding of various First Amendment cases can be applied to prohibit government from taxing Second Amendment rights out of existence.

As Ted Frank pointed out in his recent post, the self-proclaimed "fact checkers" in the media seem to have no interest in correcting the president's distortions regarding the Ledbetter Act.

Here's another whopper that has escaped the media's attention. When discussing Arizona's immigration law (SB 1070), Obama said: "Part of the Arizona law said that law enforcement officers could stop folks because they suspected maybe they looked like they might be undocumented workers and check their papers." In fact, the law allows police officers to request papers only upon "reasonable suspicion" -- a well-established standard -- and specifically states that police may not consider "race, color, or national origin" in forming a reasonable suspicion. At oral argument before the Supreme Court, Chief Justice Roberts asked the Solicitor General Donald Verrilli: "No part of your argument has to do with racial or ethnic profiling, does it?" And Verrilli replied "that's correct, Mr. Chief Justice."

But perhaps the strangest assertion from the president was this: "You know a major difference in this campaign is that Governor Romney feels comfortable having politicians in Washington decide the health care choices that women are making." That is, of course, an odd assertion from somebody who believes that the 15 members of the Independent Payment Advisory Board should be empowered to "decide the health care choices" for an entire nation, men and women. But then, by way of explanation, Obama stated that Romney would allow employers to decide what sort of health coverage to provide their employees -- even giving employers the freedom to choose health plans that don't cover contraception.

Apparently, Romney's refusal to impose a national contraception mandate on employers puts power in the hands of "politicians." Obama never attempted to back up his preposterous claim about "health care choices" -- and you can bet that the media will never challenge him.

It's frustrating that in all the media fact-check frenzy, no one ever calls out claims that the Lilly Ledbetter Act, which does nothing but transfer wealth from working-class employees to wealthy attorneys, has done anything for women other than increase their unemployment rate. Hans Bader further points out that Ledbetter herself has nothing to complain about other than her lawyers' performance.

In last night's vice presidential debate, Joe Biden purported to "guarantee" that no Obama-nominated judge would ever vote to overturn Roe v. Wade. Never mind what this "guarantee" is backed up by -- Joe's dental work? -- it demonstrates the Obama administration's view of the Judiciary. As I argue over at NRO's "Corner," the very idea that a president could guarantee the actions of an independent branch of government ought to be too unseemly to mention, even for Joe Biden. The former Judiciary Committee stalwart also claimed that overturning Roe would "outlaw abortion" -- in fact, it would simply return the issue to the states, as I also explain at NRO.