My Review of Stuart Banner's " The Most Powerful Court in the World:...."

 A History of the Supremes (Not the Motown Group)

UCLA law professor and former Supreme Court clerk Stuart Banner has written an encyclopedic history of the Supreme Court of the United States. He not only covers the case law, but he also covers the personalities, the politics inside and outside the court, from its earliest beginnings in the 1790’s to the present. In the interest of full disclosure, I had a very small adventure with the Supreme Court as a plaintiff in Yahr v. Resor (4th Circuit 1970) and having cert. denied in 1971.

What Banner rightly argues, the Supreme Court always was and always is a political body. When the Senate was controlled by a party not in the White House, appointments were often delayed until the next election. Merrick Garland’s nomination in 2016 was not an exception to history. As the old wag goes, “the Supreme Court follows the election returns.”

What I found interesting was Banner’s discussion of the 1925 judicial reforms, authored by Chief Justice Howard Taft and adopted by Congress. Those reforms enabled the Supreme Court to reject cases coming before it and it enabled the court to leave a rather dingy office space in the Senate office building to the Greco-Roman shrine it occupies today. According to Banner the ability of the court to choose its cases enabled it to take cases, many concerning civil rights, that it wouldn’t have previously taken because of a very crowded docket. Further he notes that the Republican Administrations in the 1920’s appointed several moderate justices, Harlan Fiske Stone, Charles Evans Hughes, and Owen Roberts. Those three justices played a meaningful role in ratifying the New Deal legislation of the late 1930’s.

While Banner applauds and criticizes many Supreme Court cases, he is silent on why the Supreme Court, from Marberry v. Madison in 1801 to Dred Scott in 1857, the Supreme Court did not overturn a single act of Congress. While after the Civil War and to this day many congressional acts were overturned. So, why was the court, so deferential to the congress in the early 1800’s. Banner rightly mentions Gibbons v. Ogden ((1824) which established federal supremacy over interstate commerce, but he fails to mention its huge economic impact in opening the Midwest and establishing New York City as the nation’s leading port.

He also doesn’t criticize Euclid v. Ambler Realty (1926) which ratified local zoning and, in my opinion, a regulatory taking; Berman v. Parker (1954) and Kelo v. New London (2005) which enabled government to seize private property and turn it over to another private party, not for direct use by the government for a public purpose.  He does note the extreme extension of the commerce power in Wickard v. Filburn (1942) which prevented a farmer from growing crops for his own use, hardly interstate commerce. My guess is that the case would be decided differently today. 

Lastly, he speaks favorably of Chevron v. NRDC (1984) which gave huge discretion to administrative agencies to go beyond the clear intent of Congress. Fortunately, that was overturned this year in Loper Bright Enterprises v. Raimundo. I do note that his book went to press ahead of that case.

These criticisms aside, Banner clearly explains how and why the Supreme Court overturned much of Reconstruction and how and why much of the rights we enjoy today were creatures of Supreme Court actions from the 1920’s on. However, although he discusses how the Supreme Court functioned as a super-legislature in overturning laws protecting workers and individuals, he is less critical of the court creating rights without any direct constitutional underpinning. The controversy over Roe v. Wade and its repeal is an exemplar of this. This is a book for supreme court nerds, and if you are one, it is well worth the long read.

My Amazon Review of Sebastian Edwards' "American Default: The Untold Story of FDR, the Supreme Court and the Battle over Gold"

The Great Depression Showdown over Gold

As an economic history nerd I can only applaud the work of my UCLA colleague Sebastian Edwards in his vibrant telling the story of the long forgotten Supreme Court showdown over the United States’ abrogation of contracts written with the gold clause. Remembering the inflation of the Civil War greenback era, most creditors demanded gold clauses in debt contracts in which they would be repaid in in either gold or its paper money equivalent value.

This system worked fine until the onset of the Great Depression. It is here where Edwards begins his story as President Roosevelt adopts an inflationist policy by first abandoning the gold standard by requiring all citizens to turn in their physical gold at the then $20.67/ounce price. Then in June 1933 Congress adopts a joint resolution authorizing Roosevelt to increase the price of gold which he ultimately does to $35/ounce and the legislation abrogates the gold clause in all contracts. Indeed, most economists credit the early recovery from the depression directly to the monetary easing associated with Roosevelt’s gold policies.

If Congress hadn’t abrogated the gold clause all debts would have been written up to reflect the devaluation by 69%. Thus it would require a payment of approximately $1700 to repay a nominal debt of $1,000. Needless to say a host of bankruptcies would have ensued.

Of course several creditors sued and Edwards skillfully moves the action from Roosevelt and Congress to the Supreme Court. The Supreme Court ruled that it was in Congress’ power to alter private contracts, but it was not in its power to alter U.S. government debt. However, the court ruled that as of the date of the Joint Resolution gold was still trading at $20.67/ounce and Americans were not allowed to possess physical gold at that time. Hence there would be no damages. A brilliant 5-4 ruling by Chief Justice Hughes.

The reason why these cases have been forgotten is that if they went the other way all hell would have broken loose. Instead of rallying as the stock market did after the ruling, stocks likely would have crashed. It would have triggered a constitutional crisis with Court versus the other two branches of government. Indeed the lead up to the ruling was a precursor to the 1937 court fight that Roosevelt would have.

As an aside Edwards notes that the United States had a treaty with Panama concerning the lease payments for the Panama Canal. That treaty had a gold clause in it. After a long negotiation in 1939 the lease payment was increased retroactive to 1934 thereby reflecting the dollar devaluation. Thus, the U.S. made good on its international treaty obligations.

“American Default” is a worthy addition to the economics literature of the Great Depression. It should be read with the works of Friedman & Schwartz, Bernanke, Irwin, Eichengreen and Sumner. And because it is more a history book than an economics book the lay reader should find it very readable. Further given the rising debt/GDP ratio in the U.S. when coupled with even larger unfunded liabilities, the idea of a 21^st century American default is not totally improbable.

The full amazon URL appears at: https://www.amazon.com/review/R1JCSUKKX3TVDP/ref=pe_1098610_137716200_cm_rv_eml_rv0_rv