2008 Financial Crisis: What can we learn?

Financial markets crashed ten years ago. See my previous post for what happened and comments about the graph to the left. This post is about lessons that we can learn from that crisis.

What caused the 2008 financial crisis? People who are skeptical of unbridled capitalism will highlight mismanagement, greed, and fraud in financial institutions, and there was some of that. People who are skeptical of too much government will highlight perverse incentives in certain laws and government institutions, and there was some of that, too.

This post is about two different causes: debt and models.

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2008 Financial Crisis: What happened?

Financial markets crashed ten years ago. What happened? If we are to learn from the past, we must first remember the past.

In September 2008 I was the CEO of a financial institution – Yankee Farm Credit, part of the national Farm Credit System. I had worked for Farm Credit for 24 years and I had been CEO for 2 years. Yankee Farm Credit was small ($320 million in assets at the time), but the Farm Credit System in total is a large financial institution ($186 billion then).

Ten years ago today two large financial institutions failed. These institutions were not typical financial institutions. They were a certain type of financial institution known as Government Sponsored Enterprises (GSEs). There are only four significant GSEs in the United States. The Farm Credit System is a GSE. This financial crisis had my attention.

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Free Speech Pioneers

Matthew Lyon was the first person to be fined and imprisoned under the Sedition Act of 1798, one of four federal laws passed that year known as the Alien and Sedition Acts. His crime: public criticism of President John Adams that was deemed seditious.

Lyon was a member of the U.S. House of Representatives from Vermont. His conviction in October 1798 came near the end of his first term. Vermonters overwhelmingly re-elected Lyon to a second term, and to this day he remains the only person elected to Congress from jail.

Anthony Haswell was a printer in Bennington, Vermont, and publisher of the Vermont Gazette newspaper. His publications in his newspaper in support of Lyon incurred the wrath of federal authorities, and Haswell was also arrested, tried, convicted, imprisoned, and fined under the Sedition Act. When his prison term ended, a crowd of 2,000 people gathered in Bennington to celebrate his release.

This post is about three pioneers of free speech: Anthony Haswell, Matthew Lyon, and Ethan Allen. Ethan Allen?? Yes, read on.

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Bennington Battle Day

Today is a state holiday in Vermont – Bennington Battle Day, commemorating the Battle of Bennington in the American Revolution on August 16, 1777.

The year 1777 was a pivotal year in our history.

For Vermonters, that was the year we declared ourselves an independent republic, six months after the Thirteen Colonies declared themselves to be “free and independent States.” For our country, that was the year that the American Revolution turned in our favor. The Battle of Bennington was “the turning point that led to the turning point.”

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Zac Mayo for House

Today I submitted the following letter to the editor of the News & Citizen:

Cambridge and Waterville are fortunate to have two fine young people running for the open position in the Vermont House created by Bernie Juskiewicz’s decision not to run for re-election. I have visited with both Lucy Rogers and Zac Mayo and I am impressed with their character, intelligence, energy, and humility.

In visiting recently with Zac, I was pleased to find that he is intellectually curious, a seeker of multiple viewpoints, a good listener, and an independent thinker. He talked about his quest to understand our country subsequent to the 2016 presidential election, and his desire to improve the state of our political discourse. His views about the appropriate role of government in our society comport well with my own views. (I want good government, but not necessarily more government.) Zac’s years of service in the Navy taught him about people and organizations, which will serve him well in Montpelier. For all of these reasons, I am supporting Zac Mayo for the Vermont House.

The contest between Zac and Lucy has been positive, which has renewed my faith in our ability to govern ourselves. Other political campaigns, mostly by candidates of my generation, have sometimes led me to question that faith. But if Zac and Lucy are representative of their generation, our country will be in good hands. Thank you, both Zac and Lucy, for your interest and participation in our grand American experiment in self-government.

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Open Meeting Law

This post is part of a series of posts on “Learning about town government” in my town of Cambridge, Vermont. Please see the link for context, a disclaimer, and a list of posts in this series.

This post is about Vermont’s open meeting law.

In the United States, every state and the federal government has some form of “sunshine” laws intended to create transparency and accountability in government, i.e., that government “operates in the sunshine.” Sometimes these laws are called “freedom of information” laws. These laws usually have two aspects: citizen access to government meetings and citizen access to government records. In Vermont, these laws are called the Open Meeting Law (OML) and the Public Records Act (PRA). This post is about OML.

OML applies to town government as follows: all official town boards, commissions, and committees, including subcommittees (called “public bodies”) are subject to OML. For example, OML applies to the selectboard. OML does not apply to individual officials. A meeting of the town clerk with other individuals does not come under OML (unless those involved constitute a quorum of a public body).

Following are the main points of OML:

  • Meetings of public bodies must be open to the public. That is, the public must be allowed to attend meetings to watch and listen. The law allows for limited exceptions, such as contract negotiations and certain employee matters.
  • Meetings must allow a “reasonable opportunity” for public input on matters being considered by the public body. The chair is charged with running an orderly meeting.
  • Agendas must be prepared for all regular and special meetings of the public body, and posted at least 48 hours prior to a regular meeting and at least 24 hours prior to a special meeting.
  • Minutes must be taken at all meetings, and posted not more than five calendar days after the meeting.

Those main points of OML seem straight-forward enough, but they are qualified by two important considerations:

First, with very limited exceptions, any gathering of a quorum of a public body for the purpose of discussing the business of the public body, or for the purpose of taking action, is considered a “meeting” that must satisfy all of the above requirements. The Vermont Secretary of State advises that this includes discussions by any means (e.g., email, telephone, etc.), not just physical gatherings, even if those discussions are spread out over time (e.g., an email chain over several days). Group emails can easily constitute a “discussion” that is problematic under OML. The issue with such discussions is that they do not meet all of the above requirements. It is likely that such discussions do not meet any of the above requirements.

Second, the authority of any public body is a group authority. Authority is delegated to the group, not to any individual. A public body may exercise its authority only by acting as a group in a proper meeting – meaning that a meeting is held that satisfies all of the above requirements, a quorum is present, and there is a majority vote. An individual member of the public body has no special authority unless specifically authorized by law or action of the public body. A public body may delegate some of its authority to an individual, but it may do so only by acting in a proper meeting where that action is recorded in the minutes.

The goal of Vermont’s open meeting law is transparency and accountability in government, which is desirable. However, taking all of the above into account, OML has implications for the ability of public bodies in town government to be effective. Perhaps someday I’ll write more about that, but for now I’ll simply note the following aspect which relates to the theme of this series of posts (learning about town government) especially for new selectboard members. With the current 3-member selectboard in Cambridge, a quorum is two. No member of the selectboard may talk with any other member of the selectboard about anything to do with town business outside of a public meeting. (There are very limited exceptions to this rule.) Regular selectboard meetings in Cambridge are twice a month for about two hours at each meeting. That is not much time, and meeting agendas are full. This restriction on discussions between selectboard members not only limits how much and how quickly things can be done, but it also makes it difficult for a new selectboard member to learn the job. This situation will change with the expansion of the Cambridge selectboard to five members at the next annual town meeting on March 5, 2019. Then a quorum will be three, and it will be possible for a new selectboard member to visit with a veteran selectboard member in a 2-person conversation, outside of a public meeting, to learn the job.

There are many more details to OML than I have summarized above. OML is complicated, and the legislature is constantly tinkering with it. Both OML and PRA are found in 1 V.S.A Chapter 5. OML is in Subchapter 2 (§§ 310-314) and PRA is in Subchapter 3 (§§ 315-320).

For more information about “sunshine” laws in the United States in general, see this Wikipedia article:

Freedom of information in the United States

Click here to go to the initial post in this series: “Learning about town government.”

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Dillon’s Rule

This post is part of a series of posts on “Learning about town government” in my town of Cambridge, Vermont. Please see the link for context, a disclaimer, and a list of posts in this series.

This post is about Dillon’s Rule.

In general, what are the rights of a town to govern itself? In the United States, different states answer that question differently. Two ends on a spectrum of possible answers to that question are Home Rule and Dillon’s Rule:

Home Rule: The town may do anything that is not prohibited by federal or state constitutions or law.

Dillon’s Rule: The town may do only what is permitted to it by the state.

Dillon’s Rule is named for Judge John Forrest Dillon who wrote the following in an 1868 case when he was Chief Justice of the Iowa Supreme Court:

Municipal corporations owe their origin to, and derive their powers and rights wholly from, the legislature. It breathes into them the breath of life, without which they cannot exist. As it creates, so may it destroy. If it may destroy, it may abridge and control.

(A town is a municipal corporation.)

Vermont is a strict Dillon’s Rule state. The language quoted above has been cited numerous times by the Vermont Supreme Court. This is a principle to always keep in mind when thinking about town government in Vermont: state law is supreme.

Of course, federal law is even more supreme than state law, but in my experience on the selectboard, it is seldom necessary to consult federal law. It is often necessary to consult state law.

Fortunately, the State of Vermont puts its laws online:


Vermont law is organized into 33 titles. Many of the laws pertaining to towns are in Title 24 – Municipal and County Government. Titles are further subdivided into sections (§), which may be grouped into chapters and subchapters. Section 872 of Title 24 defines the general powers and duties of town selectboards. Vermont law is referred to as “Vermont Statutes Annotated” (V.S.A.). Thus the complete reference is 24 V.S.A. § 872.

Now, to add another wrinkle to this, some municipalities in Vermont have charters that are unique to that municipality. Municipal charters are also part of state law, and they are listed in Title 24 Appendix – Municipal Charters. If a municipality has a charter, the provisions of the charter supersede other provisions in state law. If a municipality does not have a charter, it just follows general state law.

The advantage of a charter is that it may include provisions not otherwise found in state law. The disadvantage of a charter is that any change in the charter requires approval of the legislature.

The Town of Cambridge does not have a charter. Nor does the Village of Jeffersonville. However, the Village of Cambridge has a charter which can be found in Chapter 213 of Title 24 Appendix.

To summarize: Because Vermont is a strict Dillon’s Rule state, the authority of town government comes from state government. Town government should be able to cite a section of state law, either its charter or otherwise, as the authority for any action the town takes.

For more information about Home Rule vs. Dillon’s Rule, and a chart showing how the various states line up on this matter, see this Wikipedia article:

Home Rule in the United States

Click here to go to the initial post in this series: “Learning about town government.”

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