The Wall Street Journal - 20.09.2019

A16| Friday, September 20, 2019 THE WALL STREET JOURNAL.

California Calls a Foul on the Mighty NCAA

Regarding Allysia Finley’s “Califor-

nia’s Dreaming About Paying Student

Athletes” (op-ed, Sept. 16): I strongly

support the drive to allow student

athletes to accept compensation for

the use of their names, likenesses

and images. Since they are treated

exactly like professional ballplayers,

it is only fair that they receive fair

compensation as participants in the

businesses they work for. Despite the

lip service given, academics takes

second place in any serious college

sports program. I received a full

scholarship to play football and know

the physical and mental stresses the

players must endure. For many of

them, this will be their peak life ex-

perience.

A large part of America’s greatness

is allowing an individual to maximize

his or her capital, including physical

attributes. Let’s let them participate

in all aspects of the game.

STANLEYJ.OISETH

Prato, Italy

I understand how paying college

players overtly converts campus-

based sports into the minor league of

their professional counterpart. How-

ever,that’swhattheyare.

A compromise might be that each

player receives a retirement payment

of $25,000 for each of the years

played for the school. This amount

would be invested in a tax-deferred

insurance annuity for the benefit of

the athlete upon reaching 65. At that

time former players may receive pay-

ments from their annuity contract, as

they see fit. A collegiate athlete has a

four-year playing career ending at

age 21 or 22. A projected value of 40

years of investing at an imputed rate

of 5% compounded annually could

grow to over $700,000. This, together

with a player’s Social Security, 401(k)

and savings could be a comfortable

retirement and a good compromise.

SHELDONI.SAITLIN

Chicago

Allysia Finley laments: “If every

state can supersede the NCAA’s rules,

the organization would be rendered

impotent and irrelevant.” To which I

say: About time.

EDWARDR.GRANT

Arlington, Va.

NCAA’s game, NCAA’s rules.

MORGANFOSTER

Indianapolis

LETTERS TO THE EDITOR

Letters intended for publication should

be addressed to: The Editor, 1211 Avenue

of the Americas, New York, NY 10036,

or emailed to [email protected]. Please

include your city and state. All letters

are subject to editing, and unpublished

letters can be neither acknowledged nor

returned.

“Can you make it purr when I pet it?”

THE WALL STREET JOURNAL

Property Rights vs. the Extended Community

Christina Sandefur (“Airbnb Offers

a Property-Rights Opportunity,” Let-

ters, Sept. 14) doesn’t fully under-

stand the impact that Airbnbs have

on small communities. In the Sedona

area, there are approximately 1,

of them. This has drastically reduced

the number of homes to rent for

those who wish to work here. These

potential residents are forced to live

in other communities that are 15-

miles away. New rental units cannot

be built in Sedona since the city has

run out of land and is surrounded by

both state and federal land which is

not available for building.

Many of the Airbnbs have absentee

owners. That means a short-term ten-

ant deals with an agency, pays with a

credit card via a computer and never

sees the owner. So much for the con-

cept of sharing your home with a

passing stranger. The idea of using an

Airbnb to make extra income to

maintain the house and to invest in

the local community doesn’t apply

here. The local Airbnbs are used sim-

ply to make money from visitors for

the owners. There is nothing wrong

with making money but Sedona

doesn’t need more visitors.

There is one positive aspect to

having Airbnbs in your area. If you

do not like the neighbors, just wait a

day or two and you will have new

ones.

JIMEVANS

Sedona, Ariz.

The Housing Godzillas Try for a Better Life

“Subduing the Housing Godzillas,”

your editorial call to take an ax to

Fannie Mae and Freddie Mac (Sept.

10) through immediate administra-

tive action to shrink the two govern-

ment-sponsored enterprises, could

have grave repercussions for the

housing sector and U.S. economy.

Clearly, the status quo is unac-

ceptable with the two mortgage gi-

ants now entering their 11th year of

conservatorship. The strategy advo-

cated by the Journal is a far too sim-

plistic approach that would do little

to resolve the underlying problems

confronting the housing finance sys-

tem and cause even more uncer-

tainty in the housing market. The

housing sector hasn’t recovered from

the 2007-09 recession and is cur-

rently in a precarious state, acting

as an overall drag on economic

growth. For the economy to grow,

housing needs to be part of the solu-

tion.

The Treasury Department ac-

knowledges that an explicit federal

government guarantee is needed to

ensure adequate credit availability

for the U.S. housing market. This

view is widely shared in Congress

and must be a vital component in

any plan to revamp the housing fi-

nance system because the private

marketplace has yet to demonstrate

any willingness to step up to the

plate and provide affordable-housing

finance options to meet the needs of

working households in times of eco-

nomic strife.

Only Congress can provide cer-

tainty to the housing finance system

through durable housing finance re-

form. Lawmakers must act quickly

and thoughtfully to transition Fannie

Mae and Freddie Mac to a private-

sector oriented system with the fed-

eral government acting as a back-

stop in times of crisis.

GREGUGALDE

Chairman, National Association of

Home Builders

Washington

For decades before the 2008 sub-

prime-lending debacle, your editori-

als pointed out the danger of “public

risk for private profit” to no avail.

The Trump administration’s new

campaign against “private profit for

socialized risk” is unlikely to fare

any better.

The public/private model is a rec-

ipe for disaster, and the Democrats

will never allow a truly private

model. The public option, the Ginnie

Mae program for FHA-insured mort-

gages run by HUD, is a better alter-

native to this hybrid model. If the

Democrats want to control it, let the

federal government own it.

KEVINVILLANI

La Jolla, Calif.

Mr. Villani is a former chief econ-

omist at HUD (1979-82) and Freddie

Mac (1982-85).

More Pockets Can End the

Mighty Power of the Purses

Regarding Laura Boggs’s “Hell

Without a Handbasket” (op-ed, Sept.

17): I haven’t carried a purse since I

broke my wrist 25 years ago. With

my arm in a fixture, I couldn’t risk

getting entangled in purse straps,

etc. So I asked myself how was it

that my husband could get along

without a purse? The answer was

pockets. I soon learned I could get

along with a small wallet that carried

my driver’s license, a couple of credit

cards and my keys. Gone was the lip-

stick, hairbrush and other superflu-

ous items, but most of all, gone was

the stuff my husband used to ask me

to carry because he didn’t have a

purse.

INEZTANZOLA

Atlanta

Pepper ...

And Salt

Time to Regulate Monopoly,

Not Just Real Monopolies

Regarding your editorial “Introduc-

ing: Das Monopoly [TM]” (Sept. 14):

In “Californ-opoly,” building a hotel

on a property requires the purchase

of four additional “affordable”

houses. Railroads will cost $1 to ride

but $6 billion to purchase in order to

complete another mile of high-speed

rail in the desert. Eighty percent of

rent earned from the water company

must be allocated to wetland preser-

vation and the purchaser of the elec-

tric utility will be required to insure

all houses against fire owned by

other players.

JAMESFACKLER

Lexington, Ky.

The Union and Lawyer State

D

espite political howling about corporate
power, California is demonstrating that
private businesses are no match for
unions and plaintiff attorneys.
Witness the crush of anti-busi-
ness and charter-school legis-
lation that Democrats in Sac-
ramento passed last week.
Unions are breaking open
their finest burgundies after
Democrats whooped through legislation to re-
classify hundreds of thousands of independent
contractors as employees. The main targets are
companies in the so-called gig economy like
Uber, Lyft and DoorDash that use digital plat-
forms to connect workers with customers.
Independent contractors can set their own
hours and work for multiple businesses. But
they can’t unionize under the National Labor Re-
lations Act and aren’t entitled to paid sick leave,
workers compensation, overtime and unemploy-
ment insurance.
Plaintiff attorneys have been suing gig com-
panies for misclassifying workers, but they’ve
been stymied by arbitration agreements. Then
last year the California Supreme Court substan-
tially broadened the definition of an employee
in a case involving a delivery company, and the
Legislature is now going further.
The legislation defines an independent con-
tractor as a person who “performs work that is
outside the usual course of the hiring entity’s
business” and is “customarily engaged in an in-
dependently established trade, occupation, or
business.” The language is strict enough that
Democrats exempted dozens of professions such
as architects and accountants.
But then they added exceptions to the excep-
tions after unions complained. The AFL-CIO has
prepared an exemption request form for busi-
nesses that asks “Have you met with affected
unions?” Plaintiff attorneys, unions and courts
will essentially decide whether businesses are
coveredbythenewlaw.
Lyft and Uber offered a compromise that in-
cluded a $21-an-hour minimum wage for time
spent driving and picking up customers, a fund
to pay for benefits and the ability for workers
to negotiate pay with multiple employers. But
Democrats rejected it after unions did. The leg-
islation’s author is a member of the Teamsters

union, which wants to organize the ride-hailing

industry and truck drivers that Amazon relies

on for faster deliveries.

Lyft recently said that “the

vast majority of job opportuni-

ties would go away under an

employment model” and

“costs would also be higher on

the passenger side.” The bill is

also retroactive so plaintiff at-

torneys will be able to file class actions against

businesses for unpaid overtime and rest breaks.

Uber for its part says its drivers are still cor-

rectly classified as independent contractors un-

der the new law and plans to defend their em-

ployment status in court. If that fails, Uber will

sponsor a ballot initiative in November 2020.

Good luck with that.

Meanwhile, Sacramento Democrats bestowed

other gifts on their trial-attorney donors. This

includes tripling the statute of limitations to

three years for bringing employment discrimi-

nation claims, expanding the ability of employ-

ees to recover penalties for state labor-code vio-

lations, and limiting arbitration agreements in

employment.

Former Gov. Jerry Brown stopped many of

his party’s most destructive instincts, but cur-

rent Gov. Gavin Newsom has national ambi-

tions—don’t laugh—and won’t restrain his su-

permajority. This includes letting teachers

unions limit charter-school expansion. Demo-

crats passed a bill last week to let local districts

veto new charters not “consistent with the inter-

ests of the community.”

The California Charter Schools Association

chose not to oppose the bill after being threat-

ened with an outright moratorium. They’re hop-

ing that a ballot initiative backed by teachers

unions to eliminate the state’s constitutional

property tax cap on commercial property will

ease the fiscal pressures on local school districts

and political opposition to charters. Don’t bet

on it.

Business elites in California have backed

Democrats for cultural reasons. They thought

they could mollify progressives, and companies

have hired many former Obama hands. But the

Golden State is run these days by unions and

trial lawyers, and Sacramento is a prelude for

taking the political model nationwide.

California’s agenda:

fewer charters, fewer gig

workers, more lawsuits.

Administrative State Under Judicial Fire

E

lizabeth Warren touts her creation of the
Consumer Financial Protection Bureau
as a major accomplishment, and expect
regulatory agencies shielded
from accountability to prolif-
erate in a Warren Administra-
tion. But as a recent appellate
ruling suggests, the courts
may prove an obstacle to such
bureaucratic entrenchment.
An en banc Fifth Circuit Court of Appeals
ruled this month that the design of the Federal
Housing Finance Agency is unconstitutional,
with 12 of 16 judges agreeing ( Collins v.
Mnuchin ). The agency, created amid the finan-
cial crisis to manage Fannie Mae and Freddie
Mac, is controlled by a single director who can-
not be removed by the President except “for
cause.” The CFPB has a similar structure, sug-
gesting it too may be vulnerable.
Judge Don Willett’s majority opinion said the
FHFA director’s independence violates the sepa-
ration of powers, the Constitution’s “most es-
sential attribute.” The Constitution provides for
power divided between a legislative branch, the
executive and the judiciary. Too often the bu-
reaucracy has become a kind of fourth branch,
shaping policy but lacking political oversight.
“The Constitution bounds Congress’s power,”
the majority writes, “to create agencies, draw
their structure, and grant them authority.”
The Sixth Circuit also grappled with the lim-
itsofagencypowerinan en banc order Aug. 28,
though 9 of 16 judges deferred to the agency.
The plaintiff wanted to challenge certain IRS re-
porting rules; the IRS said its rules couldn’t be
challenged pre-emptively ( CIC Services v. IRS ).
The IRS prevailed, but Judge Amul Thapar

wrote for seven dissenters highlighting the im-

portance of judicial review of agency decisions.

He noted that the Founders deliberately gave

the taxing power to Congress

but now an executive agency

exercises it “in ways that the

Founders never would have

envisioned.”

He added that courts “ac-

cepted this departure from

constitutional principle on the promise that

Congress would still constrain agency power.”

But Congress has not followed through, surren-

dering legislative responsibilities to agencies.

Judge Jeffrey Sutton wrote in a concurrence

that he was inclined to rule against the IRS but

Supreme Court precedents “plausibly point in

opposite directions.” He suggested the High

Court is in a better position to decide the ques-

tion. The Justices effectively punted on two ma-

jor separation-of-powers decisions last term,

Gundy v. U.S. and Kisor v. Wilkie.

The influx of originalist judges to the federal

bench is moving the center of judicial opinion

on administrative power. The unusually hyper-

bolic majority opinion in the IRS case highlights

liberal alarm at this shift. It accused the dissent

of “their latest attempt to inflict death by dis-

torted originalism on the modern administra-

tive state.”

Conservatives have no such agenda, but they

recognize the damage to self-government as

law-making power is transferred from elected

representatives to bureaucracies. The Fifth and

Sixth Circuit opinions show that lower courts

are engaging with this issue with a new level of

intensity, and the Supreme Court will soon need

to weigh in more forcefully than it has.

Appeals courts brawl

over agency power. Will

the Justices intervene?

Thank You, Big Business

B

ernie Sanders and Elizabeth Warren of-
ten talk about tackling the high cost of
college, but some schools are beating
them to the punch. This week
Cornell University’s medical
school, Weill Cornell Medicine
in New York City, announced
a $160 million scholarship
program to eliminate educa-
tion debt for all of its students
with financial need.
The fund is backed by the kind of Wall Street
titans Ms. Warren and Mr. Sanders love to as-
sail. Major money for the scholarships came
from the Starr Foundation, affiliated with for-
mer AIG CEO Hank Greenberg, as well as from
Sanford Weill, the former Citigroup CEO.
Last year New York University announced
$450 million from private donors to cover tu-
ition for all its medical students. Months earlier,
Columbia University unveiled a $150 million
scholarship fund, endowed by former Merck
CEO Roy Vagelos and his wife, to mitigate medi-
cal students’ debt.
The assistance isn’t only for future doctors.
Late last year Johns Hopkins accepted $1.8 bil-
lion from Michael Bloomberg for undergraduate
financial aid. This spring it was front-page news
when Robert Smith, chief executive of Vista Eq-

uity Partners, told Morehouse College’s class of

2019 that he would pay off their college debt.

These donations flout the narrative of big

bad business, so it’s little sur-

prise that liberals have re-

acted somewhat sourly. Bernie

Sanders tweeted that Mr.

Smith’s gift was “extremely

generous” but added that the

“student crisis will not be

solved by charity. It must be addressed by gov-

ernmental action.”

But private generosity has an advantage in

that it is more accountable than public policy.

Donors give to institutions they love and trust,

and schools find the students they believe are

most needy or deserving. Federal subsidies

have inflated college prices, but private giving

may be creating a virtuous competition. Colum-

bia’s medical school told the Journal in April

that applications for the 2019-20 school year

increased 5% after it announced the program

in December 2017.

Given the trend, other medical schools may

need to sweeten their own offers to stay com-

petitive. This is America’s civil society at its fin-

est. Kudos to these private-sector donors for

helping so many students without burdening

the middle class with higher taxes.

The rich help pay

medical-school tuition

for those who need it.

REVIEW & OUTLOOK

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