What They Saw Is Exactly What They Got

The reign (a word I use advisedly) of ECUSA's current Presiding Bishop has been marked thus far by some striking characteristics in contrast to anything that ever came before:

1. First and foremost, the number of lawsuits in which the Episcopal Church (USA) is a plaintiff in court against its own---the initiator of litigation against fellow Christians---has multiplied enormously. A summary of cases I gave last August showed there were then eighteen pending suits that had been brought by ECUSA (either as an original plaintiff, or as a subsequent intervenor) in five different states: California (four lawsuits, counting three in Orange County and one in San Joaquin), New York (two lawsuits, one of which settled in September 2007), Virginia (eleven separate lawsuits), Georgia, and Connecticut. Of those, only the three in Orange County had been brought before Katharine Jefferts Schori became Presiding Bishop. Since that post, ECUSA has filed two more lawsuits: one in Pittsbugh and another in Fort Worth, and it was named as a defendant in a preemptive lawsuit brought by the Diocese of Quincy in Illinois, before ECUSA filed suit itself. So under the current Presiding Bishop, ECUSA initiated suit in eighteen separate instances, and there are twenty-two lawsuits for which she now has responsibility. (And that is the case despite the fact, as I pointed out in this post, that the Constitutions and canons nowhere give the president of a body which is not itself a member of the unincorporated association of dioceses authority to bring suit in court "on behalf of" the association as a whole.)

2. The amount of its resources which ECUSA is devoting to litigation in the civil courts has multiplied even more enormously. As detailed in this post, ECUSA's budget for litigation went from an original estimate (at GC 2006) of $300,000 for the triennium 2007-2009 to a currently budgeted $4,704,138 for that same triennium, plus a further $1.8 million proposed to be budgeted for the next three years, for a total of over $6.5 million.

3. The number of clergy deposed since November 2006 (when the Presiding Bishop's term began) comes to 121 --- and counting. (With the recent action in San Joaquin, the number more than doubled.) That number is up from just 36 in the years 2004-2006 --- nearly a fourfold increase. (The details---excluding San Joaquin---are on pages 22-25 of this Report.) And now there are a potential 72 more depositions scheduled in Fort Worth.

4. Three bishops were "deposed" (not canonically) under the current Presiding Bishop, while she "deemed" another six to have voluntarily renounced their orders --- without their ever having in fact done so (see page 25 for details). That makes nine bishops removed in less than thirty-six months without bothering so much as once to observe the canonical procedures. (Previously, such an abuse had occurred only once in Presiding Bishop Griswold's term, and once in Presiding Bishop Browning's term; no one saw them for the canonical violations they were at the time, but an illegality can never serve as a precedent. And counting those two, there had been just five bishops of ECUSA deposed in the entire four-hundred year history of the Church, before Presiding Bishop Schori started her current campaign.)

5. Despite an unprecedented downturn in its revenues, with resulting layoffs and downsizing in ECUSA's staff, the Presiding Bishop has found room in the budget to hire a personal legal adviser, in addition to her Chancellor.

6. At the same time that she has sought novel ways to fund litigation costs, the Presiding Bishop has urged the Church to hold fast to maintaining the Millennium Development Goals as its "first mission priority".

What may be surprising to some is that the Presiding Bishop is doing nothing more, and nothing less, than she said she would do if the House of Bishops chose her for that office. In a now largely-forgotten interview during her candidacy that she gave to Louie Crew, she answered his point-blank questions with equally frank answers (his questions are in italics, and her answers are in bold):

What do you see as the major pressures that would be upon you in moving from being Bishop of Nevada to being the Primate? I realize that primates have a responsibility to all of the people. What is and is not appropriate in terms of your own leadership?

The only parallel that I can draw is moving from Oregon to Nevada. I remember telling people the learning curve was not steep; it was overhanging. Having done some rock-climbing, I knew what that meant.

There is an opportunity, a charism in that position, that really offers the possibility to cure the whole body, and to try and stand in that crucified place that addresses the whole body.

My sense is that we still live very much in a colonial church. The eastern establishment still rules much of the church. There is a hunger in other parts of the country, and in other dioceses that are not part of this country, to hear and see some other movement that addresses their concerns.

Somehow being able to hold the whole body in prayer and in tension with the rest of the body.

What about those who seem bent and determined to leave or to wound the body if they don't get their own way?

I think they need to be challenged, more so than they have been. I see signs of hope in the House of Bishops, an unwillingness to continue to put up with bad behavior. We haven't seen any action yet, but I think it is coming.

Do you have any sense of what that action might be? Would a verbal rebuke be enough?

It won't be enough in some cases, I am sure. But I have the sense that there is some desire to hold each other accountable for actions that are not canonical, for actions that have the appearance of being downright schismatic.

"[The dissenters] need to be challenged . . . hold each other accountable for actions that are not canonical. . . that have the appearance of being downright schismatic." It was all there for everyone to see at the time, particularly when she identified the ones she was talking about as those who no longer came to the meetings of the House of Bishops:

What would you see as your major efforts in being a healer and a reconciler to the unhappy divisions of our church without encouraging further hostility?

I am a pretty good listener. I don't have any problem listening and being in dialogue with people who are willing to talk with me. The challenge in the House of Bishops has been the few who won't come. I have reasonable relationships with all of those who do come.

As a church we have got to be better self-differentiated. We have to decide what it is we are going to stand for and be clear about it, and then say 'these are the consequences.' . . .

The Presiding Bishop claims to be "a pretty good listener" --- but in the very next paragraph, she makes clear that she will not tolerate disagreement once a decision has been made, because if so, "these are the consequences . . .". (See #1 to #6 above.) Being absolutely sure that one is right is fine for her, but not for those who hold differing views:

I particularly like your emphasis in your part of the DVD on how you struggled to reconcile science and faith and did so by an awesome recognition of Mystery.

I am most worried when people are absolutely sure that their view is the right one.

And then---can you believe this? She goes right on to insist that she values "diversity" in the Church most:

What do you value most about the Episcopal Church?

I value most its historic ability to live with diversity and to celebrate that diversity. We have gotten better in some areas over the years, like liturgical diversity. We are wrestling mightily at the moment with theological diversity.

I love the Episcopal Church's ability not to define everything, to allow for a varied interpretation. Some see that as a mighty sin, but I see it as one of the gifts of the creator. To be created in the image of God doesn't mean just one thing.

And of course, one value which Mr. Crew asks her about right up front is the one she says she will fight for:

If a gay or lesbian person is elected on your watch, would you consent to the election?

If a gay or lesbian person is elected on your watch, would you be willing to serve as key consecrator?

That is a hard question. I have to tell you that I was not certain how I would vote on +Gene until that day.

I was deeply moved by your part of the DVD in which you told of the two things that struck you the most about that.

Louie, I don't think I can say right now. I don't think I can. I need to tell you if you don't know that my heart bleeds for the position of gay and lesbian people in this church. I think I must wait on the movement of the Spirit. I was part of the Special Commission on the Episcopal Church and the Anglican Communion. What we asked, what we recommended, was that electing dioceses, and Standing Committees, and nominating committees act with very considerable caution.

How does that caution translate in behavior? You don't get much of a choice if a diocese elects a lesbian or gay bishop.

That's right, and if God brings us to that day, I think we will act according to how the Spirit moves us. I am sorry not to be able to be more direct.

Obviously the whole church wants us to move toward more unity, but there is also the question of how far we will get if we don't take a stand. It's a flip side.

There is a piece of me that doesn't want Gene Robinson to be the next Li Tim Oi.

(Florence Li Tim-Oi is the woman who was first made a priest in 1944 because of wartime necessity in the Diocese of Hong Kong, but who surrendered her license after the war. She had to wait until 1971 before the Diocese elected to ordain any other women to the priesthood.)

There are a number of insights to be realized from this interview, apart from the fact that it predicted what would happen if +Jefferts Schori was elected as Presiding Bishop. Most striking to me are the inherent contradictions, which, as I fear I must never tire of pointing out, do not bother liberals in the slightest. Let me spell them out for you:

A. Katharine Jefferts Schori says she values "diversity" most in the Church, but at the same time she is troubled by those who are most sure they are right. From this it follows that it is fine with her if your opinion differs from hers, so long as you are willing to admit that she is right and you are wrong.

B. In respecting diversity, particularly in consecrating gay persons as bishops, the Church will "act according to how the Spirit moves us." But those who "seem bent and determined to . . . wound the body if they don't get their own way" --- because those who were "moved by the Spirit" instead got their way --- need to be challenged, and shown that there are consequences. So it is the ones who refuse to recognize the validity of gay ordinations who are being "downright schismatic", and who need to be punished---apparently because they are not moved by the Spirit. (They could not be, because otherwise +Gene Robinson might prove to be another Li Tim-Oi.)

C. Despite her scorched-earth, take-no-prisoners litigation tactics, the Presiding Bishop still views herself as offering "the possibility to cure the whole body, and to try and stand in that crucified place that addresses the whole body." In other words, she sees herself as the cure for ECUSA's current failings, and as a martyr who is taking all the unpleasantness upon herself ("stand[ing] in that crucified place") for the sake of the whole Church.

So the Presiding Bishop reserves to herself and those who agree with her the description of "being moved by the Spirit." Those who disagree are simply too sure they are right, are schismatic, and are bent on wounding the Church. Have you got that straight? And at the same time, she is a martyr for the cause of social justice, so it is impossible for her to conceive that she could be wrong.

In the DVD interview to which Louie Crew twice fawningly refers (still available here), the future Presiding Bishop is likewise true to her colors: God is mentioned only in passing, and Jesus Christ is not mentioned once, just as in the printed interview. General Convention had to wait for her inaugural sermon for the Presiding Bishop to mention the name of Jesus --- and when she did so, it was to refer to Him as --- deliberately, knowing the shock and pain it would cause to those who disagreed with her --- "our Mother Jesus". How is that for "listening", for "dialogue"? In other words: "I'm in charge now --- and you will listen to me, do you hear?"

There cannot thus be any surprise at how the Episcopal Church (USA) is being led today. It was all there on the table before her election. ECUSA got just what it bargained for. And it finds itself now exactly in the place where she promised to take it.

Dum excusare credis, accusas. (St. Jerome)

Friday TED Talk: Bonnie Bassler on How Bacteria Communicate

This is one of the more intriguing scientific talks given at the TED 2009 conference. You will learn things you never knew about how bacteria interact with each other, through a form of bacterial "Esperanto", and with humans---such as that in terms of cells in your body, you are only 10% human, and 90% bacteria. Dr. Bonnie Bassler, who runs a microbiology lab at Princeton, shows how collective behavior in bacteria were most likely the precursor to the multicellular coordination that lies at the heart of how our body works. (Could all of us in ECUSA perhaps learn something from this?) 

Dr. Bassler really knows her stuff. She enjoys teaching it, and learning along with her students!

Enhanced, high-res version is here. More links to download audio/video are here. A brief bio of Dr. Bassler is here, and her faculty homepage at Princeton is here. There is also an extended interview with her at this link.

This Will Brighten Your Day

A vintage photo (the original Internet link to it alas has been lost) shows a costumed couple sitting down at a piano to entertain their impromptu audience with a duet (it appears to be in some kind of rehearsal space, or perhaps a classroom---note that the piano is on a dolly). (You can still see the photo in the lower part of this image, and you can click to enlarge it.)

Now click on the video below to see the same couple, some sixty years later, still cracking up an audience with their duet shenanigans:




Marlow Cowan, the husband of the pair, is 90 years old; his wife, Frances (who is a classically trained pianist), is "almost 84". As you can tell from the photo, Marlow loves having fun at the piano, telling jokes, wearing funny hats, and making faces. When he tells a reporter "I really don't understand my piano playing," Frances immediately chimes in: "Neither do I. You just kind of bang around on it." They both came from musical families, and their children and grandchildren all love music, as well. You can read more about the couple, and watch another video of them, at this link. You can read the story of the Bösendorfer piano at the Mayo Clinic, and how the video came to be made, by following the links at this site.

Bishop Lamb Confirms Lack of Quorum to Elect Him

Bishop Lamb has finally provided proof that there was not a sufficient quorum of clergy canonically resident in the Diocese of San Joaquin who were present at the "Special Diocesan Convention" which was held in Lodi a year ago March 29. Today he acknowledged that last Friday and this Tuesday, he signed certificates with the intent of deposing 61 clergy in the Diocese for having "abandoned the Communion of this Church" in leaving to follow the Rt. Rev. John-David Schofield and his Diocese out of ECUSA. (H/T: VirtueOnLine.)

Now anyone can do the math. According to the contemporary report of the "special convention" in Episcopal Life, there were just twenty-one clergy present at the meeting. Twenty-one present, plus sixty-one absent (and now "deposed"): that makes eighty-two total clergy canonically resident in the Diocese as of March 29, 2008, exactly as I reported here on April 28, 2008 in this post. Diocesan Canon III, section 3.01, which Bishop Lamb and the meeting claim to have followed, provides (with my emphasis added):

A quorum shall consist of one-third of all the Clergy entitled to seats and votes together with at least one (1) Lay Delegate from each of one-third of all the Parishes and Missions entitled to representation. If a quorum be not present at any Convention, no business shall be transacted except that of adjournment from time to time until a quorum shall be present.

Quick, anyone: 81 is 3 x 27, so what would be the minimum quorum for 82 clergy to meet at a legal Special Convention of the Diocese? That's right---twenty-eight were required to be present for lawful business to be transacted on March 29, 2008.

And now we come to one, giant, glorious chicken-and-egg problem into which Bishop Lamb, the group he is leading, and ECUSA have gotten themselves. Let me lay out the logic for you:

A. Without a quorum present, Bishop Lamb was not lawfully confirmed as Provisional Bishop of the "Diocese of San Joaquin," under its own canons. (Nor was the "Standing Committee" voted on at the same meeting lawfully elected, either.)

B. Since Bishop Lamb was not lawfully confirmed in that position, he has no canonical authority to depose the 61 clergy he claims to have deposed.

C. Therefore, as far as the "Episcopal Diocese of San Joaquin" claims to be a lawful diocese of ECUSA, and one that follows its own Constitution and Canons, those same 61 clergy are still lawfully canonically resident in that Diocese, and no lawful Convention, Special or Annual, can be held without at least seven of them being present.

So until the "Diocese of San Joaquin" properly reconstitutes itself under ECUSA's own Constitution and Canons (which will need to be amended for the occasion), it has no Bishop and no Ecclesiastical Authority---and no way of lawfully electing one.

As I warned in an earlier post, nothing good could come from this strategy of charging ahead without any proper basis in the canons for doing so. You are witnessing a piling on of illegality upon illegality, or what I called in that earlier post "a murder of crows, a scold of jays, a sneak of weasels".

The point is not whether a court of law will accept what ECUSA tells everyone is the case in San Joaquin. The point is that anyone with a rudimentary ability to read a canon and do the numbers can see---now thanks to the brashness of Bishop Lamb and those advising him---that it is a lie. We have once again the highly un-Christian spectacle of a bishop who is sworn to uphold the "doctrine, discipline and worship" of ECUSA and who violates that same discipline in "deposing" others for violating the same oath.

And no one in ECUSA is doing anything about this ongoing, shameful lawlessness. It is business as usual for the Episcopal Church, the Church of Enablers and Lawbreakers.


[UPDATE #1 - 05/27/2009: Since the news is coming in thick and fast today, I will use this means to update regular readers on two other topics of interest:

In the Pittsburgh litigation, it is reliably reported that Judge James listened to oral argument from all parties today at a hearing to decide whether, assuming that Bishop Duncan's diocese lawfully voted to leave ECUSA, the departure also violated the terms of paragraph 1 of the stipulation the parties had entered into in October 2005 to settle (supposedly) the case. (See this post for further information on this issue.) He concluded the hearing by setting deadlines for the parties to file supplemental briefs on the issue, which extend into July. So there will be no further news from the court on this issue for quite some time.

In the matter of filing a petition for certiorari (review) by the United States Supreme Court of the decision by the California Supreme Court in the Episcopal Church Cases, about which I reported here, I am informed that St. James parish in Newport Beach has obtained a further thirty-day extension of time within which to file, pursuant to the Rules of the Supreme Court. So there will be no news from that quarter for another month.

[UPDATE #2 - 05/27/2009: Wow! Is this ever a day for news---check out this recent post at the Covenant Website. Some people, at least, are getting a little tired of the decidedly unclerical behavior evidenced recently by members of ECUSA, as described on this and other blogs. Now---will anyone in ECUSA see fit to seek discipline as well against those responsible for this latest debacle in San Joaquin?

This Would Never Pass---It Makes Too Much Sense

Let's go back to the economy for a bit---it's in trouble (in case you hadn't noticed). I have about given up hope that those currently in charge in Washington will come up with any kind of sound remedy that will (1) avoid inflation and (2) avoid payoffs and breaks to cronies and special interests at our expense. To date the inflation of the monetary base continues to soar into the stratosphere, with no end in sight. This has happened before, but not at any time you would want to live through: it happened in Germany in 1921, and in all the other instances listed here.

(Note to readers trained in economics: I am aware that simple inflation in the monetary base does not necessarily lead to instant inflation. I am also aware that due to the volume of home foreclosures and business failures, the aggregate money supply is decreasing just now, as is the average velocity. These factors will undoubtedly keep inflation in check for a while yet. My point is simply that when velocity does start to pick up, the huge increase in the monetary base---the amount of immediately available money in circulation---will produce inflation even if the Fed tries to reduce bank reserves, which are only a part of that base. Go back to the graph, and compare the growth in the monetary base in the years prior to the huge inflation of 1979-81 with the growth just in 2009 alone---we simply have never ever been before where we find ourselves now.)

My point is not to say that future inflation is inevitable, but only that it is unavoidable if we stay on our present course. And to show you that there is no need to remain stuck making the same mistakes over and over, I want to introduce to you a well-thought-out concept whose time has definitely come: Limited Purpose Banking, or LPB. It is the brainchild of Professor Lawrence J. Kotlikoff, who teaches economics at Boston University. He laid out the basics in a recent article which I urge you to read, either at his own Website (where there are links to other articles on the same topic), or at the New Republic Website. Here are some extracts to whet your appetite:

The Obama administration's strategy to address the economic crisis may be making the problem worse. Its plan--bailing out one financial institution after another and rebuilding the old system pretty much as was--treats the symptoms, not the disease, and will leave us fiscally and financially weaker. The disease is letting financial companies borrow in order to gamble, resting easy that Uncle Sam will cover their losses. The more the government enables this behavior, the more financial companies will gamble at public expense and the greater the chance of systemic collapse.

There is a better way to restore trust in our financial system and get our economy rolling: Limited Purpose Banking. It's a simple and essentially costless change in our financial system that limits banks to their legitimate purpose: connecting, and intermediating between, borrowers and lenders and savers and investors. Under Limited Purpose Banking, all financial corporations engaged in financial intermediation, including all banks and insurance companies, would function exclusively as middlemen who sell safe as well as risky collections of securities (mutual funds) to the public. They would never, themselves, own financial assets. Thus, they would never be in a position to fail because of ill-advised financial bets. No-risk banking? Exactly. It means making banks--meaning all financial corporations--be the disinterested intermediaries they pretend to be.

Have you got the idea? Banks will be prohibited from buying and selling financial instruments for their own account, using their capital and risking your deposits. Instead, they will go back to being just banks---which, in addition to holding your money, will act as brokers in offering you mutual funds of varying degrees of risk based on what you want to do with your money. But since the banks cannot purchase any of those mutual funds for their own account, and cannot make bets with your money, they cannot grow "too big to be allowed to fail". This is the current problem:

The government has been going to extraordinary lengths to cover the financial sector's losses, running astronomical deficits and printing money like crazy. But the government, too, is making promises it can't keep. Take the Federal Deposit Insurance Corporation's (FDIC) insurance. A bank run today would cost the FDIC $4.8 trillion--far beyond its $19 billion reserve. Or consider federal promises to cover AIG's bills. The government has already committed AIG $173 billion, but the company still has $1.6 trillion in credit default swap exposure. Were AIG or some other large insurer to fail, we could see a run on the industry's roughly $3 trillion in cash surrender value, which the government would surely cover. Then there's GM, Ford, GE, and many other companies the government has deemed or might deem "too big to fail." And let's not forget the government's guarantees of private pension funds; the liability there could run to $100 billion.

How can the government cover all these promises, not to mention its enormous future Social Security, Medicare, and Medicaid benefit obligations? It can't. Yes, it can print even more money--it's already on track to triple the monetary base--to pay people and companies what they were owed. But it can't guarantee that by the time they're paid, they'll be able to buy anything with their money; opening up the printing press to the extent needed to make everyone whole spells hyperinflation. The fact that the government's promises are about dollars, not purchasing power, makes the aforementioned bank and insurance runs quite plausible. Those who get and spend their money first on something real come out ahead.

Now comes the explanation of just what LPB is, and what it would accomplish:

Which leads us to the better way: Limited Purpose Banking (LPB). To understand it, think about trucking companies. Were trucking companies to sell rights to future shipping at a guaranteed price, they'd make a bundle in the short run. But were gas and other trucking costs to soar, the companies and the economy would shut down. One such episode would suffice for the government to outlaw this kind of gambling by trucking companies, limiting them to their legitimate and critical purpose.

To keep banks from shutting down the economy, we propose a new regime. Under Limited Purpose Banking, banks would let people gamble, but they would not themselves gamble. Banks would operate exclusively as pass-through mutual funds. Specifically, they would be permitted to [perform] one and only one set of activities: create mutual funds, sell shares to these funds to the public, and use the proceeds to purchase assets. These mutual funds would provide as much credit as the economy needs, allow us to engage in as much risk-taking as we want, and provide maximum liquidity.

Watch as Professor Kotlikoff demonstrates how these new mutual funds could be designed to fulfill any of the functions currently provided by banks and insurance companies---at the risk of their own and your capital---with all of the risk for each particular fund being completely self-contained in that fund itself. This lets you invest just with those who want to share exactly the same risk, and isolates your investment from still riskier ones:

There are already some 8,000 or so mutual funds on the market. Under LPB, there'd be more, including cash mutual funds that hold only cash, pay no interest, and never break the buck. Holders of cash funds could access their dollars at ATMs, via writing checks, or by using debit cards. Thus, cash funds represent the checking accounts in the new financial system.

Under LPB, people who seek to lend money to home buyers would simply purchase shares in a mutual fund investing in mortgages, with the money going directly to the mutual fund (not to the bank sponsoring the fund) and from there to the home buyer in return for his or her mortgage. Those wanting to lend to companies would buy mutual funds investing in commercial paper. Those wishing to finance credit card balances would buy mutual funds investing in those assets. Credit is ultimately supplied by people, not via some magical financial machine. And every dollar people want to lend would be provided to borrowers via mutual funds.

This is not a laissez-faire proposal. There would still be oversight, but it would be geared to each particular fund, to ensure that its risks were accurately described to those purchasing it---just as the SEC does in many cases today. But this would be much broader than the SEC:

To ensure the security of all these mutual funds, banks would be required to engage third party custodians, and a new federal regulatory authority--let's call it the Federal Financial Authority (FFA)--would oversee these arrangements and ensure that no Bernie Madoff could ever again self-custody his clients' assets and spend their money illegally.

The FFA would have other roles as well. For one, it would establish, like the Food and Drug Administration does, the safety of various securities: Every security sold on the market--be it an individual mortgage, a commercial loan, a foreign security, or a share of stock--would be rated and fully disclosed by the FFA, with no exception. Thus, we'd no longer have to rely solely on private rating companies that are paid by those they rate.

A new mortgage, commercial loan, credit card, issuance of stock, new real estate trust, etc. would be initiated by a bank, sent to the FFA (and private parties, as desired) for rating, income verification, and disclosure, and then sold by the bank to mutual funds, including mutual funds that the bank itself markets to the public. Once funded, the new securities would be held by the owners of the mutual fund--in other words, by people.

Since each investor is placing all of the money invested in a particular fund just with that fund, and the fund itself accepts only money from people who are investing in it, there are no problems with reserve requirements, as there currently are with banks and insurance companies:

In requiring that cash mutual funds hold just cash, LPB effectively provides for 100-percent reserve requirements on checking accounts. This eliminates any need for FDIC insurance and any possibility of future bank runs. Moreover, since no bank would hold any risky assets apart from the value of its furniture, buildings, and land, and would hold no debts (apart from the mortgages on its property and any loans used to finance its operations), there would be no need for capital requirements.

One-hundred-percent reserve requirements on checking accounts was, by the way, advocated under the heading "Narrow Banking" by Henry Simons, Irving Fisher, and Frank Knight in the 1930s--three of the worlds' leading economists of their day. The world listened to John Maynard Keynes' many deep insights, but, unfortunately, entirely ignored Simons, Fisher, and Knight.

The same approach would apply to how insurance companies would operate under LPB:

Given that today's insurance companies are fundamentally engaging in the same business as today's banks--insuring us against illness or our home burning down the way financial securities insure us against the stock market crashing, the dollar falling, the price of oil rising--insurance companies would be considered banks under Limited Purpose Banking. And like all banks under Limited Purpose Banking, they would be free to market mutual funds of their choosing.

The mutual funds that insurers would issue, however, would differ somewhat from conventional mutual funds. First, purchasers of such insurance mutual funds would collect payment contingent on personal outcomes and decisions as well as economy-wide conditions. This lets people buying a fund share risk with one another. Second, they would be closed-end mutual funds, with no new issues (claims to the fund) to be sold once the fund had launched.

Take, for example, a one-year homeowner's insurance policy sold by The First Bank of Homes (FBH). Purchasers of this fund would buy their shares, let's say, by September 1, 2010, but collect on August 31, 2011, only if they experience incidents like a fire, flood, or a robbery. On that last day of the policy, the FBH would divvy up all the monies in the fund between all those experiencing a loss, with the amount paid out depending on the size of one's loss and the number of shares one had originally purchased. Hence, Limited Purpose Banking permits people to buy as much insurance coverage as they'd like. Another key feature of this system is that each insurance policy is, in effect, subject to separate reserving; the money contributed to each insurance mutual fund is used exclusively to pay off its own shareholder claimants.

There are some points I would want Professor Kotlikoff to clarify. In the example he just gave, for instance, I take it if you bought into the home insurance fund on September 1, 2010 and your house burned down on Halloween, say, you would not receive your distribution from the fund until next August 31---ten full months later. (The fund would have to wait until the end of the period to see what its total payouts were.) This might work a hardship if you had to wait for your reimbursement. His answer, I assume, would be that a secondary market would probably spring up in which you could offer your shares in the fund for an immediate cash payment, at a discount, to a buyer who was willing to wait for the final distribution. Anyway, to continue with his explanation of the way the insurance would work:

The most important feature, though, is that the insurance mutual funds pay off based not just on diversifiable risk, but also based on aggregate risk. That is, if lots of the buyers of the FBH fund lose their house to fire, the recovery per shareholder with a loss will be smaller. This isn't the case under our current system: Life insurance companies, for example, tell their policyholders that they'll pay the face value of their policies if they die regardless of how many other claimants the company faces. Thus, life insurance companies are saying they'll pay in full even if there's a plague--which they can't actually do. Neither can the paltry state life insurance reserves cover the losses. This is really no different from AIG's writing some $1.6 trillion in credit default swaps that it knew it would not be able to cover in the event of systemic risk. Moreover, AIG felt no compulsion to reserve against redemptions on these contracts.

The final point is that insurance mutual funds can be set up to bet exclusively on aggregate outcomes, like a particular company going bankrupt or the nation's mortality rate exceeding a given level. Shareholders in such closed-end funds would specify whether they were betting on the event occurring or not. If the event occurs, those betting on occurrence take the pot (the holdings of the mutual fund) in proportion to their shares. If the event doesn't occur, those betting against the occurrence share the pot based on shares. If such a system sounds familiar, it is: It's pari-mutuel betting, which has been used at race tracks around the world since 1867.

How would one actually introduce LPB into the current situation? Here is his answer:

Implementing Limited Purpose Banking is straightforward. All financial corporations, if they aren't already, would register with the SEC as investment companies and begin marketing cash and other mutual funds subject to the third-party custody and other regulatory provisions of the Investment Company Act. Depository institutions would immediately transfer all their checking accounts into cash mutual fund shares and use their reserves to provide the cash to back these shares. These institutions have massive excess reserves and will have no problem covering this operation.

Since they would no longer be allowed to buy financial assets or borrow to invest in securities, banks, as broadly defined, would, over time, pay out their cash flow to their owners as dividend payments. The owners, in turn, would use these funds to purchase mutual funds issued by the banks. So the transition to LPB is gradual with respect to unwinding existing bank assets and debts, but immediate with respect to issuing new mutual funds. Banks become zombies with respect to their old practices, but gazelles in exercising their new purpose.

Professor Kotlikoff is confident the idea would be attractive to all kinds of people, if only it could be given a chance:

Politically, LPB should garner lots of support. The public is dying for a transparent, safe financial system, which puts a definitive end to financial crises and public bailouts. Bankers will likely fight this reform tooth and nail. They'll claim it is naive, too radical, a non-starter, that it relies too much on the government, that it's going to limit financial sector returns. But the bankers' party is over; even the politicians are disgusted by what they've seen.

The beauty of the reform is that it's already pretty much in place. The mutual fund industry has been operating exceptionally well for 60 years. There are over 8,000 mutual funds operating in the country holding over $12 trillion in assets. And this industry is the only part of the financial sector that is still standing very tall.

It sounds as though it is tailor-made to take us out of the current mess we are in, while at the same time ensuring that we cannot repeat the follies that got us here:

Our financial system is in terrible shape and needs a fundamental overhaul. Limited Purpose Banking is the answer. This simple system would preclude financial crises of the type we're now experiencing. The system would rely on independent rating by the government, but permit private ratings as well. It would require maximum disclosure and provide maximum transparency. Most important, it would make clear that risk is ultimately born by people, not companies, and that people need and have a right to know what risks they are facing. Finally, it would make clear what risks are and are not diversifiable. It would not pretend to insure the uninsurable or guarantee returns that can't be guaranteed, and it would keep other people from gambling with our money without our consent. In short, the system would be honest, and, because of that, it would be trustworthy.

"Honest" and "trustworthy"---words that are in too short of a supply these days. I am afraid that the idea will never catch on in Washington. Not only are our elected officials far too suspicious of such virtues, but the idea itself makes too much sense.

How to Be Irrelevant - Just Watch

Today at 10:00 a.m. Pacific Daylight Time, the irrelevancy of the Episcopal Church (USA) will be demonstrated for all those willing to see. When speaking of an institution like ECUSA, it is not usually possible to pinpoint the time or the place of such an event, but ECUSA has set itself up for this one.

Ten o'clock today is the time the California Supreme Court will announce its decision on the constitutionality of Proposition 8, adopted by a large majority of California's voters last November, on the same day that Barack Obama was elected President. Whichever way the Court rules with regard to Proposition 8, ECUSA---and particularly its bishops in California---will no longer matter to either side of the debate regarding same-sex marriage.

Consider the situation if the Court upholds Proposition 8: the Bishops took such a strong stance against it before the election that they will be part and parcel of the issue's defeat at the polls. ECUSA itself has gone on record against measures such as Proposition 8, and so will share the same fate. Moreover, if the people who expect the Court to act as a seven-person legislature of last resort go rioting when they learn of the decision, ECUSA will be identified with their brand of violence, too---as an organization that in all things supports their desire for "social justice", and that will do nothing to denounce their tactics as inappropriate under the circumstances.

And consider also the situation that will exist if the Court assumes the role of a super-legislature and strikes down Proposition 8: the Court will then be the hero, and ECUSA will have nothing to add of its own, except only to say that it is content with the outcome. But that expression of solidarity will not stand out from similar expressions by Integrity USA, or any of the other full range of people supporting same-sex marriage, including individuals identified with groups that advocate same-sex relationships regardless of age. ECUSA's support will blend in with the entire panoply of interests advocating full equality in marriage, and will have nothing distinctive to say in and of itself---nothing, at least, that could carry any moral weight.

The Church has painted itself into this corner. To illustrate what I mean, compare ECUSA's position with that of the Roman Catholic Church. Regardless of what the California Supreme Court decides today, that Church will not be diminished in the slightest, or blend indistinguishably into the cultural milieu. Unlike ECUSA, the Roman Catholic Church has a clear moral stance on the issue which is fully grounded in the Holy Scriptures with which it identifies itself. 

For the leaders and activists in ECUSA, however, the only position they can take is one that either undermines those Scriptures, or at the very least trivializes them, or reduces them to anachronisms, with nothing meaningful to say to today's "in" crowd. Words written 2,500 years ago cannot possibly have any real relevance for the oh-so-sophisticated crowd of elites who know better than the Church fathers, and who burn to be "enlightened" in spite of anything the Bible says which they consider to be embarrassing. 

Pope Benedict XVI is not embarrassed to lead a real Church. Even if they disagree with him, people can recognize a moral leader when they see one. ECUSA's leaders, however, have made it impossible for the public to perceive them as taking any moral stance whatsoever. "If it feels good, do it" is not a Christian philosophy, but a pagan one. Unless, of course, one stands the sentiment on its head, as did C. S. Lewis in this quote from the link just given:

If there lurks in most modern minds the notion that to desire our own good and to eagerly hope for the enjoyment of it is a bad thing, I submit that this notion . . . is no part of the Christian faith. Indeed, if we consider the unblushing promises of reward and the staggering nature of the rewards promised in the gospels, it would seem that our Lord finds our desires not too strong, but too weak. We are half-hearted creatures, fooling about with drink and sex and ambition when infinite joy is offered us, like an ignorant child who wants to go on making mud pies in a slum because he cannot imagine what is meant by the offer of a holiday at the sea. We are far too easily pleased.

C.S. Lewis, The Weight of Glory

Barring the extremely unusual, I will not put up anything about the California Supreme Court decision; I have already said all that I want to say on the subject. For Episcopalians, the news to note will not be the decision itself, but the reactions from the California bishops and other leaders of ECUSA. If they continue to play the Church of Enablers, then the irrelevancy of Episcopalianism will be a fait accompli.

 

Boanergean Brouhaha over B033

Was ever so much ink (or so much cyberspace) wasted on something so meaningless as Resolution B033 of General Convention 2006? Truly, the importance it has assumed in the life of the Episcopal Church (USA), and of the Anglican Communion in general, is out of all proportion to its significance, and is a symptom of the distorted values, misplaced goals and confused thinking that ails the present leadership of the Church---at all levels.

Hardly anyone quotes it today, so I assume no one has had occasion to read it recently. As befits our calling as Christians, let us begin with the text:

Resolved, That the 75^th General Convention receive and embrace The Windsor Report’s invitation to engage in a process of healing and reconciliation; and be it further

Resolved, That this Convention therefore call upon Standing Committees and bishops with jurisdiction to exercise restraint by not consenting to the consecration of any candidate to the episcopate whose manner of life presents a challenge to the wider church and will lead to further strains on communion.

Given that within hours after its adoption of this Resolution on the last day that it met, General Convention 2006 had passed into the annals of history, the first resolve can be viewed as a kind of pious window-dressing. After June 21, 2006 it would make not the slightest difference to the larger picture whether or not the group that had met for nine days in Columbus, Ohio and dissolved on that date "received" or "embraced" the invitation of the Windsor Report to engage in any kind of process whatsoever. Let us at least be clear on this point: General Convention ceased to exist after June 21, 2006. Since it passed the Resolution in question on its last day, there may have been time to "receive" the Windsor Report, but there was scarcely time for GC 2006 to "engage in a process" any more of any kind. We can therefore skip the first resolve and go directly to the second. 

Let us parse it, exactly as we once long ago learned to do in high-school English class. (I am not sure whether schools still teach students how to parse sentences, so if you cannot self-identify with the phrase "long ago", then please pay attention.) The subject of the Resolution is "this Convention"---i.e., General Convention as it existed on June 21, 2006, soon to pass out of existence forever.

Its verb is "call upon".

The object of the verb is "Standing Committees and bishops with jurisdiction"---so General Convention 2006 (subject) is calling upon (verb, meaning "to urge, exhort") the standing committees and bishops with jurisdiction (the object of GC 2006's exhortation, i.e., the groups and bishops in every diocese who vote to confirm the election of a new bishop) to do something.

What they are called upon to do is "to exercise restraint"---"by not consenting" to certain consecrations to the episcopate.

All right, now let us make the following observations about B033:

1. It is a Resolution adopted by General Convention. As Roberts Rules of Order makes clear, a resolution is a form of motion. It states a proposal by the body that adopts it---like "I move that we do X."

2. As a motion to do something, namely, to call upon Standing Committees and bishops with jurisdiction, it is not binding on anybody. To "call upon" someone to do something recognizes that you have no power to make them do what you are "calling upon" them to do. In fact, to use the word "binding" makes no sense in regard to this type of resolution/motion. The very act of passing the Resolution fulfills it, and constitutes the call having been made as proposed and moved.

3. What little effect Resolution B033 could have, therefore, was over and done with as soon as it passed. Shortly after it did pass, the body which enacted it, General Convention 2006, itself passed out of existence, into history. It dissolved and its members went home. There are no further acts which General Convention 2006 could take, or sentiments it could express, ever again.

4. Passing Resolution B033 was therefore the moral equivalent of a person on their deathbed exhorting someone at their bedside to do something after their death---the request has only moral force, and there is no enforcement mechanism if the request is dishonored.

All right, are we clear on this? From the foregoing observations, it necessarily follows that all the resolutions to be offered at General Convention 2009 to "repeal" Resolution B033, or to declare it no longer in effect, are meaningless nullities. There is nothing to "repeal", or to declare "no longer in effect", because any effect of Resolution B033 was over and done with as soon as it passed. You cannot "repeal" a one-time act that took place in the past. And no good result can come from declaring that an act which is fully over and done with, and can never be repeated, or even enforced against anyone in the present, "no longer has any effect." (Either the one-time act in the past still causes some residual effects in the present, or it does not. If it does, then declaring that it does not is simply false; and if it no longer has any effect, then a declaration saying so is redundant, and adds nothing to the picture.)

The same is true of speaking as though Resolution B033 imposed "extra-canonical restraints". It did no such thing---it imposed no restraint of any kind, extracanonical or not, on anybody. It was the one-time request of a legislative body about to pass into history, and never to be repeated by that body once it no longer existed.

Resolution B033, in short, is a dead horse. (For just this once, I happen to concur fully with the Presiding Bishop on this point.) Then why is everyone beating it so?

Some will point to the action taken by the House of Bishops in September 2007, in adopting the following statement:

The House of Bishops offers the following responses to our Anglican Communion partners. We believe they provide clarity and point toward next steps in an ongoing process of dialogue. Within The Episcopal Church the common discernment of God's call is a lively partnership among laypersons, bishops, priests, and deacons, and therefore necessarily includes the Presiding Bishop, the Executive Council, and the General Convention.

Summary

• We reconfirm that resolution B033 of General Convention 2006 (The Election Of Bishops) calls upon bishops with jurisdiction and Standing Committees "to exercise restraint by not consenting to the consecration of any candidate to the episcopate whose manner of life presents a challenge to the wider church and will lead to further strains on communion."
• We pledge as a body not to authorize public rites for the blessing of same-sex unions. . . .
  

Discussion
Resolution B033 of the 2006 General Convention
The House of Bishops concurs with Resolution EC011 of the Executive Council. This Resolution commends the Report of the Communion Sub-Group of the Joint Standing Committee of the Anglican Consultative Council and the Primates of the Anglican Communion as an accurate evaluation of Resolution B033 of the 2006 General Convention, calling upon bishops with jurisdiction and Standing Committees "to exercise restraint by not consenting to the consecration of any candidate to the episcopate whose manner of life presents a challenge to the wider church and will lead to further strains on communion." [Footnote omitted.] The House acknowledges that non-celibate gay and lesbian persons are included among those to whom B033 pertains. . . .

Do you see the contrast betweern how this Statement treats Resolution B033 and the issue of same-sex blessings? It does not adopt it, ratify it, or confirm it, or pledge anything in regard to it (unlike same-sex blessings, which the bishops "pledge as a body not to authorize . . ."). It simply refers to Resolution B033, as that resolution was described in a report to the Joint Standing Committee of the ACC and the Primates, which report was commended in another resolution by the Executive Council "as an accurate evaluation" of Resolution B033, including its application to "non-celibate gay and lesbian persons". And in the Summary portion, it merely reconfirms that the Resolution indeed made a one-time request. ("Yep, indeedy---shore 'nuff," as Snuffy Smith might say.)

And that is it. Once again: there was no adoption of Resolution B033 by the bishops themselves, no pledge to honor its request, and no commitment as to their future exercise of restraint. All they expressed in their Statement was their collective understanding of what Resolution B033 did---namely, exhort them not to do something.

And as for the Standing Committees which B033 equally addressed---did anyone ever hear anything from them? Any collective acknowledgment that the Resolution was even passed? Any commitment by them to honor the request? Again---nothing, nada, zip, zero.

So what, I ask again, is all the fuss about?

Well, I will tell you: Resolution B033 was a kind of political fig leaf. What it did was to cover up, for the time being, the cracks and fissures in ECUSA which had begun to open up with the actions of General Convention 2003, and with the action of the bishops who consecrated V. Gene Robinson to the episcopacy shortly thereafter. By taking that step immediately after the assembled Anglican primates---including ECUSA's own Presiding Bishop Frank Griswold!---had joined in a strongly-worded plea to refrain from it, the consecrating bishops (led by none other than the same Presiding Bishop Griswold) had quite simply stuck their thumb in the eye of the Anglican Communion. The result was the convening of the Lambeth Commission and the publication of its Windsor Report, which (in paragraph 134) called upon ECUSA “to effect a moratorium on the election and consent to the consecration of any candidate to the episcopate who is living in a same gender union”.

So the Anglican Communion gave ECUSA a second chance. At General Convention 2006, the fissures dividing the various factions were wide and deep. There were those (as there still are today) who wanted to call it quits with the Anglican Communion, and effectively stick their thumb in its eye one final time. There were those who felt called upon to witness for "social justice" regardless of the consequences for the Church---or for the Communion---as a whole. There were the diminishing numbers of the orthodox, who wanted to call ECUSA back from any final rupture with the great majority of the Communion. And then there were those bishops who were eyeing their invitations to the 2008 Lambeth Conference, and who were desperate not to ruin their chances of receiving one.

The story of how these, and still other, battling factions were literally impelled together at the last hour by emotional appeals to fear, and to "make a gift" to Presiding Bishop-elect Katharine Jefferts Schori, so that she would not be handicapped in her first meeting with the other Anglican primates, has never received a better account than this one by Episcopal Life reporter Herb Gunn. (I commend it to you if only to note how some of the same names who were prominent in the debates leading up to B033's last-minute enactment---the Rev. Ian Douglas, Josephine Hicks, and Bishop Jefferts Schori---were also the ones who played decisive roles in the outcome of the recent fourteenth meeting of the Anglican Consultative Council.) Perhaps the most extraordinary moment of all came when on the very last day Presiding Bishop-elect Jefferts Schori made this dramatic appeal to the House of Deputies, as recounted by Mr. Gunn:

“Yesterday afternoon,” the Nevada bishop said, “the bishop of Louisiana spoke in our house most eloquently about living in a church with two minds—one church, two minds. As he was speaking, an image rose in my mind. It is a challenging image.

“We have read many stories in the news in the last several years about conjoined twins—two or parts of two bodies united in one being. And when physicians and ethicists and parents have wrestle with decisions about whether or not to try to separate the twins, they operate out of an understanding that is it wrong to attempt to separate those twins unless both can live full lives,” Jefferts Schori said.

“I think we are in a church much like that. This creature, this Body of Christ, is not wholly one and it is not wholly two. The resolution which stands before you is far from adequate. I find the language exceedingly challenging, but my sense is that it’s probably the best we’re going to do today and at this convention. I am fully committed to the full inclusion of gay and lesbian Christians in this church. I certainly don’t understand adopting this resolution as slamming the door, and I think that if you do pass this resolution, that you have to be willing to keep working with all your might at finding the common mind in this church. I don’t find this an easy thing to say to you, but I think that is the best that we’re going to manage at this point in our journey’s history.”

"The best that we're going to manage at this point in our journey's history"---that was how Resolution B033 was seen by those who urged its enactment, as well as by those who ended up voting for it. And yet, as I have observed above, what did it amount to? "The best that [General Convention 2006 could] manage" was a whispered request, made on its deathbed in its dying moments, to bishops and standing committees "to exercise restraint".

The tragedy in all this drama is that it was seen at the time as meaning so much, and that accordingly its "repeal", or declaring it to be "no longer in effect", could be seen as meaning anything today. The Resolution was, as I say, enacted as a political fig leaf---and it still retains that function. No one wants to be "responsible" for removing it, but many cannot bring themselves to ignore what it covers up, either. A fig leaf is our Biblical symbol for a modesty which results from lost innocence and newly acquired shame. By its very nature, a fig leaf is wholly inadequate to the task of actually covering anything up. A fig leaf, in short, represents a dishonest device for evading truth.

And that is my problem with all the brouhaha over what to do about Resolution B033. The best thing that the Church could do today is to forget it as quickly as possible. It was nothing to be proud of in 2006---but by the same token, it is not worth the effort of being ashamed of now, either. It is a dead measure---over and done with, finished, and fully deserving of the dustbin of history.

Continued focus on it serves only to distract the Church from addressing the real problem with which it is faced in its present relations with the Anglican Communion. That problem is not the ordaining of LGBTs per se, although such actions, taken in defiance of the wider Communion, are a symptom. The problem is more systemic, and has its roots in the inescapable contradictions that lie at the very heart of the Episcopal Church today---in the clash between its canons and Holy Scripture as embodied in the rites and rubrics of the Book of Common Prayer ever since 1792, and as traditionally taught and ministered in the Churches of the Communion. In the grotesque image put before the Deputies by Bishop Jefferts Schori, ECUSA's Book of Common Prayer and its canons are conjoined twins. They cannot survive together as currently constituted; the one is presently draining the life out of the other. Yet they cannot be separated unless one of them dies in the process.

That topic, however, deserves a whole new post of its own---which I promise to put up soon. Meanwhile, to those about to convene as General Convention 2009, I say: "Leave the past alone. Do not, I implore you, disinter B033 only for the purpose of burning its bones, as the Catholic Church did with John Wycliffe.¹ You have far greater problems on hand which you must face."

____________

¹That famously futile gesture serves as a monument to the irrational fears (not of Wycliffe---who had been dead for thirty years---so much as of the reformer he influenced, Jan Hus) which beset the Council of Constance when it directed Wycliffe's exhumation in 1415 (at the same time as it had Hus treacherously burned at the stake). The ignominy is shared by Pope Martin V, who carried out the Council's decree against Wycliffe's bones twelve years later.

Court Rebuffs Claims Against San Joaquin's Attorneys

It seems that whenever a court ruling comes out in ECUSA's favor, or that could put the orthodox into an unfavorable light, all of the Episcopal/Anglican blogs on the left have news about the ruling up on their sites within a day, if not within hours. Just as a little experiment, I have delayed putting up this post about a recent court ruling in the San Joaquin litigation that went mostly against ECUSA, Bishop Lamb, and the group he leads in order to see whether any of those same blogs would discuss it. Well, there has been not a word, even on the group's official Website---and not even about the part of the ruling that was in their favor, either (see below for details: this blog may be ponderous to some, but we do cover both the favorable and the unfavorable).

No, the ruling is not on the matters that were argued May 5; the court still has the plaintiffs' motion for summary adjudication, and their demurrers to Bishop Schofield's cross-complaint against them, under consideration. And that may be a sign that the court is rethinking its tentative ruling on those matters, as I explained in the post just linked:

There are normally two kinds of outcome to this kind of oral argument after a tentative ruling. In the first, the judge listens politely to all the parties, lets them have their say, and then issues an order affirming his tentative ruling a day or so later---he scarcely changes a thing.

In the second type of outcome, the points made at the oral argument cause the judge to revise and rethink his ruling, and so he takes the time he needs to do so, whether it is one week or two, or even a month or more. (His only deadline is that he has to rule on the matter within 90 days, or else he is barred from collecting a paycheck until he does. What if similar requirements applied to our legislators and executives?) I am hopeful, based on what I heard, that the second type of outcome will be closer to what happens here.

The ruling I am now talking about came following the oral arguments before Judge Corona one week after those on the matters he still has under consideration. On May 12, Judge Corona heard the parties on the issue of whether or not ECUSA's/Bishop Lamb's demand that Bishop Schofield's attorneys return the retainer that had been paid to them stated a claim upon which a court could grant relief. Following the oral arguments, Judge Corona illustrated my first method of decision-making described in the quote above: he signed an order affirming his tentative ruling that same day, and gave it to the clerk for service on the parties. (It took a while for the ruling to arrive, but each side has known about it for almost a week now. And that is how I have been able to run my little experiment in newsworthiness.)  

To understand what Judge Corona decided, and its significance for the overall case, you will need some background. Last December, I reported on a move by the Episcopal Church (USA), in conjunction with its co-plaintiffs Bishop Lamb and the group claiming to be the "Diocese of San Joaquin," to demand the return of a retainer for legal services paid in December 2007 by the then-Diocese of San Joaquin and its bishop, the Rt. Rev. John-David Schofield, to their law firm. The Diocesan Council authorized the payment of $500,000 as an advance against the legal fees and expenses to be incurred in the event that any litigation should be brought against the Bishop and his Diocese, and the money was deposited into the law firm's trust account. (It could thus always be returned if no litigation was filed.) When ECUSA and Bishop Lamb did bring their lawsuit in April 2008, the legal fees incurred in defending against it were paid from the money held in the trust account as those services were performed and billed.

As part of their lawsuit, the plaintiffs also named Merrill Lynch, the investment firm where the Diocese and Bishop Schofield kept their funds. Merrill Lynch froze all the funds pending the outcome of the lawsuit---a move which helped Bishop Lamb, because ECUSA was financing his litigation, while Bishop Schofield's Diocese needed their funds for their day-to-day operations. The Diocese showed a well-informed prudence in setting aside funds for the litigation expenses it anticipated ECUSA would force it to incur. ECUSA and Bishop Lamb in turn sought to exploit that exercise of business judgment for their own ends by the unusual device of trying to drive a wedge between their opponents and the latter's own attorneys. (To do so, they had to take the strange position in their papers that Bishop Lamb and his "Episcopal Diocese" were actually the "clients" of Bishop Schofield's law firm.)

Merrill Lynch had turned over the records for the 2007 diocesean accounts to Bishop Lamb and ECUSA, and as a result they discovered the retainer payment made in December. When they saw that their strategy of cutting off the Diocese's funds had been thwarted, they immediately wrote a letter to the Diocese's law firm, Wild, Carter & Tipton of Fresno, California, in which they demanded that the money be handed over to Bishop Lamb's group, on the ground that that group was now the rightful "Diocese of San Joaquin", and had succeeded to all of the assets of what they claimed was the "former" Diocese.

(Never mind that they could not explain how, if a diocese could never leave the national Church, as per their legal theory, the diocese whose money and assets they wanted could all of a sudden become a "former" one, and they could become the "current" one, without the first in fact having left the Church. As I have had occasion several times to point out, those who form what could be called the contra-Pauline wing of the Episcopal Church (USA)---i.e., the ones who are suing all the departed dioceses and parishes---have not exhibited any signs that they respect, or follow, the laws of logic, let alone the Epistle of St. Paul to the Corinthians.)

When Wild, Carter & Tipton failed to hand over their client's money as demanded, ECUSA, Bishop Lamb and the group calling itself the "Diocese of San Joaquin" amended their complaint a third time to add the law firm as a defendant. (In another interesting procedural wrinkle, the amendment of the complaint came after they had already filed a motion for a summary adjudication in their favor on the first cause of action in the previous complaint. Normally, the filing of an amended complaint supersedes, and replaces for all purposes, the previous version. The court has not yet issued a final ruling on the motion for summary adjudication, and no matter how it comes out, nothing in the ruling can be binding on Wild, Carter & Tipton. Whether it will have any ultimate effect in the case as a whole remains to be seen.)

The law firm of Wild, Carter & Tipton had to hire their own attorneys to defend them, and they chose Payne & Fears, the law firm that has defended the parish of St. James in Newport Beach against the suits brought by ECUSA and by the Diocese of Los Angeles, and that has also represented a number of other California churches and parishes. Payne & Fears demurred to the claims made in the third amended complaint by Bishop Lamb et al. against Wild Carter & Tipton. In California procedure, a demurrer challenges the legal sufficiency of a pleading (usually a complaint). It says, in effect: "Even if everything alleged in this pleading is taken to be true, the facts as alleged are inadequate to make out any claim upon which the court can grant relief. Therefore, the court should require the pleader to amend the pleading to state facts that will make out such a claim. And if the pleader cannot do so, the pleading should be stricken."

The third amended complaint made three different claims against the law firm of Wild, Carter & Tipton. The first was a claim for declaratory relief that the transfer of money was wrongful, and that the plaintiffs were entitled to have the money returned to them, since they were now the "client" who had the right to the funds. The second was a claim that Wild, Carter & Tipton had "converted" funds belonging to the plaintiffs---i.e., that it had wrongfully taken possession of their money, and refused to hand it over. And the third claim was that the December 2007 transfer of the money amounted to what the law calls a "fraudulent conveyance"---a transfer of an asset by one facing a lawsuit for the purpose of placing the asset out of the reach of creditors, in the event they obtain a judgment.

The Fresno Superior Court issued a tentative ruling on the demurrers to these claims on May 11, 2009. The ruling is still available as a link for "May 12 tentative rulings" at this website of the Court. (The link is to a 31-page .pdf download of all the rulings for that date; you have to scroll down to page 22 for the ruling on the demurrers in the San Joaquin case.) It is a very clear statement of the issues and arguments made, and I quote from it. First the paragraph summarizing the ruling itself:

Tentative Ruling:

To sustain the demurrer to the second and fourth causes of action with leave to amend and to overrule the demurrer to the sixth cause of action. A Fourth Amended Complaint shall be filed and served within 10 days of the service of this order. New allegations shall be in boldface type.

Next, the court gives this general explanation of a demurrer, and how it proceeds with regard to them:

Explanation:

A demurrer is made under Code of Civil Procedure section 430.10, and is used to test the legal sufficiency of the complaint or other pleading. (Weil & Brown, Civil Procedure Before Trial (Rutter Group 2008) “Attacking the Pleadings” § 7:5.) The demurrer admits the truth all material facts properly pleaded, but not mere contentions, deductions or conclusions of fact or law. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

On general demurrer, the court determines if the essential facts of any valid cause of action have been stated. (Weil & Brown, supra, § 7:39; Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 572; Code Civ. Proc. § 430.10(e).) Leave to amend should be granted if there is a reasonable possibility that plaintiff could state a cause of action. (Blank v. Kirwan, supra, 39 Cal.3d at 318.)

Having thus set the stage, the Court then takes up its treatment of the specific claims in the complaint. First, with regard to the claim for declaratory relief, the court explains why the plaintiffs' allegations are insufficient to get around what is known as the "agent's immunity rule":

Second Cause of Action – Declaratory Relief

Wild Carter contends that the “agent’s immunity rule precludes liability on this cause of action. The rule is that “duly acting agents and employees cannot be held liable for conspiring with their own principals … .” (Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal. 4th 503, 512.)

Wild Carter contends that the declaratory relief cause of action is premised on the implied agreement of Wild Carter and other defendants to wrongfully withhold the retainer amount that allegedly belongs to plaintiffs. In the cause of action for declaratory relief the payment of the retainer fee occurred with the knowledge and participation of Wild Carter and the payment was an effort to deplete the accounts belonging to plaintiff (Complaint ¶ 110.) . . .

[As] Berg & Berg Enterprises, LLC v. Sherwood Partners, Inc. (2005) 131 Cal.App.4th 802, 834 recognized, “[c]ases have interpreted the ‘financial advantage’ exception to the agent's immunity rule to mean a personal advantage or gain that is over and above ordinary professional fees earned as compensation for performance of the agency.” Berg & Berg involved a statutory provision (Civil Code section 1714.10) with exceptions that allowed a conspiracy claim against an attorney; the exceptions mirrored those carved out from the agent's immunity rule. The court held the term “‘in furtherance of the attorney's financial gain’” meant that “through the conspiracy, the attorney derived economic advantage over and above monetary compensation received in exchange for professional services actually rendered on behalf of a client.” (Id. at pp. 824, 836.) Even allegations of excessive billing for the services rendered by the attorney did not satisfy the financial gain requirement of the statute's exception. (Id. at pp. 835–836.)

The “agent's immunity rule” does not apply when the agents are acting “as individuals for their individual advantage.” (See Applied Equipment, supra, 7 Cal.4th at p. 512, fn. 4; Doctors' Co. v. Superior Court (1989) 49 Cal.3d 39, 47 [the rule “does not preclude the subjection of agents to conspiracy liability for conduct which the agents carry out ‘as individuals for their individual advantage’ and not solely on behalf of the principal”]; 1-800 Contacts, Inc. v. Steinberg (2003) 107 Cal.App.4th 568, 592 [“[a]n exception to the agent's immunity, for conduct undertaken for personal advantage, is consistent with the immunity rule, because pursuit of a personal interest renders the actor more than merely the agent of another”].)

Here, all that is pled is that Wild Carter knowingly participated in the transfer of funds from its client to its trust account as a retainer. This only implicates activity taken on behalf of the client and, as set forth above receipt of monetary compensation is not enough “personal advantage” sufficient to vitiate the agent’s immunity rule. However, it is conceivable that plaintiffs could plead that Wild Carter was acting in furtherance of its own individual advantage in accepting the retainer.

So the Court finds the allegations as pled insufficient to state a claim for relief, but allows ECUSA/Bishop Lamb an opportunity to amend their complaint to state additional facts showing the particular "financial advantage" which Wild, Carter & Tipton would have gained from receiving a retainer to deposit in their trust account. (Remember that law firms are required to hold money which belongs to clients in a separate, legally protected attorney-client trust account. The moneys do not belong to the law firm, which has no right to draw on them until it has performed legal services and given the client an itemized statement of those services which the client does not dispute. And then all it can draw out is the specific amount required to pay the statement. Thus retainers of this type are not "earned" until the services have been rendered, billed and accepted.)

The Court then takes up the claim of conversion, and makes short work of it---again citing the rule that an agent is immune from liability when simply carrying out actions on behalf of his principal:

Third Cause of Action – Conversion

Conversion is generally described as the wrongful exercise of dominion over the personal property of another. (Gruber v. Pacific States Sav. & Loan Co. (1939) 13 Cal.2d 144, 148.) The basic elements of the tort are (1) the plaintiff's ownership or right to possession of personal property; (2) the defendant's disposition of the property in a manner that is inconsistent with the plaintiff's property rights; and (3) resulting damages. (Burlesci v. Petersen (1998) 68 Cal.App.4th 1062, 1066.)

Again, the tort committed is merely the acceptance of the retainer. (Complaint ¶ 124 [incorporating earlier allegations].) The agent’s immunity rule would apply unless plaintiffs can plead Wild Carter was acting in furtherance of its individual advantage in committing the tort.

Finally, the Court takes up the claim that the transfer was a "fraudulent conveyance", and here finds that the plaintiffs' allegations are sufficient to meet the law's requirements:

Sixth Cause of Action -- Fraudulent Conveyance

The cause of action based on the Uniform Fraudulent Transfer Act (Civ. Code § 3439, et seq., UFTA or Act) is different. Sections 3439.04 and 3439.05 of the Act set forth the situations in which a transfer may be deemed fraudulent. For example, a transfer made with the actual intent to hinder, delay, or defraud creditors is fraudulent. (Civ. Code § 3439.04, subd. (a)(1).) Under section 3439.04, subdivisions (a)(1) and (a)(2), it does not matter whether the creditor's claim arose before or after the transfer was made.

A creditor's remedies may include the voiding of a fraudulent transfer or an attachment against the asset. (Civ. Code § 3439.07.) "[A] fraudulent conveyance claim requesting relief pursuant to Civil Code section 3439.07, subdivision (a)(1), if successful, may result in the voiding of a transfer of title of specific real property. By definition, the voiding of a transfer of real property will affect title to or possession of real property." (Kirkeby v. Superior Court (2004) 33 Cal.4th 642, 649.) The transferee must be a party to the fraudulent conveyance action. (See Heffernan v. Bennett & Armour (1952) 110 Cal.App.2d 564, 586; see also Liuzza v. Bell (1940) 40 Cal.App. 2d 417, 424.)

Every person has a duty not to knowingly participate in a fraudulent transfer, including the transferee. A transferee who takes property "in good faith and for reasonably equivalent value" has met that duty, and, therefore, may prevent the voiding of the transfer. Plaintiffs have alleged that Wild Carter knowingly participated in the fraudulent transfer and that Wild Carter did not provide reasonably equivalent value in exchange for the $500,000. (Complaint ¶¶ 143-144.) Plaintiffs have pled that the transfer was intended to harm the interests of the plaintiffs. (Complaint ¶ 143.) This adequately invokes that Wild Carter was acting in its own motivation to harm the plaintiffs in accepting the money. The retainer was not equivalent to the value owed, it was intended to harm the plaintiffs by hiding assets, and Wild Carter knowingly participated in this scheme. The complaint need not plead Wild Carter’s motivation in its individual advantage, merely that it had one, causing harm to plaintiffs.

Remember that on a demurrer, the court must take as true all the facts as pled by the plaintiffs. Thus Bishop Lamb and ECUSA pled that the transfer of money was specifically intended to harm them, and that the defendants did not receive "reasonably equivalent value" in exchange. (Never mind that the transfer was occasioned by the threat, more than a year before it occurred, made by ECUSA's presiding bishop to Bishop Schofield in these words: "None of us has received the property held by the Church today to use as we will. We have received it as stewards, for those who enjoy it today and those who will be blessed by the ministry its use will permit in the future. Our forebears did not build churches or give memorials with the intent that they be removed from the Episcopal Church.") But pleading versions of the facts is different from proving them. To prevail on these charges at trial, the plaintiffs will have to persuade a jury that the evidence supporting them is more convincing than the evidence that the defendants were simply paying their law firm to provide legal services in response to the plaintiffs' carrying out what they warned they would do.

In the heavy-handed fashion that has now become customary when ECUSA's lawyers are involved, the plaintiffs had tried to stop Payne & Fears from so much as even interposing any demurrers to their third amended complaint. They claimed that when the Court ruled that they could amend their complaint to add Wild, Carter & Tipton as a defendant, it had already held that their proposed complaint was sufficient, as a matter of law. So they threatened to move for sanctions and attorneys' fees against Payne & Fears, and against Wild Carter & Tipton as well, if they did not withdraw their demurrers.

In order to do so, the plaintiffs' attorneys were required to disclose in detail the amounts and the services performed which they asserted their clients were forced to incur as a result of the defendants' temerity in opposing their amended complaint. As a result, the defendants were given a glimpse into the kind of charges the Episcopal Church (USA) is incurring from its litigation through the law firm of Goodwin Procter. In their motion papers, the plaintiffs stated: "As sanctions, plaintiffs seek their legal fees and costs in the amount of $10,736." One of their attorneys from the Washington, D.C. office of the Goodwin Procter firm, Adam Chud, explained this amount as follows:

4. I took primary responsibility for preparing the instant Motion for Sanctions and supporting papers. My standard hourly rate for Episcopal Church litigation is $488 per hour. I spent 7 hours preparing these papers, for a total cost of$3,416.

5. I estimate that it will take me approximately 5 hours to review any opposition that Wild Carter may file to this motion for sanctions, prepare a reply thereto, and attend a hearing on the motion by [telephone], at a total cost of $2,440.

6. The total cost to plaintiffs in connection with the motion for sanctions is therefore
expected to be $5,856.

7. Mr. Jeffrey Skinner of my office, who is also counsel for The Episcopal Church in this matter, is taking primary responsibility for preparing the opposition to the demurrer. His standard hourly rate for Episcopal Church litigation is $370 per hour. I estimate that it will take 10 hours for Mr. Skinner to prepare the opposition to the demurrer, for a total cost of $3,770.

8. If Mr. Skinner is required to prepare for and attend a hearing on Wild Carter's demurrer and attend the hearing by [telephone], I estimate that Mr. Skinner will spend an additional 3 hours, for a total cost of$1,110.

9. The total cost to plaintiffs in connection with Wild Carter's demurrer is therefore expected to be $4,880.

10. The grand total of plaintiffs' costs in connection with Wild Carter's demurrer and this motion for sanctions is expected to be $10,736.

The plaintiffs' attorneys were not finished, however, with their request for sanctions---they also added this footnote to their memorandum written in support of their proposed motion:

The Court should also exercise its inherent power to sanction Wild Carter and its counsel for misconduct under CCP §§ 128, 128.5. An appropriate sanction (in addition to payment of plaintiffs' legal fees) would be a fine payable to the Court, in an amount that the Court deems appropriate.

As you can see from what took place, neither Wild Carter nor Payne & Fears was deterred by these threats. They went forward with the scheduled hearing on their demurrers to the third amended complaint. Their belief that they had good reasons for doing so was upheld by the Court. It dealt with the plaintiffs' claim that such action was sanctionable at the end of its tentative ruling:

Plaintiffs maintain that the court’s ruling on the motion for leave to amend is dispositive on the issue as to whether the Third Amended Complaint states a case. It is not. All the motion for leave to amend decided was whether plaintiff needed to comply with Civil Code section 1714.10, the gate-keeping statute on actions against attorneys and their clients for conspiracy. The court determined that the complaint was good against a 1714.10 challenge on the motion to amend. It did not consider the agent’s immunity rule in making this determination.

Thus, plaintiffs’ argument that the complaint adequately pleads the various causes of action is without moment, as the agent’s immunity rule is a complete defense to even a properly pleaded cause of action. Moreover, plaintiffs’ analysis of section 1714.10 is misplaced, the agent’s immunity rule and section 1714.10, which similar in some respects, are not equivalent.

Those two paragraphs accordingly took care of the threat of sanctions. (Whether ECUSA was still asked to pay for the costs of drafting the motion for sanctions is a matter between it and its attorneys.)

On May 18, the parties learned that following oral argument on May 12, the Court had adopted its tentative ruling as its final disposition of the demurrers. Thus the plaintiffs now have ten days within which to file their fourth amended complaint.