John Danforth

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John Danforth

Beitragvon lucky » 12.09.2008, 07:23

Author: John Danforth


Rambus, Rubber Rooms and the Politics of Cynicism



Dear Fellow Long Term Rambus Shareholders,



I long read this forum with great interest (and great appreciation) but have never before posted. A confluence of events (political and Rambus-related) has convinced me to add my thoughts here. I don't think that this will become a habit. But I do think that the Rambus case illustrates issues that are now of profound national importance, including to the current presidential campaign.



My two earlier pieces on aspects of the FTC case against Rambus are useful background to what I have to say today. The Legal Times piece is on this message board at

www.investorvillage.com/smbd.asp?mb=366 ... id=4693185. The second article is here: www.scribd.com/doc/3429039/080616-John-Danforth.



There is, I think, a style of national politics and governance that has pervaded this country for some time -- and that recently has become very evident in the presidential campaign. That style is marked by cynicism and misdirection. It trivializes important problems, creates false, diversionary issues out of relatively unimportant matters, fosters corruption and, as a result, generates an unholy government emphasis on the selfish needs and desires of oligarchs and cartels.



I think this style of governance is at the heart of much of the injustice that Rambus has faced over the past eight years. Convicted and confessed felons have managed repeatedly to delay justice. They have done so partly through their subversion of a federal agency – the Federal Trade Commission – sworn to prevent the very anti-competitive conduct to which these oligarchs have confessed.



How did this happen?



I submit that the political culture of the last eight years is very much to blame. It validates undue influence on government by industry – and trivializes the true, public-good function of government service. This is, I think, what happens when our federal government is run by those who do not believe that government itself can have much of a useful function. Government is, in effect, sold to the highest (or loudest) bidder.



I suspect that, when the full history of Rambus is told, we will find that an unholy closeness to industry is part of what led the FTC astray in its Rambus case. I do not think the facts will be salacious – not like what we now see unfolding at the Interior Department. But I do think that politically influential semiconductor cartel members had excessive access to the FTC for many years (both in selling their misdirection to the FTC and in helping the FTC staff pursue Rambus with legal help “donated” by the cartel). A revolving door between business and government (including post-government-service consulting agreements) also appears to be a problem – and another common thread between the facts at Interior and those at the FTC.



Coziness with industry is probably not, however, the root cause of the government missteps and zealotry that we have seen in the Rambus saga. Instead, look to the cynicism that makes these things possible.



When I began with Rambus back in 2001, I heard from former FTC employees about the concept they called “the rubber room.” The concept – apparently very popular during past Republican administrations -- was to find things to keep the federal bureaucracy busy and preoccupied. Put them in a rubber room. Let them fight their fights there. The aim was so that they would not do any real harm to anyone or anything “that really matters.”



So look at the “rubber room” that senior FTC officials made out of their Rambus case. A tiny (300 employee) company whose actions had no material impact on consumer prices (but did immensely improve computers and other consumer electronics) became the target of the largest investment of FTC antitrust enforcement resources in history. The trial lasted four months. That was in 2003. Now, five years latter, appeals may yet continue, with the FTC apparently unable to accept the fundamental weakness of its case. The case may still see further delay in the form of a certiorari petition to the Supreme Court. Neglected by the federal government in the meantime (and until too late, Katrina-like) were ills that the FTC might have addressed. These are things that truly harmed consumers: e.g., a wide variety of energy company shenanigans (remember Enron?) and also, among other things, the marketing of sub-prime, balloon-payment mortgages. As a partial consequence, we now face what some call the greatest challenge to our financial markets since the 1930s.



How did this go one for so long? Did the leaders of the FTC simply forget that they had built a “rubber room” for their staff – and allow them to fight on at great expense and tirelessly for almost eight years? I think there are two answers.



To begin with, the Rambus case was of doctrinal interest to the FTC and to conservative antitrust theorists. (A conservative antitrust theory is that the most dangerous monopolies are government created – e.g. patents --- and should be viewed with caution.) So, at the beginning, the Rambus case wasn’t an entirely false or pointless project from their perspective. And it was, at the beginning, theoretically limited in scope. When then-FTC Chairman Muris confirmed he would file the Rambus case, he told me personally – in front of many FTC lawyers and other witnesses -- that he believed the action against Rambus would and should be a difficult case to prove, and that he therefore had insisted to the FTC staff that they erect what he called “high hurdles” in the Rambus complaint. Perhaps these limits were not genuinely intended as limits. But I suspect otherwise. I suspect that, with the passage of time and with significant agency turnover (including at both the FTC Chairman and FTC Commissioner levels), this cautious approach and these self-imposed “high hurdles” were forgotten. What was begun as a relatively small rubber room became a huge one.



Second, the misguided, fundamentally ill-conceived projects of a cynical government will have other unintended consequences – not simply (as with Rambus) a loss of perspective as time passes. Zealotry is another, related consequence. This may seem counter-intuitive at first. One does not think a cynic will become a zealot. But a cynical boss can still create zealous employees. And then there is a feedback loop, with energetic, highly motivated FTC staff influencing newly-appointed FTC commissioners.



Zealotry is a natural reaction if you are an ambitious young government lawyer, if you want to make a name and practice area for yourself in a finite amount of time (before you go back to private practice), and if the menu of choices you have to work with at the FTC is limited. You may well become zealous about the only job you are given. This is so even if, in your heart, you know that it may be misguided -- or that there should be other priorities. So don’t blame the young civil engineer who worked late into the night designing support beams for the “bridge to nowhere.” Blame the process and culture that gave him that work as his sole focus in the first place.



Finally, the cynical, dismissive, distracting style of governance I am addressing here is not common to both parties. It is, instead, a characteristic of the party that has been running things for these past eight years. And it now seems to pervade the current Republican ticket (whose head was also the head of the Senate Commerce Committee when it ought to have been overseeing and limiting the FTC’s persecution of Rambus). Witness the apparent win-at-all-costs GOP campaign, with its dishonesty, its focus on trivialities, its avoidance of core issues, and its scorched-earth treatment of challengers. Ask yourselves this: Having seen up close the effects of this kind of political culture, do you want to see four more years of it? I think eight is enough.


Best wishes to you all. Whatever your ultimate conclusions in this election, thank you for doing me the courtesy to hear me out. Some of these issues have been on my mind for some time.


John Danforth

http://www.investorvillage.com/smbd.asp ... id=5586398
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lucky
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