Many states have laws that prohibit anyone from making disparaging comments about the financial condition of a particular bank. It is believed that this kind of talk falls outside the scope of freedom of speech, because the slightest rumor can cause a bank run. Of course, it doesn't take much to make bankers nervous about developing at the cash register because they don't have a lot of money around to withdraw cash. The savers' money is lent, invested or investedJ. P. Morgan, used to speculate in London.
ICaliforniaSince 1917, there has been an anti-bankruptcy law that prohibits anyone from spreading false information about the condition of a bank. In this age of deposit insurance andFDIC, the law has not been tested much. But with comesRobert Rogers, who is a former employee ofTop bankposted a rant and rave onCraigslist, saying, “I would suggest that anyone who banks with Summit Bank leave before they close.”
Rogers, who served as the bank's chief credit officer and vice president, also took the opportunity to do some writingAmerican bankerdescribes it as 'vulgar comments about the bank's CEO and her son'.
The bank sued Mr. Rogers for defamation, to which the former credit manager responded that his speech had been protected byFirst Amendment. So Summit's lawyers pulled out a copy of the 1917 law and argued that his statements should not be considered free speech.
But the appeals court said in a 30-page opinion: "We find that Section 1327 is incompatible with modern constitutional requirements." The court went on to say, “When analyzed under modern constitutional jurisprudence, the broad provisions of Financial Code Section 1327 are prima facie impermissible in their prohibitive speech that is not criminally punishable.”
The justices said the law is too vague and broad in scope, "and said the law does not include the requirement — among other legal restrictions on speech — that a speaker's statement be proven to be malicious," reports AB .
“It is a statute of criminal defamation without malice intended to prohibit speech based on its content,” the court said. “It fails to honestly inform people with ordinary intelligence of what is prohibited. It places no discernible limits on the types of speech that can be criminalized, and by allowing such free range, it lends itself to arbitrary enforcement.”
Naturally, bankers and their lawyers are angry about the decision.
“While the First Amendment certainly provides broad protection to analyze and comment on banking matters, and even to provide astute and critical commentary,Supreme Court of the United Stateshas consistently held that the First Amendment does not give a person the constitutionally protected right to falsely shout “fire” in a crowded movie theater,” said V. Gerard Comizio, partner at Paul Hastings. “The real question here is whether attempting to induce a bank run with doubt has a similar effect."
“This case has profound implications for the scope of the First Amendment and the use of social media to provide critical commentary about the safety and soundness of certain banks,” Comizio said.
Murray Rothbardexplained that there is no such thing as freedom of speech, but rather property rights. Even in the case of falsely shouting "fire" in a crowded theater, Rothbard explains:
Because the announcer is logically a patron or a theater owner. If he owns the theater, he is violating the property rights of patrons who are quietly enjoying the show for which he took their money in the first place. If he is a different client, he is infringing on the property rights of both clients to see the performanceInproperty right of the owner, because he violates the conditions of attendance. For these conditions certainly include not entering the owner's property by interfering with the services he provides. In both cases he can be prosecuted as an offender; therefore, when we focus onpropertyrights involved, we see that the Holmes case does not require the law to weaken the absolute nature of rights.
In this case, Mr. Rogers has no “freedom of the press” to post on Craigslist, but instead, as Rothbard writes:
what heDoingto have is the right to write or publish a pamphlet and sell it to those who will buy it (or to give it away to those who will accept it). What he has in each of these cases, then, are property rights, including the right to free contract and transfer, which are part of such property rights. There is no additional "freedom of speech" or free press beyond the property rights a person may have in a given case.
Bankers are sensitive, and rightly so, as Rothbard makes clear:
But in what sense is a bank 'sound' if an ominous whisper, a wavering public confidence, should quickly bring the bank down? In what other industry can a rumor or a hint of doubt bring down a powerful and seemingly solid company? What is it about the banking industry that makes public trust such a crucial and overwhelmingly important role?
