Fall 1983 – Issue 30 - Stanford Lawyer - Stanford University

IITHRIFT INSTITUTIONScontinuedConclusionThis survey of the new financial servicesenvironment and some of itslegal ramifications has been bothbroad and general, as befits an attemptto get a sense of the decadeahead. I have no great confidence insome of the specific conclusions thathave been drawn, but I believe thatthe forces and questions examinedare ones that need to be kept inmind. --In principle, all of the legal problemsthat have been referred to canbe dealt with byappropriate changesin the statutes or regulations. That isnot to say that all of those changeswill in fact be made, or in a timelyfashion, because there are opposinginterest groups, and the politicalsystem has considerable inertia. Butlegal problems are not necessarilyintractable, and in fact the law offinancial regulation has been changingat a fairly rapid pace in the pastdecade.The economic and technologicalforces we have been discussing, onthe other hand, cannot be abolishedby an act of Congress, though thereare those who try. In the end, suchforces must be adapted to, in oneway or another. While the basicfunctions of financial intermediationwill continue to be performed, nothingguarantees the survival of a particulartype of financial intermediary.The public does not much careabout "level playing fields" or thelabel of the institution providingfinancial services; it cares muchmore about the cost, quality, andconvenience of the services.I am sure there are more responsesto the problems I have beendiscussing than the ones I have identified;our financial system is remarkablyadaptable and inventive.But I am also sure thatsurvival in theInew environment requires addressingthose problems and devising aplan to cope with them that is tailoredto the circumstances of a giveninstitution. I hope that the law willnot make that more difficult than itneed be, butmyadvice is: Don't bankon it..* * *This article-slightly revised from apaper presented by Professor Scott ata conference on December 9, 1982-isprinted with the permission ofFederalHome Loan Bank of San Francisco,sponsor ofthe conference. The originalpaper appears in Proceedings of theEighth Annual Conference: StrategicPlanning for Economic andTechnological Change in the FinancialServices Industry, published thisspring by Federal Home Loan Bank ofSan Francisco. Scott discussed thebackground and early implications ofthe 1980 bankingderegulation act in aprevious Stanford Lawyer article(Fall/Winter 1981).Professor Scott was recently named tothe new Ralph M Parsons Professorshipin Law and Business (see articlein School News section).HEROIN continuedof the heroin he receives from themaintenance system even while remainingaddicted.Law Enforcement andIllegal SalesUnfortunately, we cannot rely onthe threat of detection to prevent theaddict from selling some of hisheroin supply. Though the clinic canuse urine tests to monitor whetherhe uses methadone or street heroincut with various substances, it cannotdetermine whether he has usedall the heroin that has been prescribed-for him. As a result, urin-alysis would be a deterrent only tothe addict's selling all of his supply.And urinalysis is not foolproof, evenfor this purpose.Nor could the police do much. Theaddicts in heroin maintenance wouldbe far too numerous to watch; theywould be legally in possession oftheir heroin; and could easily maketheir sales in private.In fact, heroin trafficking throughdiversion from a prescriptionmaintenance system would be muchmore difficult for the police to containthan is our present illegal heroindistribution system. Often law enforcementis best able to disruptheroin distribution by intervening atthe higher end of the chain. This isquite difficult, but if the police domanage to seize a large shipment ofheroin, put a large ring out ofbusiness, or disrupt cultivation in aforeign country, there may be asizable- if temporary- contractionin the heroin supply.By contrast, where the addict sellsthe heroin prescribed for him, themaintenance system itself takes theplace of the illegal manufacturer, importer,large-scale wholesaler, andsmall-scale wholesaler. The hugenumber of extremely short supplychains- each consisting of an addictin maintenance and his customerswouldmake the illegal market virtuallyinvulnerable to law enforcement.The prescription heroin maintenancesystem may create a whollynew and very large class of regularsellers who will make heroin moreaccessible as well as cheaper. Evenamong the relatively noncriminalEnglish addicts, one study showedthat 11 percent regularly sold part oftheir heroin supply. In the UnitedStates, one would expect the figureto be far higher.We must be concerned with thepurchasers, as well as the sellers, ofprescribed heroin. Many of the customersfor illegally sold heroinwould be nonaddicts. This is the casetoday and there is no reason to thinkFall 1983 Stanford LaWyer 61