Corporate & Securities Law
Business Law Prof Blog 
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Post Frequency: 1.9/day Last Entry: August 30, 2009 at 14:53:57 Recent Entries: 490
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About Business Law Prof Blog
Posted on August 30, 2009If you are interested in serving as an editor of Business Law Prof Blog for the Law Professor Blogs Network, please contact Paul Caron and Joe Hodnicki by email.
Bernanke Back
Posted on August 25, 2009Economists' rejoice, Bernanke will be back. My main complaint with Bernanke, among many, is that he preached transparency for the Fed as an academic and now blocks transparency as the Chair -- all in the public's interest of course. In...
Securities Market Structure Redux
Posted on August 24, 2009Flash trading, dark pools, lawsuits over proprietary trading code, whopping payouts to computer greeks that create trading programs, and other news have led Senator Kaufman to call for a "broad SEC market study." Great, The SEC does not need more...
FDIC and Private Equity
Posted on August 21, 2009When will this new bunch learn. Ms. Blair, the head of the FDIC, is running out of money to bailout the depositors of failed banks and will attempt to push failed bank purchases by healthy banks. The problem? She needs...
SEC's Woes
Posted on August 20, 2009The SEC has admitted that it lacks the expertise or the technology to monitor securities trading and that, therefore, it leaves such matters to the SROs, Finra and NYSE Regulation. Yet the SEC is close to proposing rules to "regulate"...
SEC Once Again After Shorts
Posted on August 18, 2009The new SEC proposal aims at slowing down short selling, again. The proposal would force short sellers to limit sales to prices higher than the current best price offered by buyers (best bid price) of the stock. Since stock is...
Fed Extends TALF to Repair Damage
Posted on August 18, 2009On Monday the Federal Reserve extended its program to loan cheap money to those purchasing asset backed securities (TALF). Once again, after publicly trashing an entire industry, the securitization industry, the administration has quietly admitted that the industry's health is...
Supreme Court to Weigh in On Executive Pay
Posted on August 17, 2009The Supreme Court has agreed to take a case on executive pay, Jones v Harris Associates. In case is on manager's fees in the mutual fund industry but the holding will have profound effects on corporate governance in all industries....
Hope for Change: Yes We Can Fire Bernanke
Posted on August 12, 2009Ben Bernanke, the Chairman of the Fed, is up for reappointment. The economists all want him reappointed. I want him fired. Not because his replacement will be better, she will not, but because he will get what he deserves --...
Cash for Clunkers: Free Morphine for Pain
Posted on August 12, 2009Total up the costs and the benefits of the cash for clunkers program -- it is nuts. The government is borrowing $3 billion at 3.5% to buy old cars, will the government get a return of over this (4% on...
SEC Enforcement
Posted on August 11, 2009The Wall Street Journal has an article on C1 on the "urgency" of SEC enforcement. Listing three new settlements, BofA, GE and Greenberg, the author applauds the SEC chairman's efforts. The headline has it backwards. The settlements are too small,...
Judge Rakoff Questions SEC Settlement with BofA
Posted on August 11, 2009A federal district court judge, charged with approving the SEC settlement with Bank of America on the Merrill Lynch deal has delayed ruling, a very unusual move, after 90 minutes of negative questioning of the presenting lawyers. The questions were...
Landry's Failed Buyout
Posted on August 06, 2009Vice Chancellor Lamb, in his last written opinion before retiring, refused a motion to dismiss in the Landry's litigation over a busted buyout. The facts are a bit odd. The CEO had proposed a going private transaction in a cash-out...
Speculators and Regulation
Posted on August 05, 2009The SEC is considering regulating "flash orders" and "dark pools" to discourage "high-frequency" traders and the CFTC is considering position limits on commodity futures. The NYSE, which has been losing trading volume, will benefit if any of the changes are...
Cuban Insider Trading Case
Posted on August 04, 2009A federal court dismissed the SEC insider trading case against Mark Cuban, demonstrating once again troubles with the outlines of the doctrine. SEC v Cuban (N.D. Tex. July 17, 2009). The CEO of a public company in which Cuban was...
Paulson Abandoned
Posted on July 17, 2009The Bush Treasury Secretary Henry Paulson, testified in Congress yesterday in defense of his bailout policies. He was ripped by Democratic Congresspersons, which was to be expected, but also abandoned by Republican Congresspersons, which was also expected...
Cit Group Not "Too Big to Fail"
Posted on July 17, 2009Cit Group, a lender to small and medium businesses, a major factor, asked for and was refused TARP funds this week. It was not "too big to fail"; it was "too little to bailout." The company was only 1,900th in...
Sotomayor Testimony on Business Cases
Posted on July 16, 2009Judge Sotomayor, discussing business cases, noted that business "needs certanty" in the law. This is correct as noted here as far as it goes. Uncertainty has to be negatively priced in deals on both sides and is a net social...
Private Equity Under Attack, Again
Posted on July 16, 2009The FDIC has announced that private equity buyers will be penalized if they purchase failed banks in distress sales by the FDIC. Private equity will have to put up more capital and make more guarantees. The FDIC does not want...
When Governments Sell Companies: The Opel Deal
Posted on July 16, 2009Anyone with any doubt over whether governments will inject political considerations in deals affecting government owned operating companies should take a close look at the Opel sale. GM, with its majority owned the United States government, is attempting to sell...
The BofA Story
Posted on July 16, 2009The heavy-handed approach of government regulators to the Bank of America, both over the Merrill Lynch acquisition, and over the current operation of the bank is good theatre. Did Paulson or Bernanke threaten to fire the CEO, Lewis, if he...
The Government is Played for a Sucker by Bank of America
Posted on July 14, 2009The Bank of America and the Treasury had agreed to a "term sheet" that had BofA paying a sizable fee for a "back-stop" guarantee on the value of Merril Lynch toxic assets so that BofA would purchase the failing brokerage...
Data on Private Equity Management Skills
Posted on July 08, 2009I noted some time ago that private equity firms, once they buy a public company, set up a management structure that is very different from the one advocated by corporate governance "experts." Data is coming in on how private equity...
The CFTC Wants Limits on Oil Price "Speculators"
Posted on July 08, 2009This is huge news. The Commodities Futures Trading Commission, our main futures market regulator, has given notice that it is considering "position limits" on oil futures to stop the effect of "speculators" in the oil futures markets. This signal that...
GM is Sold for Too Much??
Posted on July 07, 2009The bankruptcy judge, Judge Robert E. Gerber, approved the sale of GM on Sunday. Under Section 363, GM sold its "healthy" assets to a new company owned 60 percent by the federal government and 17 percent owned by a health...
Liability of Government Director Nominees
Posted on June 24, 2009Vice Chancellor Lamb of the Delaware Chancery Court noted recently in a pubic speech that government director nominees "should be treated like anyone else (other directors)" when fidicuiary duty standards are in issue. This is the tip of the iceberg,...
The New Finanical Products Consumer Protection Act
Posted on June 22, 2009A piece of legislation sponsored by the new administration that makes sense, in theory, is the new finanical product consumer protection act. Long championed by Professor Warren, a federal act is necessary to stop consumer fraud by national financial institutions...
Broker Liability
Posted on June 19, 2009The new administration's financial regulatory proposal has big changes that dominate the headlines. It is hard not to focus on the proposal to give power of the Fed to declare large firms "too big to fail" and subject to heavy...
The New Financial Plan
Posted on June 18, 2009Some of the details of the administration's new financial plan are out. Any newspaper has a summary. A few observations: 1) The big winner is not the Fed, as reported, but the Chairman of the Fed. They are different. The...
The Obama Speech Template
Posted on June 17, 2009I was once a young faculty member on a law faculty, listening to a newly minted and clever dean give addresses to alumni. The addresses had the same template. First the dean to praise the quality of the law school...
The Slow Motion Walk to a Managed Economy
Posted on June 15, 2009It started with fear, that the failure of some companies would tank the economy. The government then eschewed market self-correction and accepted the need for bailouts; only the government could fix the crisis. The fear moved to an implied government...
The New Evolution of Chapter 11
Posted on June 15, 2009Ten years or so ago an article in the Yale Law Review criticized the Chapter 11 procedure as giving hold up power to lower echelons of creditors and claimants at the expense of the secured creditors. Moreover the procedure was...
Why the Rush on Chrysler?
Posted on June 09, 2009The Supreme Court, through the temporary act of one Justice, has delayed for a moment the rush to sell effective control of Chrysler to Fiat. The government is dismayed. We need to rush. Why? The need to rush in a...
Hedge Funds Back in the Black
Posted on June 09, 2009The news this week is that the well run hedge funds are starting to make serious money, recouping losses and recording record gains. Why? Simple. Hedge funds are lightly regulated and therefore free of political pressure to stay on the...
363 Sales in Bankrutpcy
Posted on June 03, 2009The Chrysler bankruptcy and now the GM bankruptcy feature 363 sales. I have written briefly on this before, This deserves the careful attention of more than a few blog entries. Chapter 11 features, features, a well tested "plan approval" procedure....
Setting Up a Scapegoat for GM
Posted on June 01, 2009The NYTs today is gushing over a 31 year old who interrupted law school to "run" General Motors in the bankruptcy announced today. He has no formal economic training and no business training. His dad is a "green" engineer. He...
GM Numbers: New Plan Does Not Make Economic Sense
Posted on June 01, 2009GM has $90 B in assets and $170 B in debts. The government plans to put in another $30 B, for loans. the new company will be a shell of its former self, employing 40 to 50 thousand or so...
Sotomayer on Business Cases
Posted on May 28, 2009Business law academics, pouring over, Judge Sotomayer's cases business law, authored as a district court judge and as the writing judge for a Second Circuit panel of three judge, can find no discern able "leanings" or "theories" that would either...
Sotomayer on Business Cases
Posted on May 26, 2009I was reviewing Judge Sotomayer's record on business cases and the same word kept coming up, reversed. There is little to be said of a consistent record learning one way or the other on the business cases except the high...
The New SEC Rule on Shareholder Voting: Make it Discretionary
Posted on May 22, 2009The new SEC rule on shareholder voting may be good policy for individual firms, but is it a good mandatory rule for all publicly traded firms. No. The better rule is one that asks all publicly traded firms to vote...
The Bond Rating of the United States
Posted on May 22, 2009The rating companies have announced officially the first step of a bond rating downgrade for the United Kingdom. Are we far behind? There are rumors that the United States is next due to this years ridiculous budget deficit and increased...
Indiana Steps Up
Posted on May 21, 2009The zany deal in the Chrysler bankruptcy finally has a serious opponent that willl be hard to for Obama to publicly belittle -- the three Indiana state pension funds (led by the state Treasurer Richard Mourdock). They are carrying the...
SEC Proposal on Board Nominations
Posted on May 21, 2009The SEC is proposing a new rule on board nominations for large publicly-traded companies. Shareholders, or groups of shareholders that control over 1% (3% for mid-sized companies and 5% for small) of the company's voting shares can nominate directors to...
Buchheit and Skeel on Bankruptcy in the NYTs
Posted on May 19, 2009Burchheit and Skeet have proposed a "modified" bankruptcy proceeding for large financial institutions in today's NYTs. The government will "guarantee" all trading obligations for 60 to 90 days to enable companies to "prepare" for a Chapter 11. It is loony,...
Section 363 and other "quick" sales in bankruptcy
Posted on May 19, 2009One of the clear lessons in the Lehman Bros bankruptcy is that quick sales are often bad sales. In th Lehman Bros bankruptcy, the bankruptcy trustee, the government, and some panicked investors pushed Leman to sell it broker dealer unit...
Sarbanes Oxley and the Constitution
Posted on May 19, 2009The Supreme Court will take a case on the constitutionality of the 2002 Sarbanes Oxley Act. The case features the auditor oversight mechanism put into the act, the PCAOB or Public Company Accounting Oversight Baord The President does not pick...
More Negative Data for the Interpersonal Educational Crowd
Posted on May 19, 2009See Brooks in todays NYT's discussing that, in essence, a focus on "interpersonal skills" is negatively correlated to success for CEOs. Another blow to the "well rounded person" educational theorists.
Hedge Fund Haters: Read Joe Nocera Today in the NYTs
Posted on May 16, 2009Joe Nocera, in today's NYT business section, interviews a hedge fund manager, Neil Barsky, who is hanging it up. What a wonderful column. All critics of hedge funds should read this. The interview makes several points: hedge funds were not...
Fiat's Sweet Deal
Posted on May 14, 2009The details of the Fiat deal are leaking out in the Chrysler bankruptcy. Such a deal. Fiat gets 20% of Chrysler for a promise, no cash, to give technology. Fiat then gets another 5% if Chrysler builds a Fiat motor....
You Gotta Love Business Schools: Irrelevance is Always a Problem
Posted on May 14, 2009Business schools, in their MBA programs, have a mandatory course, and often two, in writing a "Business Plan." In a business plan a group with an ideal and no money attempt to convince those with money and no ideas that...
A Fundamental Change in Governing Philosophy
Posted on May 12, 2009Many of the changes in government stem from one very fundamental philosophic change. The leaders of the federal government, from the President on down, believe that the market's power to self-correct is weak (or illusory) and that government is the...
The Schumer Corporate Governance Bill: Effect on Delaware Courts?
Posted on May 12, 2009Senator Schumer will introduce next week and new bill, The Shareholder Rights Act of 2009, that will federalize the corporate structure of our publicly traded companies. It is a slap to Delaware -- both the courts and legislature. I do...
Hartmax Bankruptcy: A Right to Not Lose a Job?
Posted on May 12, 2009The New York Times, on page one of the the Business Section today, has a story on the Hartmax bankruptcy. Workers, in league with politicians are attempting to use public pressure on the companies major lender, Wells Fargo bank, to...
Auto Bailout Woes
Posted on May 11, 2009The government's role in the auto bailouts has been a total mess. Consider Chrysler first: First creditors and union reps refused to budge in the negotiations until thegovernment declared, whichh drove the negotiations into Chapter 11. The creditors and union...
Stress is Over On Stress Tests
Posted on May 08, 2009For months the markets have suffered the uncertainty of the results of the government stress tests. Information has been leaked, by the government and by the banks themselves, about the tests and the potential results. We all saw the results...
No-one Will Now Lend to Auto Companies
Posted on May 01, 2009Obama's villification of auto company lenders, the two hedge funds that held out for better terms, pretty much seals the deal -- the government is going to be the only auto company lender. Why lend to auto companies when the...
Souter Announces Retirement
Posted on May 01, 2009Justice Souter's primary business decisions was Virginia Bankshares, a rambling mess of an opinion on Rule 10b-5 and mergers written early in his tenure. Justice Scalia felt the need to summarize the holding of opinion in the opening three sentences....
Chrysler In Chapter 11
Posted on May 01, 2009There are many, many aspects to this story. Let me mention a few. First, Obama has proposed and still seeks, through a bankruptcy trustee now, to buy a car company worth nothing for $12 B in clash, TARP money to...
The Legacy of the First 100 Days
Posted on April 24, 2009It will take some time, maybe another six months, but the full legacy of the first 100 days of the new administration will be dribbled out, story by story, local paper by local paper, in reporting on the inside corruption...
Who and Where are the AIG "Trustees"?
Posted on April 24, 2009The press has finally, finally noted that government appointed "trustees" have control of government stock positions in a variety of finanical institutions. There is now some bewildermen over who they are and what they are doing. The three trustees of...
The BofA Deal
Posted on April 24, 2009The transcript of Paulson threatening the job of CEO Lewis if he does not close the Merrill Lynch deal has re-ignited the fuse on whether, in particular, the government overplayed its hand in forcing the merger and on whether, in...
The Hunstman Case
Posted on April 13, 2009A panel in Vegas discussed the Delaware Chancery case on Apollo v Huntsman. Comments by Chancellor Lamb, if reported properly (and big it), reveal that a willingness to negotiate a settlement could affect the outcome of busted deal cases. Why?...
Stress Tests Test Disclosure Obligation
Posted on April 13, 2009The government's games with "Stress Tests" for banks show once again that disclosure to shareholders if "for others." Shareholders of banks that are evaluated want to know the results as soon as their executives learn them. Yet government and bank...
Broadcom Case
Posted on April 13, 2009When District Judge Carney threw out portions of the criminal case against Broadcom for backdating stock options, he did so on grounds that has the corporate bar taking notice. The corporate attorneys failed to tell an executive that they represented...
Thomsen Cashs In
Posted on April 13, 2009Linda Thomsen, the chief enforcement officer at the SEC who left (?) after a poor record of SEC enforcement (and Congressional testimony on same) during the Madoff scandal years has landed a fat job at Davis Polk when firms are...
Congress and 401(k)s: Pensioners--Invest in TARP or Else!
Posted on April 01, 2009Congressional leaders and Administration officials, frustrated with the amount of private money sitting on the sidelines in our economic crisis, will soon announce, according to unnamed sources inside the White House, a bill that requires all those who hold 401(k)...
Ex-GM CEO Wagoner Should Have Refused to Go
Posted on March 31, 2009When President Obama and his senior economic advisers decided that GM CEO Wagoner should be fired and this was communicated to Wagoner he responded incorrectly. He should have said: " You are not my board and you cannot fire me....
Geithner's Plan: They're All Fannie Now
Posted on March 27, 2009Geithner's new ambitious plan hinges on one assumption -- some financial institutions are too big to fail. Once one buys into that assumption, government intervention becomes inevitable. The banks that are too big to fail have the implicit backing of...
AIG: And Worse
Posted on March 25, 2009Now there is news that AIGs successful subsidiary businesses, real insurance companies, are suffering from the pasting taken by the holding company executives over bonuses. Moreover, competitors in the insurance business are complaining that the insurance company subs, too retain...
Geithner's Toxic Asset Plan: Can It Be Gamed??
Posted on March 23, 2009I hope Geithner has stopped all the ways to game his proposal. I am not hedge fund guy, paid millions to game the markets, but I suggest the following. A hedge fund makes an investment of $7 in a bank's...
Sweden: A Raw Capitalist Compared to the US
Posted on March 23, 2009We have been lectured by China on monetary prudence and now we are doing something that Sweden will not due, bail out car companies. Sweden refused to bail out Saab. "Let the markets decide," Sweden announced.
Government Prints Money
Posted on March 22, 2009We used to laugh at small country dictators who, once having ruined their country's economy and having borrowed beyond their country's capacity to pay, decide to inflate their currency. Their inflated currency worked for a short period of time, allowing...
AIG: It Gets Worse
Posted on March 18, 2009The scramble of politicians in response to populist outrage over the AIG bonuses gives one a sense of what it was like on the Titanic when it startedd to started to go down. Hostile folks are milling outside the AIG...
AIG: And Worse
Posted on March 18, 2009We now find out that AIG was incompetent in unwinding its problems with government money. And for these its experts get bonuses?? AIG was unwinding its credit default swap positionswith government money by buying the assets that were underlying the...
AIG Bonuses
Posted on March 16, 2009AIG executives are claiming from $165 million to $450 million, depending on who you believe, in contractually stipulated bonuses after the company lost $60 billion last quarter, the largest quarterly loss by a private corporation in modern history. The government...
Stewart Squares Off On Cramer
Posted on March 13, 2009Like a sucker I stayed up to watch the Jon Steward/Jim Cramer smack down on the Comedy Channel. Steward, angry at the refusal of Santelli to come to his show after Santelli's outburst against Obama's mortgage bailout, had run clips...
TALF Program Lacks Investors
Posted on March 11, 2009The Government's $1T TALF program is stalled. Recall that the government is offering to loan $1T at below market rates to investment funds (hedge funds) if the funds buy AAA asset backed securities. How could a fund turn down cheap...
G-20 Nations Expect More United States Cash
Posted on March 10, 2009We now hear that Germany, Japan, and France, among others (China) will not stimulate their economies by floating more debt and spending the borrowed money in "stimulus" payments. Only the United States, and to a much lesser extent the United...
Merck Buys Schering-Plough
Posted on March 10, 2009Is anyone in Justice investigating the anti-trust implications of all these huge deals in the drug industry. Moreover, the Merck deal seems to depend on whether a reverse triangular merger can beat a control change clause in a Schering-Plough agreement...
Dow Agrees to Buy Rohm & Haas
Posted on March 10, 2009Dow Chemical, on the eve of a trial, has reversed course and agreed once again to go forward with a deal to buy Rohm & Haas. Dow had balked at closing the deal after credit rating companies threatened to downgrade...
RIP GM
Posted on February 26, 2009GM lost $10B in the last quarter and $31B for the last fiscal year. The $4 B government loan went in and out immediately to pay creditors and salary. The current quarter will be worse, with sales declining further. GM...
TARP II Terms: The New Bank Bailout Program
Posted on February 25, 2009Treasury today issued the terms for its new Capital Assistance Program (CAP) for handing out TARP funds. There are some very interesting wrinkles. First, the government will purchase funny convertible preferred stock instead of preferred stock and warrants (on common)...
Bernanke's Reassurance Scare
Posted on February 25, 2009To reassure the market that the federal government would not nationalization Bank of American and Citigroup the Chairman of the Federal Reserve said "We do not need majority ownership to work with the banks... We have very strong supervisory oversight...
Government Into Car Companies Too Deep to Get Out?
Posted on February 23, 2009The principals in the auto companies are negotiating in light of a government bailout. This makes their negotiations difficult and less than satisfactory; everyone is encourage to hold out. We now find that even if an auto company takes a...
An Intriquing Legal Issue
Posted on February 20, 2009Some banks who took TARP I money did so under a clause that allows the government to unilaterally change the terms of the deal. What is the legal effect of such a clause. Assume the government now wants to cap...
Who Is the Sucker??
Posted on February 19, 2009Now that the new Administration's economic proposals are trickling out we can add them all up and see who is taking it on the chin, who is getting played for the sucker. The old advice for players at the poker...
Obama's Homeowner Affordability and Stability Initiative
Posted on February 18, 2009The President announced and Treasury published details of a new Homeowner Affordability and Stability Initiative today. The press is struggling to get the details correct. Here is the basis of the Initiative. To be eligible, a homeowner must have defaulted...
The Auto Bailout: A de facto Nationalization
Posted on February 18, 2009General Motors and Chrysler have petitioned the government for another $22 B in loans to keep both companies solvent and running. In exchange for the new money they have offered restructuring plans that, among other things, fire workers. GM promises....
One Bright Spot in the Bailout--Commerical Paper
Posted on February 17, 2009The Fed's program to help commercial funds has worked well. Worried about the Reserve Primary Fund's "busting the buck," the Fed offered to guarantee price levels in money market funds and buy from such funds illiquid assets (ABSs). The effect...
Kansas and California Short on Cash
Posted on February 17, 2009Kansas and California have suspendend tax refund checks and appear to be unable to met their state payrolls. http://www.kansas.com/735/story/701750.html They are desperate for cash and can no longer borrow, even against healthy accounts. This all comes after the passage of...
Now We Can Read the Stimulus Bill
Posted on February 16, 2009After the Stimulus Bill passed Congress in a rush, over 1,000 pages drafted late Thursday night and passed early Friday morning in the House and late Friday night in the Senate, we now have time to read the bill. There...
Law Firm Layoffs
Posted on February 13, 2009Blogs are reporting large law firm layoffs this week. E.g., http://blogs.wsj.com/law/2009/02/12/21209-the-darkest-day-ever-for-big-law-firms/
CBO Stays Stimulus Bill Worse that Doing Nothing
Posted on February 06, 2009The Congressional Budget Office, hardly a Republican bastion, has reported that the stimulus bill will lead to a lower GDP over 10 years than if Congress did nothing. The bill will crowd out private investment that has a higher chance...
More Mortgages in Trouble: Neg-Am and Option-Am
Posted on February 06, 2009The housing crisis is not over if we address subprime or even alt-A mortgages. While the subprime crisis may be peaking, there's another tsunami of defaults coming, this time from "prime" borrowers. Option Arms, Neg-Am's, and Alt-A mortgages, totaling in...
Arguments Over the History of Government Stimulus Packages
Posted on February 06, 2009We all know the familiar quote: "Those who do not know history are doomed to repeat it." But there is another: "Those who know history are doomed to spin it." The history of the government works packages in Japan in...
The Bank of America/ Merrill Lynch Deal: Questions, Questions
Posted on February 05, 2009The Wall Street Journal's excellent front page story on the details behind the Bank of America purchase of Merrill Lynch raises many, many questions, both political and legal. The story reveals a Secretary of Treasury that forces an unwilling CEO...
Executive Pay Caps: Goldman in the Driver's Seat -- Again
Posted on February 04, 2009After the Treasury announcement at 11:00 of caps on executive salaries the stock market dropped from positive to negative and Goldman stock price shot up 6 percent will Bank of America stock price dropped like a rock. Goldman is in...
The New Treasury Caps on Salary
Posted on February 04, 2009Treasury has released new rules on executive compensation for financial institutional that receive federal bailout funds. In essence, those that get exceptional amounts cannot pay executives more than $500,000 in cash and, if they use stock or stock options, the...
Dow's Busted Deal for Rohm and Haas
Posted on February 04, 2009Dow Chemical agreed to buy Rohm and Haas and signed a very, very seller biased contract. Now Dow wants out and seeks court sanction to do so. Is there room in the contract language? The Material Adverse Change Clause is...
Gantler v Stephens: Delaware Chancery Court Struggles Con't
Posted on February 03, 2009In a very unusual move, an en banc panel of the Delaware Chancery Court overruled a decision by a Vice Chancellor. See Gantler v Stephens (Jan. 27, 2009). The opinion is unusual because each of the Chancellors usually circulate their...
The Hidden Issue in the "Bad Bank" Solution: Rotten "Good Banks"
Posted on February 03, 2009The press is reporting that President IBM's advisor's are considering a good bank/bad bank solution to financial institution crisis. The government will buy the "toxic" illiquid assets held by banks, leaving a good bank, and put the assets in one...
TARP Terms: Obama Could Get Bonus Clawbacks
Posted on February 03, 2009Banks, reading the small print in their term sheets after having received TARP funds have discovered that the federal government "unilaterally reserved" the right to make changes in the conditions that accompanying the acceptance of the money. In other words,...
Sobering News: The French Reject Our Socialist Stimulus Plan
Posted on February 03, 2009The Prime Minister of France, Fillon, has rejected a call for an "Obama-style" stimulus plan that gives cash directly to blue collar workers and the unemployed. France has opted for a modest stimulus of $10b to infrastructure projects and another...
Daschle and Geithner: The Damage to Tax Collection Has Been Done
Posted on February 03, 2009Whether the President appoints Daschle or not, the damage has been done. Anyone close to tax enforcement knows that voluntary compliance with tax laws is necessary and essential for the system to work. The IRS does not have the resources...
Protectionism and Crisis
Posted on February 02, 2009World leaders at Davos expressed concern over American protectionism in our new economic crisis relief packages. They are worried about 1) "Buy American" policies in Public Works projects; 2) "Loan American" pressure on banks recieveing bailout money; 3) Tax subsidies...
Obama on Profits
Posted on January 31, 2009The press has well covered President Obama's remarks on "shameful" Wall Street bonuses paid last week. As it should. One phrase in his remarks is odd, however. He added: "There would be time for them to rake in profits and...
Government's Knee-Jerk Responses in an Economic SlowDown
Posted on January 31, 2009Reading the country's economic history one cannot help but be struck by the pattern in government responses to any economic slowdown. In order the government will: 1) Attack market players (short sellers,speculators, and those who use leverage), 2) Attack the...
Roche's "Hostile" Bid for Genentech
Posted on January 31, 2009Roche has announced a "hostile" bid for Genentech at $86.50 a share. Sounds simple enough. It's not. Roche already owns 54 percent of the stock. It is making a hostile bid for the remaining shares in a company it already...
Stimulus Bill
Posted on January 30, 2009The press and commentators are picking apart the House and the Senate Stimulus Bill, noting many (most) of the items are not directly related to quick job creation because they are, among other things, 1) time delayed, 2) promoting social...
Geithner the Pragmatist
Posted on January 30, 2009Geithner is know as a "pragmatist." This is why he only paid two years of back taxes when he owed four; the statute of limitations had run on the two years. He passes strict new anti-lobbying rules and then hires...
Hedge Fund Whipsaw
Posted on January 30, 2009In the UK, Parliament had three of the leaders of its largest hedge funds on the hot seat. The members wanted to know whether they were making too much money off the bank difficulties in the country. Some of the...
Thain Craps Out
Posted on January 23, 2009The news that Thain "resigned" from Bank of America is remarkable for its underlying text. First, why did Thain, a very smart fellow, give silly ammunition to those who want to attack his decisions. By buying a 35,000 dollar toilet...
Delaware Cases: A New Line of LLC Cases
Posted on January 22, 2009The last several years of Delaware business cases had many cases on predictable issues -- merger approvals, compensation, fiduciary duty, executive defense expense indemnification, and inspection procedure. The surprise was the heavy number of cases on contract theory and its...
Is the UK Bankrupt? Lessons
Posted on January 22, 2009Just as the problems in the UK foreshadowed ours in the late 20s, do the problems in the UK now foreshadow ours? There is a serious debate about whether the UK, as a country, is bankrupt. It has poured money...
Tracing Bailout Money in the Banks: the Journalists are Asking the Wrong Question
Posted on January 21, 2009It is good sport to call someone at the large banks that have received government bailout money and ask: "Were did the money go?" The right answer to a physical tracing question is "I do not know." It is the...
Geithner Takes a Cue From Obama: "We Will Have a Plan"
Posted on January 21, 2009Geithner's testimony at his confirmation hearings was priceless. He announced a "bold" plan (ie. "not incremental") on a "dramatic scale" that "hopefully" would come in the "next few weeks." The plan, when it appears, will fix a multitude of problems,...
Chrysler "Alliance" with Fiat: Giveaway Funded by the US?
Posted on January 21, 2009Chrysler is selling 35 percent of itself and a warrant for another 20 percent to Fiat. The price? No Fiat cash. Fiat puts in technology and new products. The warrant strike price is set at a measly $25 million. The...
New York Times Finds a Sugar Daddy
Posted on January 21, 2009Carlos Slim loaned $250 million to the New York Times to keep it going, for now. It was not much of a deal. The note pays 14 percent (three percent is optional pay-in-kind junk) and comes with warrants, convertible into...
BofA's Deal for Merrill Awash with Questions
Posted on January 20, 2009Bank of American closed its purchase of Merrill Lynch on January 1 of this year. BofA shareholders voted to ratify the deal on Dec. 5 of last year. We now know facts that we did not know at the closing...
Geithner and Bailouts
Posted on January 15, 2009Geithner's tax troubles are well known but less discussed is his role in the bank bailouts. The position of Chairman of the New York Federal Reserve Bank has, since the days of Strong in the 20s, been itself a very...
Citigroup and GE Need to Bust-up
Posted on January 14, 2009Citigroup and GE and old fashioned conglomerates that grew too broadly, too fast and need to be busted-up, focusing on a core business and selling or spinning off all others. Too bad hostile takeovers are dead; a bust-up buyout would...
Geithner's Troubles
Posted on January 14, 2009Obama's choice for the Secretary of the Treasury, Geithner, has, as the press refers to it, a "hiccup" in his confirmation. He did not declare personal income on which to pay taxes for several years, corrected late, and, as Secretary...
Independent Directors and Satyam Computer
Posted on January 13, 2009Sat yam Computer, a Indian company, has been exposed as a giant financial fraud. The government of India is attempting to reduce the damage and, effectively, has taken over the company. On the board were two Harvard academics. One, Krishina...
President Hoover and the Great Depression
Posted on January 12, 2009A quick education on the great depression has convinced me that President Hoover has "gotten a bad rap" or, more accurately, is blamed for the wrong thing -- doing nothing-- and should be blamed for the right thing -- starting...
Litigation Over a Triggered Poison Pill: Selectica
Posted on January 12, 2009When a poison pill threatens potential acquirers, the acquiring company usually files suit to have the pill declared invalid -- before the the acquisition. In an unusual case, a group of purchasers triggered a poison pill intentionally, the target company,...
Mises Vesus Keynes: And the Winner Is Politics
Posted on December 30, 2008The current economic crisis has the two schools of economic theory, one associated with Keynes and the other with Von Mises, at odds over the cause and cure. Mises would blame government expansion of credit for the boom and recommend...
Suing Auditors
Posted on December 23, 2008The Madoff mess will test the limits of suits against auditors. Madoff's auditor, an obscure three person firm run out of a strip mall, is not likely to have much cash. Lawyers are not suing the auditors of fund of...
Suing the SEC
Posted on December 23, 2008A frustrated Madoff investor has sued the SEC for not acting on tips that Madoff was running a Ponzi scheme. The suit is an extreme long shot, given the SEC's sovereign immunity. But who knows what the right judge may...
Cerberus and Chrysler
Posted on December 23, 2008Cerberus is apparently willing to dump its equity in Chrysler if bond holders or others will take equity for their debt. Indeed, Cerberus could simply give the company to its workers in exchange for a full release from all worker...
FASB and Mark-to-Market
Posted on December 23, 2008The FASB has begun a review of the mark-to-market rules that have attracted the ire of so many in the financial community. The major complaint -- financial institutions have to write down assets that they do not intend to sell...
Government Bailouts
Posted on December 20, 2008The current crisis has sent most to the history books, and I am no different. I have been reading about Margret Thatcher's response to the petition from 364 economists in 1979 when they objected to her reduction of government debt,...
GM and Chrysler Bailout Terms
Posted on December 19, 2008The President announced that the administration would use TARP money to bailout GM and Chrysler. Ford Motor Company did not make a request. The "Fact Sheet" from the Bush administration states that GM and Chrysler will receive $13.4 Billion from...
Mark to Market Rules
Posted on December 19, 2008The attack on mark to market accounting rules has many friends. Under the rules banks must carry on their balance sheets liquid securities at fair market values. When bank derivatives lost value, banks had to recognize write offs -- "even...
Tax Incentives Matter
Posted on December 19, 2008Taxes are in the news with a discussion of a 1997 tax break for the sale of homes (a $500,000 exclusion from capital gains for homes sold that an owner lived in for two years and owned for five) [how...
Madoff and Fraud: Is American Corrupt? No.
Posted on December 17, 2008The size of Madoff's fraud is dominating the news. The SEC has issued an apology of sorts for not catching him on a complaint from inside the industry in 1999. There are other frauds in the news as well. A...
Merkel's Experiment
Posted on December 17, 2008I have been watching with interest the approach of the German Chancellor Angela Merkel to the financial crisis. In contrast to our approach of throwing government money at anything and everything, she has taken a very conservative approach, spending less...
Madoff and Hedge Fund Regulation
Posted on December 16, 2008The Madoff fraud has reporters seeking comments from my colleagues in the academy on the "failure of the system" and many -- most-- of my colleagues who have pushed for increased regulation for their entire professional careers are more than...
The Car Czar
Posted on December 10, 2008We are on the verge of appointing a "Car Czar" to dole out federal money to domestic automobile makers. As far as I can tell, his power is negative -- he will pass on federal bailout money unless various parties...
A Hidden Problem in the Economic Crisis: State Protectionism
Posted on December 05, 2008On of the jobs of the drafters of the Constitution was to stop state protectionism in the Articles of Confederation. States wanted to put tariffs on all goods coming across their borders from other states. The drafters knew that this...
Lou Jiwei of China Comments: A Must Read for All Pundits
Posted on December 05, 2008Lou Jiwei is the head of China's sovereign-wealth fund, a fund awash in dollars (over $200 billion) seeking to invest. Our current Secretary of State, Hank Paulson, went to China to encourage China to invest in the United States financial...
SEC Posts New Rules for Rating Companies
Posted on December 04, 2008The Securities and Exchange Commission announced new rules for ratings companies. Some of the rules are designed to limit conflicts of interest --firms cannot rate debt they helped structure, for example -- and some are designed to increase the disclosure...
Big Three Auto Companies' Pleas for a Bailout: A Hook??
Posted on December 04, 2008The CEOs of our big three domestic automobile companies are back in Congress today, asking for emergency loan funds to stave off bankruptcy. They drove, rather than flew in private jets, in energy efficient cars the 520 miles to Washington....
More Lawsuits
Posted on December 03, 2008Icahn's investment partnership, an investor in the buyout of Realogy Corp. is suing to prevent the company from refinancing $1.1 billion in debt (a workout). The $1.15 billion in old debt, below, Ichan's will be transformed into $500 million new...
Novel Lawsuits Fly
Posted on December 02, 2008A hedge fund, run by William Frey, has sued Countrywide and its parent, Bank of America, on their agreement with 41 state attorney generals to modify 400,000 mortgages originated and serviced by Countrywide. In the lawsuit the hedge funds states...
Sign of the Times: Insolvency Clauses Come the Fore in Stock PUrchase Agreements
Posted on November 28, 2008For some time a buyer attempting to bust a signed leveraged buyout agreement would rely on the Material Adverse Change Clause, now buyers are relying on insolvency clauses. In the Bell Canada buyout the buyers are claiming that a buyout...
Cerberus Reads Its Covenants
Posted on November 27, 2008Cerberus has just read the covenants in its stock purchase agreement with Daimler Benz for 80 percent of the stock of Chrysler and has decided that Daimler "intentionally and materially" violated the value of its lease and loan portfolio. This...
Tax Losses and the Banking Crisis
Posted on November 27, 2008Treasury, by two rule changes, has changed the tax loss carry forward rules for banks. On September 30th, Treasury decided that a buyer of a troubled bank could use all the tax losses of the selling bank to offset the...
Tuesday's $800 Billion Credit Market Bailout: An Incentive to Sercuritize??
Posted on November 26, 2008Monday was the Citigroup bailout and Tuesday was the $800 Billion credit market bailout. The goal of the new bailout is to free up credit in consumer credit markets -- mortgages, car loans, student loans, and credit card loans. The...
Geithner, The New Treasury Secretary: There is Nothing "New" About Him
Posted on November 25, 2008The markets soared on Friday on the announcement of Tim Geithner as the "new" Secretary of the Treasury. But just how "new" is he? He was Paulson's "go to guy" as President of the largest Federal Reserve Bank in New...
The Citigroup Bailout: More Confusion
Posted on November 25, 2008The markets hailed the fact of the Citigroup bailout, but we are just now digesting the details. Last month Treasury bought $25 billion in preferred stock and warrants (at-the-market and equal to 10% of the value of the preferred). Yesterday,...
Bailout Questions
Posted on November 24, 2008Sometimes the simple questions are the most revealing. 1) Should a government bailout forces banks to take or apply for money they do not need?? 2) If the government can "spend" its way out of distress and it will eventually...
Delaware Courts and Distress Deals: A Word to the Wise
Posted on November 21, 2008Delaware courts are now adjudicating "busted deals," deals from the top of the bubble that were overpriced but not closed until the bubble burst. Buyers looking to escape are, largely, being forced to pay damages (or even close) for attempting...
The Ionia Management Case: ON Its Way to the Supreme Court??
Posted on November 21, 2008A federal appeals courts is hearing arguments in the prosecution of a Greek shipping company, Ionia Management SA, for dumping waste in the ocean. The facts are not good but the case has, by luck, presented the federal courts with...
Defined Benefit Plans and the Economic Crisis
Posted on November 20, 2008The front page of the New York Times reports on a request by pension funds for Congress to modify pension funding rules for defined benefit plans. Defined benefit plans are promises by employers to pay employees on retirement a percentage...
Paulson and Congress: High Comedy
Posted on November 19, 2008Paulson's testimony before Congress was high comedy. Paulson was attempting to tell members of the House Financial Services Committee what they had passed in a rush in the Bailout bill now known as TARP. And Congress members were attempting to...
Cuban's Insider Trading Defense
Posted on November 19, 2008I do not spend every waking moment on the definition of insider trading so perhaps I am missing something here. Cuban receives confidential information on corporate business problems from the CEO and the CEO ask him to keep it confidential....
Fannie Mae and Freddie Mac
Posted on November 19, 2008On September 6th, federal regulators seized Fannie Mae and Freddie Mac. The Treasury promised $100 billion for preferred stock. Private investors still required hefty interest rates when asked to loan Fannie and Freddie even short term cash. So Freddie is...
Henry Paulson in the New York Times
Posted on November 18, 2008Hank Paulson wrote his final official defense today in the editorial pages of the New York Times. It takes up one-third of the page and says -- well -- nothing that is not trite or trivial. His point - Treasury,...
When Do Managers Get Real?
Posted on November 18, 2008A good litigator knows that things to clients look very, very different when they are in trial. During a dispute but before trial clients (and their lawyers) can spin and rationalize, moralize and condemn, but once they get in front...
Gov. Strickland and the DHL Fiasco
Posted on November 17, 2008The last card had dropped in the DHL saga in Wilmington Ohio and Gov. Strickland is finally facing up to reality -- too late and after thoroughly sullying the state's reputation in its effort to attract new businesses. Here is...
The National City Scandal
Posted on November 17, 2008In the spring, government regulators reached a "memorandum of understanding" with the management of National City Bank, a top ten national bank based in Cleveland since 1845. The shareholders were not told. the stock was trading in the thirties. In...
Obama's Election Strategy in Business Terms
Posted on November 14, 2008President Elect Obama had a very straight forward election strategy that can be understood in business terms. Obama took two short positions and funded both with lots of cash ($650 million or $1 billion depending on how you count). He...
Suggestion for a New "String" on the Next TARP Authorization: Paulson Goes
Posted on November 14, 2008Paulson has almost spent his first tranche of cash under the TARP bailout bill. He must go to Congress to get more cash. Congress is making noises about new "strings" for an approval of the next tranche of funds --...
Bush on Capitalism, Too Little Too Late
Posted on November 14, 2008President Bush came out defending capitalism yesterday before the G-20. After his remarks the stock market zoomed up 800 points from historic lows. I do not know if his remarks caused the increase but the coincidence is interesting. Where was...
Damage Control for Treasury
Posted on November 14, 2008The Treasury has been stung by revelations that a "review panels" mandated in the TARP program have not only not been working they have not been filled. Treasury has released a "Setting the Record Straight" press release that lists what...
Investment Banks Use Bailout Money for Executive Pay??
Posted on November 12, 2008Goldman Sachs will pay $12.4 billion in executive bonuses after receiving $12.5 billion in bailout funds from TARP. Morgan Stanley and Merrill Lynch will pay another $8 billion in bonuses and Citigroup will pay $26 billion. Each bank received $12.5...
Paulson Should Be Fired
Posted on November 12, 2008Paulson gives a news conference outlining "changes" in the TARP program and the market drops 350 points on the DJIA. The TARP program, he stated, originally sold by him as a vehicle to purchase Mortgages and Mortgage Backed Securities, will...
Should you stop paying your mortgage???
Posted on November 12, 2008The question I get from my middle-class friends (read outside the law school) is "Should I stop paying my mortgage to get a piece of the government relief program?" They have a point. The new program for Fannie Mae and...
Auto Bailouts: How?
Posted on November 12, 2008Amid continuing cries for a bailout of automobile companies by democratic politicians is a dearth of details. The basic question is how does one give money to companies that do not show an operating profit -- that is, its cost...
Junk Financial Recommendations: No Details
Posted on November 12, 2008At some point good financial newspapers should realize that junk financial recommendations help no-one. In today's Wall Street Journal we have James B. Stewart's, "How Obama Can Fix the Economy." Junk. His general suggestions "Shore up banking...[aid] faltering industrial concerns"...
Fed is Slow on Commerical Paper Purchases
Posted on November 11, 2008The Fed's program for financing the purchases of commercial paper is not yet off the ground and has been delayed. Other bailout programs have strained staff resources. Two smaller Fed programs have purchased some commercial paper but the main program,...
Auto Company Bailouts: How??
Posted on November 10, 2008The big three American automobile companies are showing substantial operating loses. GM is losing $1 billion or more a month. How does a capital injection help? The companies will just burn through the cash (using it to pay labor or...
The AIG Bailout: A Mess
Posted on November 10, 2008The AIG bailout is a mess. The government has had to restructure its current outstanding $120 billion loan (extending repayment and lowering the interest rate), to add a $40 billion equity infusion. and to buy around $50 billion of toxic...
Fannie Mae Loses $29 billion in 3rd Quarter
Posted on November 10, 2008Fannie Mae reported a 3rd quarter loss of $29 billion. The three month loss was larger than the total profits the company had earned from 2002 to 2006. Under fair value accounting, Fannie Mae has a capital deficit (it is...
First Obama Press Conference
Posted on November 07, 2008President Elect Obama started his press conference at 252 with stock trading over 220 points higher on the DJIA. By the time he was finished the Index has dropped to 110 points or so, the majority of the drop occurring...
How Taxes Work
Posted on November 06, 2008Making the rounds of the Internet: "How Taxes Work . . . This is a very simple way to understand the tax laws. Let's put tax cuts in terms everyone can understand. Suppose that every day, ten men go out...
Democrats Want to Outlaw "Excessive" Risk Taking
Posted on November 06, 2008Democrats in Congress, Barney Frank, Charles Schumer, Nancy Pelosi and others, want to have an "overarching" regulatory authority to, in essence, regulate "excessive" risk-taking, whatever that is. The authority will tell private actors in the financial industry how much risk...
New York Times Business Section: Written by Trial Lawyers
Posted on November 06, 2008On Wednesday, B-1 headline "Strongest Election Day Stock Rally in 24 Years." On Tuesday, B-7 headline, "Stock Fall as Service Industries Weaken." 1st paragraph mentions Tuesday's rally. Third to last paragraph, "for those curious" mentions that Wednesday's decline fits within...
A Zany Bailout: Take the Money, on the House, Pleeease ....
Posted on November 03, 2008I am the only one that thinks the TARP program is zany. Paulson calls in nine major banks and forces them to take bailout money, $25 billion apiece. Some of the banks object: "We do not need it." Paulson pleads...
The Baby Boomers: The Shallowest Generation
Posted on November 03, 2008See an excellent piece on baby boomers. http://seekingalpha.com/article/103202-the-shallowest-generation?source=article_sb_popular This is my generation and this fellow is largely correct. We spend now and pay later. We are not dead yet (and when we are, books will be written on us that...
Nassim Nicholas Taleb: the Black Swan
Posted on November 03, 2008You have to love this guy. He writes a book, the Black Swan, that is readable and puts forth a trading market strategy. He also puts his cash in his strategy, managing a hedge fund. His ship has come in....
Private Equity as a Punching Bag
Posted on November 03, 2008The New York Times as a front page story on private equity buyout deals. Andrew Sorkin and Michael de la Merced, "As Bills from Huge Buyouts Come Due, Economy Faces a Blow." You can almost feel the glee in the...
Kicking a Man When Down: Edward Hadas
Posted on November 03, 2008Edward Hadas "piles on" in todays New York Times. "Less Finance May Be Just Fine." Finance employees out of work will be thrilled to read that they were social baggage anyway and should take up careers in "industry, education or...
GM Does Not Receive Government Cash for Chrysler Deal
Posted on November 03, 2008Days after the United States auto makers announced 30 year sales lows for the last quarter, the government refused to give General Motors $10 billion in cash or guarantees to help the company purchase Chrysler. Paulson did not want to...
Lehman Bankruptcy and the Presidential Race
Posted on October 31, 2008John McCain was up in the most of the polls (and the Intrade markets) the weekend before Lehman declared bankruptcy on Sept. 15, 2008. After the bankruptcy of Lehman, McCain has trailed in every poll ever since. The economy soured...
Bank Bailout Compensation Limit Problems
Posted on October 31, 2008The bank bailout bill bans severance payments to bank executives over 3 time salary and puts vague limits on salary. Yet the banks covered are under a contractual obligation for "billions" to their executives. See "Banks Owe Billion to Executives,"...
Commerical Paper Market Recovering
Posted on October 30, 2008The Fed program to guarantee commerical paper, one of the few government programs I support, is having a positive effect.
The Early Results of the Government Bailout: Classic Complaints
Posted on October 30, 2008An amazing combination of stories today show already show problems with government bailout money that, I suggest, we will see repeated over and over for the next decade. 1) The Cash is Lost. See "Where Did the Cash Go?" by...
3rd Quarter GDP Estimates Slightly Negative
Posted on October 30, 2008Estimates of the 3rd Quarter GDP figures show a decline of .3%. If 4th Quarter GDP figures are negative were are in a recession, starting at the beginning of the 3rd Quarter (July 1). Estimates change, however. The 1st Quarter...
US Steel??
Posted on October 28, 2008US Steel (X) announced its 3rd quarter profits tripled from last year. The stock fell to 28 dollars a share, 3 times earnings. It is exhibit A in the case for the total zaniness of the stock market.
Dynegy Agrees to Environmental Disclosures
Posted on October 28, 2008Dynegy is the second company to negotiate a settlement with the Attorney General of New York, Cuomo, that includes a promise to include environmental disclosures in its Form 10-K filings (annual report). Cuomo issued subpoenas to four companies under a...
Ohio Banks
Posted on October 27, 2008This morning we learned that two Ohio banks recieved bailout money, Hunnington and Key City, while two others have not, Fifth Third and National City. The refusal drove National City into the arms of PNC. What do not know what...
Avoiding the Compensation Limits in the Bailout Bill
Posted on October 25, 2008The PNC acquisition of National City provides yet another means of avoiding the prohibition on golden parachute payments to executives in banks that get government bailout money. The National City executives will get healthy golden parachutes because the bailout money...
Government's Role in the National City Deal
Posted on October 25, 2008We now have discovered that the government, in this case John Dugan in the Office of the Comptroller of the Currency, is forcing bank deals with the selective granting and withholding of promises to get government bailout money. He promised...
Professor Says We Will Have to Close Securities Markets
Posted on October 24, 2008A professor from New York, Nouriel Roubini, once a senior advisor to Treasury, in a talk in London at a conference on hedge funds has stated that hedge funds will start to crumble as cash-strapped investors demand redemptions. Once the...
PNC to buy National City with Your Money
Posted on October 24, 2008PNC said it would sell $7.7 billion preferred shares to the government and then announced it would buy National City for $5.2 billion in stock. The acquisition was a "take-under"; the value of the PNC shares exhcanged for National City...
New York Times is Junk
Posted on October 24, 2008Not the reporting, its debt. S&P downgraded the companies bonds to BB-, junk. The bonds can no longer be held by funds that must hold "investment grade" securities.
Character Comes Out In Times of Trouble
Posted on October 23, 2008China has started to allow short selling in its markets; the UK has extended the ban on short selling. The leader of Argentina has nationalized all private pension plans. The Democratics want to spend $300 billion, that we must borrow...
Paulson Should Go
Posted on October 23, 2008Can anyone, after reading the front page story in today's New York Times on Paulson, not believe that Paulson should be fired? He is now spending time, in the middle of a crisis, recasting history to protect his reputation.
Bush's Bailout Justification
Posted on October 21, 2008President Bush noted, in a speech Monday, that "we would get our money back." True enough. When the government sells bonds at 3.5 percent and buy preferred stock at 5 percent for five years (and then ten percent thereafter), the...
Paulsen's Plans
Posted on October 21, 2008Paulsen's purpose in giving money to the banks is to encourage banks to lend money to others. The problem? The mechanics of the grant. The government is buying preferred stock and warrants with cash and has no managment authority. Banks...
Gretchen Morgenson On Bailout Bill Compensation Limits
Posted on October 19, 2008Morgenson, in Sunday's New York Times, waxes approvingly about the compensation limits in the governments purchase of equity in banks. The limits are more illusion than substance. First, there is no cap or other limit on salary or bonuses. Just...
Fire Paulsen; Hire Thain
Posted on October 17, 2008In an interview with Kudlow yesterday, Hank Paulsen again showed why he should be fired as the Secretary of the Treasury. Paulsen is behind buying preferred stock at subsidized prices (very low divident rates). when confronted by problems he had...
Cuomo Has a New Toy: Fraudulent Conveyance Claims
Posted on October 16, 2008The State Attorney General of New York, Andrew Cuomo, is using the state's fraudulent conveyance statute to threaten AIG into reclaiming paid compensation to AIG executives. The claim is that the compensation was not for "fair value" and was constructive...
Government Bailout Action--Unintended Consequences Abound
Posted on October 16, 2008The government is using the wrong analogy. They are using the "finger in the dike" analogy -- it needs to stop the leak. A more appropriate analogy is "routing a river"; the government is fixing a breach in the river...
Did Paulsen Get the Incentives Right in the Bank Bailout?
Posted on October 15, 2008The short answer is -- no. 1) The Banks get below cost capital grants. Loans would cost 11 to 12 percent. The government gives them cash at 5 percent for five years and 10 percent thereafter with optional repayment; it...
Terms of Government Purchase of Bank Stock
Posted on October 14, 2008The Treasury has announced the terms of its offer to purchase bank stock. The government will buy the lesser of $25 billion or 3 percent or risk-weighted assets from banks that elect to participate. Nine large banks have already agreed...
How to Spot a "Bottom"
Posted on October 13, 2008Savvy investors are closely watching the securities markets in an attempt to spot a "bottom," a point at which prices stop failing and begin rising and do not "test" or hit the low point again for some time (if ever)....
Government Delay in Control of AIG
Posted on October 13, 2008AIG has spent over $120 billion of government money. Part of the exchange is government ownership, through senior convertible preferred stock, of 79.9 percent of the shareholder voting power. The catch? The government will act through a "trust" that holds...
Italian and Russian Response to Market Decline: Close the Markets!
Posted on October 11, 2008They are consistent. Berluscone (Italy) and Putin (Russia) want to close the markets to stop the market decline. That, in light of oft-repeated history, has proven to be a disaster. But we you think you can control things, you do...
The Difficulties of the Government's Decision to Buy Bank Stock
Posted on October 11, 2008We now have the government "thinking" of buying bank stock to recapitalize the banks. Economists are grouping around the solution as well. The UK has already said it will do so. Solution? No. Economists need to talk to some lawyers....
The Government's Roll in a Crisis
Posted on October 11, 2008Jonathan Macey writes in today's Wall Street Journal that "The Government is Contributing to the Panic." He makes two salient points and leaves one out. First, he notes that the government should not retard or otherwise or hinder trading market...
Bernanke Disappoints, Abandoning Principle
Posted on October 11, 2008When Bush appointed Bernanke, I applauded, mainly because he had publicly and repeatedly taken the position that the Fed had to be "predictable" for the markets to function well. He has even suggested a "algorithm" for all Fed interest rate...
On a Lighter Note: Bird Watching Passion
Posted on October 10, 2008We all need a little chuckle now and again. My latest edition of Wild Birds had three letters/articles: 1) A women in Colorado saw an unusual oriole at her feeder, took a quick picture and put it on-line to her...
Who Will Be the Next Secretary of the Treasury?
Posted on October 09, 2008In the latest presidential debate both candidates were asked about who they would appoint to be the next Secretary of the Treasury. The question bored many listeners: "Who cares? Ask about the next Supreme Court appointee!" And the question was...
Governments May Be the Next To Fall
Posted on October 09, 2008California, a state in which the housing price bubble started first, was the most severe, and burst first, is now insolvent and seeking federal government money. Iceland, a country with a population the size of Columbus, Ohio and a capital...
McCain's Garbled New "Mortgage Purchase" Plan
Posted on October 08, 2008In the debate, Senator McCain offers a "new" solution. "Buy mortgages from citizens." Whattttt? Citizens do not own mortgages; they own houses. You cannot buy a mortgage from someone who does not own it. He can mean one of two...
AIG in the News Again
Posted on October 08, 2008The government loans AIG $85 billion less than two weeks ago. The company draws is down almost immediately and Ed Liddy took his executive staff to a spa. Congress goes nuts and then the Treasury announces, after markets close today,...
AIG Bailout Details: What a Legal Mess
Posted on October 08, 2008It seems like the AIG bailout is now old history, but the disclosed loan documents reveal some startling news to AIG shareholders and show problems inherent in our government owning controlling equity positions in major American companies. 1) First, there...
Answers to Some Blunt Questions
Posted on October 08, 2008I live in two worlds, a law professor world dominated by those lean left and a blue collar world dominated by those who lean right. People on both sides have asked some very blunt questions about the bailout. 1) Where...
The Lesson from Hexion's Loss in the Huntsman case: "It's the Contract Language, Stupid."
Posted on October 07, 2008Hexion attempted to bust a buyout deal with Huntsman and the Delaware Chancery Court held that Hexion had itself intentionally breached the buyout agreement. Hexion does not have to close the deal but is liable for damages, which are not...
Fuld's Testimony
Posted on October 07, 2008A House Sub-Committee had fun yesterday; it's members had Fuld, the CEO of now bankrupt Lehman Bros., answer its questions. The press covered the hearing will glee, knowing that it would make headlines and lead stories for an angry public....
Finally--The Fed Will Buy Commercial Paper--A Way Out?
Posted on October 07, 2008The Fed has finally decided to show up, even though very late, and buy commercial paper. The market is up immediately on the announcement. The Fed did not need the bailout bill to buy commercial paper; it had the power...
A Weekend of Foolishness in Haste:The Wachovia Deal
Posted on October 06, 2008Our government -- the courts, Congress, and the Fed -- has totally lost it. Exhibit A is the Wachovia Deal. Here is the background. Citigroup offered $2.2 B to buy parts of Wachovia with a stop loss guarantee from the...
Judge Ramos Blocks Wells Fargo Takover of Wachovia
Posted on October 05, 2008A State Supreme Court Judge in New York (the Supreme Court is the trial court) has heard arguments at his home Saturday and, Citigroup claims, temporarily blocked a signed takeover deal between Well Fargo Bank and Wachovia. Citigroup has argued...
The Next Bailout? California
Posted on October 03, 2008California apparently needs an emergency loan of $7 billion. Those banks who have written credit default swaps on California municipal bonds will now face huge payments. Should we bail them out too by buying the "toxic" paper?
Floyd Norris Hits the Bull's Eye
Posted on October 03, 2008Floyd Norris's column in today's New York Times, "Mistakes of the Past Live Again," is right on target. I can say little but to repeat its themes: Increasing deposit guarantees reduces the monitoring of banks by depositors; Changes in mark-to-market....
The Pork in the Bailout Bill
Posted on October 02, 2008With all the language of doom and Armageddon on the economic front, and the need for fast action to "save the American economy", the Senate took time to put 350 pages of pork in the Economic Emergency Stabilization Act of...
New Bailout Bill: You Have Got to Be Kidding...It's a Joke Right? Wooden Arrows for Children??
Posted on October 01, 2008The new bill that the Senate will pass is a 451 page stapled together piece of legislation that has Five Major Parts. Only one of the parts deal with the credit crisis. The additional stuff is from bills that have...
What's Next on the Bailout
Posted on September 30, 2008On a 228 to 205 no vote, the House of Representatives rejected Paulsen's bailout plan. The vote was 133 no to 65 yes among Republicans and 140 yes to 95 no among Democrats. Among those Democrats voting no were some...
House Bails on Bailout Bill: Paulsen Has to Go
Posted on September 29, 2008The House refused to pass the bailout bill, only 208 (217 needed) voted to pass the bill. Pelosi lost any hope of Republican support when, using very poor judgment, she blamed wagged her finger from the podium, blaming Republicans for...
$700 Billion: Government Could Buy Top 11 Banks!!
Posted on September 29, 2008One gets lost in the size of the bailout bill numbers. For $700 billion, treasury could buy 100% of the equity all publicly traded commercial banks but Morgan and Chase. Or government could buy 100% of the top 11 banks,...
Where is Morgenson on the WaMu/TPG Deal?
Posted on September 29, 2008Morgenson, the muckraking business columnist of the New York Times, blasted the TPG buyout of MaMu a few months ago. It diluted shareholders, she screamed. I answered that she had done a hatch job and that MaMu shareholders should thank...
Bailout Bill Turns Crisis into a Disaster
Posted on September 29, 2008The details of the bailout bill are now on the table and Congress is turning an economic crisis into an economic and political disaster. There are two points: 1) Even the bill works as intended, it will not help much....
Mr. President: Please Fire Paulsen
Posted on September 28, 2008An open letter to President Bush: Please fire Hank Paulsen before it is too late. Here are the reasons: 1) As head of Goldman Sachs he was one of the primary people responsible for our reckless risk taking culture. He...
Church Leaders Comment on the Market: Oops
Posted on September 26, 2008Church leaders are using the economic crisis, as are politicians, to air old grievances about trading markets and capitalism. They should all take note of the problems of the Archbishop of Canterbury, Rowan Williams, the head of the Anglican Church,....
The Ban on Short Selling List
Posted on September 26, 2008We now have learned that the companies on the "no-short selling list," which were supposed to be financial companies, include CVS, Ford, GM, IBM, NYSE Euronext, GLG, Fortress and ICE. These are not financial companies; they have some finanical operations...
Mark-to-Market Accounting Gets a Bad Rap
Posted on September 26, 2008Mark-to-Market accounting is a rule of transparency -- companies have to discuss the fair value of assets on their balance sheet. One can criticize the mechanics of the rule on illiquid assets or in times of extreme market distress (when...
Good Gracious: Interbank Lending Dries Up on Government Bailout Package Uncertainity
Posted on September 25, 2008The reason for panic, the lockup in the commercial paper and interbank lending markets, led to Paulsen's $700 B asset purchase proposal. I have, here, advocated direct relief for those markets, beyond what the Fed has already done. But now...
Economists Have Rediscovered Chapter 11, Sort Of
Posted on September 25, 2008I am amused by the international economists, and many American economists, who suggest that a better solution to the bailout is a government directed reorganization of troubled financial institutions which, failing to raise cash, should be forced to swap their...
Buffett Steals Goldman Stock
Posted on September 24, 2008Buffet bought $5 b in Goldman Sachs preferred stock, giving him close to 62% of all the Goldman preferred stock outstanding. The catch, he gets a 10% dividend (above the market rate for preferred stock recently issued by investment banks....
Wednesday's Panic
Posted on September 24, 2008We read that Paulsen and Bernanke became convinced of the need for the $700 B bailout last Wednesday when the country's commercial paper market locked-up. Late Tuesday, Putnam Investors announced that its Prime Money Market Fund, holding $12.3 B had....
Today's Hearings on the Bailout: Price???
Posted on September 23, 2008Bernanke and Paulsen were before the Senate Banking Committee today asking for power to spend $700 billion on mortgages and mortgage backed securities. Senators asked the critical question repeatedly and in several different forms: How will your price the mortgages...
New Rules on Bank Stock Purchases
Posted on September 23, 2008A crisis reveals the weakness in some silly rules and drives government, under extreme pressure, to sanity. The rules on private equity purchases of bank stock, recently revised, are an example. Prior to the new rules, if a private equity...
Question for Presidential Candidates At the Debates: Who is the Next Secretary of Treasury?
Posted on September 23, 2008At the presidential debate coming up in a few days the public needs to know who the next Secretary of the Treasury will be; expecially if the bailout bill passes in its current form. Supreme Court appointments are secondary to...
Goldman and Morgan Register as Commercial Banks
Posted on September 23, 2008Goldman Sachs and Morgan Stanley, our last two free standing investment banks, registered as regulated bank holding companies, capable of acquiring commercial banks and, in essence, agreeing to the heavier regulation of the Fed over commercial banks. It was a...
Paulsen in A Game of Chicken with Congress
Posted on September 22, 2008A Democratic Congress wants a piece of the bailout bill to call their own -- lower executive compensation or more affordable housing-- and will push Paulsen to add provisions to the bill. It will be a game of chicken, with...
Obama Shorts the Market
Posted on September 22, 2008Obama has a short position in the market; when it goes down his vote total goes up. Moreover, he is doing what short traders often do, running a bear raid for over a year and one-half, by talking down the...
Government Pricing in its Purchase of MBSs
Posted on September 22, 2008Under Paulsen's Plan we will bail out foreign banks with taxpayer money -- but wait, this is a minor issue, the major issue is how the government will price what it will buy. The government will buy mortgages and MBSs,...
Are Supreme Court Selections Critical to Election? No, "Its the Secretary of the Treasury, Stupid."
Posted on September 22, 2008The new bailouts may take pressure off the politization of the Supreme Court selection process. Who will the new President select as Secretary of the Treasury?? The Secretary of the Treasury confirmation hearings will be the new show and the...
Paulson Asking Congress for Authority to Buy $700 B MBSs: Congress Should Say No
Posted on September 21, 2008Paulson and Bernanke have told the public that the administration will draft legislation authorizing the Fed to buy up to $700 billion of mortgage backed securities (MBSs). The MBSs securities have plummeted in value and jeopardize the balance sheets of...
Prohibition on Short Selling Creates Problems
Posted on September 20, 2008The SEC's bone-headed suspension of all short selling on 799 financial stocks has created havoc in the markets and the SEC is scrambling to create exemptions. Options market markets cannot hedge positions; exchange traded funds that short the market cannot...
Form For Bailout Requests from the Fed
Posted on September 19, 2008To: Hank Paulsen, Secretary of the Treasury From: [Fill in name of your company here] Date: [Before Nov. 4, 2008] 1) Our company [...] needs an immediate cash infusion due to matters beyond our control. Despite our fine employee, excellent...
The "S" Word
Posted on September 19, 2008Congress has lately been bludgeoning three "S" Words - Success, Speculators, and Short-Sellers. Congress wants to tax any success, prohibit any speculation, and stop any short-selling. Well, it got its wish today. The SEC, after McCain came out in favor...
Private Equity Firms, Sitting on the Sidelines Loaded with Cash
Posted on September 17, 2008How fast things change. Just a year and a half ago, Congress and the pundits were riping private equity firms who had just completed a five year buyout binge -- in 2006 alone there were, in amount, one-third of the...
Does the Fed Have the Power to Buy AIG?
Posted on September 17, 2008One or more of the twelve federal reserve banks, which are privately-owned companies chartered by the federal government with limited powers, and that are part of the Federal Reserve System, have loaned another privately held company, AIG, 85 million dollars...
ESOP Employees Sue Zell in Tribune Takeover
Posted on September 17, 2008Sam Zell bought the Tribune Company using a fancy ESOP plan structure. The employees of the company technically own the company but cannot vote for the board and cannot sell their shares. Zell, with a cash payment and an option,...
Monday's Legal Times: Soothed Waters Roiled
Posted on September 16, 2008The following is a Legal Times article that I wrote on Friday for Monday's edition. You will note that by the time the article came out, the folly of the "soothe the waters" approach had already failed -- Lehman in...
Lehman Declares Bankruptcy
Posted on September 15, 2008Lehman, minus some of its healthy units (its asset management group, for example) has filed for bankruptcy. Paulsen refused to put federal money into a workout deal and potential buyers walked out. Bear Stearns investors should view themselves very lucky...
There is Cash Out There
Posted on September 15, 2008I am less panicked than others this morning because I am informed that there is a healthy amount of cash on the sidelines. The cash is waiting to get in the market. At issue is how our government can encourage...
"Not Sure What Financial Companies [Lehman, e.g.] Are Worth"
Posted on September 14, 2008The title is a quote from today's New York Times. How can this be when the companies are publicly traded and liquid and deep stock and debt markets? The government, that's how. By dabbling in the financial markets the government...
Harvard's Hedge Fund
Posted on September 13, 2008For the fiscal year ending in June, the Harvard University endowment, one of the country's largest hedge funds, earned 8.6 percent while the S&P 500, a common market index, dropped 13.1 percent. Other schools had a median minus 4.4 percent...
Xcel Energy Settlement with Cuomo: Trouble Coming
Posted on September 11, 2008Excel Energy has agree to disclose "climate change risks" in its annual 10-K filings to get the Attorney General of New York, Andrew Cuomo, off its back. Excel has not thought this through. According the Cuomo's self-congratulatory press release, Excel...
Delaware Court Upholds a Deal Termination Fee
Posted on September 11, 2008Delaware Vice Chancellor Leo Strine dismissed a claim by a shareholder of the Lear Corporation that the company's board should not have agreed to a buyout contract in which the company promised to pay a termination fee of $25 million...
UnitedHealth McGuire Settles Option Backdating Case
Posted on September 11, 2008Old scandals take a while to play out in the courts. By the time court resolutions roll in we are well past the scandal and occupied by new ones. One of the biggest offenders in the compensation stock option back...
Putin: The KGB Did Not Teach Him Anything About Markets
Posted on September 11, 2008There is no partial market economy. Putin is finding that out. After his war with Georgia and his other saber rattling threats to the West, the Russian stock market has dropped more than 40 percent from its highs. Investors are,...
Plaintiff's Lawyers in Enron Litigation Get $688 Million
Posted on September 09, 2008A federal district court judge in Houston has approved $688 million in legal fees to Coughlin Stoia and Geller for the firm's representation of the plaintiffs in the Enron litigation. The plaintiff's recovered $7.2 billion on claims of $40 billion...
ShowTime in Delaware Court
Posted on September 09, 2008The busted Huntsman buyout litigation in Delaware Chancery Court is high drama. It is the first Delaware case over the busted buyout problems created by the credit crunch that stated early last year: on one side is a well-known private...
A Rumor Here, a Rumor There
Posted on September 09, 2008An Internet blog rumor that UAL, the parent of United Airlines, would file for bankruptcy was false -- but it did not matter. The rumor started on from a post on a Florida newspaper web site. The rumor spread and...
The Fannie Mae and Freddie Mac Seizure Fallout
Posted on September 09, 2008We are starting to get wind of who the winners and losers are in the government seizure of Fannie Mae and Freddie Mac. It is not a pretty picture. Holders of mortgage-backed debt of the two companies, so called agency...
Fannie and Freddie Seized
Posted on September 08, 2008Over the weekend the United State Government, read Treasury Secretary Henry Paulson, seized two federally charted mortgage companies, Fannie Mae and Freddie Mac. This comes on the heels of a federally sponsored buyout of one our largest investment banks, Bearn...
Strickland Sings a New Tune
Posted on September 06, 2008The Democratic Governor of Ohio has an editorial in today's Wall Street Journal entitled "Don't Believe the Doomsayers (sic). Ohio's Economy is Doing Fine". He notes that the press, covering the presidential race, has made the Ohio out to be...
Freddic Mac's Capped Voting
Posted on September 05, 2008Freddie Mac has just changed its capped shareholder voting bylaw that disables any shareholder from voting over 20 percent of the outstanding voting stock unless the others shareholders vote to allow it. The voting cap discouraged takeovers and thereby protected...
Omnicare of "Questionable Continued Vitality"
Posted on September 04, 2008The Omnicare case is of "questionable continued vitality" notes a new opinion from the Delaware Chancery Court. In Optima v WCI Steel, the Chancery Court refused to apply Omnicare to block a deal between Severstal and WCI in the face...
Ryan v Lyondell "Clarification"
Posted on September 03, 2008In denying a motion for an interlocutory appeal of, Vice Chancellor Noble, explained his early July 29th opinion denying summary judgment to the defendants in the case. The company, Lyondell Chemical, had a 102(b)(7) charter amendment in place. The Court...
Bartels Book Makes Classic Mistake in Logic
Posted on September 03, 2008The left is pushing a book by Larry M. Bartels entitled "Unequal Democracy" to argue that Democrats are better for the economy than are Republicans. Bartels, a professor of political science at Princeton, is a formidable critic. He notes, among...
Nocera on Ichan at XO
Posted on September 01, 2008Joe Nocera of the New York Times went after Carl Ichan's management of XO Communications in Saturday's business section. He sided with an unhappy hedge fund R2 that had invested in XO. Ichan bought control of the company when it...
US v Stein: The Second Circuit Weighs In With a Terrible Opinion
Posted on August 29, 2008The Second Circuit has affirmed, in a 3-0 decision, Judge Kaplan's dismissal of criminal indictments against 13 KPMG employees on the grounds that the Justice Department violated their right to counsel. Consider how hard the court had to stretch to...
Rule 2a-7 and Independent Directors
Posted on August 29, 2008The SEC has proposed dropping the requirement that boards of money market funds purchase only securities rating by licensed rating agencies. The boards themselves have lobbied against the change -- their argument -- we are too dumb to handle the...
2nd Q GDP Shows Growth
Posted on August 28, 2008The figures for the GDP growth for the second quarter (April to June 2008) are in, and they show growth of 3.3 percent. On the heels of a 1st quarter of .9 percent growth, it appears that our economy, which...
SEC Announcement on Accounting Rules: We are Going International
Posted on August 28, 2008I must admit, I did not expect the SEC announcement today that it had proposed a rule that encourages and may even require all United States companies to follow international accounting rules by 2014. This is a major policy change....
A Judge as Lobbyist
Posted on August 28, 2008The Justice Department announced today the reversal of its company prosecution guidelines. No longer will a company's decision to fund legal fees of indicted executive officers or a company's decision to stand on attorney client privilege to protect indicted executive...
The Primary Lesson on Fannie Mae and Freddie Mac: Purpose Creep
Posted on August 27, 2008Government officials are debating what to do with Fannie Mae and Freddie Mac, and their shares swoon in the markets. There is no longer any doubt that the companies have been very poorly run and the taxpayer will pay something,...
Disclosure Versus Business Confidentiality
Posted on August 27, 2008The efforts of the Federal Reserve and the Office of the Comptroller of the Currency to keep abreast of the situation in struggling banks is yet another illustration of problems in our disclosure theory of securities law. Both government agencies...
OBAMA and the Ohio Mandatory Sick Days Citizen Initiative
Posted on August 22, 2008Governor Strickland's failure to head off a citizen's initiative on mandatory sick days for Ohio workers will put Obama in a bind. If the initiative passes a citizen's vote, Ohio businesses with over 25 employees must give their employees a...
Ohio Democrats and DHL
Posted on August 22, 2008If the democratic leadership of Ohio is fully intent on saving Ohio jobs by convincing DHL to continue to use its Wilmington hub for air freight and not just doing political grandstanding, the governor, Lt. governor, and attorney general ought...
Ohio and DHL: A CaseStudy in Why Ohio Is Losing Business
Posted on August 20, 2008The political leaders of Ohio met yesterday in Wilmington to plan on how to stop a deal between DHL and UPS that would effectively close a local air freight facility that employs 8,000 people. In the run up to the...
Hedge Fund Activity In a Bidder
Posted on August 19, 2008On my final exam last semester the students were asked to advise a hedge fund that has purchased shares of a bidder in a control acquisition of a third party target. The hedge fund wants leverage to break up the...
Delaware Supreme Court On Shareholder ByLaws
Posted on August 19, 2008The Delaware Supreme Court has issued it opinion on shareholder sponsored bylaws in response to a certified question from the SEC. The certification procedure is slick, allowing the SEC, when applying its inappropriate under "state law" exclusion in letter rulings...
Posner and Easterbrook Disagree on Mutual Fund Fees
Posted on August 16, 2008In a series of opinions that law professors will love, Judges Richard Posner and Frank Easterbrook of the Seventh Circuit disagreed over the legal standard that ought to apply to an assessment of fees paid managers of mutual funds. In...
A Box for Abstain
Posted on August 15, 2008The just completed election for seats on the Yahoo board of directors featured a contest between ?yes? votes and ?abstain? votes on the Yahoo proxy forms. There was no alternative candidate on the proxy or any other proxy and there...
New Short Sale Rule Fades Without a Wimper
Posted on August 13, 2008The new SEC short sale rule died Monday without much of a notice. It was, from the beginning, only a technical change, applied only to 17 companies. The creation and death were political, giving something showy to Congressmen and women...
DHL/UPS Vendor Agreement Hits the National News
Posted on August 11, 2008The New York Times ran a feature on the DHL/UPS vendor agreement that will close the package sorting operation at a privately owned airport in Wilmington Ohio, costing Ohio 6,000 to 8,000 jobs. As noted here, McCain helped broker a...
Market Bottom?
Posted on August 11, 2008The governments efforts, well-intentioned, to cushion the current economic situation have a side effect -- they obscure the bottom. Market participants are sitting on the sidelines with cash waiting for a clear indication that the market has bottomed so they...
Government Tinkering with the Student Loan Market
Posted on August 11, 2008The federal government is now running the student loan market. How's it doing? Private sector lenders have left the market in droves and private-sector lending has dried up. In for a penny, in for a dollar. We are in danger...
Sherrod Brown and the Old Byrd Amendment
Posted on August 11, 2008My Senator, Sherrod Brown, is sponsoring a bill to return the disgraced Byrd Amendment to law. The the WTO declared illegal in 2006 the Byrd Amendment to a federal trade bill passed in 2000. The Amendment gave American businesses an...
Corporate Boards and Environmentalism Subcommittees
Posted on August 11, 2008Twenty-five percent of the the Fortune 500 companies now have a subcommittee of the their board of directors overseeing environmental concerns. Environmental activists are delighted. The debate is over whether these subcommittees are seriously engaged or just marketing (window dressing)...
Nancy Rogers and the DHL Contract: Politics in the Raw
Posted on August 07, 2008Ohio State Attorney General Nancy Rogers has asked DHL and UPS to save records on their recent contract to have UPS handle DHL's North American air shipments. DHL is the American subsidiary of a German company, Deutsche Post World Net....
Harvard Endowment Shines. Oh the Irony!
Posted on August 07, 2008The Harvard endowment returned seven to nine percent in the last fiscal year ending in June. The market? Down 12 to 15 percent. It was a stellar performance. Big gains came from treasurys, commodities (oil and gas, among others), and,...
GM Losing $1 Billion a Month
Posted on August 07, 2008GM is losing $1 billion a month and the board reaffirmed its support for the CEO Robert Stempel. That's a pretty low bar. The company is running on its considerable cash reserves and will do so until it turns a...
Yahoo Recount Raises Questions
Posted on August 06, 2008The recount in the Yahoo board of directors election more than doubled the "asbtain" votes for several of the inside directors, including the CEO. The asbtain votes are the only way to vote no on management sponsered proxies. The recount...
Missouri will Come to Appreciate New InBev CEO
Posted on August 05, 2008The new InBev CEO, Carlos Brito, is something rare in the United States -- frugal. Anheuser-Busch is a typcial American beer company with numerous perks for employees -- corporate jets, free beer, tickets to sporting events -- and high profile...
Hedge Funds and Tough Times
Posted on August 04, 2008Some are celebrating the troubles of some hedge funds in the current investment market. Their celebrations are false, however, as hedge funds, even though going through a difficult period, still seem on pace to beat common market indexes, which show....
Boards and ClawBacks
Posted on August 04, 2008Several boards of major financial institutions have made the decision not to exercise "clawback" provisions in CEO compensation agreements. The contracts permit boards to reclaim parts of a CEOs salary and benefit package if the CEO presides over periods of...
Martin' Conditions on the XM-Sirius Merger
Posted on August 02, 2008Keven Martin cast the deciding vote at the FCC in favor of the XM-Sirius Merger but imposed conditions. Among other things, Martin insisted on rate freezes, channel sale packages, and set aside channels for "minority" broadcasters and education. In so...
Ryan v Lyondell: Good Faith Reappears
Posted on August 01, 2008On July 29th, 2008, Vice Chancellor Noble published his opinion in Ryan v Lyondell. The Vice Chancellor denied summary judgment on a claim by shareholders that the management of Lyondell Chemical has sold the company to Basell AF for an...
KKR Goes Public
Posted on July 28, 2008KKR, the country's premier private equity fund manager, is going public. Apart from the obvious irony, a firm that made its money taking firms private is going private, there are other lessons here. First, KKR is not using the traditional...
Judges and Foreclosure
Posted on July 28, 2008The headlines proclaim that the country's judges are showing hostility to home foreclosures. In the body of the story are details of judges demanding technical correctness in proof of mortgagee rights to foreclose. Since many of the banks and the...
FCC Vote on XM and Sirius Expected
Posted on July 24, 2008On Wednesday, the FCC agreed to fine XM Satellite Radio Holdings and Sirius Satellite Radio Inc. $17.5 million and $2.2 million, respectively, to resolve the issue of interference the satellite radios cause with land-based radio stations. The two radio companies...
Housing Market Legislation Update
Posted on July 24, 2008On Wednesday, President Bush dropped his opposition to the current housing market legislation despite his objections to a $3.9 billion provision. It includes about $15 billion in housing tax breaks, including a credit of up to $7,500 for first-time home...
New Short Rule Causes Technical Problems
Posted on July 19, 2008The new technical rule on short sales has technical problems. Small banks, not covered by the rule, wonder whether it will drive short sellers their way. Market makers, exempted by the rule, wonder have the exemption works. A short sale...
New "Emergency" Short Sale Rules
Posted on July 16, 2008There is an advantage to having Cox, a politician, as head of the SEC. When a false crisis is in the press he knew to respond with a largely symbolic answer that the press can trumpet as well -- emergency...
Wait for It, Wait for It...
Posted on July 15, 2008August Busch IV announced that Anheuser-Busch would never be sold to a foreign buyer "on his watch." He is now extolling the virtures of the new deal with InBev. We know he gets a seat on the InBev board of...
Short the Regional Banks
Posted on July 14, 2008The national banks get all the news but the real rot is in the small regional banks. They hold bad paper and have much less cushion to survive the hard times. caveat emptor
Fannie Mae and Freddie Mac
Posted on July 14, 2008Well, the other shoe has finally dropped. Fannie Mae and Freddie Mac, government sponsored entities, are essentially bankrupt and Paulson is trying to figure out how to keep them afloat. They are "too big to fail" because they are too...
Dow Chemical Signals that Big Deals are Still Being Done
Posted on July 14, 2008On Thursday, Dow Chemical Co. announced that it will buy rival Rohm and Haas Co. for $18.8 billion. Financing for the acquisition includes an equity investment by Berkshire Hathaway and the Kuwait Investment Authority in the form of convertible preferred...
InBev Negotiates to Buy Anheuser-Busch
Posted on July 14, 2008Early Monday, Anheuser-Busch agreed to a $52 billion buyout by Belgian brewer InBev. When reporters called me about the case and asked for predictions they were always a bit disappointed by my view that the buyout would go through at...
Small Business Subsidies
Posted on July 08, 2008The federal government subsidies small business through a variety of programs. The necessary reauthorization of one of those programs, The Innovation Research Program, has put the focus on the vagaries of federal subsidies of business. Should small businesses that have...
InBev Announces Insurgent Slate of Directors for Anheuser-Busch
Posted on July 08, 2008InBev, the Belgian brewer attempting to purchase Anheuser-Busch has announced a slate of directors that it will run in its consent solicitation contest. Eventually, Anheuser-Busch will negotiate with InBev, which it currently refused to do, demand a higher price of...
CSX Ruling on Beneficial Ownership Confounds
Posted on July 07, 2008Judge Kaplan's ruling that swaps should be counted in the calculation of five percent ownership under Rule 13D disclosures has the corporate bar wondering whether swaps will be counted in a host of other stock calculations that trigger regulations, Rule...
Delaware Innovates, Agains
Posted on July 03, 2008Delaware will test its new law that gives its courts jurisdiction to respond to inquiries from the SEC on what Delaware corporate law provides. The SEC, in Rule 18-A8, allows firms to deny ballot space to shareholder resolutions that are...
Grasso Wins
Posted on July 02, 2008The ex-Chief Executive of the NYSE, Richard Grasso, won his long lawsuit filed by the state of New York over his compensation. The win was technical, the state had no standing, but a win nonetheless. Obscured in this fight is...
Exxon Valdez Damages Reduced
Posted on June 30, 2008On Wednesday, the Supreme Court ruled to cut the punitive damages for the 1989 Exxon Valdez disaster to $507.5 million. A jury decided in 1994 that Exxon should pay $5 billion in punitive damages and in 2006, a federal appeals...
InBev Goes Hostile
Posted on June 30, 2008On Thursday, Anheuser-Busch rejected the unsolicited $46 billion purchase offer from InBev. A copy of the letter to InBev CEO, Carlos Brito, stated, "we see that now could be opportunistic timing for you to make this acquisition, given the weak...
Governor Strickland's Gamble
Posted on June 24, 2008The Governor of Ohio, Strickland, is a nice fellow. He has decided to gamble with taxpayer's money. Pushing through a 1.6 billion dollar bond issue, he will use the money to "attract more business to Ohio." Of course, if he...
Attack on Oil Speculators
Posted on June 24, 2008I love to start the day with a chuckle. The news reports of the hearing Monday before the House Energy and Commerce Subcommittee on Oversight and Investigations are a hoot. Dingell (D-Mich) and others want to attack "speculators" in the...
SEC Gets it Right??
Posted on June 24, 2008The SEC has proposed rules that reduce long standing requirements that certain investments have specified ratings from rating agencies. The requirements give rating agencies a government backed monopoly (oligopoly perhaps). The governments response has been to complain about the rating...
Huntsman Sues Appollo
Posted on June 24, 2008A few days ago I noted that Appollo has filed for declaratory judgment in Delaware to get "permission" to abort its buyout of Huntsman. Huntsman has now sued Appollo in Texas attempting to force Appollo to close. We again have...
Cox and the SEC
Posted on June 23, 2008Washington is humming with the buzz that Chairman Cox of the SEC was left out of the Bear Stearns buyout planning. Now comes news that a "formal agreement" between the Fed and the SEC will, in essence, cede some of...
Bear Stearns Hedge Fund Managers Indicted
Posted on June 23, 2008Former Bear Stearns hedge fund managers, Ralph Cioffi and Matthew Tannin, were arrested and indicted on wire and securities fraud charges on Thursday following a federal criminal probe into the collapse of two funds they managed. The failure of the...
Canada Gets it Right, Darn
Posted on June 21, 2008The Canadian Supreme Court, without a written opinion, ruled unanimously in favor of Bell Canada and its buyout group, overruling a lower court that had ruled in favor of bondholders and held up the buyout. Now the buyers, who are...
Courts and Mergers, Closed or Not
Posted on June 19, 2008If one company wants to acquire another or the companies want to merge, the parties must now expect a court hearing and a certification from a judge is required to close. Now if one party wants to call off a...
Governor Blunt on the Anheuser-Busch Takeover
Posted on June 18, 2008Missouri Governor Roy Blunt, a vehement opponent of InBev's proposed takeover of Anheuser-Busch, has asked the Federal Trade Commission to review the deal, saying that he is "concerned that this sale would have destabilizing impacts on our nation and state's...
Buffett for the Insurgents
Posted on June 18, 2008On Wednesday, Belgian newspaper De Standard reported that Warren Buffett supports InBev in its cash offer for Anheuser-Busch. Buffett's company, Berkshire Hathaway, has a 35 million share stake in the beer conglomerate, worth approximately 5% of the company...
Anheuser-Busch on the Block: What a Difference Fifteen Years Makes
Posted on June 17, 2008The potential sale of Anheuser Busch to a Belgian company, InBev, has produced the normal local efforts to block the sale from the Missouri governor, the St. Louis mayor, and St. Louis employees. What is different is the heavy push...
Marsden Study on Taxes
Posted on June 16, 2008Keith Marsden has released a new study, "Big, Not Better," on the tax policies of 20 countries over the past 20 years. He grouped the countries into two groups, those with slimmer governments (revenue and expenditure under 40 percent of...
Another Hatchet Job By Morgenson
Posted on June 15, 2008In today's business section of the New York Times, Gretchen Morgenson writes, under her op-ed title "Fair Game", of the buyout by a private equity firm, TPG, of the otherwise failing savings and loan bank Washington Mutual. It is total...
Equity Swaps Count To 13D Calculation
Posted on June 13, 2008A federal district court judge in New York City has ruled that a group of hedge funds that used equity swaps to gain future positions in CSX should have disclosed those positions in their 13D filing. The equity swaps gave...
Outsourcing and Fuel Costs
Posted on June 13, 2008There is strong evidence that high fuel costs have stopped outsourcing of American jobs to foreign factories. Ohio unions should welcome the high cost of crude.
Speculators Under Attack, Again
Posted on June 13, 2008When a major market in the United States exhibits price rises and, later, price declines, we like to blame "speculators." The New York Times has a front page story noting that "financial speculators...have a target on their backs..for high gas...
Microsoft Drives Yahoo into Arms of Google
Posted on June 13, 2008Microsoft's attempt to buy Yahoo drove Yahoo into an agreement with Google to share ad revenue. Google is, in essence, a white knight, a party that cuts a deal with a target of a hostile bid to foil the bidder....
Buffet on "Fund of Funds"
Posted on June 12, 2008Warren Buffett, the value investor who runs Berkshire Hathaway, has entered into a bet with a firm that runs funds of hedge funds over whether or not funds handpicked by experts can beat the S&P 500 index over a 10...
This Bud's for Belgium
Posted on June 12, 2008American beer giant Anheuser-Busch confirmed Wednesday that it had received a cash offer from Belgium-based InBev for $65 per share. The buyout sum totals $46B USD, but only 30B euro. The governor of Missouri is in a panic, trying to...
Employees in Employee Buyout Get Fired
Posted on June 09, 2008Tribune Co. Chairman, Sam Zell, disclosed Thursday he plans to cut the staffing size of newspapers across the board. Tribune Co. intends to downsize and sell assets to pay down $13 billion in debt Zell incurred when he took it...
Krugman on Stagflation
Posted on June 09, 2008A student, Jordan French wrote the following: Unions Make the Wage-Price Spiral Go Round: Paul Krugman argues we aren't about to see a return of 70's style stagflation because there's no sign whatsoever of the wage-price spiral that, in the...
Insurance Brokerage Buyouts
Posted on June 09, 2008On Monday, No. 3 global brokerage Willis Group agreed to buy Hilb Rogal & Hobbs for $2.1B. In 1998, leveraged-buyout giant KKR had bought out then-troubled Willis for about $3 a share and took it private. Industry leaders Aon Corp.,...
Ratings Agency Rules
Posted on June 04, 2008New York Attorney General Cuomo has cut a deal with the rating agencies to change the way they will be for fees. The agencies at present are solicited by issuers, issue ratings, and then ask for fees. Issuers that are...
Brocade and Stock Options Backdating
Posted on June 04, 2008Late Monday, Brocade Communications Systems, Inc., agreed to pay the plaintiffs in a class-action lawsuit $160 million to settle allegations the network equipment maker injured investors by backdating stock options between 1999 and 2004. Arkansas Public Employees Retirement System filed...
A Dutch Company Blocks an Acquisition
Posted on June 04, 2008On Tuesday, Staples Inc. raised to $2.6 billion its hostile bid for Dutch office supplies distributor Corporate Express NV. Under Dutch bidding rules, Staples cannot raise its offer again. Rather than accepting two previous buyout offers from Staples, Corporate Express...
Germany Plans to Privatize Freight Railroad
Posted on June 04, 2008Last Friday, according to the decision passed by Germany's parliament, the Bundestag, Deutsche Bahn's passenger, freight and logistics railway divisions will be spun off into a holding company, of which 24.9 percent will be privatized. The government plans to partially...
P&G sells Foldgers to Smuckers
Posted on June 04, 2008On Tuesday, J.M. Smucker Co. stated its intent to purchase the Folgers brand from Proctor and Gamble in an all-stock deal. Given Folger's annual sales in excess of $1.6B, the price for the business could be upwards of $2B. The...
Corporate Income Tax
Posted on June 02, 2008Scholarly research is supporting what corporate executives have known for years, corporations do not pay corporate income tax, they pass it on. At issue has been to whom. Most assumed consumers get hit but no research is showing that company...
Exxon Shareholder Meeting: Resolutions Lose
Posted on May 30, 2008Everyone is claiming victory after three notable shareholder resolutions failed at the spring Exxon annual shareholder meeting. The shareholder's, supported by Rockefeller heirs, attracted close to 40 percent of the votes cast. One of the resolutions was structural -- to...
Shareholders Approve Bear Stearns Deal
Posted on May 30, 2008On Thursday, Bear Stearns Company shareholders approved JPMorgan Chase & Co.'s $2.2 billion buyout of the investment bank. The Bank is buying Bear Stearns for approximately $10 per share. the meeting was short and lightly attended. Commenting on the ten...
The SEC Going the Wrong Direction on New Ratings Agency Regulations
Posted on May 29, 2008The SEC is going the wrong direction again. The poor performance of the country's rating agencies in the current structured financial debacle should be no surprise. The agencies have been performing poorly for some time. It just took the current...
Airline Mergers
Posted on May 29, 2008US Air and United will not merge. We should not weep. Airline mergers have a terrible recent history. Most are prompted by airline desires to restructure. A merger ought not be needed to restructure a poorly performing airline; CEOs find...
First Quarter GDP Figures: No Recession
Posted on May 29, 2008The final figures are in for the first quarter of the year and the estimate was low. The final figure is a GDP growth of .9 percent; the estimate was .6 percent. So once again, we are not in a...
Germany Backs VW Anti-Takeover Law
Posted on May 28, 2008For some time I have watched the dispute over the a special German law that protects VW from takeovers. The law also gives a government sub-unit, Lower Saxony, effective veto power of all significant strategic decisions. It also capped voting...
The Evil Financials
Posted on May 27, 2008Kevin Phillips new book will be the sacred text for those who want to blame financials for the fall of the American economy. Oh, by the way, fianancials position as number one in its shares of the S&P 500, has...
US Auto Companies
Posted on May 26, 2008On Friday, General Motors Corp.'s stock dropped 5 percent after the company reported that strikes at some of its own plants and parts supplier American Axle will cost the automaker about $2 billion, before taxes, in the second quarter. This...
Canadian Courts and the Bell Canada Buyout
Posted on May 23, 2008As mentioned yesterday on this site, a Canadian appeals court permitted Bell Canada debt holders to complain about the effects of a negotiated leveraged buyout on the value of the debt securities. The effect? The deal is in danger and...
Sixth Circuit and Mutual Fund Fees
Posted on May 23, 2008Judge Frank Easterbrook, chief judge of the Sixth Circuit, has released an opinion that withdraws federal courts from overseeing the fees of mutual fund managers. If fund managers make full disclosure, the judge says courts should not "cap" the fees,...
Say on Pay: A Bust?
Posted on May 22, 2008The Wall Street Journal todays has a nice piece by Tom McGinty on shareholders resolutions that ratify executive pay. Investors in struggling banks do not seem to want to vote for the resolutions. I am not surprised. I suspect that...
Canada on Shareholder Primacy: Not
Posted on May 22, 2008A Canadian Court of Appeals, reversing the trial court, has held that debenture holders in the leveraged buyout of Bell Canada have a right to contest to terms of the deal. Canada has a provision found in Commonwealth corporate codes...
New Farm Bill an Embarrassment
Posted on May 22, 2008President Bush has vetoed the new farm bill and his veto is sure to be overridden. Yet most all economists agree that it is a boondoggle. How do we get such bad pieces of legislation? The rest of the country...
Message to Private Equity: Rescue US Please
Posted on May 20, 2008Private equity buy-out firms have also had an unfavorable press. According to critics: They buy at dear, distress prices, hurt business constituencies when they restructure operations, flip the business, and suck all the money out of a going business...
The New Target of the Left: Financial Institutions
Posted on May 19, 2008The left is constantly looking for targets. For some time the target was hedge funds. Now the financial crisis has produced a new target, financial institutions. Hedge funds did not misbehave as an industry in the sub-prime mortgage crisis, some...
The Index Fund Internecine Fight
Posted on May 17, 2008The New York Times has discovered the index fight. Why? Because academics have come to calling each other names over the dispute. The fight itself is definitional. The traditional "index" fund is a fund that matches a well known market...
Bubbles: Free the Shorts
Posted on May 16, 2008The Wall Street Journal today has a wonder front page story on developments in the study of financial bubbles. (Justin Lahart does a marvelous job) The problem is in the recommended solution by the new scholars: More government interference. A...
The Recession Scare
Posted on May 15, 2008Now that the preliminary first quarter GDP data is in showing positive but small growth and the markets have indicated we have bottomed in all but housing prices (under which Congress is trying to put an artificial floor, a mistake)...
Freddic Mac: What a Mess
Posted on May 15, 2008Freddie Mac, one of two United States chartered companies that own or guarantee the bulk of home mortgages, recorded a net loss for the quarter that was reduced by accounting gimmickry. The true loss is close to $2 billion. Freddie...
GE Starts its Bust Up
Posted on May 15, 2008GE, a company that should go through a classic series of spin-offs to focus on its core business, has started the process of divesting some of its units. The problem? It is divesting its appliance unit, its best known consumer...
Three SEC Chairs for Obama
Posted on May 14, 2008Three ex-Chairs of the SEC for Obama, the headlines scream. Two were Democratic appointees -- so what-- they are frontrunners. But one Donaldson, was a Republican appointee--is Obama better for the markets than McCain. No. Donaldson was a Republican appointee...
Univ. of Colorado and the new "Chair for a Conservative"
Posted on May 14, 2008My old place of employment made the front page of the Wall Street Journal yesterday by announcing a new Chair for a Conservative Thinker. There are so few conservatives on campus that the provost has decided to use reverse affirmative...
Icahn and Yahoo
Posted on May 14, 2008Carl Icahn is threatening a proxy fight for some seats on the Yahoo board in an effort to restart the deal with Microsoft. The sad part is that he ought not to have to use the proxy fight avenue. He...
Thanks Cox for Helping Me
Posted on May 14, 2008I hold stock in Goldman Sachs, an investment bank that despite not getting caught holding bad mortgages has been hammered in the stock market (dropping from a high of 210 to a low of 165 or so). Recently sanity has...
Exxon Not Well Managed?
Posted on May 13, 2008Exxon, a company that had over 12 billion dollars in profits last year (perhaps the highest in real dollars in modern history for any private company), raising howls of protest from Congress and the left, is apparently not well managed....
Foreign Companies Not Registering in the US
Posted on May 13, 2008Wayne Carnall, Chief Accountant in the Securities and Exchange Commission of Corporation Finance confirmed May 1 what we all have suspected. Fewer foreign based companies are registering in the United States. Moreover, over many foreign companies listed in the United...
Congress to Regulate Oil "Speculators"
Posted on May 12, 2008Congress is considering a bill that will apply CFTC regulations on oil futures speculators to a London based futures trading market -- the Intercontinental-Exchange (ICE). There are two problems: First, any regulations of this type will not affect international market...
Government Intervention
Posted on May 11, 2008Oh good gracious. Peter Bernstein article in todays NYT's Sunday business section ("When Should the Fed Crash the Party?") is so predictable it is a bore. He trots out all the cruel statements from "anti-interventionists" and then mentions all the...
Congratulations to the Moritz Class of 2008
Posted on May 11, 2008Saturday was the graduation ceremony for the Moritz Law School Class of 2008. All those attending had a great time. Thanks again for the honor of selecting me to address you so that I would embarrass myself once again in...
Wireless Deal Forms a New Blockbuster Company
Posted on May 10, 2008On Wednesday, Sprint Nextel and Clearwire agreed to combine their wireless broadband businesses in a $14.5 billion deal to form a new communications company. The new company, which will be named Clearwire, will deploy the first nationwide mobile WiMax network...
The Government "Fix" of the Student Loan Mess
Posted on May 08, 2008Congress has decided to "fix" the student loan mess by purchasing those student loans that it guarantees against default (technically the guarantee is only for 90% of the default). Direct government lending now accounts for only 22 percent or so...
Plaintiff's Securities Lawsuits
Posted on May 08, 2008Plaintiffs lawyers who have filed class action securities suits relating to the sub-prime loan crisis face Congressionally mandated higher pleading standards. The standards were a crude attempt by Congress to stop an acknowledge problem in the United States - an...
Yahoo's Deal with Google: A Takeover Defense?
Posted on May 07, 2008Yahoo negotiated a strategic partnership with Google contingent on Yahoo staying independent (i.e. not selling to Microsoft). The deal lead Yang to demand a higher price, too high a price for Microsoft to pay. Shareholders of Yahoo can bring a...
Shell and BP "Retention Bonuses"
Posted on May 07, 2008Shell and BP roiled their investors by announcing plans to pay huge, one-time ("one-off") "retention bonuses" to senior executives. They make no sense. A "one-off" retention bonus, once made, will not retain anybody once the bonus is paid. The bonus,...
Hedge Fund Investors Still Bullish
Posted on May 07, 2008Despite selected academic studies showing hedge fund investors that the investments do not "beat the market," the hedge fund investors themselves disagree. The investors expect to put $200 billion in hedge funds this year and expect their funds to make...
"Say on Pay" a Bust?
Posted on May 06, 2008Pundits have spent years, years, trying to get a shareholder vote on executive pay packages. Be careful what you wish for. First, shareholders have voted for some time on parts of executive pay packages (most option programs) and overwhelmingly supported...
Google's Clever
Posted on May 06, 2008Google used a carrot and a stick to meddle in the Microsoft bid for Yahoo. It state that it would fight the deal on anti-trust grounds and then cut a contingent deal with Yahoo to share valuable technology if Yahoo...
Yahoo Successfully Blocks Microsoft Offer
Posted on May 05, 2008Microsoft has withdrawn its offer for Yahoo. The Yahoo board demanded $37 a share and Microsoft only offered in the low 30s. The Yahoo board demand is cheeky considering that the Microsoft offer came on the heels of a four...
Ohio Has Elected a Buffoon as Its State Attorney General
Posted on May 04, 2008Marc Dann is Ohio's Attorney General and he is a buffoon. We elected him on his populist rants and an anti-Republican vote stemming from corruption in then Governor Taft's office. He became the darling of the national media because he...
The Markets and Sup-prime
Posted on May 04, 2008The markets are correcting. Distress financial buyers of sub-prime mortgages from banks are getting distress prices and willing to work with borrowers to forgive loan terms to keep them in their houses. The market is clearing. The major problem is...
Sup-prime and Governmnet Rationale Creep
Posted on May 04, 2008An increase in mortgage defaults in the sup-prime market have hurt the country's financial institutions and, according to the press, hurt cities as abandoned housed devalue neighborhoods. Government, angry over abuse by mortgage brokerage agents of borrowers, has put programs...
Sarbanes-Oxley Compliance Costs Decline
Posted on May 01, 2008A survey of 185 companies by Financial Executives International found that compliance costs for Sarbanes-Oxley's internal controls audit requirements, Section 404, had declined 5.4% last year. Total audit costs were up 2%, however. The data will give some solace to...
We Are Not in a Recession
Posted on April 30, 2008The Commerce Department released preliminary data on the GDP for the first quarter of this year. It showed a growth rate of .06%. Granted this is not stunning but is it not negative -- we are not now and have...
Political Arbitrage
Posted on April 29, 2008Business is focusing on the election and guessing that a very liberal Democratic will win the White House and that Democrats will control both houses of Congress. Politics will change and business parameters will change. We will see higher investment...
Liberty Mutual to buy Safeco
Posted on April 28, 2008On Wednesday, property and casualty insurer Safeco Corp. agreed to be acquired by Liberty Mutual Group in a $6.2 billion deal. The acquisition would make Liberty Mutual the fifth-largest property and casualty insurance-provider in the U.S. and the second-largest surety...
Mars to Acquire Wrigley
Posted on April 28, 2008Today, Mars, Inc., and Berkshire Hathaway, Inc., agreed to acquire Wrigley Jr. Company for about $23 billion. Mars will spend $11 billion, with Goldman Sachs providing a $5.7 billion credit facility, and Berkshire will provide provide $4.4 billion of subordinated...
Clear Channel Will Win or Lose in Texas
Posted on April 28, 2008The New York Court has refused to block the Texas suit by Clear Channel against the lenders of the buyout group for tortuous interference with the Clear Channel buyout. The lenders have refused to lend. So we are back to...
Hedge Fund Mavericks
Posted on April 28, 2008Reading about David Einhorn of Greenlight Capital is a delight. He is a maverick with strong opinions on the SEC, boards of directors, and the fed. A financial system that can supports such folks (as opposed to concentrations of power...
SEC Asleep at the Switch or Did It Throw the Wrong Switch?
Posted on April 27, 2008Critics have long suggested that the SEC has been asleep at the switch when it comes to new financial frauds. The SEC may have done more--it may have thrown the switch to the wrong track. In 2004, the SEC changed...
Questions About National City's Outside Directors and Executives
Posted on April 27, 2008There is a very telling note to the recent $7 billion infusion of money into National City Bank by a hedge fund club. The leader of the hedge fund group, Corsair Capital Vice Charmian Richard Thornburgh, is joining the board...
Arbitration: "Be Careful What You Wish For"
Posted on April 26, 2008Not long ago arbitration was one of the darlings of the anti-court, anti-lawyer crowd. Courts and lawyers cheated poor people and arbitration was a solution. Now mandatory arbitration clauses are common in consumer industries and there is a bill pending...
Wendy's Bought by Peltz
Posted on April 25, 2008Thursday, Wendy's International, Inc. agreed to be acquired by Arby's parent Triarc in a stock deal valued at about $2.3 billion excluding debt. The deal will create the third-largest fast-food company, with approximately 10,000 restaurants and annual sales of more...
Private Equity Still Flush with Cash
Posted on April 25, 2008Private equity funds are sitting on close to one trillion dollars, one trillion dollars, on uninvested cash. Investors believe the funds will do better than alternative investments -- no matter what the academics say.
Rating Agencies
Posted on April 25, 2008The SEC is finally, finally, tackling the problem of rating agencies. They are very, very late to the party on the matter. Moreover, the SEC has found that its running up against Reg. FD and insider trading rule problems in...
Student Loans: Wrecked
Posted on April 24, 2008Right-thinking people have long fussed about the "burden of student loans" on idealistic young students who want to go to school on other people money and do "do good". We have devised forgiveness programs and capped interest rates. The wife...
States as Creditors in Bankruptcy: Ohio and Skybus
Posted on April 23, 2008Ohio has found itself as a major creditor in the bankruptcy of Skybus Airlines and it will, as other creditors will, get nothing. The Ohio Department of Development gave Skybus 1.5 million taxpayer dollars to locate in Columbus. One year...
National City's Woes Affect Ohio Pension Plans
Posted on April 23, 2008It was an easy prediction to anticipate shareholder lawsuits over the National City buyout. Shareholders have lost 84% from highs and the hedge fund buyout group is diluting existing shareholders by close to 70 percent at a below trading market...
Zell to Sell Newsday to Murdoch?
Posted on April 23, 2008Tribune CEO Sam Zell indicated in a conference call last week that he may sell Newsday and other Tribune assets, a reversal of his plan to keep Tribune's paper businesses in place. Rupert Murdoch indicated interest in buying Newsday from...
Intrepid Potash IPO a Success
Posted on April 22, 2008Agri-business in the United States is booming. Note the success of the Intrepid Potash IPO in the United States yesterday. Shares of the pure-play agricultural nutrient producer, Intrepid Potash, Inc., began trading yesterday on the NYSE. The 30 million-share IPO...
Hedge Funds to the Rescue: National City
Posted on April 22, 2008In what has to be galling to the many hedge fund critics, the nation's hedge funds are rescuing the country's ailing financial system. After the overblown hysteria directed at hedge funds in the past two years we have discovered that...
A Ridiculous Example of Executive Compensation Disclosure
Posted on April 21, 2008Footnoted reports on a silly disclosure in a recently filed proxy statement: Here at footnoted, we?re all about better disclosure. But as with most of the other good things in life, there are certain times when there is simply too...
Blockbuster's "Hostile Bid"
Posted on April 21, 2008There is no such thing as a hostile takeover anymore. A hostile takeover is a takeover that occurs without the support of the incumbent board of directors of the target. Anti-takeover statutes and firm specific defenses make this impossible. A...
National City Corporation's Deal
Posted on April 21, 2008The board of directors of National City Corporation is going to sell 50 percent of the company's stock to a club group of hedge funds. The price? Five Dollars a share. The trading price of the shares when the deal...
Income Disparity in United States: It's not a conspiracy
Posted on April 20, 2008Most now know the data. In the last few years income, as recorded on income tax returns, of the very very wealthy as increased as a percentage of the total amount of income reported. In 1980 the top .01 percent...
How Good People Have Come to Look Like "The Three Stooges"
Posted on April 20, 2008We have three very talented and experienced people running our capital markets. Chris Cox, a well-respected, capable member of Congress, is Chairman of the SEC; Henry Paulson, who ran the world's best investment bank -- Goldman, is Secretary of the...
It's the Liquidity, Stupid!
Posted on April 18, 2008Many in the market claim that we are in a "credit crunch." In other words, folks are not loaning each other each money. They are partially right. There is much money on the sidelines waiting to get in; it is...
The Zell Deal for Control of Tribune
Posted on April 18, 2008I am still somewhat flummoxed about the details of Sam Zell's successful deal for operating control of the Tribune Corporation. In the first step of the transaction, the Zell Entity invests $250 million in Tribune for (1) 1,470,588 shares and...
The Liquidity Crunch Hits Talbots & Sears
Posted on April 18, 2008Dale's post below brought to mind an example of the liquidity crunch and banks wanting to stay on the sidelines. Here's the report from the AP: According to a filing with the Securities and Exchange Commission, Talbots said HSBC will...
GE's Problems Continue
Posted on April 17, 2008Ex-CEO John Welch has publicly criticized the current CEO Jeffry R. Immelt for not being correct in Immelt's projections of earnings. It is a very rare public moment. The problem is, of course, deeper. GE's stock has slumbered since Immelt's...
Obama and Investment Taxes
Posted on April 17, 2008The Dublin Intrade market has Senator Obama as the prohibitive favorite in the Democratic primary and as the favorite for President of the United States in the general election in November. So we ought to pay careful attention to what...
New "Best Practices" Guidelines for Hedge Funds
Posted on April 16, 2008A group of hedge fund managers, backed by treasury Secretary Hank Paulson, have just published a "Best Practices Guide" of hedge funds. The Guide contains the expected -- more transparency and better internal valuation of assets. Although the Guide is...
Another Large Airline Merger
Posted on April 16, 2008On Monday, Delta Air Lines reached an agreement to take over Northwest Airlines. Delta said the combined airline will have an enterprise value of $17.7 billion and over $30 billion in revenue placing it ahead of Fort Worth, Texas-based American...
The Expanding Role of the "Financial Stability Forum"
Posted on April 16, 2008A perhaps underreported aspect of the credit crunch is the growing role of internation regulatory efforts such as the Financial Stability Forum (FSF). The FSF, as described by Treasury Undersecretary David McCormick, "brings together supervisors, central banks, finance ministries, the...
Sorkin's Interview with Stephen A. Feinberg
Posted on April 15, 2008Sorkin, noted business columnist for the New York Times, has ripped Stephen A. Feinberg, founder of Cerberus Capital Management, for being "cold and ruthless." So, Feinberg, following the dictates of modern public relations specialists, did penance and invited Sorkin in...
Israel, Founder of Bayou Group, a Hedge Fund, Goes to Jail
Posted on April 15, 2008Samuel Israel, III, the co-founder of a hedge fund, Bayou Group, was sentenced to 20 years in prison two days ago. His Connecticut based hedge fund took $400 from investors and lied to them about profits and losses. They fabricated...
Turn-Around Funds: Apollo and Appalossa's Woes
Posted on April 14, 2008Turnaround private equity funds that purchased struggling companies in good times, with leverage, have found that their turnaround plans and suffering the with economy. Plans that may have worked in good times have no chance in bad. Apollo Management is...
A Race Between Court in the Clear Channel Busted Buyout
Posted on April 14, 2008There is a race between two judges in the litigation over the busted Clear Channel buyout. A state court in Texas is racing to beat a court in New York. Clear Channel is based in San Antonio and is attempting...
Questions on KPMG's Audit of New Century
Posted on April 13, 2008The surprise failure of New Century Financial, one of the country's largest subprime mortgage lenders, has led to an all too familiar question -- how could the auditors have given the company a clean bill of health right up until...
Cadbury Schweppes Shows GE the Way
Posted on April 13, 2008On Apr. 11, Cadbury Schweppes shareholders voted to spin off the company's U.S. drinks division. The newly independent chocolate, candy, and gum business is to be listed on the London Stock Exchange on May 2. The new U.S. drinks business?which...
Alice Rivlin Scares Me: Good Intentions Ought Not to Excuse Folly
Posted on April 11, 2008In an editorial in todays NYT's Alice Rivlin showed why she should never have been a government official, much less the former vice chairman of the Federal Reserve and the Clinton's director of the Office of Management and Budget. Consider...
GE Should Bust Itself Up
Posted on April 11, 2008General Electric reported that its first-quarter net income fell 6% to $4.3 billion, or 43 cents a share, from $4.57 billion, or 44 cents a share, a year earlier. GE also lowered its 2008 guidance substantially. The company is one...
Protectionist Canada: Ohio has a new shinning example
Posted on April 11, 2008Canada invoked the rarely used Investment Canada Act of 1985 to block a negotiated acquisition of a Canadian company, MacDonald Dettwiller, by an American company, Alliant Technsystems. The Canadian company is in the satellite business. On the announced of the...
National City Corp. on the Block
Posted on April 10, 2008National City Corp, the ninth-largest U.S. bank, is looking to sell itself and is in talks with more than one potential buyer. Fifth Third Bancorp and KeyCorp are interested.. A sale to a bank such as Fifth Third, which is...
Novartis Buys Alcon From Nestle
Posted on April 10, 2008After tight-lipped negotiations which started in December, Nestle and Novartis inked the $39 billion sale of Nestle-owned Alcon to Novartis. The Alcon deal is the first such deal of its kind, according to A&O partner Daniel Cunningham, who worked on....
Top Ten Hedge Funds
Posted on April 10, 2008The Trader Monthly has data out on the top pay for hedge fund managers for last year. The top manager, John Paulson in New York, made $3 billion, more than the GDP of Rwanda. If he made $3 billion, his...
The Goose That Lays the Golden Eggs
Posted on April 03, 2008Once the Democrats select a Presidential candidate and focus on running against the Republican candidate, we are going to hear a great deal about tax cuts and the efficacy of "supply side" or "trickle down" economics. The argument will focus...
The Uptick Rule
Posted on April 03, 2008In July of this year the SEC finally overturned the "uptick" rule on short selling. The rule disables short sellers from shorting stock until after an uptick in the stock price. Jim Cramer has called the SEC "morons'' for repealing...
Sovereign Wealth Funds
Posted on April 03, 2008When the sovereign wealth funds showed up to invest in United States financial institutions, my first response was great -- we enjoyed Japan's sucker money in the 1990s and now we will enjoy this sucker money as well. Well, how...
The Clear Channel Deal and the Court
Posted on April 03, 2008This is choice. The banks financing the $19 billion privatization of Clear Channel Communications by Bain and Lee Partners want to back out. The buyout firms, sitting on a $600 million termination fee obligation, want to close. Clear Channels controlling...
James E. Cayne and the Bear Stearns Collapse
Posted on April 03, 2008The chair of Bear Stearns, James E. Cayne, was a high flier -- brash and self-important. He held 1$ billion in Bear Stearns stock. After the collapse of Bear Stearns, his stock, which he sold, was worth $61 million. Ordinary...
Treasury's New Plan
Posted on April 03, 2008By now most have in the financial community have digested the details of Sec. Paulson's grand plan to reorganize federal financial regulations in the country. The plan augments the power of the Federal Reserve Board to step in when there...
Pension Benefit Guaranty Corporation's New Policy
Posted on March 26, 2008Along with discussion of Bear Stearns, the WSJ's opinion page has a helpful discussion of another moral hazard problem: the Pension Benefit Guaranty Corporation. The PBGC is a government safeguard against shortfalls by company pensions. The PBGC is funded by...
The Fed, the Treasury and the Bear Stearns Deal
Posted on March 25, 2008Two government units, the Treasury and the Fed, are negotiating the JP Morgan buyout of Bear Stearns. This should give us great pause. First Paulson has agreed to write a $29 billion credit derivative swap on Bears risky mortgage backed...
Treasury, Abu Dhabi and Singapore Agree to Basic Principles for SWFs
Posted on March 24, 2008The Treasury Dept. and two of the largest and mosty active SWFs have agreed on some basic principles for sovereign wealth investment. The press release from Singapore is here. The principles are essentially the those of the framework set out...
Two Items on Financial Restatements
Posted on March 17, 2008The SEC's Advisory Committee on Improvements to Financial Reporting met last week in San Francisco, and discussed a February report from the Committee finding that companies are restating financials "for trivial reasons that have no bearing on their true financial...
A Plug (Sort of) for XBRL
Posted on March 10, 2008The SEC has expended a lot of effort in promoting XBRL (extensible business reporting language), which essentially codes data within electronic SEC filings so that the data can be searched and analyzed more easily. The SEC even invites software engineers...
Sovereign Wealth Funds as Shareholders
Posted on March 07, 2008I have posted to SSRN a preliminary draft of a paper entitled "Sovereigns as Shareholders". Here is the abstract: Abstract: This paper considers the increasing impact of sovereign wealth funds as equity investors. Sovereign investment has been viewed with suspicion...
New Form D Requirements
Posted on March 04, 2008The SEC continues to tinker with private equity offerings by proposing changes to Form D, the disclosure document for Reg D offerings. All companies must file Form D electronically by March 16, 2009 (or voluntarily after September of this year)....
Rule 144 and 145 Changes
Posted on March 04, 2008Effective February 15th, new versions of SEC Rules 144 and 145 went into effect. There are some major changes hidden here. First, Rule 144 reduces the required holding period to only six months for "restricted stock" of a reporting issuer....
Globalization and Prosperity
Posted on March 04, 2008Amid the discussions about the detrimental effects of NAFTA on Ohio (see Dale's post on "Ohio's Economy" below), a soon-to-be published study of globalization's effects on the European Union states that "the European Commission estimates that at least a fifth...
London Again the Most Competitive Financial Center . . .
Posted on March 03, 2008according to the third in a series of reports commissioned by--you guessed it--the City of London. The rankings, which have New York second and Hong Kong a distant third, are based on surveys of professionals. The surveys focus on 14...
Student Loans
Posted on February 28, 2008Educators have long been concerned over the heavy loan debt carried by students once they leave school. Their primary concern is that the loans constrain the work choices the students have once they graduate. In other words, students cannot take...
Wachovia's Lawsuit Against Providence Equity
Posted on February 27, 2008Providence Equity Partners, a private equity firm, signed a deal to purchase television stations from Clear Channel. Wachovia agreed to finance the $500m deal. Providence and Clear Channel agreed to a reduced purchase price because the stations revenues were down...
The Take-Two Offer
Posted on February 27, 2008Electronic Arts has made a hostile bid for Take-Two Interactive. The Take-Two board has decided to take the low road. It immediately awarded the company's managers, who have not done well, generous severance packages contingent on any control change and...
Ohio's Economy
Posted on February 27, 2008The debate last night in Cleveland Ohio between Barack Obama and Hillary Clinton featured a discussion about the Ohio economy. Apparently both candidates blame NAFTA and other free trade agreements for the decline in manufacturing jobs in Ohio. Both candidates...
Loser Pays Rule?
Posted on February 27, 2008On Valentine's Day Rep. Jeb Hensarling re-introduced a bill that Rep. Richard Baker has been pushing for at least two years--the Securities Litigation Attorney Accountability and Transparency Act. Inter alia, the bill states that "(A) DETERMINATION REQUIRED- If the court...
Deal Are Down But Litigation Over Deals is Up
Posted on February 26, 2008The number of deals has fallen dramatically this year but litigation over pending deals is way up. As note by Karnitichning, Rappaport & Ng in today's Wall Street Journal in a timely piece, collegiality it out and "law of the...
Visa's Public Offering
Posted on February 26, 2008Visa has announced plans for the single largest intial public offering in American history. It plans to sell $17.1 billion in stock in March. The announcement is both good and bad news, in a way. It is good news in...
Sweet Irony
Posted on February 26, 2008A piece in the New York Times by Andrew Ross Sorkin today castigates CEOs for not doing more M&A deals in the current, volatile stock market. Sorkin notes that many deals fail and that those that are successful are often...
Profitable Government Buyout/Bailouts
Posted on February 25, 2008Whenever a market is in severe distress, we can be sure that several commentators, many of whom are economists, will argue for a structured government buyout, bailout. "The government should buy.... and then resell the assets slowly over time. The...
The Fed
Posted on February 25, 2008New evidence suggests that the substantial drops in interest rates by the Federal Reserve have 1) not aided substantially the stock or debt markets and 2) have enhanced fears of inflation. The Fed can have four interrelated goals: help the...
Club Deals in Private Equity Buyouts
Posted on February 25, 2008There has long been a question about whether potentially competing private equity firms all after the same company could agree amongst themselves to make a joint offer, a club deal, rather than compete with each other on price. Is the...
Competitiveness & Debt Markets
Posted on February 25, 2008At last week's ALI-ABA conference on corporate governance, Hal Scott (who leads the Committee on Capital Markets Regulation) announced that his Committee likely would expand its review of U.S. competitiveness to include private debt markets. Meanwhile, Scott produced data indicating...
"Shotgun" Entrepreneurship
Posted on February 20, 2008The Financial Times reports on a trend in entrepreneurship towards a "shotgun" approach to developing new business ideas: The quest to develop the internet's next big thing can be full of unexpected twists and turns. PayPal, the online payments service,...
Theft and Insider Trading
Posted on February 18, 2008Posted by: Paul Rose In Friday's New York Times, Floyd Norris discusses a case in which a hacker obtained material, non-public information and made $296,456 in trading profits. Do insider trading laws require him to forfeit the gains? This situation....
SEC Commissioner Atkins Speaks Out on SAB 99
Posted on February 15, 2008Posted by: Paul Rose At last week's "SEC Speaks" conference, Commissioner Paul Atkins addressed, among other things, the "age-old" question: What does it mean to be material? Of particular interest were his comments on Staff Accounting Bulletin No. 99, which...
SPACs: Is Europe Following the U.S. Trend?
Posted on February 13, 2008Posted by: Paul Rose Last year 68 special purpose acquisition vehicles (SPACs) were listed in the US. Last week saw the listing of continental Europe's second SPAC ever, Liberty International. The Financial Times reports that there are perhaps five or...
Tough Times Mean More Pressure for Government Preferences and Setasides
Posted on January 16, 2008Two items of interest are in the news. First women are upset that the Small Business Administration announced rules that require at least 5 percent of all federal government contracts to go to female "controlled" companies. Controlled companies include those...
Stoneridge v Scientific Atlanta Decided
Posted on January 16, 2008The Supreme Court, very predictably to anyone who read the arguments, decided 5-3 in favor of the defendants in Stoneridge. Justice Kennedy, the author of the earlier Central Bank of Denver opinion, wrote the majority opinion affirming the logical extension...
Lawyer CEOs?
Posted on January 02, 2008The firing of Prince at Citigroup and Cherkasky at Marsh & Mclennan has some wondering whether lawyers make good CEOs. Too much attentiont to process and not enough attention to results was common in both firings. Is this a bias...
Blaming the Fed
Posted on January 02, 2008No-one on Wall Street seems to have anything good to say about the Fed. The economy is slowing and some on Wall Street see cherished positions threatened by a higher than comfortable probability of recession. I is hard to recommend...
Smart People Seeking Dumb Money
Posted on January 02, 2008There was a great headline in the NYT "Smart People Seeking Dumb Money" referring to the IPO's of private equity groups in the past year (all have lost money since their initial day price run-ups). The headline is broader than...
Hard Lesson for Harvey Electronics
Posted on December 29, 2007Harvey Electronics filed for Chapter 11. The cause of its distress was a failed merger negotiation that led to "distractions" and increased professional fees. As a result of the failed negotiation the credit markets lost confidence in the company and...
Genesco Ordered to Close Finish Line Acquisition
Posted on December 28, 2007A chancellor in Tennessee has order Genesco to close its buyout agreement with Finish Line. A suit still pending in New York, brought by UBS, Genesco's financing bank, will now determine whether the deal will produce a viable or bankrupt...
Blankfein Pockets $69 Million for the Year
Posted on December 22, 2007The CEO of Goldman Sachs made $69 million in salary for the year. His base salary was $600,000 (plus a charitable gift of 200,000) and the rest was in bonuses tied to the performance of Goldman this year. Cayne, the...
URI v RAM
Posted on December 22, 2007The Delaware Court of Chancery has decided the URI v RAM case. Cerberus Capital Mgn. can walk away from its deal to buy URI on the payment of a $100 m reserve termination fee. The Court decided, after a trial,...
Potter v Bailey: The Wrong Debate
Posted on December 21, 2007Several opinion writers, Floyd Norris is the latest, have noted the application of the movie "Its a Wonderful Life" to the sub-prime mess. Bailey, the idealist, versus Potter, the cold hearted investor, in evaluating the plight of sub-prime borrowers who...
Plaintiff Lawyers and Subprime
Posted on December 21, 2007This is a crisis made in heaven for plaintiff lawyers. Solvent companies, banks, do not have the internal controls to protect themselves from fraud from within and from without the bank by those seeking closing fees at the expense of...
When is There A Fiduciary Duty to Liquidate? Chrysler?
Posted on December 21, 2007Nardelli, the new chief of Chrysler, is reported to have been asked "Are we bankrupt?" His answer -- "Technically no, operationally yes. The only thing that keeps us from going into bankruptcy is the $10 billion our investors entrusted us...
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Did I harass someone?
Oh, yes. This can be taken in as so many things, especially since you had testif...
How can i sue for a straw purchase?
Anyone can co-sign. A straw purchase would be if you has someone buy the car for...
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You didn't apply for the job. so that's a tough one. Seemingly your Bo...
Is it legal for a company to overwork their employees?
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