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Corporate & Securities Law

Wall Street Law Blog

Straight talk on current issues in securities litigation, financial fraud, and risk management.
By Brett D. Sherman

Post Frequency: 0.5/day

Last Entry: April 06, 2013 at 02:23:00

Loss Frequency v. Loss Magnitude - A Financial Risk Management Lesson

Posted on April 06, 2013
In finance, risk is the chance that an investment decision or strategy will result in loss. Any analysis of risk must consider two major elements - FREQUENCY OF LOSS and MAGNITUDE OF LOSS.

Bear Stearns collapsed 5 years ago; fraud remains overwhelming success

Posted on March 18, 2013
"Fraud by complexity" is very dangerous. Until Main Street has a far better understanding of what happened on Wall Street, then the corrupt rigged game that senior management for the old investment banks played so well for so long will resurface in slightly different form sooner rather than later.

We found the Right Guy to Prosecute the Banksters...

Posted on December 27, 2012
By Brett Sherman We have not heard anything about the federal government disbanding the Justice Department. Maybe we missed it. Still, no big criminal prosecutions. This, we believe, is a problem. Our hypothesis is that there is a big correlation between the ongoing scandals that plague Wall Street and the...

Traders hate risk limits! (a lesson in risk management)

Posted on December 16, 2012
The point of risk limits is to make sure that no one trade - or series of related trades - can generate losses big enough to cripple, or even kill, a financial institution

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Bear Stearns: Why civil action, not criminal?

Posted on October 03, 2012
In a civil action, a plaintiff (there is no prosecutor in the civil case) must meet the preponderance of the evidence standard in order to win. What is a preponderance of the evidence? 51%. AG Schneiderman has, in other words, a pretty big margin of error.

Bespeaks Caution- no such thing as a Safe Harbor if The Sea is Already Angry, My Friend

Posted on September 13, 2012
Some harbors are safer than others... Filling a prospectus with risk factors won't always protect you. Remember, risk warnings are all about uncertainty, and uncertainty -- at least in this context -- means uncertainty about the future. If you know, or should know, that something you described as a risk...

Rampant Securities Fraud - Why it Exists; How to Stop It...

Posted on September 12, 2012
Life is about playing by rules. Sometimes we make a pact to voluntarily follow a set of rules - like when we play golf or tennis or darts or ping pong. Other times we are requited to obey a rule regardless of whether following the rule is something we want...

My 9/11 - A Lucky Escape from Two World Trade Center, 65th Floor

Posted on September 11, 2012
Seconds later came a thunderous explosion, the loudest sound I have ever heard. Then, almost immediately, a shockwave radiated out from the blast. The windows on my floor rattled. The building shuddered. Right away we knew. A plane - a jet plane - had slammed into One WTC.

Statistics Reveal that Many Bear Stearns Employees Should Consider class action settlement opt out

Posted on June 08, 2012
IN LIGHT OF THE JUST ANNOUNCED SETTLEMENT OF BEAR STEARNS SHAREHOLDER CLASS ACTION CLAIMS, WE ARE REPRINTING OUR MAY 2008 PRESS RELEASE ABOUT THE OPT OUT ALTERNATIVE --------- New York, NY (PRWEB) May 12, 2008 Based on a recently completed statistical study, The Sherman Law Firm has concluded that Bear...

What did Jamie Dimon Tell Charlie Rose?

Posted on June 08, 2012
Some interesting things... Let's just say that this is one of those glass houses/stone throwing morality tales... JPMorgan Chase CEO Jamie Dimon Appeared on the Charlie Rose Program in the summer of 2008 to talk about Risk-Taking, Risk-Management, and the risks taken by the then Recently Acquired Bear Stearns...

Talking JPMorgan Debacle, Latest Evidence of Fraud at Bear Stearns and the Meaning of Securities Fraud

Posted on June 05, 2012
Internet Killed The Radio Star WallStLawBlog (@WallStLawBlog) 6/4/12 11:54 PM Me on Maureen Ennor's talk show from today, talking securities fraud blogtalkradio.com/wallstreetmom/?

Is There one honest Wall St Exec Left? Check out WSLB Editor Brett Sherman on Maureen Ennor's Radio Program

Posted on June 04, 2012
Listen to internet radio with Maureen Ennor on Blog Talk Radio

The Fraudulent Branding of Bear Stearns (a call to action)

Posted on June 01, 2012
DECEIT IS THE ESSENCE OF FRAUD. At Bear Stearns, senior management spent years deceiving investors. And boy was it ever worth it... Former Bear Stearns CEO - consummate salesman and card-sharp Jimmy Cayne - led a campaign to brand Bear Stearns. Management work damn hard to convince investors, potential investors,...

BEAR STEARNS BELIEVED IT BOUGHT CREDIT RATINGS

Posted on June 01, 2012
Credit Ratings Shopping Clear? Wall Street Law Blog Thinks So By Brett Sherman Several complaints filed against Bear Stearns, its former subsidiaries, and/or JP Morgan by monoline Insurers like Assured Guaranty and Ambac describe a rather revealing reaction by Bear Stearns to October 2007 decisions by credit ratings agencies S&P...

Did JPMorgan Commit Securities Fraud? Don't Overlook This Basic Analysis.

Posted on May 16, 2012
There are myriad ways in which J.P. Morgan?s ?hedge? could be securities fraud. Here's an easy one... At the most basic level, the fact that JPMorgan made (giving the bank the benefit of the doubt) such a massive risk management error may, in and of itself, be proof of fraud...

Reconcile This: Former Bear Stearns Exec. Either Lied to FCIC or Pulled An Ollie North

Posted on April 14, 2012
Lying Under Oath to The Financial Crisis Inquiry Commission is the Equivilent of Perjury. The Law: United States Code, Title 18, Section 1001: "Whoever, in any matter within the jurisdiction of any department or agency of the United States knowingly and willfully falsifies, conceals work covers up by any trick,...

Subprime Analysis by Salomon Brothers, May 1994: Return of the Wall Street Law Blog Time Machine

Posted on March 27, 2012
From the Horse's Mouth? Fascinating 1994 Report on Subprime MBS From Salomon Brothers, The Firm That Coined the Term Securitization.

Fraudulent AAA Credit Ratings Have Many Tentacles, Don't They?

Posted on March 14, 2012
The year? 2006. Hypothetical Bank X - knowing that AAA ratings on mortgage-backed securities on its balance sheet were bogus - accounts for the bonds in the annual report as if the bonds were virtually, if not entirely, riskless. If so, how could the annual report be anything other than materially misleading (i...

Bear Stearns Planned to Dance Like Former Citi CEO Chuck Prince.

Posted on March 13, 2012
at the 2005 conference Bear Stearns senior managing director Scott Eichel said "[t]here is a [CDO] machine going..." Indeed, the Bear mortgage guys were saying stuff that sounded a lot like Citi's former CEO Chuck Prince. Speaking about the risks of the CDO market, Prince infamously said his company would keep dancing until the music stopped.

The New Wildcard: Major League Baseball's Worst Call

Posted on March 06, 2012
Extra Wildcard Is an OK Idea, but The Plan is All Wrong. Let's see - 162 game season; unbalanced schedule; 1 game playoff? Hypothetical: Let's say the NL East is the best division in the Sr. Circuit. True, the Mets couldn't win a little league title, but the other 4...

When is a prime mortgage not a prime mortgage? A different take on contagion... (update 1)

Posted on March 04, 2012
But did you know that the number of prime borrowers went way up during the golden age of subprime? It's true. Credit scores spiked in the first half of the 2000s. This period of credit score inflation meant lots of high-risk borrowers could qualify for prime mortgages.

Difference maker? An Admission that Bear Stearns Chose Not to Share With Its Shareholders (Corrected)

Posted on February 10, 2012
-Warning: If you owned shares of BSC (the former NYSE ticker symbol for Bear Stearns common stock) when Bear's share price was falling through during 2007 and early 2008, you may be somewhat pissed off by an admission that Bear made to the SEC. If I had owned shares of...

Giants Win Makes Eagles fan Seek Help from Red Sox Nation

Posted on February 08, 2012
CAN BOSTON FANS HELP OUT A PHILLY BOY? My name is [REDACTED ON ACCOUNT OF SHAME] and I am a fan of the Philadelphia Eagles. Since Sunday night, I feel like acid is burning a hole in my gut. Hopefully it is one of those psychosomatic thngs, but who the...

Bottle Of Wine Key To Understanding Subprime Debacle

Posted on February 04, 2012
Learn about subprime debacle. Visual aids make for easy reading!

Bear Stearns Report: Relative to Income, Home Price "About as stretched as [they have] ever been!"

Posted on January 27, 2012
Another in an occasional series in which Wall Street Law Blog posts excerpts from primary source documents that flat out contradict Wall Street's revisionist history of the financial crisis... Top executives at Bear Stearns - as we like to point out - have repeatedly insisted (including in sworn testimony) that...

The Great Mortgage Swindle: Most Lucrative Fraud of All Time? �

Posted on January 17, 2012
Turns out, we now know, that the big securitizers knew there was a significant distinction between the toxic AAA rated securities which the banks pushed like drug dealers and other AAA quality investments. While a majority of mortgage bonds were rated AAA, the bankers that designed, manufactured, and sold these�mortgage bonds knew the AAA ratings they received were pure bs

Bear Stearns, Merrill Lynch Expected Housing Disaster (our all-time most viewed post; first published Oct. 2010)

Posted on January 01, 2012
UPDATE: Because Bear Stearns Execs' FCIC testimony largely focused on allegedly unforeseeable, "unprecedented" market forces to defend their lack of competent management, Wall Street Law Blog decided to re-post one of our favorites.

Leverage, the Downside; An attempt to simplify (Our top 5 posts of 2011)

Posted on December 29, 2011
Here is the kicker - the reason why it is incredibly risky for a company to to have equity represent only 3% of its balance sheet... Creditors have superior claims to equity-holders (typically shareholders). IN OTHER WORDS, LOSSES ARE, AS A RULE, ALLOCATED TO SHAREHOLDERS ONLY UNTIL ALL EQUITY IS GONE.

Diary of a 9-11 Survivor (Our Top 5 Posts of 2011)

Posted on December 28, 2011
Two weeks ago, my beautiful wife and I celebrated celebrated our fifteenth wedding anniversary. The past ten years have been the best of my life (so far). How different things might have been.

Why Did So Many Investors Buy Mortgage Bonds for So Long? The Ice Cream Analogy

Posted on December 22, 2011
1. INTRO (a/k/a - Prelude to an analogy) US Treasury bills have, historically, served as a proxy for riskless investment. (Risk, in this context, means chance of loss.) The yield on these bonds, therefore, has historically served as a proxy for "riskless rate of return...

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