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Corporate & Securities Law

Business Law Prof Blog

Business law resources, information, and news for the academic community

Post Frequency: 11.8/day

Last Entry: April 01, 2011 at 11:04:42

Gretchen Morgenson On Bailout Bill Compensation Limits

Posted on October 19, 2008
Morgenson, 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, 2008
In 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, 2008
The 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, 2008
The 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...

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Did Paulsen Get the Incentives Right in the Bank Bailout?

Posted on October 15, 2008
The 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, 2008
The 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, 2008
Savvy 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, 2008
AIG 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, 2008
They 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, 2008
We 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, 2008
Jonathan 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, 2008
When 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, 2008
We 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, 2008
In 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, 2008
California, 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, 2008
In 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, 2008
The 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, 2008
It 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, 2008
I 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, 2008
Hexion 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, 2008
A 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, 2008
The 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, 2008
Our 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, 2008
A 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, 2008
California 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, 2008
Floyd 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, 2008
With 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, 2008
The 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, 2008
On 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, 2008
The 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...

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