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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

$700 Billion: Government Could Buy Top 11 Banks!!

Posted on September 29, 2008
One 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, 2008
Morgenson, 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, 2008
The 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, 2008
An 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...

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Church Leaders Comment on the Market: Oops

Posted on September 26, 2008
Church 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, 2008
We 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, 2008
Mark-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, 2008
The 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, 2008
I 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, 2008
Buffet 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, 2008
We 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, 2008
Bernanke 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, 2008
A 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, 2008
At 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, 2008
Goldman 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, 2008
A 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, 2008
Obama 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, 2008
Under 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, 2008
The 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, 2008
Paulson 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, 2008
The 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, 2008
To: 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, 2008
Congress 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, 2008
How 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, 2008
One 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, 2008
Sam 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, 2008
The 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, 2008
Lehman, 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, 2008
I 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, 2008
The 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...

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