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Wall Street

CALPERS, the giant California public-sector pension fund, is among the nation’s leading scolds of corporate governance. So as Ira Stoll points out, it’s kind of newsworthy that its CEO over most of the 2000s just pled guilty to taking $200,000 in bribes from a contractor, the money handed over in paper bags and a shoebox. [New York Sun]

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  • Furor grows over Obama administration’s Operation Chokepoint program chilling bank access for legal but disfavored groups [Iain Murray, Elizabeth Nolan Brown, FDIC list (not just payday lenders but also lawful purveyors of pills, guns, ammunition, and much more), Hans Bader] Parallel, though not happening under same program: JP Morgan abruptly closes accounts of former Colombia finance minister who is a renowned international economist, apparently because he made it onto a list of diplomats and other “politically exposed persons” statistically associated with legal risks and high compliance costs [Business Insider] Update via Nolan followup: Dana Liebelson at Mother Jones quotes anonymous bank officials as claiming that some account closures are wrongly being attributed to the program, but even in defending it concedes that should banks opt for continuing to service clients in disfavored lines of business they will shoulder distinctive (maybe decisive) compliance costs from “manag[ing] these relationships and risks,” engaging in due diligence, etc. Also, lawmakers like Sens. Jeff Merkley (D-Ore.) and Elizabeth Warren (D-Mass.) and Rep. Elijah Cummings (D-Md.) back the program; besides, this isn’t “the first time that feds have asked banks to keep an eye on their customers” since the Know Your Customer program goes back some years. So that’s comforting!
  • “Court: Standard & Poor’s is entitled to discovery supporting its ‘selective prosecution’ claim” [Volokh, earlier here and here]
  • “Plaintiff? Is That Really Necessary In A Class Action?” [Daniel Fisher on ZymoGenetics case]
  • Backed by hedge fund, lawyers exploit anti-terror law to squeeze global banks [Norman Lamont, New York Post]
  • “CEO facial masculinity predicts firm’s likelihood of being subject to SEC enforcement action” [Jia, Van Lent, and Zeng, SSRN via @brucecarton]
  • “Reflections on High Frequency Trading” [Robert Levy, Cato]
  • Banks finally lay to rest long-running litigation under Missouri second-mortgage law (MSMLA), though only after one Kansas City law firm ran up more than $600 million in settlements [Litigation Daily]

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The city of Providence R.I. has consented to serve as their client [Kansas City Star, Reuters, Center for Financial Stability, earlier on Michael Lewis book]

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As you might have heard, Michael Lewis has a new book out [Tyler Cowen, Cato panel with Louise Bennetts, Holly Bell and Hester Peirce, Charles Gasparino/NY Post]

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We’ve been reporting on Standard & Poor’s contentions for a while (here, here, here), and now allegations have surfaced in a new legal filing [Politico; background from Cato's Mark Calabria]

Marc Hodak: “The golden parachute became popular after passage of the Williams Act [of 1968, which insulated managements against "hostile" takeover offers] because the Act effectively gave CEOs a veto over the acquisition of their firm. … Note that this ‘rent extraction,’ as it’s termed by economists, was not the result of managerial power granted by a lazy or corrupt board to a greedy CEO. This was managerial power created by law.”

My new Cato post tells how on-site feds increasingly direct big business decisions.

P.S. Related thoughts on deferred prosecution agreements from Brandon Garrett and David Zaring at NYT “DealBook.”

Roger Parloff makes the story clearer and more understandable than I’ve seen it anywhere else. [Fortune cover story]

Matt Levine concludes that a large share of it was for making dumb trades, as opposed to intentional malfeasance. (Earlier on whether regulators had taken a bead on Morgan because of chief Jamie Dimon’s perceived bad attitude.) Will Morgan’s admissions materially help plaintiff’s lawyers in the inevitable shareholder class action? Don’t be so sure [Alison Frankel, Reuters] More: WSJ (sees politics), Hank Greenberg via FedSocBlog, Iain Murray.

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“Ratings agency Standard and Poor’s (S&P) has claimed the lawsuit filed against it by the US Justice Department was ‘retaliation’ against its decision to downgrade the US’s credit rating.” [BBC; earlier here, here] My Cato colleague Mark Calabria, a specialist on banking and finance issues, sees a pattern at work in which businesses that make life hard for the government get hit with enforcement actions:

Maybe S&P can compare notes with Craig Zucker of Buckyballs fame.

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“Standard & Poor’s is trying to show it was unfairly singled out in a $5 billion fraud lawsuit 18 months after it downgraded U.S. sovereign debt. Getting the government to provide supporting evidence will prove difficult.” [Bloomberg Business Week]

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  • After bank burglarizes Ohio woman, law will give her curiously little satisfaction [Popehat]
  • North Las Vegas scheme to seize underwater mortgages through eminent domain raises constitutional opposition [Kevin Funnell]
  • “The SAC Insider Trading Indictment” [Bainbridge, WSJ MoneyBeat]
  • “He who sells what isn’t his’n/Must buy it back or go to prison.” Most naked short selling driven by fundamentals, study says [Daniel Fisher]
  • NY AG Schneiderman to Thomson Reuters: don’t you dare sell early access to the market-moving survey you pay for [Bainbridge]
  • “The Confidential Witness Problem in Securities Litigation” [Kevin LaCroix]
  • “The puzzling return of Glass-Steagall” [Tabarrok]
  • “FATCA: How to Lose Friends, Citizens and Influence” [Colleen Graffy, WSJ via Paul Caron/TaxProf, earlier]

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“I mean, frankly, I am totally puzzled, given that plaintiffs’ bar in this area uses the Wall Street Journal as their source of clients and cases, right? You guys read it every day, looking for scandal, right? Other people read People Magazine, but you read the Wall Street Journal.” – Judge Naomi Reice Buchwald (S.D.N.Y.), during a proceeding on the LIBOR class actions. [Staci Zaretsky, Above the Law] “And in other news, the Sun rose today.” [@LawyerKitty]

Wait till you see how the market reacts, advises Marc Hodak [Hodak Value]

John Carney, Daniel Fisher (more), Ira Stoll, David Henderson, and Jonathan Weil have some questions about it.

December 4 roundup

by Walter Olson on December 4, 2012

  • Wendy Murphy brings her believe-the-accuser shtick to the University of Virginia [KC Johnson, Minding the Campus]
  • UK: foster parents in Rotherham might want to take care not to belong to the wrong political party [Telegraph]
  • “The Disappearance of Civil Trial in the United States” [John Langbein, Yale Law Journal & SSRN]
  • “Liability Is ‘Wrong’ Solution for Rating Agencies” [Mark Calabria, Cato at Liberty] Mere days later: “Sixth Circuit Rejects Ohio Pension Fund Suit Against Rating Agencies” [Adler]
  • “Yes, it is now illegal to be fully nude in San Francisco *unless you are in a parade*” [Lowering the Bar]
  • Once lionized in press: “Former Ohio AG Loses Law License for 6 Months Over Ethics Violations While In Office” [ABA Journal, Adler]
  • Facebook says it may go after some lawyers who’ve repped adversary Ceglia [Roger Parloff, Fortune]

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Financial roundup

by Walter Olson on August 21, 2012

  • New York plaintiff wanders the South looking for ATMs out of compliance with federal fee sticker regulation [Kevin Funnell, Bank Lawyers' Blog, earlier]
  • In the mail: Stephen Bainbridge, “Corporate Governance After the Financial Crisis” (Oxford, 2012), with blurb from NYT “Deal Professor” Steven Davidoff: “an important book for those seeking to understand the theoretical and practical implications of Dodd-Frank, Sarbanes-Oxley, and the federal government’s foray into corporate regulation.”
  • American lawprof understandably unpopular trying to defend FATCA to the Swiss [TaxProf, earlier here, etc.]
  • Bank is trustee for mortgage holders, says loan servicers are responsible: “LA Files Big-Bucks Suit Against ‘Slumlord’ US Bank, Blames Lender for Condition of Foreclosed Homes” [ABA Journal]
  • “Swiss Banks Face ‘Slow Death’ As Foreign Powers Chase Undeclared Assets” [Giles Broom, Bloomberg/Business Insider]
  • “A comprehensive list of hyperinflations in history” [Steve Hanke/Nicholas Krus, PDF, via Ian Vasquez, Cato]
  • Warning: regs could “wipe out community banking industry by end of this decade” [Cam Fine, ICBA via Iain Murray]