Banking Law Prof Blog

Bank Bailout, Executive Bonuses and Bank of America

University of Chicago Law Faculty Blogger Bernard Harcourt says Bank of America should immediately write the U.S. Treasury a check for $4 Billion -- the amount Merrill Lynch (acquired by Bank of America) paid out in year-end 2008 executive bonuses after B of A received $25 Billion in TARP money in Oct. 2008, followed by an additional $20 Billion in Jan. 2009.

Link to University of Chicago Law School - The Faculty Blog:  http://uchicagolaw.typepad.com/faculty/2009/01/geithner-needs-to-tell-bank-of-america-to-cut-a-4-billion-check-to-the-us-treasury-now.html

Link to: Financial Times article "explaining" that technically, Merrill Lynch was still a separate company until Jan. 1, 2009, and accelerated its bonus payments so that they were made in Dec. 2008 -- three days before the sale to B of A actually closed.

http://www.ft.com/cms/s/0/378a38d4-e814-11dd-b2a5-0000779fd2ac.html?nclick_check=1

Okay, I feel much better about this, don't you?

(ag) Jan. 29, 2009, in Economy

Eric Holder and Attorney Client Privilege

Now that it seems assured that Eric Holder will be Attorney General, I reflect back on DOJ's use of privilege waiver as an indicator of cooperation with government investigations that may be a mitigating factor under Principles of Federal Prosecution of Business Organizations.  Of course, the "Holder Memorandum" (June 16, 1999) has been supplanted by the "Thompson Memo" and then by the "McNulty Memo". 

The question of whether and under what circumstances the Justice Department should "strongly encourage" a corporation to waive attorney-client privilege to avoid being charged with a crime is a very serious one.  It's worth watching what DOJ does under a new AG (especially one who has considered this issue before).

Link to a Texas Lawyer article I wrote about this time last year discussing the McNulty Memo and concerns about attorney-client privilege:

http://www.law.com/jsp/ihc/PubArticleIHC.jsp?id=1202469642951

(ag) Jan. 29, 2009, in General Issues

Committee on Capital Markets: How to Reorganize the U.S. Financial Regulatory Structure

The Committee on Capital Markets Regulation has released its "Recommendations for Reorganizing the U.S. Financial Regulatory Structure."

The key point is that there should be only two (or at most three) independent regulators for the U.S. financial system:  1.  The Federal Reserve;  2.  A newly-created independent U.S. Financial Services Authority; and  3.  "Possibly another new independent investor/consumer protection agency.

Some concerns about these recommendations:

1.  Britain's FSA demonstrates that this model has its own problems.

2.  What about FDIC?

3.  What about the states' role in chartering and regulating half of the dual banking system and what about the states' role in consumer protection?

We can expect the issue of regulatory restructuring to come before Congress sometime this spring.  This report and the Treasury's Blueprint for a Modernized Regulatory Structure highlight the need for more extensive input on the issue. 

Link:  http://www.capmktsreg.org/press.html

(ag) Wednesday, January 28, 2009, in Federal Banking Agencies