Banking Law Prof Blog

Berkshire Hathaway Annual Report

Warren Buffett is one of my heroes, not just for his investing expertise but mainly for his clear and unassuming explanations of his investing theories.  I look forward to his Annual Letter to Berkshire Hathaway Shareholders, included in the Annual Report, and commend it to my corporate governance students. 

Berkshire Hathaway's 2009 Annual Report was released yesterday:  http://www.berkshirehathaway.com/2009ar/2009ar.pdf

Enjoy!!!

(ag) Feb. 28, 2010, in Corporate Governance, Economy

The Complete Idiot's Guide to the Federal Reserve

Seriously, there is such a book.

Link:   http://www.amazon.com/Complete-Idiots-Guide-Federal-Reserve/dp/0028643232

Executive Compensation, Golden Parachutes, and Government Ownership of Key Companies

Excessive?  You be the judge.  The U.S. Treasury's Pay Czar says it's okay for GM CEO Ed Whitacre to receive a $1.7M annual salary plus $5.3 million in salary stock to be paid over three years beginning in 2012 and $2 million of restricted stock pursuant to a long-term incentive plan. . 

Former GM CEO Fritz Henderson gets $7.3M in stock plus $59,090 per month plus expenses through the end of this year -- not bad for serving only 8 months as CEO before an unceremonious departure.

Pay Czar Kenneth Feinberg approves salaries for the 25 top executives at five companies that received the biggest taxpayer bailouts.

Thanks to Texas Tech Law Student Wes Wright for bringing this story to my attention.  We've been discussing these issues in Corporate Governance.

Link to story:  http://in.news.yahoo.com/137/20100220/748/tbs-gm-ceo-whitacre-annual-cash-salary-1.html

(ag) Feb. 20, 2010, in Corporate Governance, Economy, Executive Compensation

WWRBDD: What Would the Reasonable Bank Director Do?

The Federal Reserve has a great new website with resources for bank directors.  It's called Bank Directors' Desktop and has a training resource for bank directors, a handbook on "Basics for Bank Directors" and resources for bank directors.  This will be excellent for new directors, a refresher for bank directors who have been serving for some time, and a resource for banking law students trying to get a grip on what banking is all about.

With the prospect of more directors' liability litigation coming out of the financial crisis, these resources are very timely.  Making sure that directors understand their duties is key to making sure they discharge those responsibilities appropriately.

Link to Bank Directors' Desktop:  http://www.bankdirectorsdesktop.org/resources-for-bank-directors.cfm

(ag) Feb. 18, 2010, in Bank Directors, Federal Banking Agencies

Fortunately or Unfortunately? Wall Street Hiring Returns

CNN Money reports that Wall Street firms are stepping up their recruitment and hiring.  According to the report, more than 30,000 Wall Street jobs were lost over the past two and one-half years, but now firms like Bank of America and Morgan Stanley are hiring again.  Prospects for being hired, as always, are enhanced if the applicant brings a substantial book of business.

Link to story:  http://money.cnn.com/2010/02/11/news/companies/wall_street_employment/index.htm

(ag) Feb. 16, 2010, in Economy 

New Support for an Independent Consumer Financial Protection Agency: Business Owners

Small business owners are mobilizing to convince the Senate that a new independent Consumer Financial Protection agency is needed.  Here's what the Feb. 9, 2010, news report says:

"As financial industry lobbyists try to kill the Consumer Financial Protection Agency (CFPA) in the Senate, hundreds of business leaders and small business owners nationwide are calling for a strong, independent watchdog. In a statement organized by Business for Shared Prosperity, they say the CFPA would help business, especially small businesses, which over the past 15 years have created two out of three net new jobs and spurred innovation - producing 13 times more patents per employee than large patenting firms."

Link to story:  http://news.yahoo.com/s/prweb/20100209/bs_prweb/prweb3573524

(ag) Feb. 15, 2010, in Consumer Protection, Financial Regulatory Reform

Corporate Governance, The Supreme Court, and Honest Services

By the end of this term, the Supreme Court will deliver opinions in three cases that will shape our understanding of criminal liability for violations of the federal "honest services" statute, 18 U.S.C. Section 1346.  The cases are Weyhrauch v. U.S. and U.S. v. Black (both argued Dec. 8, 2009) as well as Skilling v. U.S. (to be argued Mar. 1, 2010).

Congress passed the "honest services" fraud statute in 1988 in response to U.S. v. McNally, a Supreme Court ruling that the federal mail fraud statute protected only property rights and did not cover a public official's “scheme or artifice to defraud” citizens of their “intangible rights to honest and impartial government.”   Section 1346 overturned the result in McNally by providing that the federal mail fraud statute does apply to a scheme or artifice to deprive another of the intangible right of honest services.

The Skilling case is former Enron executive Jeffrey Skilling's challenge to the prosecutors' use of the "honest services" fraud statute.  According to the appellant's brief, "Prosecutors argued that Skilling took inappropriate measures to maintain or improve Enron’s stock price, in violation of his fiduciary duties. The allegedly improper actions included business decisions that ostensibly exposed Enron to an irresponsible level of long-term risk in exchange for short-term stock-price benefits.  In closing argument, the
Government declared that Skilling and [Enron CEO Kenneth] Lay committed honest-services fraud because they violated a duty to Enron’s “employees”—one prosecutors described as “a duty of good faith and honest services, a duty to be truthful, and a duty to do their job … and do it appropriately.”

These three cases are significant for corporate governance because the decisions will define criminal liability for corporate officers and directors.  Have prosecutors stretched the "honest services" fraud statute too far?  Will the Supreme Court reign in or confirm an expansive interpretation?

Link to Supreme Court Briefs on the Merits:  http://www.abanet.org/publiced/preview/briefs/home.html

Link to analysis of Weyhrauch case:  http://www.scotusblog.com/2009/12/honest-services-and-the-mail-fraud-statute/

(ag) Feb. 12, 2010, in Corporate Governance, Supreme Court

Where Is She Now? Carly Fiorina and the Demon Sheep

For those of you wondering what Carly Fiorina, former CEO of Hewlett Packard is doing now:  She's campaigning in the Republican primary for a U.S. Senate seat from California.  The disastrous H-P/ Compaq merger during her term as CEO, her "golden parachute" ($45 million, including a $21.4 million severance package when she was dismissed by Hewlett Packard in 2005), and the boardroom leaks and subsequent spying-tactics-gone-wrong that occurred in the wake of her departure are the stuff of MBA case studies and law school corporate governance illustrations. 

But wait until you see her political ads -- starring her political opponent as a "demon sheep!" 

Link:  http://www.slate.com/id/2243729/pagenum/all/#p2

(ag) Feb. 5, 2005, in Corporate Governance

Barnes & Noble, Takeover Defenses and Poison Pills

My Corporate Governance class is discussing responsibilities of corporate Boards of Directors.  I'm pleased to pass along this discussion of controversy surrounding the Barnes & Noble shareholder rights plan (poison pill) adopted Nov. 17, 2009 -- brought to my attention by Texas Tech law student Clint Dennis.  Enthusiastic curiosity from the soon-to-be lawyers I see every day convinces me that the legal profession will be in good hands. 

Link:  http://dealbook.blogs.nytimes.com/2010/02/03/on-the-uses-and-misuses-of-poison-pills/

(ag) Feb. 4, 2010, in Corporate Governance

"Mistakes Were Made (But Not By Me)" - New Slogan for Financial Regulators

 
Here's the answer to how the OCC, OTS, Federal Reserve, the Treasury Department and even FDIC could have been so wrong about the subprime mortgage "situation" and the resulting bailouts -- and now rationalize!   This is a general info book, but oh, so true!

If you've been wondering how the existing federal financial regulatory agencies can insist that they (and not a new, independent Consumer Financial Protection Agency) are the best choice for monitoring and enforcing consumer protection compliance, this mantra explains how they can make that argument with a seemingly straight face.

Check out the book on Amazon:  Carol Tavris & Elliott Aronson, Mistakes Were Made (but not by me) - Why We Justify Foolish Mistakes, Bad Decisions, and Hurtful Acts.

(ag) Feb. 2, 2010

Nationwide Mortgage Licensing System and Registry - Consumer Access

CSBS reports that, as of January 25, the Nationwide Mortgage Licensing System and Registry started providing consumers with access to information about state-chartered mortgage companies and individuals.  Web access will allow consumers to find out who's licensed and who's not.

LInk to information:  http://csbs.informz.net/csbs/archives/archive_708119.html

(ag) Feb. 1, 2010, in Consumer Protection