Recently in Financial Services Category

Unless you are finishing up a two-year corporate counsel stint at a remote company in rural Antarctica, you are probably pretty well-versed in the language of the recession that has taken hold of news headlines, board-room meetings, and dinner-table conversations.  Scaling back, laying off, flat-fee billing, in-house eDiscovery ---these have been the recent buzz words in legal departments across nation.

Well, now there are a few numbers to back up the in-house recessionary fodder.  Hildebrandt International has released its annual Hildebrandt Law Department Survey, which provides benchmarking data for U.S. and global law departments. 

Bernard Madoff will be spending the rest of his life in prison.  Earlier today, the King of Ponzi was sentence to the maximum possible term of 150 years for defrauding his clients out of billions.

The harsh sentence renders the request by Madoff's attorney, Ira Lee Sorkin, for a twelve year term almost laughable. 

The judge called Madoff's crimes "extraordinarily evil."  Now, I was never a litigator, but I'm pretty sure that's never a good sign.

Madoff did apologize to his victims, for whatever that's worth.  At this point, though, I'm pretty sure that they don't give a damn how sorry he is.

Obviously, the 71 year-old Madoff won't be serving the full sentence, but the judge said that it was necessary in order to deter others from running the same kind of Ponzi schemes.

So let this be a lesson for in house counsel that you can pass along to the heads of your companies: apologizing is nice and all, but not stealing the money in the first place is probably the better strategy.

See Also:
Bernard Madoff gets maximum 150 years in prison (AP)
Madoff's 150-Year Sentence: Long But Not Longest (WSJ Law Blog)
Breaking: Madoff Sentenced to 150 Years (Above the Law)

Testifying on Capitol Hill today, Federal Reserve Chairman Ben Bernanke told a House committee that he didn't put the screws to Bank of America executives in order to force them to acquire Merrill Lynch.

That deal wound up costing taxpayers $20 million, and Bank of America CEO Kenneth Lewis stated that the Treasury Secretary at the time, Henry Paulson, and other federal regulators threatened his job after he expressed doubts about the deal.  Bernanke told the committee that he was not involved in any such intimidation.

Bernanke also denied that he or any other member of the Fed had instructed BoA to cover up information about Merrill's deep financial troubles, arguing that failing to disclose that information would have violated the executives' fiduciary duty to the company's shareholders.

In addition, Bernanke defended the deal as necessary to avoid a complete meltdown of the financial system at a time when Lehman Brothers had just collapsed and lending was essentially frozen. 

The Obama administration's plan to alter regulations governing financial institutions will undoubtedly significantly impact those institutions' legal departments.  The proposal promises to profoundly alter the regulatory scheme that such institutions work under.  Nowhere is this prediction more pronounced than on the subject of mandatory arbitration of claims against lenders and brokers. 

Under the present system, individuals with a claim against lenders or brokers usually sign contracts that bind them to mandatory arbitration of their claims.  This arbitration can occur in a jurisdiction unrelated to the individual and their claim, and the right to choose the arbitrator is generally reserved for the financial institution. 

As if banks haven't had enough to worry about recently, now the Obama administration is planning the biggest financial reform in two generations. 

In a speech today, President Obama outlined his plans for the new financial regulations scheme.  Among the changes: the administration will eliminate the Office of Thrift Supervision and place the Federal Reserve in charge of overseeing systemic risks.  The goal of the changes is to streamline bank supervision and reduce risk that could spread out from the financial sector and threaten the broader economy.

The House of Representatives passed The Credit Cardholders' Bill of Rights Act yesterday, and sent the bill to President Obama for his signature.  President Obama has indicated that he will sign the bill (even though a provision was tacked onto the bill allowing for the possession of loaded weapons in national parks to the extent permitted under state law).

This bill is sure to provide in house counsel at credit card companies some long nights at the office soon, and some sleepless nights after that worrying about whether the company is in compliance with the new regulations.

Ok, ok, I know what you're thinking: "Not another post about the government's 'stress test' for banks!"

But this one's different, I promise.  The results are finally in, and they aren't as dire as once feared.  In fact, some banks even want to start paying back some of the funds they received from the Troubled Asset Relief Program (TARP).

It's a day that could dictate the direction of the stock market for some time to come, and could even radically reshape the nature of the relationship between the United States Government and the banking sector.

Stress Test Day.

The Federal Reserve has begun privately releasing the results of the so-called "stress tests" it performed on the 19 largest US banks.  The purpose of the tests was to determine which of the financial institutions required government assistance, which could be saved, and which must fail.

Some top regulators have written that there is a strong chance that the US government could end up acquiring significant stakes in banks according to how the stress tests go and the rate of economic recovery.

After Bank of America bought Merrill Lynch, the markets responded with a resounding rejection of the deal.

It's a sentiment that the financial institution's own legal department might soon share.

A post at the JD Journal states that lawyers in the combined legal department of the two companies - about 700 attorneys in all - are being asked to reapply for their own jobs.  As the post points out, this almost always leads to layoffs.

Is it a government cover-up?  Or is the Obama Administration just trying to avoid any unnecessary market shocks? 

The Administration has asked banks currently undergoing "stress test" evaluations to keep the results quiet when they report earnings.  The fear is that investors might punish those institutions that don't report positive outcomes.