Guys at my high school used to bail out companies all the time. It was no big deal.

The pretzels are tasty and satisfying and not at all overly salted.

1 - best comment of the day

FIRST to say Elie is scrambling for some credibility

Aren't they crooked too? Feel like there's always something in the news about AIG paying fines and being investigated and whatnot.

The Republican Party is nationalizing everything but the oil industry.

When do I get my dividend check from AIG?

Will the CEO's have to reimburse the taxpayers for their failures?

Will the economy completely collapse before we have a competent President in office?

Will Republicans now offer back payments to "welfare queens"?

Check out the last 7.5 years and you'll see that what this government can do is not a limit on what it will do.

In unusual and exigent circumstances, the Board of Governors of the Federal Reserve System, by the affirmative vote of not less than five members, may authorize any Federal reserve bank, during such periods as the said board may determine, at rates established in accordance with the provisions of section 14, subdivision (d), of this Act, to discount for any individual, partnership, or corporation, notes, drafts, and bills of exchange when such notes, drafts, and bills of exchange are indorsed or otherwise secured to the satisfaction of the Federal Reserve bank: Provided, That before discounting any such note, draft, or bill of exchange for an individual, partnership, or corporation the Federal reserve bank shall obtain evidence that such individual, partnership, or corporation is unable to secure adequate credit accommodations from other banking institutions. All such discounts for individuals, partnerships, or corporations shall be subject to such limitations, restrictions, and regulations as the Board of Governors of the Federal Reserve System may prescribe. Section 13(3) of the Federal Reserve Act http://www.federalreserve.gov/aboutthefed/section13.htm

The sky is falling. We need a chicken in every pot.

The Republican Party is nationalizing everything but the oil industry.

When do I get my dividend check from AIG?

Will the CEO's have to reimburse the taxpayers for their failures?

Will the economy completely collapse before we have a competent President in office?

Will Republicans now offer back payments to "welfare queens"?

Does anyone actually share the same concern that maybe Lehman could not have been bailed out?

I was reading the bankruptcy filing and the numbers suggested some impracticability of doing so ... some estimates for the Fannie / Freddie bailout were at 25B
but Lehman went under seeking protection from hundreds of billions of bonds...

http://patrick.net/housing/contrib/LEH_Bankruptcy.pdf

I do want to know who has standing to challenge a decision by the Fed.

The Fed, like Cartman, does what it wants. Lehman needed to be made an example of. The Fed won't let AIG fail because public perception of AIG is insurer and moneyholder for widows and orphans. I don't pretend to understand the credit derivatives side of this, but it makes me wonder (when people go on about trillions of dollars of counterparty risk or whatever) if the people currently making these types of decisions really understand it either.

Quick! Someone give Bush a pretzel!

Does anyone actually share the same concern that maybe Lehman could not have been bailed out?

I was reading the bankruptcy filing and the numbers suggested some impracticability of doing so ... some estimates for the Fannie / Freddie bailout were at 25B
but Lehman went under seeking protection from hundreds of billions of bonds...

http://patrick.net/housing/contrib/LEH_Bankruptcy.pdf

Does anyone actually share the same concern that maybe Lehman could not have been bailed out?

I was reading the bankruptcy filing and the numbers suggested some impracticability of doing so ... some estimates for the Fannie / Freddie bailout were at 25B
but Lehman went under seeking protection from hundreds of billions of bonds...

http://patrick.net/housing/contrib/LEH_Bankruptcy.pdf

If slick willy did not work to remove all of the restrictions that were in place (Glass-Steagall) with respect to investment banks we would not have been in this mess in the first place. That being said Bush should have put them back in place but everyone was enjoying the ride too much

If slick willy did not work to remove all of the restrictions that were in place (Glass-Steagall) with respect to investment banks we would not have been in this mess in the first place. That being said Bush should have put them back in place but everyone was enjoying the ride too much

Is there a link for the more important news point, that the "SEC is investigating 'improper short selling' in MS and GS"?

What is the basis for that? Could not find any mention of this on WSJ, CNN, etc...

The writer could't make it as a lawyer: now he is commenting to 1st and 2nd year associates on how to fix the economy? Only a lawyer can stand there and talk with his thumb up his ass.

Palin will answer all of Prof. Bainbridge's questions in due time.

If slick willy did not work to remove all of the restrictions that were in place (Glass-Steagall) with respect to investment banks
__________________________________________

Wow. Republicans are really desperate to avoid taking the fall for this one, aren't ya?

Guys at my high school diversified their equity portfolios by nationalizing crappy companies and rationalizing it by saying they were too big to fail all the time. It was no big deal.

Is there a link for the more important news point, that the "SEC is investigating 'improper short selling' in MS and GS"?

What is the basis for that? Could not find any mention of this on WSJ, CNN, etc...

Dealbreaker explained how they could do this 3 DAYS ago. How fucking lame is this site. The Fed can even lend to me if it decided to. In fact, that was the title of the fecking thread.

This site has gone to hell.

Face it, most of us 3-7 year finance lawyers are fucked. No one will be making parter, at least 25% of us will not be doing this next year. Law students entering the work force in '09 and 2010, be prepared for a shit storm, coz you are about the learn what it is like to be useless and unwanted. NY to 190 won't be back till 2012 at earliest, if at all. And all this stupid blog can do is talk about something its sister site explained THREE DAYS AGO.

Exactly 26 - right on.

Guys at my high school spoke like free traders but acted more communist than Hugo Chavez. It wasn't a big deal then, but it will be tomorrow.

26 - Do you think most firms will still give nearly 100% offers next summer? Will I be shit-canned soon after starting as a 1st year?

Is there a link for the more important news point, that the "SEC is investigating 'improper short selling' in MS and GS"?

What is the basis for that? Could not find any mention of this on WSJ, CNN, etc...

Can I get the Fed to finance my Hostess Pie positions?

The question is: why, in this economy or any other, would anyone want to be an asshat biglaw lawyer?

Gov't got equity in chrysler bailout and actually made money in the process, so this may be a good opportunity for the U.S. treasury to buy low and sell high.

30--There doesn't seem to any articles on this yet. CNBC got the scoop. Here's a link discussing it.
http://blogs.barrons.com/stockstowatchtoday/2008/09/17/cnbc-sec-investigating-short-selling-of-morgan-goldman/

and

http://www.cnbc.com/id/15840232?video=858994209&play=1 (video)

Is there a link for the more important news point, that the "SEC is investigating 'improper short selling' in MS and GS"?

What is the basis for that? Could not find any mention of this on WSJ, CNN, etc...

29, I think you are going to see higher offer numbers next year. Of course, that is going to be due to noticeably smaller classes rather than an increase in business. A lot of firms just overhired this year.

1. Commerce Clause

2. AIG shareholders

3. Lehman's assets and work will be picked up easily by other banks via the market; AIG's services are not easily replaceable

4. This is the only thing I don't know in this world.

19,

Wow, the contortions necessary to get to that level of spin are truly breathtaking. If only someone knew the name of the act that removed "all of the restrictions that were in place (Glass-Steagall) with respect to investment banks we would not have been in this mess in the first place." Oh wait, I do remember, it was the Gramm-Leach-Bliley Act. I wonder what party those three gentlemen belonged to? It couldn't possibly be the Republicans could it? I mean, the only controlled both houses of Congress at the time.

Nah, it must be Clinton's fault. Can't possibly be the effect of the Republican's stated desire to eliminate regulation and the laissez-faire attitude of the current Administration. Nope, must be those nasty Dems.

Moron.

Ghostbusters reference by Elie. Much respect.

Panicky investors taking money out of stocks and putting it in no risk government bonds = optimal time to invest

Thank you summer associate salary!

We don't have enough money to fix Social Security.
We don't have enough money to fix Medicare.
We don't have enough money to provide health care to all Americans.
We don't have enough money to help out Americans losing their homes.
We don't have enough money to help all our veterans returning from war.

BUT

We do have enough money to bail out Fannie Mae and Freddie Mac.
We do have enough money to bail out Bears Stearns (or try to).
We do have enough money to bail out AIG.
We do have enough money to pay for a trillion dollar war

When the little guy needs help, they scornfully say, "Get a job!"
But when of their big guy cronies need a bailout, what do they say?

Sure, no problem. Where's the checkbook?

I just heard a reliable rumor that Heller is dissolving. Yes? No?

I just heard a reliable rumor that Heller is dissolving. Yes? No?

22 - best comment in months on ATL

23/38 - The bottom line is that the GOP never thought that it was a fundamental right for US citizens to be given 104% mortgages to purchase homes. However, if that was going to be the policy you can be damn sure that money was going to made off of it.

29 - Wait until you see the sizes of this year's summer classes.

Hint: Not good to have multiple investment banks imploding within a week in the midst of recruiting season. Tends to put an exclamation point on the fact the economy blows.

Law students should consider alternate 2L summer job prospects. Even if they currently have offers.

The systemic market-based problems existed, in similar fashion, in the 1987 market cash. The 87 crash was a confidence issue as well, and the I-banks were close to failure. Therefore, Glass-Steagall may have something to do with this, but it may have happened regardless.

AIG was too big to fail because of the counter-party consequences (ie, Main Street). The same is the case of FNM and FRE.

As a note, the failures largely as a result of liquidity, and not insolvency. If the gov't 'bails out an entity, the liquidity issue is resolved, and once the liquidity can be restored, the government can get the funds back. Therefore, the use of taxpayer funds may result in a return of the funds to the fisc at a later date. If the funds are lost, they likely when to the benefit of the taxpayer by preserving reasonable mortgage rates (FNM.FRE) or stable insurance coverage. I think this can be distinguished from the War.

But that's just one perspective.

What's the alleged basis for Goldman's and Morgan's collective allegations of improper shorting? I'll admit I don't know the details, but it sounds like Morgan and Goldman are trying to take their ball and go home b/c now that their heads might be on the block and the CEOs' respective equity positions are going down the tubes.

Full disclosure, I'm not a securities lawyer, so this may be a simple issue that I am missing here.

46 - So you think there's cause for concern even if one has received, and accepted, an offer for a 2L Summer gig next Summer? Would they really rescind now? I mean, they should be aware that the economy is in trouble and have already reduced their offers accordingly.

As fun as it is to whine about bailouts, remember that the gov't isn't out a dime on the AIG deal. It is making $$ at usurious (L+850) rates, likely will only ever fund a very small fraction of the facility, and as a kicker gets - wait for it- for FREE, 80% of the market cap of the world's largest insurer. It can hold that nut for a couple of years until this all blows over (and it will), and then IPO for eleven figures.

This is genius. I hate the W administration, but I have to say this could be the best investment the feds have ever made. It's virtually all gravy.

25bn? Fannie/Freddie put 'em on the hook potentially for trillions... lehman could have been saved but no point since they weren't as critical as AIG. Doubt they could have pulled off Lehman and AIG.

Someone could sue over AIG, not sure if they'd win.

free? last time I checked you had to pay for warrants you wanted to exercise... the 80% is a smokescreen... even if they get the 85bn back the US credibility has been shot to hell .. who will now tell the chinese and venezuelans and cubans what they should allow in their economies?

free? last time I checked you had to pay for warrants you wanted to exercise... the 80% is a smokescreen... even if they get the 85bn back the US credibility has been shot to hell .. who will now tell the chinese and venezuelans and cubans what they should allow in their economies?

Elie, the only thing that has stopped me from turning against you the increasingly large number of posters on this site is your lexicon of excellent movie references.

As far as whether the government should bail out AIG, does anyone honestly think it's a good idea to let America's largest insurer crash and to bankrupt all of its policyholders?

I think if AIG crashes and all those policies are worthless, we'll be talking global depression pretty quickly. The insurance industry will collapse like so many dominoes.

49 -

Incoming/first year associates, i.e. real lawyers, were rescinded and terminated wholesale in the tech bust. This is worse. It was worse before the Ibanks imploded.

You are an overpaid summer clerk without a license or any real skills. You are entirely expendable.

As to whether they had already taken it into account...if I knew LEH, MER, AIG and quite possibly some others weren't going to make it out of this *week,* even last week, I wouldn't be worrying about my legal career. I'd be in the market for a South Pacific island big enough to land my private jet on.

http://www.nytimes.com/reuters/business/business-shortselling-sec.html?ei=5070&emc=eta1

I don't have a problem with the AIG receiving some assistance, although I think it is going to be tough for them to service LIBOR plus 850. But if the government wants to play white knight, how about cleaning out the executive suite (you know, the asswipes who "led" AIG to this spot)? What about massive divestiture of assets to raise capital? 85% stake is great, but I don't see any apparent improvement in financial health here. I would have forced more BK-like cuts on them.

Seems McCain was for the economy before he was against it.

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/09/16/EDKB12VBBP.DTL

Actually a big fan of the Ghostbusters quote. Of course, the switching of "to" and "too" was a little much to take. You still s u ck it Elie.

Since we now collectively own AIG, can we please get Beckham back on Man U.

55: 1st years are the least expensive mouths to feed; there's always plenty of simple drudgery work that must be done at the largest firms; and every decent firm expects to weather this (admitedly worse than any other) downturn and be poised to take off once the dust settles and the new financial system is firing on all cylinders, for which having an adequately trained crew of 2nd-4th years will be essential (that means those who are currently 1st years, and perhaps those who will be summers in 09'). In times like these, in many firms and in many practice areas, it is the associates highest up the ladder who are the most nervous (i.e., those who are the most expensive, who do work that many partners are currently opting to do themselves).

38, you shouldn't end your post calling someone else a moron in a fashion that looks like you're signing the post with the name, "Moron." It inadvertently makes it look like you're calling yourself a moron. Alternatively, it is possible that your name is actually Moron, in which case I'm sorry (both for this post and your mean parents).

For those asking about Milbank, I just read that it's been named counsel to Lehman's creditor's committee. If you're a 1st-year going into Lit or Bankruptcy, you're all set.

"Why was AIG to big too fail...."

This phrase was both (1) typed by a law professor at a respectable school (UCLA), and (2) uncorrected by a graduate of HLS (Elie).

Lat never misses an opportunity to throw a "[sic]" into the mix, and rightly so, lest we assume--as we do for Elie--that our editor is an illiterate hack.

Millkbonk ssss suckkks

I am thinking about offering to take a pay cut if it will help me keep my job. Is anyone else thinking this?

Bitches, simmer. Sidley math says a 10% crater is nothing to be concerned about. In fact, the market's only down 7% in the last three days. It's practically peaches and cream on Wall Street.

the fed giving releif to insurance companies has always authorized by legislation but the fed refused to use it - until now....

What is this Glass Seagull? Is it a play by Tennessee Checkov?

The fed is a private company. Standing to sue depends on the nature of the collateral they got to secure the loan.

41:

-We don't have the balls to fix Social Security (increase taxes and significantly delay benefits)
-We don't have the balls to fix Medicare
-We don't want universal government health care
-We don't want to bail out people that bought homes they can't afford
-Agreed (re: veterans)

-Failure of Fannie/Freddie might have caused far greater problems for innocent taxpayers than the bailout will
-Agreed (re: Bear)
-Failure of AIG would have caused far greater problems for innocent taxpayers than the bailout will
-Agreed (re: stupid expensive war)

Regarding the big guy cronies, is there any chance that Section 304 of Sarbox could be used against some of these guys? It might not help the taxpayer, but it might reduce the unjust enrichment that has gone on.

Why is everyone blaming the recission of Glass-Steagall when now everyone in the past 3 days is saying the best route for ibanks now is to merge with commercial banks?

Bailout of AIG implies that it was actually good for AIG.

If you think this deal is good for AIG relative to anything other than Chapter 7, please stay in litigation. 11.5% interest rate and gunpoint liquidation of assets that are probably more than 25% of the company, coupled with obliteration of common and preferred stock?

Yeah, real good terms.

The only people whose ass got saved by the AIG loan are anyone who isn't living in a cabin in Montana with gold and an automatic weapion under the bed.