Bowie Bonds hit baseball. Or is this a case of a player having an IPO on himself? (H/T Alex Tabarrok)!
You have to give markets credit — they have created a way for prospects to buy a form of insurance on their careers.
And, as usual, Larry Ribstein asks the essential legal question.
The chronically troubled airline industry has been a frequent topic on this blog over the years. Even as savvy an investor as Warren Buffett swore off investing in the airlines long ago. After a particularly distasteful experience in an airline investment back in the late 1980’s, Buffett observed that if you calculated all of the airline industry’s finances since the day the Wright Brothers flew the first plane at Kitty Hawk in 1903, you would discover that the airline industry has cumulatively not made a single penny of profit.
That led Mr. Buffett to suggest famously that, in hindsight, shooting down the Wright Brothers on that beach would have been a reasonable financial, if not moral, move.
However, Buffett’s observations aside, when Larry Ribstein gets to the point where even he cannot figure out the structure of a solution to the mess of the airline industry, my sense is that this is an industry that is in serious trouble.
By the way, Professor Ribstein’s feelings toward air travel these days are the same as mine.
Regular readers of this blog know that I believe the NCAA’s regulation of big-time college sports is hopelessly corrupt, albeit an entertaining form of corruption (see previous posts here, here, here, here, here, here, here, here, and here).
That entertaining form of corruption is pretty valuable, too, as this Forbes List of the 20 Most Valuable College Basketball Programs reflects. And even at a top range of $25 million, the top basketball programs lag well behind the top football programs in value.
But one can only estimate how much these programs would be worth if they were unleashed from the obsolescent NCAA regulatory scheme. Particularly one that not only deprives its main income-generators from being paid their true value, but would open up an administrative investigation into an alleged regulatory violation involving a 97-year old icon:
Just before the start of this college basketball season, UCLA received a letter of inquiry from the NCAA, seeking information about possible illegal contact between a recruit and a person representing the interests of the university.
The recruit was Kevin Love, now the Bruins’ star freshman center.
The person representing the interests of the university was [legendary 97-year old former UCLA coach] John Wooden.
The NCAA has not disclosed who made the complaint.
Love and his family visited Wooden during his recruiting trip. They had a nice chat, Wooden teased the Loves’ young daughter, Emily, for being so quiet, and a nice time was had by all. [. . .]
. . . The NCAA, apparently shrugging off common sense and going with protocol, procedures and robot-ism, actually wrote a letter of inquiry to UCLA, requiring the school to investigate.
The blawgosphere’s analysis has been extensive and insightful in regard to the Supreme Court’s important decision Tuesday in Stoneridge Investment Partners v. Scientific-Atlanta (previous posts here), which upheld the Central Bank rule against holding third parties secondarily liable for damages for providing financing to a company that is found to have defrauded its investors. The Point of Law.com blog, which has been a leader in providing a forum for discussion of the issues in the case, provides links to many excellent commentators, including Professors Bainbridge and Ribstein, the latter of whom has this follow-up post to his initial one that is well worth reading.
Although the issues and policy implications involved in Stoneridge are easy to understand for those of us involved in business, it’s interesting how many people who are not involved in business on a day-to-day basis have asked me about the case and why I think it’s so important that the Central Bank rule be upheld. Why shouldn’t the banks that facilitated a company defrauding its investors not have to contribute something into the compensation pot for the investors, they inquire?
I have found that directing the folks asking that question to the practical example presented in this earlier post usually does the trick in explaining why erosion of the Central Bank rule is a manifestly bad idea.
Wouldn’t it be nice if at least one of the Presidential candidates would embrace the basic reform that is really needed in the U.S. tax system? Simply simplification. Previous posts on tax simplification issues are here. Interestingly, one of my least favored Presidential candidates — Rudy Giuliani — has the best tax simplification proposal that I’ve seen so far during the campaign.
The development of in-store health care centers over the past decade has unquestionably been a positive development for the American health care system. They provide relatively inexpensive primary care and take some of the burden off of over-crowded emergency rooms that are currently required to provide non-emergency care to folks who have no other conduit to the health care system.
So, in the face of this important service that the in-store health centers are providing to people and communities, what does the Mayor of Boston want to do? Stop them from making money! (H/T Radley Balko):
Mayor Thomas M. Menino embarked on a highly public campaign yesterday to block CVS Corp. and other retailers from opening medical clinics inside their stores, . . . Menino blasted state regulators for paving the way Wednesday for the in-store clinics, which are designed to provide treatment for sore throats, poison ivy, and other minor illnesses.
The decision by the state Public Health Council, “jeopardizes patient safety,” Menino said in a written statement. “Limited service medical clinics run by merchants in for-profit corporations will seriously compromise quality of care and hygiene. Allowing retailers to make money off of sick people is wrong.”
In a separate letter, Menino urged members of the city’s Public Health Commission to consider barring the clinics from Boston.
Meanwhile, W$J columnist David Wessel writes “The business model for big U.S. banks is broken. . . . Banks and Wall Street could devise a better business model. But they’d best hurry. If they don’t act, regulators will. And if regulators don’t, House Financial Services Committee Chairman Barney Frank and the other Democrats in Congress will.”
Wessel’s column and Frank’s usual anti-business antics prompted Andrew Morriss to write a letter to the WSJ, which Don Boudreaux passes along over at Cafe Hayek:
Mr. Wessel is correct that most banksí business models are not currently producing profits, but this is not cause for concern for anyone but their shareholders. Markets are a discovery process, with firms and investors learning as they try new ideas and react to changed conditions. What markets need is a stable regulatory environment, in which every dip in the market does not produce a new set of rules.
Unfortunately, there is little evidence that Rep. Frank and his comrades on the House Financial Services Committee understand this, making it virtually certain that they will rush to ìsolveî the banking crisis with new legislation. The best assistance Rep. Frank could offer would be to commit his committee to resolute inaction for an extended period of time, offering both banks and investors the assurance that the rules of the game would remain unchanged and allowing them to learn from their experience in the market place.
It seems as if everyone who has been traveling recently has a horror story to relate about an abysmal experience with an airline. Heck, air travel has become so distasteful that I don’t even think about flying anymore if I’m traveling within the Houston-Dallas-Austin/SanAntonio triangle here in Texas. I have an excellent chauffeur (i.e., my wife) who handles the driving while I work. It’s far more pleasant than dealing with the non-stop hassles of air travel.
But if you simply must endure air travel these days, take a moment to read this Peter Greenberg article that provides about a half-dozen tips for minimizing stress during air travel, such as:
Avoid “direct” flights. The only good flight is a nonstop flight. Labeling a flight “direct” is an airline euphemism that means you’ll stop at least once, exponentially increasing your chances of being delayed.
Midwesterner Larry Ribstein — who is currently on leave from the University of Illinois Law School while teaching in New York City — humorously experiences culture shock while shopping in the Big Apple.
As noted here last month, Berkshire Hathaway chairman and mainstream media folk hero Warren Buffett is a key player and, as these NY Times and W$J articles report, perhaps even a key witness in the upcoming criminal trial of a former AIG executive and four former executives of Berkshire’s General Reinsurance Corp, including former General Re CEO, Ronald E. Ferguson.
Although Buffett knew about the finite risk transactions that are at the heart of the prosecution, he is exempt from prosecution under the Buffett Rule. Previous posts on this case are here, here, here, here and here.
What’s particularly interesting about all this is that the prosecution is attempting to prevent the defense from even mentioning Buffett, whose knowledge of the transactions (and the government’s election not even to include Buffett as an unindicted co-conspirator, much less a defendant) is at least some evidence of the defendants’ lack of criminal intent (Warren Buffett would not engage in any criminal conduct, now would he?). The prosecution is contending that any evidence relating to Buffett’s knowledge of the transactions is hearsay and, thus, inadmissible. But until the testimony regarding Buffett’s knowledge is propounded in court, who knows whether it is hearsay?
Of course, the prosecution is not shy about using hearsay testimony when it comes from someone who is not an avuncular media darling such as Buffett. The prosecution has fingered former AIG chairman Maurice “Hank” Greenberg as an unindicted co-conspirator in the trial, which — based on previous experience — means that the prosecution will use testimony about Greenberg’s statements that would otherwise be hearsay.
As usual, Larry Ribstein sums up the vagaries of the government’s policy of selectively criminalizing merely questionable business transactions:
One might think that the government would have been trying to ensnare Buffett, who would be a high-profile trophy. The problem is that trying a cultural icon like Buffett would raise public doubt about the legitimacy of the government’s corporate crime enterprise. So Buffett gets the benefit of a version of the Apple rule — . . . the Buffett rule. In this case, unlike Enron, it’s better for the government to land the tuna than the barracuda.
According to the WSJ, the prosecution is arguing that “[t]he defendants want to deflect the issue of their involvement, knowledge and the intent relating to … the fraudulent transaction at the heart of this case by creating a trial-within-a-trial about Warren Buffett.” Deflect? Yes, I guess, for the government, a defendant’s insistence on defending himself is a pesky nuisance.
The bottom line is that issues of defendants’ guilt, including critical evidence of whether they knew they were engaging in wrongdoing, may not be available because, ultimately, the government decides who testifies by deciding whom to prosecute. All part of the costs of the extensive criminalization of accounting and other conduct of corporate agents.
The 30 Major League Baseball clubs invested $80 million in a fledgling media company. That initial investment has been repaid and the media company generated $450 million in revenues this past year, producing a $3 million dividend for each MLB club. Several investment banks recently estimated that the value of the clubs’ original $80 million investment is now worth $2.5 billion.
Who managed this windfall for MLB? The most influential person in the sports business that no one has ever heard of — Bob Bowman, the President and Chief Executive Officer of MLB Advanced Media (MLBAM). Maury Brown interviews Brown.