Employment Law Man

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    • Wed Nov 12th 00:54 AM | Rating: +1 0
      Commented on:
      Should We Really Bail Out the Big Three Automakers with $73.20 Per Hour Labor?
      The numerous comments by folks who claim that the United States is a "free market" and that this is reflected in union wages are bizarrely misguided.

      Anyone with even a passing familiarity with the National Labor Relations Act realizes that it creates a system under unionization that has no resemblance whatsoever to a free market. As a preliminary matter, in a true free market employers are free to replace striking laborers with others who are willing to work.

      The NLRA effectively prohibits that in all but extreme cases. Likewise, collusion among laborers is no different than price-fixing or anything else among manufacturers/retalier... - collusion is anticompetitive by definition and injures the ability of a free market to function. Furthermore, in many fields unions are free to constrain the supply of labor as unions traditionally run the apprenticeship programs through which new workers gain entrance into a profession.

      Union supporters will say that aside from wage increases, unions help to improve working conditions, including health and safety considerations, for unionized workers. This is true, but it would be far better if there were simply more direct regulation of these issues by the government. After all, only a small percentage of workers are unionized anyway, so for workers to win true protections the government must simply step in and set standards - this means meaningful enforcement of OSHA, new standards, the end of at will employment as a concept in American law, etc...
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    • Mon Feb 18th 01:50 AM | Rating: 0 0
      Commented on:
      Real Estate Brokers Must Hate Economists
      Service 7: providing a convenient person to sue if something goes wrong.

      Although I haven't read the study, your explanation of it suggests that the authors aren't accounting for the value of the time that an unrepresented seller expends on 1 and 3. I always assumed that was the primary thing a seller pays for.

      In other words, an unrepresented seller may get the same price ultimately, but they do more work.
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    • Sat Feb 2nd 17:05 PM | Rating: 0 0
      Commented on:
      Who Would Want Sprint? Google, Comcast
      The Sprint-Google rumor strikes me as silly.

      What would happen to Sprint's aging and overpaid workforce? They wouldn't be welcome at Goog, that's for sure. Goog has worked harder than any company in recent history to attract and retain top talent - with an emphasis on young innovators. They have worked equally hard to keep the University of Phoenix, corporate lifer crowd OUT. The last thing they want is to acquire a boatload of bozos from a sinking ship who could drag down the company until they all either die or retire.

      For legal reasons that are not worth detailing, it would not be feasible for them to buy any substantial portion of Sprint's assets but dump the workers. Not to mention the PR and practical problems with firing everyone.
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    • Thu Dec 6th 03:53 AM | Rating: 0 0
      Commented on:
      Paulson's Plan is Nothing but Lip Service
      "Who in their right mind would not want to jump on that?"

      Your assumption here seems to be that mortgage loans are non-recourse to the borrower. Depending on state law, the type of loan, and the loan terms, they may or may not be recourse. In California it depends on whether the loan is for a primary residence, what the loan documents say, whether the loan is purchase money or non-purchase money, and how the lender ultimately chooses to foreclose. In many cases the borrower may be personally liable in the event of foreclosure, particularly when home equity loans are involved. If a borrower has two loans, a first loan and a second home equity loan (common situation), and defaults on both, odds are the first lender will foreclose. This leaves the home equity lender unsecured, so the home equity lender will sue. Borrower will file bankruptcy, but debt may be non-dischargeable if borrower lied on the loan application (fraud). Even if the debt is dischargeable, borrower may spend the next 3-5 years asking his employer to make his paychecks payable to "U.S. Bankruptcy Trustee." Not to mention the credit and tax consequences.
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    • Thu Dec 6th 03:38 AM | Rating: 0 0
      Commented on:
      Why Paulson Needn't Worry About Litigation Risk in His Mortgage Plan
      "Bond contracts specify specific payment amounts at specific intervals."

      That's actually kind of the antithesis of how these bonds work. They are set up so that the money flows according to complex rules, and each tranche's entitlement to payment is defined by reference to various ratios, measures, and triggers contained within the rules of the overall cash flow structure. I.e., for nearly all tranches, the right to payment at any given time is contingent on, at a minimum, there being enough money in the pool to make the payment. So there's no absolute duty to pay any tranche.

      For instance, a particular tranche of bonds may be entitled to payment only if certain overcollateralization requirements or ratios are met for the pool as a whole (e.g., the face value of mortgages in the pool is more than 105% of the principal value of bonds currently outstanding). Otherwise the tranche's payments may be skipped in favor of another tranche being accellerated, or in favor of purchases to improve the collateralization of the pool, or whatever else.

      The issuer and the trust holding the bonds are separate legal entities. The issuer is not liable for the bonds, nor are the mortgages in the underlying pool available to the issuer's creditors for liquidation in the event of the issuer's bankruptcy. This method allows people to invest in the mortgage pool without having to worry about the credit status of the issuer.
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    • Thu Dec 6th 03:24 AM | Rating: 0 0
      Commented on:
      Why Paulson Needn't Worry About Litigation Risk in His Mortgage Plan
      Even if the deal is in the best interest of the bondholder, that doesn't mean the bondholder doesn't have a legal cause of action. i.e., you can have a cause of action even when someone does something that is in your best interest - particularly when that "someone" is a fiduciary (such as the trust administrator or servicer in the case of a securitization (everyone keeps saying "issuer" but the issuers are the least relevant party post-securitization (often the issuer is also the servicer, but it is still wrong to refer to "issuer" in that capacity)).

      Second, buyers of bonds have concerns aside from default risk. Your analysis here focuses in on minimizing credit losses. But bondholders are concerned about more than just credit losses.

      They are concerned about extension risk, the general shape of the cash flow over time, tax considerations, the pairing of asset and liability durations, liquidity, interest rate risk (closely related to extension risk in this context), and the ongoing distribution of outcomes/volatility of the value of the bond.

      In other words, depending on the needs/situation of the individual bondholder, some bondholders might be aggrieved even if the plan reduces overall credit losses in the short term, because that is not the goal or immediate need of all bondholders.

      Also, not that the Paulson plan partly relies on manipulating the overall market in order to prevent a flood of foreclosures leading to sales occurring in a depressed market and a death cycle (ironically, exactly what happened with the bonds themselves when the market for MBS dried up suddenly). Thus, the benefit is not direct to the bondholders, but rather accrues indirectly to all participants in the market. If everyone goes along with it, it minimizes losses across the board, reduces foreclosures, etc. etc. From this perspective, there is a free rider problem where individual trusts could gain the benefit of this bargain without actually participating.

      Given that option, the administrators/service... of those loan pools now have an obligation to be free riders if that is in the best interest of bondholders... and if not, we are back to the lawsuit scenario.
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    • Wed Dec 5th 01:24 AM | Rating: 0 0
      Commented on:
      Why Paulson Needn't Worry About Litigation Risk in His Mortgage Plan
      The "Paulson Plan" is not specific enough to really figure out what the legal issues might be. I also don't have the benefit of having MBS deal documents in front of me, so it would be interesting to see to what extent they allow the servicer/trust administrator to modify loans.

      I would note though that, from what I recall from my days at an MBS hedge fund, these deals were usually subject to arbitration provisions. As such, it would probably be fairly easy for institutions to quietly litigate these issues without it being a public spectacle. You are correct that the institutions involved tend to be litigation-averse, but the scale of this issue, and the massive amounts of money lost by now-defunct hedge funds with nothing to lose, suggests to me that at least some funds would try to litigate. If they were to win, other bondholders would be all-but-forced to make similar claims in order to fullfil their duties to their investors - a fund manager cannot choose to not pursue a meritorious legal claim on behalf of his investors without risking becoming liable, itself, to those investors.
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