{"id":1136,"date":"2009-04-23T10:34:20","date_gmt":"2009-04-23T18:34:20","guid":{"rendered":"http:\/\/hodakvalue.com\/blog\/?p=1136"},"modified":"2009-05-05T21:13:36","modified_gmt":"2009-05-06T05:13:36","slug":"practical-definition-agency-cost","status":"publish","type":"post","link":"http:\/\/hodakvalue.com\/blog\/practical-definition-agency-cost\/","title":{"rendered":"Practical definition: Agency cost"},"content":{"rendered":"

\"\"<\/p>\n

Speak clearly directly into the mic, please.\u00a0 Now say again<\/a>?\u00a0 At the moment you realized that your shareholders would be screwed by the ML transaction, and it was time to invoke ‘material adverse change’ to back out of it, why didn’t you do it?<\/p>\n

I can’t recall if [Hank Paulson] said “we would remove the board and management if you [invoked the material adverse change clause to block the Merrill deal]” or if he said “we would do it if you intended to.” I don’t remember which one it was, before or after, and I said, “Hank, let’s deescalate this for a while. Let me talk to our board.”<\/p><\/blockquote>\n

There it is.\u00a0 When the BAC board, including Lewis, came face-to-face with doing right by their shareholders or keeping their jobs, they chose to “deescalate.”\u00a0 Later they rationalized:\u00a0 getting fired = systemic risk.<\/p>\n

So, Ken, you decided not to back out of the deal, what about at least telling your shareholders what you were getting them into?<\/p>\n

Q:<\/strong> Were you instructed not to tell your shareholders what the transaction was going to be?<\/p>\n

A:<\/strong> I was instructed that ‘We do not want a public disclosure.’<\/p>\n

Q:<\/strong> Who said that to you?<\/p>\n

A:<\/strong> Paulson…<\/p>\n

Q:<\/strong> Had it been up to you would you [have] made the disclosure?<\/p>\n

A:<\/strong> It wasn’t up to me.<\/p><\/blockquote>\n

So, the government ordered you to shoot your shareholders from behind a curtain, and you pulled the trigger.<\/p>\n

Not corporate governance’s finest hour.<\/p>\n","protected":false},"excerpt":{"rendered":"

Speak clearly directly into the mic, please.\u00a0 Now say again?\u00a0 At the moment you realized that your shareholders would be screwed by the ML transaction, and it was time to invoke ‘material adverse change’ to back out of it, why didn’t you do it? I can’t recall if [Hank Paulson] said “we would remove the […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[21,12],"tags":[],"class_list":["post-1136","post","type-post","status-publish","format-standard","hentry","category-politics","category-revealed-preference"],"_links":{"self":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/1136","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/comments?post=1136"}],"version-history":[{"count":6,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/1136\/revisions"}],"predecessor-version":[{"id":1223,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/1136\/revisions\/1223"}],"wp:attachment":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/media?parent=1136"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/categories?post=1136"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/tags?post=1136"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}