Law on Rice

If you haven’t noticed, I haven’t posted much. That’s because it’s… finals again. I probably won’t be posting much over the next few weeks. See you on the other side.

What if the real problem in the financial meltdown was simply a problem of exposure? I was kind of curious to see how the big banks had allocated their loan assets over the past few years, so I did a quickie comparison based on FDIC and OTS data. The results were shocking to me, even if someone savvier wouldn’t bat an eye.

Wells Fargo’s latest call report shows that they are carrying around $55 billion in closed end single family residential loans secured by a first position lien. That’s about 15.3% of their loan portfolio. By comparison, March 2008’s call report for Bank of America revealed that they were carrying about $203 billion of the same loans, or 30% of their portfolio. Washington Mutual was carrying a whopping 54% of its portfolio in those loans, or $133 billion. Talk about exposure.

No wonder Washington Mutual was willing to write my home loan!

I’m at the mad crush that is Costco before Thanksgiving weekend, and I finally noticed that the sample people are just plain odd. They just stand there muttering about the praises of their wares, engaging nobody. It’s weird.

Dear Mr. Corker:

I watched some of the mark up session on the Restoring American Financial Stability Act of 2009 on the web tonight. In your comments, you mentioned that you had recently held a meeting with bankruptcy lawyers and members of the FDIC. You said you were trying to find better resolution mechanisms for failing institutions.

I was wondering if you would be willing to share the names of the lawyers in the meeting so that I might follow up with them. I would like to know what some of their ideas are.

Thank you very much in advance.

When I left Arizona, the real estate boom was reaching fever pitch. Shoot, it had been at fever pitch ever since the 1980s. Everyone had new cars that were shiny as new pennies, and Scottsdale threatened to eclipse Las Vegas.

As I drove on the Five through the rain this morning in Seattle, I heard that 14% of mortgages are behind or in foreclosure. And I wondered if Arizona will be the same when I come back?

Maybe all the cars will be the same, just not so shiny and new.

I have a new religion. I no longer praise the market for its sole sake. I now see it as a powerful tool for feeding and connecting a quickly growing world.

It’s a dangerous perspective, I know. But I think it reflects reality. I think it reflects necessity. It is thus because it has the simultaneous power to foster as well as quell revolution.

My professor asks us daily “how much risk is too much?”

My new religion helps inform my answer and will guide my paper.

I know this is a cryptic post. Please bear with me. I’m in paper writing mode. I get like this.

As you can tell, I haven’t had much time for posting. Finals are starting to wind up, as are a handful of papers I need to turn in.

So, the best I can do now is leave you with a quote I read today from a guy named Antony Jay. He said, “The uncreative mind can spot wrong answers, but it takes a creative mind to spot wrong questions.” I like that.

I got a little frustrated with my Espinosa paper over the weekend. I’m in that in between period where I know a lot, but I’m unhappy with what I’ve got…

So, I want to simplify this next draft. To me, procedure really drives the case, and the paper should be structured around the procedural posture here. The posture is that the creditor attacks the bankruptcy court’s judgment under Federal Rule of Civil Procedure 60(b)(4). Under that Rule, the creditor must establish that the judgment was void.

As such, the creditor must prove the court lacked jurisdiction or that there was a due process defect because simple error is insufficient. I think it’s a stretch to argue that the court lacked jurisdiction. I think it’s more likely that the plan was simply confirmed in error (i.e., failure to enter an undue hardship finding under 523(a)(8)).

The due process argument is a little stronger, however. Under Mullane, the standard for due process is pretty low and, worse, the creditor had actual notice–they just chose to ignore it. A stronger argument might be, however, that the Bankruptcy Rules and Code changed the creditor’s expectation and thus, altered the totality of the circumstances under Mullane. So far, that’s the only way I can think of to make the creditor win.

Here’s the debate on CNBC. This is basically my final exam: fix it.

I just got my copy of Barry Kramer’s venture capital report from Fenwick and West. They report that up rounds exceeded down rounds for the first time this year–not by much, but enough. The report is here.