Deutsch & Lipner

Hip-Hip Hooray; It's Arbitration's Day 

      by Seth E. Lipner

 

In AMEX, and before that in AT&T,

The Supreme Court said that you cannot sue me.

 

Even if I didn’t treat you so well,

If I made a false ad; or if I’m a cartel.

 

Legal immunity is what I desire,

And I use arbitration - it’s what my contracts require.

 

Your lawyer says arbitration is not economic,

He says arbitration is wholly demonic.

 

But the FAA, my friend, will do in your suit,

The Supreme Court has told courts to give you the boot.

 

Congress, they wrote, just loves arbitration,

And made it the law, throughout the whole nation.

 

And though contract law the statute does mention,

My standard form contract gives me perfect protection.

 

You can’t ever be in a class action case, 

And I’ll never suffer a public disgrace.

 

But wait, can it be, there’s some hope to be had?

Florida said arbitration was bad. [Busalto v. Hialeah Automotive]

 

A Latino buyer to whom English was foreign,

Appeared to be trapped in the ADR warren.

 

He just bought a car, and signed on the line,

Yet he spoke no English; though his Spanish was fine.

 

The Supreme Court of Florida said that it was unfair,

To require arbitration of one so impaired.

 

Forced arbitration was wrong, those judges did say,

And for once a consumer was given his day.

 

But will the Supreme Court reverse that decision?

Will their ruling deny him the right of rescission?

 

The Arbitration Act, after all, leaves room for state law,

When a state’s contract rules perceive some real flaw.

 

But in ATT, and in AMEX, the Court ignored those provisions,

The FAA, and preemption, underlies their decisions.

 

So what do you think will happen this time?

Will consumers ever get more than a dime?

 

I’m betting against it – they’ll say it’s “finito,”

With the opinion written by Scalia, or Alito.

 

Big business sellers are really immune,

From class action suits, and they’ll whistle this tune:

 

“We are happy, so happy, to go arbitrate,

It is a system that every consumer will hate.

 

“We use pro-business ‘judges,’ and no juries to boot,

And you can forget about a class action suit.

 

“It does not matter that your rights are ignored,

Or through an adhesion contract that you have been gored.

 

“And we’ll do it in private, where the press cannot see,

I love it, I love it, I’m so very, very happy.”

 

“Hip-Hip-Hooray,” these businesses will say,

Because no consumer will now get his day.

 

*****

© Seth E. Lipner 2014

 

 

Learning from Bernie

by Seth E. Lipner

 

When Bernie made off with billions in dough,
A few skeptical folks claimed “I told you so”.
But most of the people just plain got fooled
And lost all the money that Madoff had pooled
 
Rich guys, foundations, widows and boards
He got them to invest all that they could afford
His fund was exclusive, it was open to few
When it came to lying, Bernie knew what to do.
 
He did the trades himself, in the dark of the night
His secret, he claimed, was to time things just right 
He was in, he was out, he bought options and stock
No matter the market, his fund was a lock
 
But it all was one big fraud, it was just a big fake
Billions and billions this devil did take.
While he told everybody how much their wealth grew
He paid old investors with money from new
 
The investigations, the hearings, they now have begun
Unwinding this fraud is what next must be done
For those victimized in this Ponzi-esque fashion
I hope the Trustee will have some compassion
 
For now, anyway, the creep’s out on bail
But i can assure you, he’ll soon be in jail 
Then the government lawyers will seize all his stuff
But in light of the crime, it seems hardly enough
 
For 20 long years, lots of folks did he rob. 
While the SEC was asleep on the job
So what can we learn from this con-man so evil? -- 
That crooks can defraud even very bright people.
 
******
©2009 Seth E. Lipner

 

 

Bad Week On Wall Street

by Seth E. Lipner

 

So Lehman Brothers is no more
But they had almost failed before
 
First Kuhn expired, then Hutton died too
But Lehman, till now, had always pulled through
 
Long Term Capital made the top execs frown
But Lehman lived on – though its stock was way down
 
Through markets that were both turbulent and churnin’
Lehman rose up; they bought Neuberger Berman
 
But the mortgages, the swaps, and the money they lent
Caused it all to go south, and away Lehman went
 
Merrill was sold, and Morgan will too
But not for that much, because of the billions they blew
 
They all took huge salaries, but seemed not to care
That the risks being taken were too much to bear
 
So how can we trust them with our money and wealth
Just thinking about it is bad for your health
 
Now many will suffer because of this blight
As Lehman and Merrill disappear from our sight
 
******
© Seth E. Lipner, 2008

 

 

GOODNIGHT SROP

by Seth E. Lipner

 

So Lehman Brothers is no more
But they had almost failed before
 
First Kuhn expired, then Hutton died too
But Lehman, till now, had always pulled through
 
Long Term Capital made the top execs frown
But Lehman lived on – though its stock was way down
 
Through markets that were both turbulent and churnin’
Lehman rose up; they bought Neuberger Berman
 
But the mortgages, the swaps, and the money they lent
Caused it all to go south, and away Lehman went
 
Merrill was sold, and Morgan will too
But not for that much, because of the billions they blew
 
They all took huge salaries, but seemed not to care
That the risks being taken were too much to bear
 
So how can we trust them with our money and wealth
Just thinking about it is bad for your health
 
Now many will suffer because of this blight
As Lehman and Merrill disappear from our sight
 
******
© Seth E. Lipner, 2008

 

 

THE ARS MESS

by Seth E. Lipner

 

 

What if they held an auction, and nobody came?
Would the interest paid still be the same?

What if the market ran totally dry
And suddenly there was an over-supply?

If UBS stopped bidding that bond
Do you think that their customers would still be so fond?

Suppose that you bought a safe student loan
And now you can’t sell it - would that make you moan?

Would you think that your broker is some kind of wierdo
If he told you the interest on your Notes now was zero?

What if your cash all of a sudden went bad?
I bet that would that make you angry, or sad.

This stuff goes by the letters “A”, “R” and “S”
The wizards of Wall Street have again made a mess

****** 

© Seth E. Lipner 2008

 

Oh No, I Own a CMO

by Seth E. Lipner

 

I looked this month in my account
I like to check, to see the amount
But down was my portfolio
Because of a loss in a CMO!

Can it really be a CMO?
A "mortgage" is what it says below
It also says it is an IO
But what that means I just don’t know

Oh no, I own a CMO.
The losses just grow and grow
They say its rated triple A
But the prices drop now every day

I asked the broker what it was
But his answer was just full of fuzz
Good income was the justification
It was supposed to provide diversification

I heard the lenders went to town,
And now the stuff has gone way down
The mortgage brokers had a ball,
"No doc loans" for one and all !!!

Some are sub-prime, others Alt-A,
Lots of wealth has gone away
Defaults are up, the markets down

So what the hell are these CMOs?
And why are they next to a bunch of zeros
I just got over the big tech wreck
And again my account has gone to heck

I heard they fired Stan O’Neil
But he, for sure, won’t miss a meal
For my retirement, well, I just don’t know
Because I own this CMO

********
©2008 Seth E. Lipner

 

 

Ode to NASD

by Seth E. Lipner

 

The end of an association
there’s not much fascination.

The birth of an authority
by vote of the majority.

Its now the financial industry
a product of global chemistry.

Its mission is to regulate
to make it safe to speculate.

FINRA's now the name, you see
so long, farewell, oh NASD.

******
©2008

 

Victims of the Bull Market

by Seth E. Lipner

 

Molly & Sam had been through a lot
They ran a small business, dummies they're not

They'd saved for years, and invested some too
In stocks, bonds and funds, mostly stuff that was blue

Retirement was coming, the kids' college was done
Molly played in the market, it seemed lots of fun

Sam handled the million, the money they'd saved
Invested conservatively, 8% they had made

Molly's friends had made bunches, she heard them all say,
And she had some hunches, but what would Sam say?

Then one day at lunch, her rich friend talked of trades
Molly's friend called her broker, a meeting arranged

She brought Sam along, he was doubtful but willing
He too heard of friends who had just made a killing

The broker had lots of nice graphs and a chart
He seemed honest and earnest, and showed lots of heart

He talked about tech stocks, dot coms, and who knows
Returns of 20%, and some nice IPOs

Not a word about risk did the broker ever utter
"Not to worry" he said, "I'll treat Molly like my mother"
- she thought he said "mother" actually, he said "mother-in-law"

They turned over the stocks, and the bonds were sold too
The first months were good, their net worth nicely grew

Then the next month, when the statement it came
They saw the word "margin", it seemed less than tame

Sam called the broker, who scoffed and said "poo!"
"It’s the way pros invest, I know more than you do."

Sam was still nervous, but Molly was sure
That the broker was brilliant, that his heart was still pure

Then August, September, October they came,
The market was dropping, it was no longer a game

They tried to hang in there, the market must rise
If more losses were coming, the broker’d advise

Then boom it came down, with calls and mailgram
the account went to zero, "oh my god" said old Sam

Now Sam drives a taxi in his spare time
Retirement is distant, he hasn't a dime

Molly she doesn't know quite what to do,
But she read in the paper that she might try to sue

Lots of these cases are being filed now
At the NASD, where agreements allow

So to arbitration they'll go,
To recover their losses
The firm will blame them
Say that they were the bosses

You'll have to decide who should take all the blame
For the account that imploded, for conduct insane

Was it the broker who urged them to trade?
Was it the friend and the referral she made?
Was it old Sam who feared it was risky?
Or was it poor Molly, who was a little too frisky?

There are lots of these cases you'll see later this year
And next year as well, the brokers do fear

You might see me there, on behalf of some person
Of this tech stock debacle, I'll tell you my version

Of unsuitable conduct, of duties they breached,
Of returns no sane broker would think could be reached

The brokers will say Sam and Molly knew better
They'll argue some law, and they'll cite every letter

But I blame the brokers, who egged on the trading
Who told Molly and Sam to risk their life savings
Who pretended that stocks never go down, not ever
Who said that the market would go up forever
Who talked about growth and forgot about income
Who never talked safety
or diversification
The brokers whose clients lost 50%,
or 60 or 70 - its horrible, but that's how it went

So how will we sort out this terrible mess?
Some say "mediation" will do it the best

Arbitrators will decide, we hope they’ll be fair
The victims of bull markets are in their care.

******

(The author is a professor of law, Zicklin School of Business, New York, N.Y.)
© All rights reserved