[Dingell's, no Henry Gonzalez but maybe he's going to climb the learning
curve....]
Dingell's an odd one. He's close buddies with the NRA, a major proponent of further telco deregulation, yet he's questioning bank dereg, which is a very good thing. (I read somewhere that Dingell's father was one of the architects of the original Glass Steagall Act). Loan tying, among many other deceits, lies at the center of this boom / bust cycle.
"Since tying, however, is understandably never done in written form, do you intend to directly question bank officials about whether they violate formal written
policies in verbal communications with corporate borrowers? For example, will
you ask them whether, notwithstanding any such policies or procedures, they ever
request that a borrower provide investment banking business as a condition of
extending or renewing a credit facility?
This is pretty astute. Since it's a major breach of anti-trust law, no bank will admit to, or have written documents stating they specifically tied a loan to a deal. And they will lie through their teeth about how they're really just a "full service institution, which provides clients credit (on extraordinarily favorable terms) as well as merger, acquisition and IPO services." When I was researching Global Crossing, I spoke with JPM Chase about loan tying. The head of investment banking assured me that Global Crossing's biggest acquisition (of Frontier) happened BEFORE they established a $3bln credit facility. When I pointed out that the facility closed on 7/2/99 and Frontier closed AFTERWARDS on 9/28/99, the response '"well maybe in that case, but it was merely a coincidence." Yeah, right.
Will you specifically investigate any of the widely publicized reports of tying
in cases such as Phillip Morris Cos.' multi-billion-dollar initial public
offering (IPO) spin off of its Kraft Foods Inc. subsidiary, Lucent's IPO spin
off of Agere Systems Inc., Motorola, Corning, and Vivendi? I am transmitting
copies of complaints that I have received involving Bank of America and
Westdeutsche Landesbank. I also note that it has been widely reported that Enron
's treasury staff systematically linked fee-based business to credit extension.
Absolutely, in Enron's case, it's apparent from the timeline. Their very last hurrah was the sale of Northern Nat. to Dynegy, JPMChase and Citi were the banks and key providers of the $1.5bln credit line.
Do you intend to contact corporate financial executives to inquire as to whether
they feel pressure to award investment banking or other services as a condition
to obtaining commercial bank participation in loans? (See the October 2001
Greenwich Associates Survey of Corporate Executives.)
This is tricky. Points to a major conflict of interest. Corporations were not about to say no to loans extended at better rates in return for banking business. They arm twisted banks as much as banks arm twisted them.
Nomi
