Xeno:
And your cites mean…???
Bush et. al. as li’l ol’ ladies. <snicker>
[sub]All right, all right; I’m leaving already.[/sub]
Christ, Scylla, does someone have to explain it to you in a way that Forrest Gump could understand?
Sheesh. RTFA. B’bye.
Yes. You do. Because I checked your link and your cites do not actually mean what I guess you are going to pretend they do.
You of course will follow your SOP and avoid actually trying to make an argument or identify whatever it is that you think your saying, or your cites say, for fear (quite justified) of the further embarassment you will suffer upon immediately being proven to have your head once again completely up your ass.
Your only defense seems to be acting indignant, and making cryptic statements.
http://www.people.fas.harvard.edu/~skomarov/harvardwatch/
For any one wanting every single last word on the subject. Of particular interest is an investigative report by that scurrilous left wing toady, Wall Street Journal
“…The Harken deal was designed to raise money without incurring new debt or selling stock. It did so by exploiting “a fundamental weakness in accounting rules” by moving the deal off its balance sheet, said Rice University accounting expert Dala Bharan, who reviewed the transactions for The Wall Street Journal…”
Another ignoramus, no doubt.
“…Harken was already technically in default at that point, according to other company records, because it had failed to abide by equity requirements in loan agreements with its two primary banks. One, Bank of Boston, was demanding immediate payment, but the other, First City Bancorp, agreed to take over Bank of Boston loans…”
Merrrill Lynch would have loved this one. Talk about putting lipstick on a pig!
“…“It seems to be a simple case of Aeneas bailing out Harken,” said Mr. Dharan, an accounting professor at Rice University’s Jones Graduate School of Management. Because Harken owned less than 20% of the partnership, it no longer was required under accounting rules to include the debts and assets on its balance sheet. Mr. Dharan argues that a true reflection of Harken’s financial health would have included them…”
Well, what does he know? Probably full of shit, eh, Scylla. You should get right on the phone and straighten him out!
No, gentlemen, the case is not as clear cut as you make it out. But soft! Let’s give it a day or two, see what surfaces on the pond.
Profound! Well, that’s a first. Been called a lot of things, some of them quite complimentry, but never “profound”. But I must demur, as I suspect it isn’t offered entirely in good faith.
“Blunt tool.” No, Scylla, blunt is “you are wrong!” “You are full of shit” is schooyard, and if its not beneath you, it ought to be.
I have yet to hear a plausible interpretation of the deal that would suggest the deal wasn’t kosher. If you have such an interpretation, I suggest you offer it. Put up or shut up.
He isn’t an ignoramus but he isn’t God either. The rules regarding the movement of debt and assets off the balance sheet are a matter of vigorous debate in the accounting world. The key question, as always, is “what treatment will most accurately reflect the economic position of the company?” You will find academics on several sides of the issue.
Incidentally, Prof. Bharan has written a pretty good article on the SPE’s and off-balance sheet financing, should you be so inclined.**
A stupid assertion. So Harken had loans from two banks, and it was under technical default of both loans. One bank wanted to accelerate payment, the other bank thought a workout would be the best way to insure repayment of both loans. So what?**
The rules are what they are because FASB has decided they represent the best position amidst competing viewpoints. It’s unfair to hold a company to a standard outside of those rules. That’s like saying that because some sports analysts think the DH is stupid, the AL teams are acting unethically in using a DH.
elucidator:
your quotes:
[quotes]
…The Harken deal was designed to raise money without incurring new debt or selling stock. It did so by exploiting “a fundamental weakness in accounting rules” by moving the deal off its balance sheet, said Rice University accounting expert Dala Bharan, who reviewed the transactions for The Wall Street Journal…
[/quote]
True enough. The company needed cash, and couldn’t handle new debt. New equity would have diluted shareholders. Dala Bharan is taking liberties by calling the move off the balance sheet a fundamental weakness. There are sound and complex reasons why that way at the time (and why it remains so now) though it is a matter of continuing debate.
I’d go into these reasons, but seeing as it took you nine repeats to understand that Harvard stood to lose if Harken went bankrupt, I found the prospect of educating you on this matter daunting.
I don’t think you understand what “technical default” is, nor do you understand the process of a workout, or you would not be presenting this quote as if it aids your case. It is exactly in line with the scenario that both Dewey and I have espoused.
Additionally, this scenario bears not even a passing resemblance to any of the current troubles associated with Merrill Lynch. Suggesting that they do is an idiotic assertion.
I will be happy to go into as much detail into any of these issues, providing of course you demonstrate the ability to make a meaningful argument.
In other words you are completely full of shit.
This is true.
Once again though, it doesn’t mean anything at all like what it is that I guess you think it means. I have to guess, because you don’t actually come out and make an argument.
Suffice it to say that nothing about that quote in any contradicts either my or Dewey’s general points, or the scenario as we’ve described it.
If you disagree back it up specifically, and make a debatable proposition.
http://www.thecrimson.com/article.aspx?ref=217942
Moving money around.
I have NO clue what’s going on, I’m just enjoying the discussion. Carry on. 
Why, sure, Scylla Mr. Balan is “taking liberties” in his estimation, though, as you say, this a matter of debate. By saying it is a matter of continuing debate, aren’t you implying that other persons, whose judgement may be as informed as your own, disagree with your assessment? It seems that Mr. Balan is credentialed enough to merit the trust of the Wall Street Journal. Aren’t you remiss is failing to inform WSJ of the fallibility of their informant?
Pity they didn’t call you first, might have saved them considerable embarassment.
Then you finish off by advising me that there are “excellent reasons”, but I am too stupid to grasp these subtleties, but should simply content myself with your word on the matter.
Well, that certainly takes care of that, doesn’t it? What argument can a mere mortal make?
I’ll take a wild stab at it. Means that, if a fine point be made, that Harken had failed to lived up to the letter of its obligations, but that the bank wasn’t packing up thier chairs and desks yet, as something might yet be worked out. Not so tough, even for a bear of little brain.
I will, however, make so bold as to suggest that your agreed scenario is not the only scenario, that it is absitively, posolutely the Gospel truth because Dewey and Scylla say so.
Actually, that was sarcasm. Which, of course, you knew. Tsk. Cheap.
And once again, Scylla wins by default, since the opposition is not only stupid, but full of shit. That’s why I love arguing with you, so decorous, such a paragon of civility.
You have to guess what I think it means, but you are nonetheless certain that I’m wrong? That is, if I have parsed out the meaning of that sentence correctly. I think I have. Yes, I’m sure I have…no, wait a tick…yes, I’m sure now! Did you have yourself a couple of good pops before you wrote that? Bit of a locution and syntax lesson from the estimable Mr. Johnny Walker? You can tell us, we’re all pals here.
Debateable proposition? That more than one scenario exists. That doubt as to the propriety of these transactions has been cast by persons we have reason to believe are knowledgeable. That you are capable of suffering disagreement without becoming slanderous, insulting, and vindictive. Only that last remains in doubt.
Scylla, you scamp, you didn’t quite give us the full quote, now did you, you rascal you! Now if I read this correctly - though it is replete with such dauntingly technical phrases as “loss” and “$200 million” - that Harvard might very well have lost one hell of a lot of money in the Awl Bidness.
Of course, we’d best wait for a more authoritative definition. Which I have no doubt is forthcoming.
I’m a little confused.
Did Harvard make out or not?
And if they did, was it because of the money injected by the anonymous benefactor/
Even the Sopranos know how sometimes you can make money even tho’ you “lose” money.
It appears that the Harvard fund was being used as a laundry, at the least, and if they escaped with their bucks it must have been at the expense of either subsequent stock purchasers or because laundered money was injected.
Or am I misinformed on the actual absence of value in Harken (other than the political connections which enabled them to get the drilling concession that was way out of their league otherwise.)
Ignorance Elucidator be thy name. Hey, it’s your ignorance, go ahead and be proud of it.
Fine. What is your argument? What is it you wish us to assume from the fact that the ongoing activities of the Harken Anadarko partnership are not fully disclosed on Haken’s balance sheet, and that investors were therefore not receiving a true reflection of Harken’s financial health?
Do you wish to assert that it was structured this way to defraud investors?
Make your argument.
Not at all. What I’m saying is that if you are going to start a debate on a subject and argue effectively it behooves you to be familiar with the subject matter to the point where you have a minimum grasp on it.
Failing that, it is not your opponent’s job to educate you, as Dewey and I are doing.
Your modus operandi is The argument for ignorance. You don’t understand it, so you assert that something is therefore wrong, and challenge us to correct it, so that you can understand it. You win by resisting, and remaining ignorant.
In other words you use your own ignorance as your weapon. It seems to be your only one.
You’ve been doing this for quite some time, and it gets wearying.
No. That’s not what technical default means.
And that’s the whole problem. You don’t know, and you don’t bother to understand it even when we show it to you. You don’t bother to look it up for yourself, either. You just guess, and assume a general meaning to a specific term.
Sure. Offer another one. Or, maybe the little old lady is alien with a ray gun.
Truer words have yet to be spoken by you.
Fine. What’s your scenario.
No. That’s not in the words of your quote, and it can’t be read into them. Bharan is making a statement of fact, not opinion. That fact is regarding the specifics of accounting principles re the Harken/Harvard partnership and the imperfections of the compromise in the accounting model. It says nothing whatsoever about the propriety of the transaction.
So? It’s no concern of mine if Meyer failed to maintain an efficient portfolio and meet his benchmarks, especially since they made money on Harken, it would have been worse for Harvard had they not done the the partnership. Again, this is erxactly consonant with the facts of the scenario I’ve been presenting.
In light of other investments in the sector losing money, Harvard would wish to maximize and consolidate their viable holdings. Being behind on their benchmarks they would seriously consider injecting money into a proposition that would help them regain some of that ground.
They did, and it appears to have worked.
You are indeed confused. There is no “anonymous benefactor.” The Harvard Fund injected some cash and helped restructure some debt for a company it had loaned a good deal of money to. It did so because it feared that company would go bankrupt otherwise.
There was no “laundering” here (defined as a series of transactions designed to hide a source of funds) – even Elucidator, in all his fevered imaginings, hasn’t made that accusation.
Thanks, Scylla, for so succinct a phrasing of a principle I have observed but not been able to isolate.
I couldn’t put my finger on it until now.
Regards,
Shodan
Professor Balan does not disagree with Scylla and my view of the transaction. Professor Balan is commenting on a hotly-debated issue in the accounting world – in this case, “when is balance sheet consolidation of the obligations of certain independent entities appropriate?”
He is NOT suggesting, as you seem to think, that the Harken-Harvard transaction was inappropriate, unethical or otherwise suspect, or that it was accounted for improperly under existing accounting rules.
Balan is, in essence, criticizing the accounting standard, not the application of that standard. Is he right? Maybe. But it’s the equivelant of criticizing the DH. Different people will have different opinions. That doesn’t mean it makes sense to criticize the Yankees for letting Nick Johnson bat in place of a given night’s pitcher.
**
Not quite. I have more patience for educating than Scylla, so here goes:
A “default” on a loan is commonly understood to be a payment default – the equivelant of missing your house payment one month.
Complex loan documents also usually require that the borrower make a series of additional promises (for example, to maintain certain financial ratios) in addition to the promise to make payments on the loan. Failure to comply with these additional promises constitutes technical default, the consequence of which is usually the bank’s right to accelerate the loan – that is, to demand repayment in full immediately.
Thus, if a compaly promised to maintain (for example) a certain debt-to-equity ratio, and found its equity numbers slipping due to sustained losses (thus driving the ratio south), it would be in technical default. Contrary to your assumption, this is a very big deal. Those promised ratios are important to the bank because they represent the ability of the borrower to repay the debt. A technical default will be taken by the lender as a sign that a payment default may be forthcoming.
All in the name of fighting ignorance. Will Elucidator learn? We shall see.**
We haven’t asked that you take our descriptions as the truth “because we say so.” We’ve explained the logic behind the workout and why it makes sense to all involved.
You, on the other hand, haven’t provided even the flimsiest scenario where this transaction would be inappropriate. Sure, you’ve said over and over "but you could be wrong, it could be inappropriate, but you’ve never given a plausible theory as to how that would be the case.
And frankly, while I’m never one to rest an argument on appeal to authority, you might consider taking our words somewhat seriously: I work in mergers and acquisitions, which has a good deal of overlap with my bankruptcy colleagues when they are working on a restructuring or workout, and IIRC Scylla works in the finance sector. We aren’t pulling this stuff out of our asses: we see these kinds of deals on a regular basis.**
It has not, as noted above. You are blatantly misrepresenting what the good professor is saying.
'fevered imaginings" Oh, dear me! I had no idea I was in the grip of fevered imaginings. But we are in agreement on one point: I very much doubt that any of these transactions are examples of money “laundering”. Unless, of course, you and Scylla (The World’s Foremost Authority) deem otherwise.
But lets take a moment to hear from the feverish Mr. Krugman (who, we are given to believe, deludes himself that his expertise is on a par with the Dewey/Scylla axis)
"…The key defense against charges that his sale of his Harken stock amounted to insider trading has always been the fact that while that stock’s price plunged soon after he sold his shares, it then recovered, albeit temporarily.
Now we know why it recovered. It wasn’t just the mysterious invitation to drill for oil off Bahrain. Harken also pulled a trick that would be emulated on a larger scale by Enron: In effect it borrowed money to pay its bills, while using loopholes in accounting rules to conceal the resulting debt…
…This institution [Harvard] acquired a large stake in Harken as soon as Mr. Bush became a board member, and subsequently showed itself willing to do whatever it took to keep the hapless company afloat. This included taking much of the company’s debt off its books in return for assets of doubtful value, and giving Harken a share in their partnership almost twice as large as its contribution to the partnership’s capital…"
Well, now, here is an alternative scenario, though it too is littered with such daunting technical terms as “borrowed”, “loophole” and “conceal”.
elucidator:
Krugman is a reporter, and has no credentials in accounting, corporate finance, or securities and law. Nor apparently does he have a background in this. In the previous 7 page thread you so kindly linked to after your OP we demonstrated pretty conclusively that Krugman was flat out wrong on many important points.
Dewey, and I seem to have both background and credentials.
This is a falsehood. There was not a defense, because there was not an accusation. In the event of an accusation the performance of the stock bears no relevance to insider trading accept as it may apply to materiality. Furthermore, you will need to check and see if the timing adds up. IIRC, it doesn’t. The Harvard bailout does not coincide with the subsequent dead cat bounce in stock price of Harken following the diallowal of the Aloha transaction by the SEC.
So now you’re financial analyst? This is a stupid series of assertions.
You know you’ve been complaining that I’m being mean to you, and calling your arguments stupid. I got news for you. It’s because they are.
Every assertion (I can’t even charitably call them arguments,) you’ve made in this thread has been ridiculous and dismissable out of hand.
What you don’t seem to realize is that you’re arguments have been treated with far more courtesy and respect than they deserve. You make one of your bold and unfounded misinterpretations and other parties go to considerable effort to correct them. Rather than acknowledgin that effort or correcting yourself, you just go on with another stupid assertion.
You make December appear credible and even-handed in comparison.
No. That is not an “alternate” scenario. It’s a sensationalized condensation of the scenario we’ve been talking about. I can’t believe you don’t recognize it. It’s the same thing we’ve been saying.
Even your beloved Krugmans back us.
Scylla
Could be. Is it your assertion that this is not possible? It would seem to me, in my benighted ignorance, that a potential investor might be better informed if all of this had been made known. Do you disagree? In what respect is such ignorance of value to the potential investor?
(I’ll skip over the ad hominem invective that dominates the bulk of this post, as so many others…)
A bit of confusion there, Scylla. It would seem, if I parse Mr. Meyer’s statement correctly…
"…Harvard showed a negative rate of return of 33.5 percent—the only category in which HMC’s internal benchmarks were not met—for a loss of nearly $200 million. …
that Harvard took rather a bath in the energy sector. Unless, of course, in my ignorance, I have failed to understand “loss of $200 million” really means “a shrewd investment”.
But, just as you say, that is neither here nor there, as whether or not Harvard showed poor judgement is of no consequence. One must wonder, then, why you brought it up?
As always, I am indebted, once again for Shodan’s generosity in pointing out my failings, even as he must have sacrificed an opportunity to say something that bears on the matter at hand.
Further, I am content that your (S/D) explication of the debate that Mr. Balan refers to is accurate. Point conceded. It would appear that the world of accepted accounting principles contains vast latitude. Whether this is proper, and what can be done about it, is a matter for another debate altogether.