We like to think that when we deposit a dollar at the bank, it goes into a big vault and we can pull out that same dollar at any time. But that¿s not how the U.S. banking system works. Banks take that money and invest it to make money themselves, so cash gets spread around. This, naturally, leads to a big risk: What happens if those investments go sour? Well, you¿d be out of luck. You can¿t get your dollar back.

The Federal Reserve doesn¿t like that scenario, so it prohibits banks from putting all the cash it has on deposit on the line. In fact, the Fed forces banks to keep a portion of their assets at the Federal Reserve itself, to make sure that some of your assets won¿t get squandered if the bank¿s bets go south. These are called ¿reserves,¿ (hence, Federal Reserve. Got it? Good), and usually amount to 10% of the total cash kept in checking accounts.

These reserves are never exactly 10%, and banks like to keep a little extra in reserve ¿ not, as you might think, to make you more comfortable that they¿re in good financial shape, but rather so they can take that excess and lend it to other banks and make money off it. (They¿re banks, they can¿t help themselves.) The rate at which they make these loans is called the Federal Funds rate, which is set by the Federal Reserve¿s Federal Open Market Committee.

When you hear people chattering about how the Fed cut or hiked interest rates, this is what they¿re talking about: the interest rate banks can charge for lending money from their reserves. This begs the question: If these are essentially loans between banks, why is the Fed Funds rate so important for the rest of the economy?

Well, simply put, because loans make the financial world go round. Bank A lends Bank B $10,000 at a Fed Funds rate of 5%. Bank B then lends out $10,000 to a small business at 7%. The small business then takes that money and expands the business and hires new workers. Now someone is employed, Bank B has made interest off the loan, and Bank A is the richer for making it all happen. It¿s perhaps overly simplistic, but you get the idea. When you want the economy to thrive, you make lending cheaper.

Of course, sometimes you don¿t want the economy to thrive. In fact, you might want it to cool down, mostly to avoid money flooding the system and causing inflation. In that case, the Fed raises interest rates, making it difficult to lend or borrow.

Home / Markets / Industries / Energy

Sunday, June 29, 2008

Massey Energy Co. Agrees to Noteworthy Corporate Governance Improvements in Environmental Compliance and Worker Safety

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MOUNT PLEASANT, S.C., Jun 29, 2008 (BUSINESS WIRE) ----Plaintiffs' litigation firm Motley Rice LLC today announces court approval of a shareholder derivative settlement with Massey Energy Company (NYSE: MEE). Institutional shareholder Manville Personal Injury Settlement Trust (Manville Trust) commenced this action aiming to improve the company's policies and procedures in the areas of environmental compliance and worker safety.

In the settlement with the Manville Trust, which resolves personal injury claims resulting from exposure to the asbestos-related products of the Johns-Manville Corporation and its affiliated entities, Massey Energy Co. agreed to significant structural changes and initiatives to improve and advance the company's environmental and worker-safety practices. The reforms provided by the settlement include the creation of new corporate vice presidents for Best Environmental Practices and Best Safety Practices, the implementation of an annual "Corporate Social Responsibility Report" to shareholders, and additional measures to improve monitoring and compliance. Originally proposed in May, the settlement was approved by Kanawha County Circuit Court Judge Irene Berger on June 25, 2008.

The Manville Trust filed the case in July 2007 against company Chairman, CEO, and President Don Blankenship and certain other current and former officers and directors. The plaintiff sought several corporate governance reforms, specifically regarding environmental compliance and worker safety. Citing several incidents involving Massey Energy, including a major federal water pollution lawsuit, penalties for two coal miners' tragic deaths and other safety and environmental compliance problems, the lawsuit claimed that a "conscious failure" by the defendants to ensure compliance with federal and state regulations and other legal obligations posed a "substantial threat of monetary liability for violations."

"The reforms outlined in the settlement will help ensure that the company's practices conform to applicable legal requirements and also will promote a safe working environment for Massey Energy employees," said Ann Ritter, Motley Rice LLC member who played a significant role in negotiating the settlement. "Moreover, there is a large body of empirical evidence establishing that the quality of a company's governance practices correlates positively with increased shareholder value," Ritter added.

Motley Rice LLC, Andrew MacQueen of Charleston, West Virginia, and Rigrodsky & Long, P.A., worked together on this shareholder derivative action.

About Motley Rice LLC

Motley Rice LLC is one of the nation's largest plaintiffs' litigation firms. Motley Rice attorneys gained recognition for their litigation targeting bad business practices which have negatively impacted workers, the environment, public entities, aviation passengers, innocent victims of terrorism and shareholder value. Today, with nearly 70 attorneys and hundreds of staff, the firm continues to handle complex litigation, including cases in the areas of securities fraud, shareholder rights, aviation, asbestos bankruptcy, and human rights. The securities and consumer fraud practice group, composed of attorneys, business analysts and investigators, utilizes up-to-date case analysis and litigation strategies and has been appointed lead counsel in multiple cases. For more information on Motley Rice LLC or securities fraud litigation contact attorney Joe Rice (SC) at 1-800-768-4026 or visit http://www.motleyrice.com.

SOURCE: Motley Rice LLC

Motley Rice LLC Alicia G. Ward, 843-216-9548 Director of Marketing and Communications AWard@motleyrice.com

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