Banking Law

According to attorney and financial consultant Tom E. Greene, most lawyers suck at understanding numbers. At least, that's my blunt take on his more diplomatically-expressed views, as communicated to well-known law blogger Robert Ambrogi. Bob interviewed Tom for an article in his Bullseye Newsletter entitled "What Lawyers Don't Get About Finance," recently posted online.

There are two kinds of people in the world, says finance expert Tom E. Greene: word people and number people. Most lawyers fall into the first group, which explains why they either panic or gloss over when faced with financial concepts in litigation.

Since Tom makes a portion of his income by leading lawyers through the maze of various financial concepts, he has a vested interest in seeking out "word nerds." According to Tom, too many lawyers tend to believe that financial concepts can't be "boiled down to an understandable narrative." That's where Tom comes in, to hold the lawyer's hand and to explain these concepts in terms even a "financially challenged chimp" could understand. In that manner the weak-minded are not only comforted, but led into the light of revelation.

It might be because I associate with with financial types all day, or that so much of my professional career has been spent in the banking biz, but I know a lot of lawyers who grasp financial concepts just fine. Then again, I try not to hang with litigators (notwithstanding the fact that some of my best friends are litigators), and it appears that Tom is addressing himself mainly to them. I'm not sure that accusation holds water, though. Every litigator I know understands how to multiply an hourly rate by a finite number of hours, then square the result. When required by the court, they can even divide total number of travel hours by the number 2, then multiply by an hourly rate (and square the result).

I do agree with Tom's take on "the human factor."

Lawyers share another common misunderstanding about corporate finance, Greene says, which is that they forget the human factor.

"Attorneys think that large financial institutions have agnostic, computer-based models for financial transactions," he explains. "Usually, that's not true. Usually, it's a couple of individuals somewhere and it is very much subject to manipulation."

Just ask Jeff Skilling.

I don't recall ever seeing a "faith-based" financial model, so I'm not certain what an "agnostic" model might be, but I get his point. There is sometimes a tendency to be impressed with a snappy financial presentation, especially with pie charts, graphs and Excel spreadsheets, although I have friends who've never seen a spreadsheet they didn't relish slicing and dicing and looking to cough out "horse hockey" behind their fist like Bluto in the classroom scene from Animal House. I have one friend, in particular, a recovering lawyer working as a consultant, who would not only agree with Tom but would add that most of lawyers would be too arrogant to admit their ignorance. Apparently, many lawyers are not so arrogant, or Tom wouldn't make a living.

Ultimately, Tom asserts, numbers tell a story and he's a storyteller.

For Greene, lawyers involved in financial cases too often overlook the fact that behind every transaction, there is the work not of computers and calculators, but of humans. In every case, that means, there is the possibility of human manipulation, fault and fallibility.

 

The human factor, in other words, almost always provides the basic story a trial lawyer hopes to hone in on, even in the seemingly complex realm of high finance.

"Figures don't lie, but liars figure." I get it. Just barely, since I'm a word nerd, but I get it.