Banking Law

We've previously yapped about all the litigation generated by the subprime mortgage meltdown, and how trial lawyers are in a feeding frenzy as a result. Now it appears that law firms, especially the large ones, are gearing up for yet a new sub-specialty: work thrown off by the recently passed federal bailout bill.

Designed to help struggling financial institutions, the legislation came at an opportune time for law firms, which have been mired in their own downturn.

Now, firms in New York, Washington, D.C., and pockets around the country are digging into the bill and gearing up for what they hope will be a nice bump by advising clients on the bill's nitty-gritty or preparing documents to gain U.S. Treasury assistance.

"People are hoping this becomes the Full Employment Act for lawyers," says law-firm marketing and organizational consultant Peter Zeughauser.

Exactly who are these "people," Peter? Of the species Homo sapien? For most of the "people" I know, the prospect of lawyers using the generally loathed bailout bill as an opportunity to keep up the payments on their second Jaguar is a cause not for hope but for despair. If by "people" you mean "lawyers," then many human beings would argue that you're stretching the definition of the term to its outermost limits.

Assuming that people and lawyers can be lumped into the same category for discussion purposes, it's true that a lot of traditional mergers and acquisitions and asset securitization work is taking it in the nether regions, which has resulted in layoffs at even the most staid of blue-blooded Wall Street firms, and that the bailout bill offers a lifeline to barristers and solicitors alike.

"Any time you get a large-scale transfer of capital, lawyers get involved," says Mr. Zeughauser.

And their fingers get awfully sticky when so much cash is passing through the system, don't they?

The contours of the work aren't yet clear. But Erik Klingenberg, a structured-finance lawyer at Thacher Proffitt & Wood LLP in New York, says that calls from banks, hedge funds, asset managers, and distressed-asset investors started coming in last week, just after President Bush signed the legislation. "Clients were eager to know how this was all going to work," he says.

That's correct: no one knows how this might work, but lawyers will be pleased to bill you thousands of dollars to tell you in many, many convoluted words, that they don't know yet how this might work. For a few thousand more, they'll throw in some wild conjecture.

And that's just the beginning, folks.

Just how lucrative will the business be? Early-stage advisory business, such as monitoring developments and passing word along to clients, isn't the most lucrative work. But Michael Missal, a partner at K&L Gates in Washington, expects that once Treasury makes the full details of its programs clear, firms will kick into high gear, helping clients through the processes of selling off assets.

Many are hopeful that the work will go well beyond helping clients get a slice of Treasury's package. "You're going to get a pickup in regulatory work, and probably one in litigation and bankruptcy," says Dan DiPietro, the client head of the law-firm group at Citi Private Bank.

Others feel confident that a rush of investigative and white-collar criminal work also is coming. "Politicians are going to demand accountability," says Bruce McLean, Akin Gump's chairman. "If the government's going to buy up assets from a bank, it's probably also going to look into whether or not there was criminal activity." If there are indictments, civil shareholder litigation would be likely to follow.

Yep, there's sure to be a lot of chum thrown into the roiling, hour-churning waters of Oceana Lex. By the time the heat of the economic meltdown finally cools, Joe Sixpack, Hockey Mom, and their illegitimate step-cousin, Joe The Plumber, won't be able to afford even a can of cat food for dinner, but lawyers will find a way to not only fund that vacation on the Kohala Coast, but to send their kids Biff and Muffy to Cornell.

God bless us, every one!