Legal News

S&C?s Cohen Gives Props to Obama Over Handling of Banking Crisis

By Ashby Jones

Want to know what Suillivan & Cromwell’s Rodge Cohen eats for breakfast? Where he vacations? Whether he was truly a candidate to be one of Tim Geithner’s deputies at the Treasury Department? So would we. Unfortunately, a recent TheStreet.com Q&A with Cohen doesn’t answer all these questions, but does give a really nice job of conveying what Cohen thinks about the current state of affairs in the beaten-up banking world.

A few excerpts:

What do you think of the Obama administration’s handling of the crisis so far?

When you consider the depth and breadth of the crisis, I think the administration has moved with both alacrity and comprehensiveness to deal with the issues. Inevitably in a situation like this not every decision will be the right decision, but the way they have attacked the problem I think is exactly what the problem requires.

There are so many different government programs — trillions of dollars being aimed at the crisis. Which are most important?

These are all integrally related. They all complement each other. The danger here is not in overshooting. That you can deal with. You should try and get it right, clearly, but the danger is not in overshooting. It is in undershooting. That is the lesson of every financial crisis. They become deeper and less controllable when you undershoot.

Do you think we’ll eventually see a major wave of bank M&A and how far off do you think it is?

Absolutely. I mean the industry still needs consolidation, but the huge problem that continues to exist is the accounting. If you go in and are buying a company at 100X — whatever that is — and that company had a book value of 100X one second before you closed and then it has a book value of 80X one second after you close, you can’t live with that. It just brings down your tangible common equity ratio by too great an amount. This accounting anomaly is by far the biggest barrier to M&A in financial services.

Full post as published by Law Blog - WSJ.com on April 16, 2009 (boomark / email).