5 Insights On Representing The Banking Industry, From Rodge Cohen Of Sullivan & Cromwell

A leading lawyer to the financial services industry, H. Rodgin Cohen of Sullivan & Cromwell, shares some of his wisdom.

Last week, I had the pleasure of attending Bloomberg BNA’s inaugural Big Law Business Summit. Prominent figures from the Biglaw and in-house communities came together to share their thoughts on the future of the legal industry.

One of the nation’s top banking lawyers, H. Rodgin Cohen of Sullivan & Cromwell, delivered the luncheon keynote address. He was then interviewed by Matt Levine of Bloomberg View (and before that Dealbreaker, one of Above the Law’s sister sites).

Here are some highlights from Rodge Cohen’s remarks.

1. It’s hard out here for a banking lawyer.

These are tough times for the banking industry — and, by extension, the lawyers and law firms who represent them.

You often hear expressions of worry about how the plunge in oil prices harms the energy industry and everyone who depends on it for their livelihood. You don’t hear as often about the challenges that the current low-interest-rate environment poses to the financial-services sector. But when you think about it, there are a lot of similarities; interest rates are effectively the “price” of the product being sold by banks, namely, capital. We shouldn’t ignore the wealth transfers that a prolonged period of low interest rates is bringing about.

Other challenges for the banking industry include increased costs for regulation and compliance — in the wake of the Great Recession and the regulation it spawned, some banks have had to increase their compliance staffs by a factor of three to ten — and reputational problems. The tarnishing of the financial sector’s reputation has caused smart, talented people to avoid banking and enter other sectors instead.

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2. Pay attention to privilege issues.

As banks navigate the new regulatory environment, they must conduct prompt and thorough investigations of internal problems they confront. As they do so, they must be mindful of attorney-client privilege issues. The Justice Department has committed to not invade the privilege, and Cohen said that in his experience, the DOJ has respected that commitment. But other regulators of the banking industry sometimes press for — and obtain — privileged materials. So if a client wants counsel to put something in writing, both the lawyer and client should acknowledge the possibility that any such work product could someday end up in the hands of regulators.

3. Debate over reinstating the Glass–Steagall Act should be informed by facts.

As a lawyer to the banking industry, Cohen is admittedly not neutral — but he gets very frustrated when repeal of the Glass–Steagall Act is blamed for the financial crisis. According to Cohen, only select portions of Glass–Steagall were repealed, and there’s no evidence that this led to any specific aspect of the financial crisis. If you look at the list of institutions that failed or encountered trouble during the crisis, including Bear Stearns and Lehman Brothers, you will look in vain for any institution that was affected by repeal of the relevant Glass-Steagall Act provisions.

4. Cyber, cyber, cyber.

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This was perhaps the most passionate part of Cohen’s speech (to the extent that the impressively placid Cohen gets passionate). He described threats to cybersecurity as “an existential threat” to the banking industry and, by extension, to the economy as a whole.

His favored reform: a Cabinet-level Department of Cybersecurity to provide a comprehensive and coordinated response to cyber threats. Right now, cybersecurity issues fall under the jurisdiction of a host of different organizations, including the CIA, NSA, DHS, FBI, Treasury Department, and Air Force, along with other federal and state agencies that address liability issues. Cybersecurity is too big and too important an issue to be handled in such an uncoordinated fashion.

5. Financial-services companies must work together when addressing proposed regulatory changes.

In the interview following Cohen’s prepared remarks, Matt Levine asked Cohen how lawyers and law firms can serve as effective advocates for their clients with respect to regulation. Cohen had several responses.

First, banking lawyers and their clients must develop coordinated responses to proposed regulation; individual banks shouldn’t take the view of “any regulation is fine as long as it hurts my competitor more than it hurts me.” Second, regulatory reforms must be based on data; too many debates are driven by opinion and rhetoric rather than facts (see his earlier remarks about Glass-Steagall). Third, don’t be shrill; that doesn’t go over well with regulators or legislators.

Based on his remarks last week, one can see why H. Rodgin Cohen is arguably the nation’s leading banking lawyer, sought after by clients and trusted by regulators. He is insightful, he is calm, and he is so darn… reasonable. If you’re a troubled Wall Street bank in need of world-class wisdom, there’s no need to schlep to Delphi; just consult the Oracle of 125 Broad Street.

(You can check out Cohen’s complete remarks via the embed below.)

A Keynote Address From H. Rodgin Cohen [Big Law Business / Bloomberg BNA]

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